Wollongong Coal Limited t/a Wollongong Coal
[2019] FWCFB 3306
•15 MAY 2019
| [2019] FWCFB 3306 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.604 - Appeal of decisions
Wollongong Coal Limited t/a Wollongong Coal
(C2019/741)
VICE PRESIDENT HATCHER | SYDNEY, 15 MAY 2019 |
Appeal against decision [2019] FWCA 216 of Senior Deputy President Hamberger at Sydney on 15 January 2019 in matter number AG2018/2488.
Introduction and background
[1] Wollongong Coal Limited t/a Wollongong Coal (Wollongong Coal) has lodged an appeal, for which permission to appeal is required, against a decision issued by Senior Deputy President Hamberger on 15 January 2019 1 (Decision). The Decision concerned an application for the termination of the NRE No 1 Colliery Workplace Agreement 20112 (2011 Agreement) pursuant to s 225 of the Fair Work Act 2009 (FW Act). The Senior Deputy President dismissed Wollongong Coal’s application on the basis that termination of the 2011 Agreement would be contrary to the public interest. Wollongong Coal contends in its notice of appeal that the Senior Deputy President erred in a number of respects in reaching this conclusion, and that the Decision should accordingly be quashed.
[2] The background to the matter may be summarised as follows. Wollongong Coal owns two collieries in the Illawarra region of NSW, being the Russell Vale Colliery (formerly known as the NRE No 1 Colliery) and the Wongawilli Colliery. Majority ownership and management control of Wollongong Coal is vested in Jindal Steel and Power Limited, an international steel and power company listed on the Bombay Stock Exchange. The 2011 Agreement was made in October 2011 at a time when, as Wollongong Coal characterises it, there were buoyant coal prices and favourable operating conditions. It commenced operating on 17 November 2011 and has a nominal expiry date of 30 September 2015. Clause 3 of the 2011 Agreement provides that it applies to Wollongong Coal (which was named “Gujarat NRE Coking Coal Limited” when the agreement was made) and its employees at the Russell Vale colliery who are members or eligible to be members of the Construction, Forestry, Mining and Energy Union, as the Construction, Forestry, Mining, Maritime and Energy Union (CFMMEU) was then named. At the time it was made the 2011 Agreement covered approximately 174 employees. The favourable business conditions existing at the time the 2011 Agreement was made did not continue, and mining at Russell Vale ceased in August 2015 upon the expiry of its longwall mining approvals and its failure to secure approvals for a proposed underground expansion plan. Employment of the employees covered by the 2011 Agreement was terminated by redundancy in September 2015. No employees have been covered by the 2011 Agreement since that time.
[3] Wollongong Coal now intends to seek State Government mining approval for a smaller scale board and pillar (rather than longwall) mining operation at Russell Vale. In that context, Wollongong Coal made its application to terminate the 2011 Agreement on the basis that the terms of the 2011 Agreement posed an impediment to it resuming operations on a cost effective and profitable basis. The CFMMEU opposed the application for the termination of the 2011 Agreement.
Statutory framework
[4] Subdivision D of Div 7 of Pt 2-4 of the FW Act contains the statutory scheme concerning the termination of enterprise agreements after their nominal expiry date other than by way of a vote of employees. The provisions of the subdivision are as follows:
225 Application for termination of an enterprise agreement after its nominal expiry date
If an enterprise agreement has passed its nominal expiry date, any of the following may apply to the FWC for the termination of the agreement:
(a) one or more of the employers covered by the agreement;
(b) an employee covered by the agreement;
(c) an employee organisation covered by the agreement.
226 When the FWC must terminate an enterprise agreement
If an application for the termination of an enterprise agreement is made under section 225, the FWC must terminate the agreement if:
(a) the FWC is satisfied that it is not contrary to the public interest to do so; and
(b) the FWC considers that it is appropriate to terminate the agreement taking into account all the circumstances including:
(i) the views of the employees, each employer, and each employee organisation (if any), covered by the agreement; and
(ii) the circumstances of those employees, employers and organisations including the likely effect that the termination will have on each of them.
227 When termination comes into operation
If an enterprise agreement is terminated under section 226, the termination operates from the day specified in the decision to terminate the agreement.
The proceedings before the Senior Deputy President
[5] Pursuant to directions made by the Senior Deputy President, Wollongong Coal and the CFMMEU both filed witness statements and written outlines of submissions prior to the hearing of the matter. At the hearing, which was conducted before the Senior Deputy President on 10 October 2018, witnesses gave oral evidence and the parties made oral closing submissions. Wollongong Coal advanced its case on the basis of the following propositions (as summarised by the Senior Deputy President in paragraph 8 of the Decision):
• mining of coking coal at Russell Vale ceased in August 2015, and there have been no employees covered by the 2011 Agreement since September 2015;
• any resumption of mining at Russell Vale is dependent on the applicant securing approval for its revised Underground Expansion Plan (UEP) and the applicant undertaking the necessary capital investment and development works in order for production to recommence;
• the coking coal market is significantly less favourable than when the 2011 agreement was made, and the commercial environment the applicant currently operates in is difficult;
• the cost, operational restrictions and other inflexibilities imposed by the 2011 agreement are an impediment to the applicant recommencing operations at Russell Vale in a cost-efficient and flexible manner; and
• in the absence of any employees, there is nobody with whom Wollongong Coal can make a new agreement.
[6] As summarised by the Senior Deputy President in paragraph [9] of the Decision, the CFMMEU’s case against termination of the 2011 Agreement was as follows:
• termination of the 2011 Agreement will make no material difference to the viability of Russell Vale;
• the commercial difficulties faced by the applicant cannot be attributed to the 2011 Agreement;
• the terms of the 2011 Agreement are typical of enterprise agreements applying to other coal companies in the Illawarra region which continued to operate;
• many of the restrictions complained about by Wollongong Coal are contained in similar, if not more restrictive terms in the enterprise agreements binding on the other coal mining companies in the Illawarra region; and
• Wollongong Coal wished to have the ability to restart Russell Vale with a completely outsourced workforce, which was not a good reason to terminate the agreement and, in any case, the barrier that the 2011 Agreement posed to that outcome was more imagined than real.
[7] One aspect of the way in which the matter progressed before the Senior Deputy President requires close attention. We have earlier set out the terms of s 226. There is no dispute that, where an application has been made under s 225, s 226 requires that the Commission terminate the relevant enterprise agreement if both of two conditions are met: first, that the Commission is satisfied that it is not contrary to the public interest to do so and, second, it considers it appropriate to do so taking into account all the circumstances including the two specific matters identified in s 226(b)(i) and (ii). In relation to the first of these two conditions, Wollongong Coal contended in its outline of submissions dated 9 August 2018 that there were “compelling reasons” why the Commission could be satisfied that termination would not be contrary to the public interest and would indeed enhance the public interest by facilitating the resumption of mining with consequent benefits for the national and local economy. It further contended that any persons engaged to work in the mine if it re-opened would be protected by the safety net provided by the FW Act and the applicable award.
[8] In response to this, the CFMMEU in its outline of submissions dated 21 September 2018 submitted the following:
“15. It is accepted that the public interest requirement in s 226(a) of the FW Act is cast in the negative.
16. There are no compelling reasons that enliven the public interest one way or the other. Accordingly, the CFMMEU does not contend that termination of the Agreement is contrary to the public interest. Rather, the CFMMEU contends that it is not appropriate to terminate the Agreement. Consequently, the Agreement should not be terminated.”
[9] The CFMMEU went on in its outline of submissions to rebut Wollongong Coal’s contention that termination of the 2011 Agreement would positively be in the public interest, but as it had already stated that was not the test posed by the first condition for termination in s 226(a). Accordingly the CFMMEU’s position going into the hearing was that the first condition in s 226(a) was satisfied, but that the second condition in s 226(b) was not and therefore termination should be refused.
[10] In closing submissions at the hearing of the matter on 10 October 2018, counsel for Wollongong Coal addressed the first condition in s 226(a) in the following manner:
“…We take it from the union's outline of submissions that it doesn't oppose the application on that criteria [sic]. We take that from paragraph 16 of my friend's outline, that the challenge is really on the basis of section 226(b), that is they're arguing that it is not appropriate in all the circumstances that the application be granted. Whilst it's obviously still for your Honour to determine that the application is not contrary to the public interest we are submitting that it satisfies that. The union is not opposing it.
On that basis we think the Commission could be comfortably satisfied that section 226(a) is met. Unless your Honour requires, I don't propose to address you further on that criteria. We have had - well, to the extent I will, there has been nothing in the evidence that says that this would have a negative impact if the agreement is terminated on employment levels, that anybody is going to be employed on less than a safety net. It's not contrary to the objects of the Act…” 3
[11] There was no indication from the Senior Deputy President in response to the above that he required Wollongong Coal to address him any further in respect to s 226(a). The CFMMEU subsequently started its closing submissions with the following:
“Your Honour, I too rely upon the outline that was filed. In terms of the points I wish to make today I confirm that our opposition to the agreement is not premised upon section 226(a). We say there are neither any positive nor negative public interest considerations that arise in this matter…” 4
[12] In Wollongong Coal’s submissions in reply, the following exchange occurred between its counsel and the Senior Deputy President:
“MR BROTHERSON: I'll try and be as efficient as I can be but my friend has covered a fair bit of territory there that I think need to say some things about. He properly identifies the likely foreseeable outcomes as being the test and I thought I'd actually addressed that but to the extent he has re-raised it. On the issue of the public interest or the requirement that the termination not be contrary to the public interest the simple fact is - - -
THE SENIOR DEPUTY PRESIDENT: Well, I don't think there's any contest on this issue.
MR BROTHERSON: There's no contest.
THE SENIOR DEPUTY PRESIDENT: No, there's not. All right.
MR BROTHERSON: It's probably the hour. I will move on…” 5
The Decision
[13] The Decision of the Senior Deputy President set out the background circumstances of the matter, the applicable statutory provisions and the relevant legal principles, and contained a summary of the evidence. The Senior Deputy President then engaged in his consideration of Wollongong Coal’s application as follows:
“Consideration
[60] I am satisfied that the 2011 agreement is a fairly typical enterprise agreement for coal mines operating in the Southern District. While it provides for reasonably generous pay and conditions, and includes a number of restrictions on managerial prerogative, these are not out of line with what applies to the other mines in the same area of New South Wales. While the agreement is well past its nominal expiry date it is not obviously ‘out of date’.
[61] Having said that, the applicant – if it is to reopen Russell Vale on an economically sustainable basis - clearly faces a number of challenges not faced by other mines in the district, including the use of the board and pillar operating procedure and the depth of the mine itself. These certainly place additional pressure on the applicant to operate as cost effectively as possible.
[62] One of the relatively unusual features of this application is that there are no employees who would be directly affected by the termination of the agreement. Nevertheless the applicant clearly hopes to re-open the mine and as things stand any production and engineering employees employed by the applicant would be covered by the agreement. It also possible (though not beyond doubt), that the agreement would have some application even if the mine were to be reopened using outsourced labour (in the same way as Wongawilli is currently operating).
[63] It may well be that there are provisions in the agreement that would make it more difficult to operate the mine on a sustainable basis. What causes me particular disquiet however is that the applicant has made no effort to try and negotiate with the respondent about its concerns with the 2011 agreement. I accept that in the absence of any currently engaged employees it would not be possible to finalise an agreement under the FW Act. That does not mean however that negotiations could not take place between the parties as to what form a new – and possibly more appropriate – agreement could take.
[64] In my view it would be premature to terminate the agreement until there has at least been a genuine effort by the applicant to try and resolve its concerns by negotiation. I am satisfied that it would be contrary to the public interest to terminate the 2011 agreement before any such effort has been made. In particular it would be inconsistent with the object of the FW Act – especially the emphasis on enterprise-level collective bargaining.
Conclusion
[65] The application to terminate the 2011 agreement is dismissed on the basis that I am satisfied that terminating the agreement would be contrary to the public interest.”
Appeal grounds and submissions
[14] Wollongong Coal’s appeal grounds and submissions contended that the Senior Deputy President erred in the following respects:
• in finding it was contrary to the public interest to terminate the 2011 Agreement given the evidence and material before him;
• in failing to consider, or give weight to various material factors, including: the benefits arising from a resumption of mining at Russell Vale; the impediment posed to the recommencement of mining by the costs, restrictions and inflexibilities in the 2011 Agreement; and the fact that the CFMMEU’s opposition to the termination of the 2011 Agreement was directed to the improper purpose of seeking to regulate the terms and conditions of the engagement of contractors;
• by acting on a wrong principle in finding that termination of the 2011 Agreement was contrary to the public interest by directing himself to issues between the parties as opposed to the public as a whole;
• in taking into account in paragraph [60] of the Decision that termination of the 2011 Agreement would be contrary to the public interest because the 2011 Agreement is a “fairly typical enterprise agreement” in the Southern District and was “not obviously out of date”, in circumstances where the 2011 Agreement was made and approved in 2011, has a nominal expiry date of 30 November 2015, mining at Russell Vale Colliery ceased in September 2015 and there have been no employees covered by the 2011 Agreement since that time;
• in giving particular weight to, and acting on a wrong principle in respect of, his view expressed in paragraph [64] of the Decision that it would be inconsistent with the emphasis in the object of the FW Act on enterprise-level collective bargaining and premature to terminate the 2011 Agreement until there had been genuine efforts by Wollongong Coal to negotiate with the CFMMEU, in circumstances where no employees would be directly affected by the termination of the agreement, there was no way under the FW Act to vary the 2011 Agreement or make a new agreement, and Wollongong Coal wanted the option to recommence operations with a contract workforce;
• in failing to afford Wollongong Coal procedural fairness in finding at paragraph [65] of the Decision that terminating the 2011 Agreement would be contrary to the public interest in circumstances where both Wollongong Coal and the CFMMEU contended that the application was not contrary to the public interest and the Senior Deputy President did not require the parties to address him further on the issue at hearing beyond what had been set out in the written submissions;
• in finding that the termination of the 2011 Agreement would be contrary to the public interest, and therefore not giving consideration to whether it was appropriate to terminate the 2011 Agreement taking into account all of the circumstances and then failing to determine it was so appropriate; and
• by failing to properly exercise the Commission’s jurisdiction under s 226 of the FW Act because, on the facts, the decision was unreasonable or plainly wrong.
[15] Wollongong Coal submitted that it would be in the public interest to grant permission to appeal because the appeal raises important and novel questions about the application of s 226 when an employer no longer employs any employees covered by an agreement, the extent to which an employer is required to negotiate with an industrial organisation covered by an agreement before making an application for termination when it has no employees covered by the agreement, and the principal purpose of the CFMMEU in opposing the application. It also contends that the errors made by the Senior Deputy President mean that substantial injustice would occur if permission were not granted and Wollongong Coal was to remain constrained by the terms of the 2011 Agreement.
[16] The CFMMEU submitted that:
• the decision-making process involved the exercise of a “narrow” discretion, and accordingly it was necessary for Wollongong Coal to demonstrate error in the decision-making process of the type identified in House v The King; 6
• the Senior Deputy President took into account the relevant matters identified by Wollongong Coal and, insofar as Wollongong Coal contended that various matters had not been given proper weight, that was not a House v The King error;
• it was legitimate for the Senior Deputy President to take into account the object of the FW Act in his consideration of the public interest;
• the comparison undertaken by the Senior Deputy President between the 2011 Agreement and other agreements applying to coal mines in the Illawarra region was a relevant consideration, and the conclusion reached was reasonably open to him;
• it was not contrary to principle to encourage Wollongong Coal to first have discussions and negotiations with the CFMMEU, which as a matter of reality represented almost all coal miners in the Illawarra region;
• the matters in paragraphs [63]-[64] of the Decision were squarely raised with and addressed by the parties in the proceedings before the Senior Deputy President, and accordingly there was no denial of procedural fairness;
• the complaint of Wollongong Coal was that these matters were considered under s 226(a) rather than s 226(b), and accordingly if there was a denial of procedural fairness it could not have made any difference to the outcome;
• there was no manifest injustice in the Decision such as to render it unreasonable or plainly wrong; and
• because there was no error in the Decision, the public interest was not enlivened, nor should permission to appeal be granted on other grounds.
Consideration
[17] Wollongong Coal’s contention that it was denied procedural fairness in respect of the Senior Deputy President’s determination pursuant to s 226(a) that termination of the 2011 Agreement would be contrary to the public interest must, we consider, be accepted. We have earlier set out the way in which the issue of s 226(a) was addressed by the parties in the proceedings before the Senior Deputy President in their written outlines of submissions and at the hearing. It is plain that there was no contest between the parties that termination of the 2011 Agreement would not be contrary to the public interest, and accordingly that it was only the second condition for termination of the agreement in s 226(b) that remained in dispute. The Senior Deputy President was of course not bound by the parties’ positions, even where they were in agreement, and was required to make his own independent determination as to whether the first condition in s 226(a) was satisfied. But in circumstances where the CFMMEU had made the concession that s 226(a) was satisfied, there necessarily arose the difficulty that Wollongong Coal might not reasonably apprehend that s 226(a) remained a live issue in the proceedings. 7
[18] There is no issue in the appeal that the Senior Deputy President had an obligation to afford procedural fairness to Wollongong Coal, the legal duties and commercial interests of which were directly affected by the fate of its application. The content of that obligation does not “call into play a body of rigid procedural rules which must be observed regardless of circumstances”; rather the content of the obligation “varies to reflect the common law's perception of what is necessary for procedural fairness in the circumstances of the particular case.” 8 In the circumstances of this case, we consider that the Senior Deputy President was obliged to advise the parties (whether at the hearing or at some subsequent time prior to the publication of the Decision) that there remained a question in his mind concerning his satisfaction in relation to s 226(a) and to invite them to address him further in relation to this question. The Senior Deputy President did not do this; indeed, as earlier set out he halted counsel for Wollongong Coal addressing him in submissions in reply on the issue of s 226(a) with a reminder that the issue was not in contest. This could only have the effect of reinforcing the reasonable apprehension that s 226(a) was not a live issue.
[19] The CFMMEU’s submission that the matters set out in paragraph’s [63] and [64] of the Decision which caused the Senior Deputy President to conclude that termination of the Agreement would be contrary to the public interest were squarely raised during the proceedings with Wollongong Coal is correct. However, in the circumstances described, Wollongong Coal could not reasonably have apprehended that they were being raised in connection with s 226(a) rather than (b). The CFMMEU’s contention that this could not have made a difference to the outcome cannot be accepted, since s 226(a) is concerned with matters distinct from s 226(b). In Re Aurizon Operations Ltd 9a Full Bench of this Commission said, in respect of s 226(a), that “a consideration of the public interest will involve something that is distinct from the interests of the persons and bodies covered by the agreements”,10 and that the interests of the persons or bodies covered are considered separately from the question of the public interest under s 226(b).11 The fundamental requirement under s 226(b) is to consider whether termination is appropriate in all the circumstances, which requires a different and arguably broader exercise of evaluative judgment than the requirement in s 226(a) to be satisfied that termination would not be contrary to the public interest. There will be some matters that are relevant to one of the two statutory criteria for termination but not the other and, even where a matter is potentially relevant to both, it may apply itself in a different way because of the distinct nature of the criteria.
[20] In this appeal, Wollongong Coal has contended that the fact that the parties had not engaged in any discussions or negotiations concerning future employment arrangements at the Russell Vale Colliery could not support a conclusion that termination of the 2011 Agreement would be contrary to the public interest. It contended that was a matter which only concerned the interests of the parties and, in circumstances where there were no employees, such negotiations would be futile because they could not lead to a new enterprise agreement under the FW Act or variations to the 2011 Agreement. Those arguments are not without merit. However because of the circumstances we have earlier described Wollongong Coal was not able to articulate these arguments in connection with s 226(a) at first instance and, as a result, was denied the opportunity of a successful outcome.
[21] For these reasons we consider that permission to appeal should be granted and the appeal should be upheld. We consider that the appropriate course is to refer Wollongong Coal’s application for termination of the 2011 Agreement for re-determination by another member of the Commission pursuant to s 607(3)(d). This is preferable to us re-determining the application because new circumstances relevant to the application may have arisen since the last hearing over six months ago which might require that further evidence be adduced. 12
[22] Although we have found that the conclusions in paragraphs [63] and [64] of the Decision were reached in a way which involved a denial of procedural fairness to Wollongong Coal, we do not disagree with the general sentiment expressed in those paragraphs that discussions between Wollongong Coal and the CFMMEU concerning future employment conditions which would support the re-opening of the Russell Vale Colliery would be desirable. It may be accepted that such discussions could not give rise at this time to a new enterprise agreement or a variation to the 2011 Agreement because no employees are engaged. However that does not mean they would be futile: they could lead to a draft of a new agreement to be proposed when employees are engaged, or a template for an enterprise agreement which a contract labour supplier could use, or standard-form employment contracts for future use, or undertakings which Wollongong Coal could offer in return for a consent termination of the 2011 Agreement. Accordingly we will direct that the member who is to re-determine the application shall first make endeavours to have the parties confer in relation to Wollongong Coal’s application.
Orders
[23] We order as follows:
(1) Permission to appeal is granted.
(2) The appeal is upheld.
(3) The Decision ([2019] FWCA 216) is quashed.
(4) Wollongong Coal’s application for termination of the 2011 Agreement (AG2018/2488) is referred to Commissioner Riordan for re-determination upon the evidence already admitted and such further evidence as the Commissioner may determine to admit.
(5) The Commissioner is directed to make endeavours to have the parties confer in relation to the Wollongong Coal’s application prior to any further hearing and determination of the matter.
VICE PRESIDENT
Appearances:
GJ Hatcher SC and K Brotherson of Counsel for Wollongong Coal.
A Walkaden for the Construction, Forestry, Maritime, Mining and Energy Union.
Hearing details:
2019.
Sydney:
20 March.
Printed by authority of the Commonwealth Government Printer
<PR708265>
1 [2019] FWCA 216
2 AE889393
3 Transcript, 11 October 2018 PNs 1277-1278
4 Transcript, 11 October 2018 PN 1346
5 Transcript, 11 October 2018 PNs 1575-1579
6 [1936] HCA 40, 55 CLR 499 at 505
7 See Re Building Workers' Industrial Union of Australia; Ex parte Gallagher [1988] HCA 4, 76 ALR 353, 62 ALJR 81
8 Haoucher v Minister for Immigration & Ethnic Affairs [1990] HCA 22, 169 CLR 648 per Deane J at 652
9 [2015] FWCFB 540; 249 IR 55
10 Ibid at [129]
11 Ibid at [131]
12 We note in particular that operations at Wollongong Coal’s Wongawilli Colliery have also ceased since the hearing of the appeal.
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