Wollongong Coal Limited T/A Wollongong Coal

[2020] FWC 1844

[2020] FWC 1844

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.225 - Application for termination of an enterprise agreement after its nominal expiry date

Wollongong Coal Limited T/A Wollongong Coal
(AG2018/2488)

COMMISSIONER RIORDAN SYDNEY, 7 APRIL 2019

Application for termination of the NRE No 1 Colliery Workplace Agreement 2011.

[1] On 7 June 2018, Wollongong Coal Limited (the Applicant) lodged an application with the Fair Work Commission (the Commission) to terminate the NRE No1 Colliery Workplace Agreement 2011 (the Agreement), in accordance with section 225 of the Fair Work Act 2009 (the Act). The Construction, Forestry, Maritime, Mining and Energy Union (the Respondent) opposed the application.

[2] The Agreement covers the operation of the Russell Vale Coalmine (Russell Vale), a coking coal mine in the Illawarra region of NSW. The nominal expiry date of the Agreement was 30 September 2015.

[3] On 15 January 2018, Senior Deputy President Hamburger determined to dismiss the application: –

“[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.” 1

[4] On appeal, a Full Bench upheld the appeal, quashed the decision of the Senior Deputy President and remitted the application to me for conciliation and determination.

“We order as follows:

…

(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.” 2

[5] The evidence from the first Hearing includes witness statements from the Applicant’s Company Secretary, Mr Sanjay Sharma as well as from the Respondent’s District Vice President, Mr Robert Timbs, former Lodge President, Mr Dean Conkey and the Respondent’s National Research Director, Mr Peter Colley.

[6] At the Hearing on 13 November 2019, the Applicant relied upon witness statements from Mr Mitch Jakeman, the Applicant’s Chief Executive Officer and Mr Wayne Sly, its Chief Operating Officer. I invited Mr Sharma and Mr Timbs back to answer questions in relation to their earlier evidence.

[7] In accordance with section 590 of the Act, I sourced a copy of the 2019 Annual Report. I invited the Applicant to nominate an individual to answer a number of questions in relation to this report. I was surprised that Mr Jakeman volunteered to attend the Commission for this purpose on the basis that Mr Jakeman had only been employed for the last two months of the 2019 reporting period. This Hearing occurred on 28 January 2020.

Background

[8] Russell Vale ceased mining coal in August 2015. Since this time, the mine has been on “care and maintenance” with several staff employees maintaining the integrity of the mine. No employees covered by the Agreement have been employed at Russell Vale since September 2015.

[9] The principal reason Russell Vale was placed on “care and maintenance” was due to the fact that the Applicant had removed all of the coal it had been approved to mine in accordance with its lease. Also, operations at Russell Vale extracted coal from under one of Sydney Water’s catchment areas. Apart from the expiration of the lease, concerns have been raised that the Applicant’s most productive and preferred mining method, i.e., longwall mining, was producing cracks in the surface. This resulted in water leaking from the catchment area into the mine.

[10] The Applicant has applied to the New South Wales Department of Planning and Environment (the Department) for approval of a revised Underground Extraction Plan (UEP). The Applicant is seeking the approval of a new lease to mine additional coal by using a more labour-intensive method of mining known as ‘bord and pillar’. The Applicant believes that ‘bord and pillar’ mining is a more environmentally suitable method of extraction than longwall mining and will not result in surface cracking. The Applicant claims that the mine is uneconomical if has to switch to ‘bord and pillar’ mining yet maintain its current Agreement.

[11] In what appears to be a unique scenario not contemplated by the Parliament, the Applicant is unable to re-negotiate the Agreement because it has no employees. It is also unable to negotiate a new deal with the Respondent because Russell Vale is not a greenfield site. The Applicant believes that its only option to make Russell Vale more efficient is to terminate the Agreement.

Statutory Provisions

[12] The statutory provisions which are relevant to enterprise agreements are contained in Part 2-4 of the Act. An application seeking to terminate an agreement, after the nominal expiry date of the agreement must satisfy the following:

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.

[13] The objects of the Act are set out in section 3:

3 Object of this Act

The object of this Act is to provide a balanced framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion for all Australians by:

(a) providing workplace relations laws that are fair to working Australians, are flexible for businesses, promote productivity and economic growth for Australia’s future economic prosperity and take into account Australia’s international labour obligations; and

(b) ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions through the National Employment Standards, modern awards and national minimum wage orders; and

(c) ensuring that the guaranteed safety net of fair, relevant and enforceable minimum wages and conditions can no longer be undermined by the making of statutory individual employment agreements of any kind given that such agreements can never be part of a fair workplace relations system; and

(d) assisting employees to balance their work and family responsibilities by providing for flexible working arrangements; and

(e) enabling fairness and representation at work and the prevention of discrimination by recognising the right to freedom of association and the right to be represented, protecting against unfair treatment and discrimination, providing accessible and effective procedures to resolve grievances and disputes and providing effective compliance mechanisms; and

(f) achieving productivity and fairness through an emphasis on enterprise‑level collective bargaining underpinned by simple good faith bargaining obligations and clear rules governing industrial action; and

(g) acknowledging the special circumstances of small and medium‑sized businesses.

(my emphasis)

[14] Section 171 of the Act provides for the objects of the Act in relation to enterprise agreements:

171 Objects of this Part

The objects of this Part are:

(a) to provide a simple, flexible and fair framework that enables collective bargaining in good faith, particularly at the enterprise level, for enterprise agreements that deliver productivity benefits; and

(b) to enable the FWC to facilitate good faith bargaining and the making of enterprise agreements, including through:

(i) making bargaining orders; and

(ii) dealing with disputes where the bargaining representatives request assistance; and

(iii) ensuring that applications to the FWC for approval of enterprise agreements are dealt with without delay.

Background of the Applicant

[15] The Applicant was first listed on the Australian Stock Exchange on 10 July 2007, in the name of India NRE Minerals Limited. On 1 February 2008, its name was changed to Gujarat NRE Minerals Limited. On 24 February 2010, the name was changed to Gujarat NRE Coking Coal Limited. On 15 November 2013, Jindal Steel & Power (Mauritius) Limited, a wholly owned subsidiary of Jindal Steel & Power Limited, became the majority shareholder in the Applicant (they were previously the minority shareholder). On 25 February 2014, the Applicant changed its name to Wollongong Coal.

[16] In September 2013, the Construction, Forestry, Mining and Energy Union (CFMEU) (as it then was) notified the Commission of a dispute in relation to the non-payment of wages to employees. It is not disputed that the employee’s wages were not paid for six weeks . The employees’ superannuation entitlements were not paid for thirteen months. I convened a number of Conferences back in 2013 in an attempt to resolve this dispute.

Relevant Industrial Precedent

[17] Both parties referred me to the Full Bench decision in ReAurizon Operations Limited; Aurizon Network Pty Ltd; Australia Eastern Railroad Pty Ltd[2015] FWCFB 540 (Aurizon), which provides a useful summary in relation to the issues pertaining to section 226 of the Act.

“[129] Section 226(a) requires a consideration of whether termination of the agreements is not contrary to the public interest. It seems to us 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. This distinction seems to be reflected in the structure of s. 226. The question of how the public interest is to be assessed was considered by a Full Bench of the Australian Industrial Relations Commission in Re Kellogg Brown and Root, Bass Strait (Esso) Onshore/Offshore Facilities Certified Agreement 2000. The decision in Kellogg Brown concerned an application to terminate a certified agreement pursuant to s. 170MH of the WR Act. The Full Bench observed:

“The absence of any reference to the interests of the negotiating parties in s.170MH(3) is significant. It follows that the views of persons bound by the agreement may be relevant to the exercise of the discretion if they shed light upon the effect of termination on the public interest, but they should not be given any independent weight. To do so would be to import into the application of the section something which on its proper construction it does not include. The notion of public interest refers to matters that might affect the public as a whole such as the achievement or otherwise of the various objects of the Act, employment levels, inflation, and the maintenance of proper industrial standards. An example of something in the last category may be a case in which there was no applicable award and the termination of the agreement would lead to an absence of award coverage for the employees. While the content of the notion of public interest cannot be precisely defined, it is distinct in nature from the interests of the parties. And although the public interest and the interests of the parties may be simultaneously affected, that fact does not lessen the distinction between them.”

….

[151] Section 226 of the Act is part of the simple, flexible and fair framework, established by Part 2–4 to which the objects in s. 171 relate. There is nothing inherently inconsistent with the termination of an enterprise agreement that has passed its nominal expiry date and collective bargaining in good faith. There is nothing incompatible with the termination of such an agreement and the continuation of collective bargaining that has commenced in good faith at an enterprise level for an enterprise agreement that delivers productivity benefits. The framework that is established by Part 2–4 provides for applications and orders to be made for the termination of an enterprise agreement that has passed it nominal expiry date. It is not too difficult to suppose that such an agreement in particular circumstances might no longer deliver productivity benefits, or that such an agreement has never done so. It is not too difficult to suppose that the termination of such an agreement might better support good faith bargaining for an agreement that delivers productivity benefits at the enterprise level.”   

….

[164] The circumstances in which the agreements were made is a significant factor. As part of the privatisation processes the Queensland government required Aurizon to provide a three year employment guarantee and formalise that in the enterprise agreements. The pressure exerted by the government led to other concessions to claims that Aurizon would not have otherwise agreed on. The three year period expired some 18 months ago, yet they continue to apply, and to restrain Aurizon’s capacity to conduct its business more effectively and productively.

[165] Many of the provisions sought to be removed or varied are not common in most enterprise agreements. They restrict Aurizon in making business changes that it wishes to make in response to a competitive market situation. The restrictive provisions restrain Aurizon’s capacity to effectively manage its labour resource needs. Aurizon has endeavoured to negotiate changes to those provisions but the lengthy and comprehensive negotiations have not led to an agreement. Many of the changes sought by Aurizon in the negotiations seem to us to be rationally based. We readily understand its desire that its now private sector business no longer be restrained by provisions that were effectively imposed through the privatisation process. We do not think the changes proposed, objectively viewed, involve exploitation or unfairness in the terms and conditions of employment of Aurizon employees.”  3

(my emphasis)

[18] The Full Bench also endorsed the decision in Re Kellogg Brown and Root, Bass Strait (Esso) Onshore/Offshore Facilities Certified Agreement 2000 (2005) 139 IR 34 (Kellogg Brown):

“[130] After considering the decision in Re Queensland Electricity Commission; Ex parte Electrical Trades Union of Australia, the Full Bench in Kellogg Brown said:

“It is clear from this passage that the ascertainment of the public interest may involve balancing countervailing public interests. That the Commission should take all of the circumstances into account is made clear by Dawson J in Re Australian Insurance Employees Union; Ex parte Academy Insurance Pty Ltd [(1988) 78 ALR 466 at 467]. These authorities provide useful general guidance in the application of the test in s. 170MH(3). They illustrate the types of interests which can be properly described as public interests and confirm the breadth of circumstances which may be relevant to the ascertainment of those interests.

It should be emphasized that the Commission's consideration of the public interest for the purpose of s. 170MH(3) is directed to the consequences of terminating the agreement. In a given case, some consequences will be clearly predictable, others will be less so. For the most part the Commission should be guided by the likely foreseeable consequences of termination rather than speculation about possible consequences.” 

[131] Section 226, unlike s. 170MH(3) of the WR Act, clearly requires the interests of the persons or bodies covered by an agreement to be taken into account.  Those interests are considered separately from the question of the public interest, although it is accepted that these interests may nevertheless be similarly affected” 4

(My emphasis)

[19] A Full Bench in Construction, Forestry, Maritime, Mining and Energy Union v AGL Loy Yan Pty Ltd t/a AGL Loy Yang [2017] FWCFB 1019 outlined the relevant principle with respect to the appropriate exercise of discretion under s. 226 of the Act.

“[29] The proper approach to be taken in an appeal from a decision made under s.226 of the FW Act was described in the Full Bench decision in Construction, Forestry, Mining and Energy Union v Peabody Energy Australia PCI Mine Management Pty Ltd19 as follows:

“[16] The nature of the exercise of power under s.226 was explained by the Full Bench in AWX Pty Ltd ([2013] FWCFB 8726) as follows:

‘[18] We begin an examination of this aspect by noting that the application of s.226 of the Act is an exercise in discretion by the decision maker. The provision requires that an instrument must be terminated if the Commission is satisfied that it is not contrary to the public interest and after taking account of all the circumstances including the views of the employees, each employer, and each employee organisation (if any), covered by the agreement; and the circumstances of those employees, employers and organisations including the likely effect that the termination will have on each of them.’

[17] In identifying that s.226 required the exercise of a discretion, the Full Bench in AWX Pty Ltd referred to the following passage in the High Court decision in Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission ([2000] HCA 47; (2000) 203 CLR 194) (footnotes omitted):

‘[19] "Discretion" is a notion that "signifies a number of different legal concepts". In general terms, it refers to a decision-making process in which "no one [consideration] and no combination of [considerations] is necessarily determinative of the result." Rather, the decision-maker is allowed some latitude as to the choice of the decision to be made. The latitude may be considerable as, for example, where the relevant considerations are confined only by the subject matter and object of the legislation which confers the discretion. On the other hand, it may be quite narrow where, for example, the decision-maker is required to make a particular decision if he or she forms a particular opinion or value judgment.’

[18] Section 226 involves the exercise of a ‘narrow’ discretion of the type described in the last sentence of the above passage. Notwithstanding this, it remains the case that the evaluative assessments required by s.226(a) and (b) allow a degree of latitude on the part of the decision-maker as to the conclusions to be reached. For the reasons explained in Coal and Allied Operations, this means it is necessary in an appeal from a decision made under s.226 to demonstrate error in the decision-making process (ibid as [21]. The types of errors that might be demonstrated are those identified in House v The King ([1936] HCA 40; (1936) 55 CLR 499 at 505 per Dixon, Evatt and McTiernan JJ).”” 5

Brief Outline of Submissions

[20] The Applicant’s evidentiary case can be summarised by the following statements, which the Applicant’s representative referred to as ‘indisputable facts’:  6

•  The Agreement was approved on 10 November 2011.

•  The nominal expiry date of the Agreement was 30 September 2015.

•  Mining at Russell Vale ceased in August 2015.

•  No employee has been covered by the Agreement since September 2015.

•  The Applicant cannot make a new agreement or vary the current agreement without employees.

•  There are contractors working in the industry who are lawfully engaging staff at less than the wage rates provided for by the Agreement.

•  The resumption of mining at Russell Vale is dependent on approval of the new UEP by the Department.

•  Approval is being sought for five years using a ‘bord and pillar’ mining method.

•  All other mines in the Illawarra region use a longwall mining method.

•  Compared to longwall mining, ‘bord and pillar’ mining is more labour intensive.

•  Russell Vale does not have a coal washery and has no plans to install a coal washery. As a result, the Applicant must sell their coal at a significantly lower rate compared to its competitors.

•  The types of coal in the Illawarra region vary. Russell Vale is mining a lower grade coking and thermal coal product.

•  The Applicant has a chequered past. However, the company is turning itself around.

•  The Applicant’s only other operation, the Wongawilli Mine, was placed on care and maintenance on 30 May 2019.

•  Hamberger SDP rejected the Application on 15 January 2019.

•  Hamberger SDP’s judgement was overturned on appeal.

•  The Full Bench directed the Applicant and the CFMEU to enter into discussions concerning a new agreement.

•  The discussions occurred and an agreement was not reached.

•  If the Applicant gets approval for mining, it will need to undertake a further $19 million capital investment before mining can recommence.

•  The Applicant needs to identify to its investors that it can operate in an efficient and cost-effective manner.

[21] The Respondent submitted that:  7

•  The Agreement cannot be blamed for the poor financial position of the company.

•  The Applicant has only made a profit once in the last 14 years.

•  The Respondent opposes the termination of the Agreement.

•  The Agreement is a typical coal mining enterprise agreements in the local area.

•  The terms of the Agreement were freely agreed to by the parties.

•  The Agreement is not overly restrictive or oppressive on the company.

•  The Agreement is not a barrier to mining recommencing.

•  The barrier to the recommencement of mining is the fact that the company does not have approval to mine.

•  The former employees have an interest in the Agreement not being terminated.

•  The former CEO guaranteed that the “increase in hands clause” would be able to be utilised when and if the mine began to re-operate.

•  The undertaking that the company offered is not substantially different to the Award.

•  The Company has in the past failed to pay its employees, its taxes as well as the levies and administration fees required by the resource regulator.

Summary of Evidence

Mr Sharma

[22] Mr Sharma has been the Company Secretary of the Applicant since 1 November 2004.

[23] In relation to the Applicant’s financial position Mr Sharma claimed:

“26. In 2011, the Company was preparing to transition longwall mining at the Russell Vale Colliery, with longwall mining to commence in 2012. The Company's expectation in 2011 was that the use of longwall mining techniques would steadily increase production to approximately 3 million tonnes per annum by 2015.

27. At the time that the 2011 Agreement was made in late 2011, the Company was investing heavily in plant, property and equipment due to the positive operating and financial circumstances and outlook. This investment was funded by increased debt, reinvestment of earnings and shareholder equity. The Company's liabilities for bonds and loans increased significantly in this period.” 8

[24] Mr Sharma claimed that the new majority shareholders invested $500 million between 2013 and 2015 to cover capital and operating expenditure. Further, the Applicant was awaiting approval from the Department for a UEP at the time of placing the mine into ‘care and maintenance’.

[25] Mr Sharma stated that following rejection of this UEP in 2017, the Applicant sought relief, albeit unsuccessfully, in the Supreme Court of New South Wales. As a result, the Applicant decided to revise and resubmit its UEP, changing its proposed mining method from longwall to “bord and pillar” in order to “reduce the potential groundwater, biodiversity, heritage and infrastructure effects and in order to avoid any prospect of subsidence.” 9

[26] Mr Sharma claimed that the Agreement is a barrier to it recommencing operation at Russell Vale (if approved), due to its high cost base and restrictive practices. Mr Sharma identified the following issues:  10

•  Wage rates above the award;

•  The No 1 Colliery Bonus scheme which requires the applicant to pay a bonus based on the average bonus for the previous calendar year of the Southern District Coal Mines;

•  An attendance incentive (based on how many days sick leave are taken);

•  The payment of all overtime at double the ordinary rate of pay;

•  A requirement to pay union members to attend a union meeting once per quarter;

•  A requirement that contractors paid by the applicant be paid the same conditions as in the 2011 agreement (unless they have their own enterprise agreement recognised by the CFMEU).

•  Restrictions on the use of fixed term employees;

•  Restrictions on allowing employees to return to work with less than a 10 hour break between shifts;

•  Personal leave in excess of the award provisions;

•  Restrictions on the process to be followed in the case of retrenchments and additional retrenchment pay;

•  Provisions requiring the applicant to give preference to previously retrenched workers when filling positions;

•  Scope for the unilateral referral of disputes to arbitration and the wide scope of the dispute settlement procedure;

•  Restrictions on the way in which poor attendance is managed.

[27] Mr Sharma agreed that the Applicant suffered a loss of $73 million for the year ended 31 March 2018. I note that the accumulated losses, at this date, for the consolidated company were $989,429,000 and that the total equity was negative $80,287,000.

[28] Mr Sharma admitted that the Applicant had issues paying employees in 2013 and had recently been prosecuted by both the Australian Taxation Office (ATO) and the New South Wales Resource Regulator for the non-payment of taxes and fees. In defence of the Applicant, Mr Sharma testified:

“The Company has also entered into a repayment plan with the ATO and an Enforceable Undertaking with the NSW Resources Regulator. It continues to meet its obligations under both arrangements. The Company is resolving these issues to position itself to recommence production at the Russell Vale Colliery and establish itself as a productive and viable Company for the future. It should not be criticised for that.” 11

[29] Mr Sharma stated that:

“The Company is required to optimise its profitability in the interest of its shareholders. This includes JSPL. JSPL will not continue to support the Company if it is unable to operate in a commercial and cost efficient manner” 12

[30] Mr Sharma testified that the staff employees who continue to work at Russell Vale:

“Almost all of these employees were employed in the same roles when the employees covered by the Agreement were retrenched in September 2015, and remain employed in these roles at the date of this statement.” 13

[31] In response to a question from me, Mr Sharma advised that the bonus scheme for staff was stopped in 2015. Further, he could not recall any wage increases for staff since 2015 but that he was unaware of any plans to reduce the salaries of the staff employees.

[32] Mr Sharma acknowledged that the statement at clause 7.1 of the Agreement, which says:

“NRE employees will be safe, honest and fair in all their dealings” 14

applies to all employees of the Applicant. Mr Sharma stated that he did not think it was fair that ongoing staff employees will continue to receive the 2015 rate whereas any new employees, whose classifications are the same as those covered by the Agreement, would receive a lower rate than the rate which applied in 2015.

[33] Mr Sharma acknowledged that he appeared in proceedings before me in 2013 and that the Applicant had experienced significant financial difficulties around that time. Further, commitments given in the Commission in relation to the payment of wages provided by the Applicant had not been honoured. However, Mr Sharma claimed that the Applicant had been “behaving quite well over the last 6 to 8 months.”

Mr Jakeman

[34] Mr Jakeman commenced as CEO of the Applicant in February 2019. Mr Jakeman advised that he was engaged to reopen Russell Vale.

[35] Mr Jakeman claimed that the Agreement is cost prohibitive and too restrictive. Mr Jakeman stated that unless the Agreement is terminated, even if the Applicant is successful in obtaining approval from the Department, he will recommend to the Applicant’s Board to not reopen the mine.

[36] Mr Jakeman stated that, based on the Applicant’s modelling, if subject to the Agreement and operating a ‘bord and pillar’ method, the Applicant would not make a profit until the fifth year of any new approved lease.

[37] Mr Jakeman was highly critical of the wage rates contained in the Agreement and the District Bonus Scheme, which Mr Jakeman described as a car park bonus, i.e. you get paid the bonus just for turning up to work. Mr Jakeman also advised that the costs to undertake the remedial work had increased from $15 million to $19 million, since the first Hearing.

[38] In response to a question from the Commission, the following discourse occurred:

“You've indicated that the mine cannot function profitably on the existing rates of pay and conditions of employment?---Correct.

That obviously means that there will be a reduction? ---Yes.

If there is a reduction for the production employees moving forward, should there also be - wouldn't it only be fair to also - for there to be a reduction in the staff rates of pay, going forward? ---That's already occurred.

Sorry?---It's already occurred Mr Commissioner.  The people that are already there, have been at a market level agreed age ago.” 15

[39] Mr Jakeman advised that this application is becoming time critical on the basis that he expects a positive response from the Department in the first or second quarter of 2020 and there is a need to commence the necessary refurbishment works to make the mine operational.

[40] Mr Jakeman stated that the Board of Jindal Steel and Power Limited (JSPL), the parent company of the majority shareholder, would have to make a decision to spend the $19 million to undertake refurbishment work to make the mine operational. To date, no decision had been forthcoming in relation to this work.

[41] Mr Jakeman testified that he will only comply with the alleged commitment made by the former CEO to re-employ employees when Russell Vale recommenced operations if it is in writing, signed and witnessed by both parties.

[42] Mr Jakeman also provided an Undertaking to the Commission which detailed the terms and conditions of employment that the Applicant is willing to offer any new employees that are directly employed at Russel Vale.

[43] Following two private conferences, which were conducted after the conclusion of the Hearing on a without prejudice basis, the Undertaking was modified to include actual rates of pay and a provision which provides for annual wage increases.

Mr Wayne Sly

[44] Mr Sly is the Chief Operating Officer of the Applicant and commenced employment in 2017. Mr Sly testified that he has oversight of the day-to-day running of the Applicant.

[45] Mr Sly advised that the Applicant submitted its revised UEP to the Department on 17 July 2019.

[46] Mr Sly emphasised the need to operate the mine in a cost-effective and productive manner:

“The Company needs to demonstrate to investors that it can operate the mine in an efficient and productive manner to secure that funding. The major shareholder continues to maintain support of the current Care and Maintenance activities and business initiatives, such as focuses on compliance and the reduction of historic debts with local and regional suppliers.” 16

[47] Mr Sly outlined the operating system he would employ to recommence mining at the Russell Vale mine:

“Absent the restrictions in the 2011 EA, the mine can establish an operating system that is more suited to the lower capital, labour intensive bord and pillar mining method. The recommencement of mining would take place in the following way:

a) The Company would recruit or engage an initial crew of approximately 12 to 14 personnel, including supervisors.

b) The crew will then complete the introduction to site, site inductions and familiarisation with the mine. This will include site appointments to operate equipment and other specified tasks. Further training will follow to cover the site’s statutory managements system requirements and operating procedures. Specific training needs will be identified and addressed by the mine’s Training Scheme. This could continue for a period until competency and appointment is completed. All initial inductions and site appointments will be completed on weekday dayshift.

c) The initial crew will work a Monday to Friday day shift roster on the mine restart work program, primarily installing and commissioning equipment and ancillary tasks to get the mine ready to produce.

d) The Company will then start recruiting for, or engaging, a second crew. Again, this crew would follow the same start up process. That crew could then continue on dayshift to assist the work program. At a later time as more people are bought on board, personnel will be moved to cover Monday to Friday operations around the clock as more personnel are started in accordance with the work program. Shift rotation will be considered to support ongoing training and development requirements.

e) This process will repeat until the Company is able to operate three mining units over the 24 hour day cycle, for example on day, afternoon and night shifts. Weekend rosters will be in place with small crews addressing statutory and operational tasks initially and would be reviewed over time.

As outlined in paragraphs 89 to 95 of Mr Sharma’s statement of 9 August 2018 (Exhibit 1), the 2011 EA does not permit the Company to re-open the Russell Vale Colliery in the above way.” 17

[48] Mr Sly advised that experienced mineworkers at Wongawilli were paid approximately $38 per hour. I note this rate is higher than the current Agreement rate of $37.78 per hour and higher than the $36 per hour proposed in the Undertaking.

Mr Timbs

[49] Mr Timbs gave evidence in the earlier proceeding and was invited back to answer questions in the current proceeding. Mr Timbs is the Vice President of the South Western District Branch of the Mining and Energy Division of the CFMMEU.

[50] At the time of his statement, Mr Timbs advised that there were five working coal mines in the Southern District of New South Wales (the District), namely, Appin Mine (owned by South 32), Dendrobrium Mine (owned by South 32), Tahmoor Mine (owned by Simec Mining), Metropolitan Mine (owned by Peabody) and Wongawilli Mine (owned by the Applicant, Wollongong Coal). Mr Timbs stated that all the working mines in the Southern District of New South Wales produce Metallurgical Coal, known as Hard Coking Coal.

[51] Unlike any other witness in the proceedings, Mr Timbs was involved in the negotiations for the Agreement in 2011. Mr Timbs advised that the only two provisions that were the subject of any significant discussion during the negotiation were the wage rates and the bonus scheme. Further, Mr Timbs claims that the during the negotiation of the Agreement it was the Applicant who suggested the inclusion of the Attendance Incentive Payment.

[52] Mr Timbs advised that the District Average Bonus (which is calculated based on the amount of coal cut in the District rather than at a specific mine) was $454.29 per week. By comparison the minimum weekly bonus at Appin is a minimum of $500 per week. At Metropolitan the bonus has averaged approximately $500 per week over the previous 12 months.

[53] Mr Timbs testified that the Agreement, whilst different in some areas, is similar to other coal mining enterprise agreements in the District and was a typical coal mining enterprise agreement for the Illawarra region.

[54] Mr Timbs testified that the Applicant failed to pay wages to its employees on numerous occasions in 2013. On the first occasion, the payment was only one day late. On the second occasion, the payment was one week late. On the third occasion, the Applicant failed to pay wages for a six-week period during September and October but the employees continued to work as normal throughout this period.

[55] Mr Timbs advised that in October 2013, the ATO had garnisheed the Applicant’s bank accounts. The Applicant’s company announcement to the Australian Stock Exchange states:

“ATO issued a Garnishee order on the Company’s bank account on 2nd October 2013 due to unpaid tax liabilities.” 18

[56] Mr Timbs provided the Commission a copy of the Enforceable Undertaking that the Applicant has entered into with the Department and provided a copy at attachment 7 of his witness statement.

[57] Mr Timbs’ advised that you would need to be an experienced mine worker to work in a ‘bord and pillar’ mine and that he is confident that the former employees of the Applicant have the necessary skills to work in a mine utilising a ‘bord and pillar’ process.

[58] Mr Timbs’ unchallenged and sworn evidence is that the former CEO of the Applicant gave a guarantee to the employees at a meeting in September 2015 that the Applicant would honour the “increased hands” provision of the Agreement. In response to a question from me, Mr Timbs, said;

“Thank you.  Mention is made in evidence that out there was a meeting in September 2015.  I think it was 17 September 2015 or thereabouts where 80 employees were made redundant?---Yes.

And that there was a commitment given by the applicant, that if these employees - or that the increase in hands clause would be applied if re-employment was to occur?---Yes.

Were you at that meeting?---I was.  Yes.

And who gave that commitment?---It was the CEO at the time and I can't recall his name right now.

Is that Mr Wright - somebody - is that his name?---He was the first CEO - - -

He was the CEO?---Yes.  He was the first CEO that come on after Gujarat.

Right?---Yes.

And was there any time limit placed on that commitment?---No.  It was a bit of a - obviously a state of the nation.  There was questions asked off the floor and the company adhered to the agreement and put the guys back on.  They made a commitment and said, "Yes, of course.  We will put you back on.  In the future, we will start mining again.  When we do, we will adhere to the increase in hands clause."

Were you aware, at that point in time, that the agreement was due to expire in a fortnight?---Yes.

And so you assumed that the company was aware.  Were you aware that the company was aware - - -

MR BROTHERSON:  Commissioner, I understand your powers to enquire, but I don't think the witness can make an assumption of what the company - - -

THE COMMISSIONER:  Yes.  That's right.

Had you had discussions with the company in relation to the fact that the agreement was going to expire in two weeks' time?---Yes.  Look, they were aware of it and there was no talk of termination of employment - sorry, termination of enterprise agreement that - I gathered from conversations - other conversations that I'd had with the CEO that I was just going to leave the enterprise agreement.” 19

(My emphasis)

[59] Mr Timbs confirmed that it is in the best interest of the CFMMEU for Russell Vale to be re-opened.

[60] Mr Timbs claimed that terminating the Agreement would result in employees being paid at rates below the current Agreement. Mr Timbs argued that this outcome would set a “nasty precedent in the area for this industry because the other employers in the district would want the same deal.”

[61] Mr Timbs indicated that there were approximately 1200 employees who are directly employed by the other mines in the District.

Mr Dean Conkey

[62] Mr Conkey provided a witness statement in the first proceeding. Mr Conkey was not cross-examined on his statement.

[63] Mr Conkey commenced employment with the Applicant in August 2012 as a mechanical tradesperson and was paid as a level 4 – Experienced Mineworker.

[64] Mr Conkey was the Lodge President for the final 6 months of his employment and had served as Lodge Vice President for the 3 months prior to his election.

[65] Mr Conkey testified that:

“8. The final few years of my employment at the Mine was traumatic and difficult. The workers and their families paid a very heavy price as a result of many poor decisions taken by management. In that final few years, there was a very difficult period of about 6 weeks in September 2013 where the workers continued to work, but simply were not paid wages. At around this time, superannuation was not paid to the entire workforce for a period of about 13 months. After considerable heartache and hardship, the non-payment of these very basic employee entitlements were fixed up.

9. Successive waves of redundancies then occurred at both mines over the following years.

10. The trauma caused by these events was very real. At their extreme, these events resulted in suicide, as well as the breakdown of marriages and other relationships. I know this because I have provided support to many workers affected by these events.” 20

(My emphasis)

[66] Mr Conkey’s further evidence goes to the issues of s. 226 of the Act and the increased hands clause where he states:

“11. I have kept in touch with many former workmates. A significant number are so scarred by their experience of working for Wollongong Coal that they have vowed never to work in the coal industry again. Many of these people have sought work in construction, manufacturing and the like. Even if offered, these people would not accept a job back with Wollongong Coal.

12. Of those former workmates that I have kept in touch with, I estimate that about 50% have found work in the coal industry. For all bar a few, these jobs are all casual jobs with a labour hire company with inferior wages and conditions to the job with Wollongong Coal.

13. After being made redundant, I have been able to find another job. I am now employed on a casual basis and working for a labour hire company in another coal mine in the Southern District. I am now earning less than I did when I was working for WDS back in 2011. I am now earning less but rostered to work more hours than my previous job with Wollongong Coal. I also don't receive the benefits of permanent employment - such as annual leave, personal leave and the like - and also have almost no job security and no entitlement to redundancy pay.

14. I would like to be offered my job back with Wollongong Coal.

15. Only 1 former workmate is now employed on better wages and conditions that their previous job with Wollongong Coal.” 21

(My emphasis)

Mr Peter Colley

[67] Mr Colley provided a witness statement in the first proceeding. Mr Colley was not required for cross examination.

[68] Mr Colley is the National Research Director for the CFMMEU, Mining and Energy Division. Mr Colley holds a Masters in Economics with Honours from the University of Sydney and a Bachelor of Arts with Honours also from the University of Sydney. Mr Colley states that one of his primary duties is to analyse the performance of individual companies in the mining and energy industries.

[69] Noting that Mr Colley’s witness statement was signed on 18 September 2018, Mr Colley claimed:

“9. Since mid 2016 there has been a large increase in coal prices - though it has been volatile. The price recovery has been largest for the coking /met coal in which mines in the lllawarra specialise (See Figure 5.1, Resource and Energy Quarterly, December issue).

10. The significant and sustained increase in the coal price means that it is simply wrong to suggest that the coal industry is in a downturn or decline.

11. With very few exceptions, almost all companies operating coal mines in Australia are making a very healthy profits from their Australian coal operations.” 22

Mr Mitch Jakeman – 28 January 2020

[70] The matter was re-convened on 28 January 2020. Mr Jakeman advised that following recent discussion with the department, he is confident that the Applicant will be provided with a new mining lease at Russell Vale.

[71] The Applicant tendered Appendix 1 of an interim financial report for the 9 month period ending in 31 December 2019 which had been provided to the Australian Stock Exchange and the Department. A full copy of this report provided to the Commission some days after the proceeding. For the purpose of Mr Jakeman’s examination and this decision, I have relied upon the audited 2019 Annual Report. I note that this interim report provided by the Applicant identified the on-going trend in the Applicant’s poor financial position.

[72] I took Mr Jakeman to the Auditor’s comment in relation to whether the Applicant is a going concern. The auditor noted:

“We draw attention to Note 3 (b) of the financial report, which indicates that the group incurred a net loss of $379,230,000 during the year ended 31 March 2019 and, as of that date the Group’s current liabilities exceeded its current assets by $925,496,000. These events or conditions, along with other matters as set forth in Note 3 (b), indicate that a material uncertainty exits that may cast significant doubt on the Group’s ability to continue as a going concern and therefore, the Group may be unable to realise its assets and discharge to its liabilities in the normal course of business. Our opinion is not modified in respect of this matter.” 23

[73] In response to the following question from me, Mr Jakeman said:

“Without disclosing board confidentiality and the like, if the auditor has concerns about the capacity of the organisation to continue as a going concern, why shouldn't the Fair Work Commission have those same concerns?---Because the other question that was asked was from the major shareholder, whether they would continue supporting Wollongong Coal, and that has now been stated in two reports and in the current nine-month report.  The matter has gone through to the DPIE and a whole range of other government instrumentalities.” 24

[74] Mr Jakeman acknowledged that the Applicant spends approximately $30 million annually just to pay interest to Jindal Steel and Power (Australia) Limited (JSPAL), a wholly owed subsidiary of the majority shareholder.

[75] In response to a question from Mr Brotherson, Mr Jakeman said:

“Could you just reaffirm for the Commission what is the purpose, as you understand it, of the loans that are being extended to Wollongong Coal?---I can't get to the bottom of that because there is a whole range of different entities foreign companies have for tax purposes, both in Australia and within their overseas jurisdictions.  That is not my responsibility to get into how they are set out.  All I want to know is I have the funds when I need them to do the work I need to do.” 25

(My emphasis)

[76] Mr Jakeman explained the volume of loss in the following manner.

“If I could ask you to turn to page 95, Mr Jakeman, which you went to before.  This is in relation to the borrowings of the company ?---Yes, sir.

You will see, comparing the 2018 to the 2019 figures, that the JSPAL term loan went from 822 million to 847, so that's 25 million.  The JSPML working capital loan went from 200 million to 300 million.  The JSPAL working capital went from 21 and a half million to 24 million.  What were you spending the money on?---I wasn't here.  I started work in February last year, sir.

I understand that.  Yes, all right?---So this was the previous year's reports. You were there for two months.  I accept that?---Thank you.

But as the CEO did you ask a question of the auditor as to - or the board as to what that money was spent on?---Yes.  They said business.  It would have been paying wages; it would have been paying for capital events for Wongawilli Coal; it would have been the improvement process - - -

You're talking about $130 million there, Mr Jakeman, and from memory Wongawilli produced coal to the value of - I think it was 68 or 69 million dollars off the top of my head?---62.

$130 million is a lot of wages.  That doesn't include - well, I suppose it might have been the restructuring of the debts.  Is that possible?---No, well, I don't know, Mr Commissioner.” 26

(My emphasis)

[77] From my pervious experience, I am aware of a number of useful ASIC guides for Directors. I provided Mr Jakeman with a copy of the ASIC Regulatory Guide 217 - Duty to prevent insolvent trading: Guide for Directors. Relevantly, page 21 of this guide states

“Table 2 sets out some of the factors that a reasonable person would take into account when determining whether a company is insolvent. Should the financial position of a company display one or more of these indicators of potential insolvency, a director should investigate the financial position of the company, and consider obtaining appropriate advice about the financial position of the company and how any financial difficulties can be addressed.”

“Table 2: Factors to take into account in considering whether a company is insolvent Indicators of potential insolvency

•  The company has a history of continuing trading losses.

•  The company is experiencing cash flow difficulties.

•  The company is experiencing difficulties selling its stock, or collecting debts owed to it.

•  Creditors are not being paid on agreed trading terms and/or are either placing the company on cash-on-delivery terms or requiring special payments on existing debts before they will supply further goods and services.

•  The company is not paying its Commonwealth and state taxes when due (e.g. pay-as-you-go instalments are outstanding, goods and services tax (GST) is payable, or superannuation guarantee contributions are payable).

•  Cheques are being returned dishonoured.

•  Legal action is being threatened or has commenced against the company, or judgements are entered against the company, in relation to outstanding debts.

•  The company has reached the limits of its funding facilities and is unable to obtain appropriate further finance to fund operations—for example, through: − negotiating a new limit with its current financier; or − refinancing or raising money from another party.

•  The company is unable to produce accurate financial information on a timely basis that shows the company’s trading performance and financial position or that can be used to prepare reliable financial forecasts.

•  Company directors have resigned, citing concerns about the financial position of the company or its ability to produce accurate financial information on the company’s affairs.

•  The company auditor has qualified their audit opinion on the grounds there is uncertainty that the company can continue as a going concern.

•  The company has defaulted, or is likely to default, on its agreements with its financier.

•  Employees, or the company’s bookkeeper, accountant or financial controller, have raised concerns about the company’s ability to meet, and continue to meet, its financial obligations.

•  It is not certain that there are assets that can be sold in a relatively short period of time to provide funds to help meet debts owed, without affecting the company’s ongoing ability to continue to trade profitably.

•  The company is holding back cheques for payment or issuing post-dated cheques.” 27

[78] Mr Jakeman agreed that the highlighted provisions above all applied to the Applicant.

[79] Mr Jakeman also advised that, contrary to his earlier evidence, the Department will not be dealing with the Applicant’s new mining lease application until at least October 2020.

Consideration

[80] I have taken into account all of the evidence and submissions which have been submitted by the parties through both proceedings. The fact that an issue has not been identified in this decision does not mean that it has not been considered.

226(a) – Public Interest

[81] In relation to the public interest, the Applicant submitted that while there were no adverse public interest considerations and several positive public interest considerations a determination with respect to section 226(a) of the Act was ultimately a matter for me to be satisfied and determine. The Applicant submitted that as well as 150 new jobs in the local area, the Enforceable Undertaking that it has signed with the New South Wales Regulator provides a benefit to the community by paying its Authorisation Fees 12 months in advance. The Applicant is also required to lease a property to a community preschool for one dollar per annum rather than 26,000 per annum for five years and it has committed to pay $5,000 annually to two local charities for five years. I have taken this into account.

[82] The Respondent submitted that it believes the public interest considerations to be a neutral factor. With respect to the public interest the Respondent stated:

“We say in relation to the public interest we don't base our opposition on the public interest.  We accept, as I say, that that part of the Act is cast in the negative, and we don't point to any negative public interest considerations that would arise if the agreement was terminated, but likewise we say that there are no positive public interest considerations that would result if the agreement was terminated.” 28

[83] The Respondent’s assertion that there are no positive public interest considerations was guided by the decision in Kellogg Brown, where at[27], the Full Bench stated:

“It should be emphasised that the Commission's consideration of the public interest is directed to the consequences of terminating the agreement.  In a given case some consequences will be clearly predictable.  Others will be less so.  For the most part the Commission should be guided by the likely foreseeable consequences of termination rather than speculation about possible consequences.” 29

[84] The Respondent submitted that to contemplate the positive public interest considerations such as jobs, taxation and community support would be speculative because the Applicant is yet to receive approval from the Department to recommence mining. I have taken this into account.

[85] I agree with Mr Timbs’ assessment that if the CFMMEU was to endorse a lower rate of pay in an enterprise agreement for Wollongong Coal, the other mining companies in the District would demand no less favourable treatment. Such an expectation is common in other competitive industries such as electrical contracting and construction where, from my experience, pattern bargaining by both industrial parties is the preferred outcome. This would result in lower wages being paid across the entire coal mining industry in the Illawarra at a time when most companies are enjoying profitable operations. I have taken this into account.

[86] For completeness, the final public interest consideration issue is that of climate change. The New Year bushfires on the South Coast were catastrophic, as they were in other locations around Australia. However, the issue of coal mining and its link to climate change is a matter for the Government, not the Commission. I note that the Applicant mines coking coal which is used in the steel making process and not thermal coal which is used to generate electricity. I have taken this into account.

[87] I am satisfied and find that the public interest is a neutral consideration in this matter. The termination of the Agreement does not guarantee that Russell Vale will be re-opened – that is reliant on a decision from the Department and a subsequent decision from the Board of Wollongong Coal.

Section 226(b) - Appropriate in all the circumstances

[88] Section 226(b) requires the Commission to take into account “all the circumstances” including the views of the employees, each employer and each employee organisation and the likely effect the termination will have on each of them.

Section 226(b)(i) – Views of Wollongong Coal

[89] The Applicant no longer wants to be covered by the Agreement and has provided detailed reasons for this position, which I have identified earlier. Put simply, the Applicant has submitted that the Agreement is too costly and restrictive. The Applicant further submitted that, even if approval to recommence mining is given by the Department, if the application to terminate the Agreement is not successful then it will recommend to its Board that Russell Vale not be reopened. I have taken this into account.

Section 226(b)(i) – Views of the employees

[90] There are no employees currently covered by the Agreement. I have taken this into account.

Section 226(b)(i) – Views of the CFMMEU

[91] The CFMMEU opposes the application. The detailed reasons for their opposition have been identified earlier in this decision. Put simply, the CFMMEU submitted that, based on the overwhelmingly poor financial situation the of Applicant, the termination of the Agreement will have little material difference to the financial position of the Applicant. I have taken this into account

Section 226(b)(i) – Other Issues

[92] I have taken into account that the Applicant is moving from long wall mining to ‘bord and pillar’ mining and that this process is more labour intensive.

[93] It has been held many times by this Commission that past conduct is an indicator of future performance. In a recent decision in relation to a right of entry application, Saunders DP said:

“One important consideration when undertaking the evaluative assessment of whether a person is a fit and proper person to hold an entry permit is the personal characteristics of the individual concerned in relation to the activities of a permit holder. Past conduct is relevant to the assessment of such personal characteristics” 30

[94] The same assessment applies equally to employers. The Applicant has previously failed to pay wages to its employee for a six-week period. In today’s industrial climate, I am confident that the Fair Work Ombudsman (FWO) would be pursuing the Applicant for some 750 breaches of the Agreement (150 employees not paid for 6 weeks.) Mr Sharma argued that this occurred when the current majority shareholder was only a minority shareholder. However, the Act does not abdicate noncompliance based on the relevant percentage of shareholdings. Even if it did, the now majority shareholder breached the Agreement and Trust Deed of the Superannuation Fund by not paying the employee’s superannuation entitlements for some thirteen months after the they took control of the Board. If faced with similar cashflow constraints in the future or the mine does not return to a viable operation, then it is foreseeable, based on the Applicant’s previous conduct, that the employees will not be paid their entitlements.

[95] Clause 18 of the Agreement contains a provision which has been identified as an “increase in hands” clause. Clause 18 states:

“When the Company decides to recruit employees, then ex NRE No 1 Colliery employees who were made redundant involuntarily shall be re-employed provided that:

•  The personnel covered by this agreement are those people who were ex-full-time employees of NRE No 1 Colliery.

•  The positions being recruited for are full time permanent.

•  The applicants have the necessary skills and experience for the position.

•  Applicants are capable of performing the inherent requirements of the job for which they apply. For this purpose, a medical examination will be required.” 31

[96] The unchallenged evidence of Mr Timbs is that the former CEO gave a commitment to the workforce that if the mine were to recommence operation then they would be re-employed. The employees at this meeting were not at a political rally where they might have been required to differentiate between a core or non-core promise. I have taken this into account.

[97] I am satisfied that I should take into account the views of any former employees due to Clause 18 of the Agreement. I have taken into account the unchallenged evidence of Mr Conkey. Mr Conkey wants to return to work at Russell Vale in accordance with the commitment given to him by the former CEO, as per clause 18 of the Agreement.

[98] If the Agreement is terminated then the rights of the ex-employees including Mr Conkey, in relation to the increase in hands provision of the Agreement will be extinguished. I have taken this into account.

[99] I am satisfied that the Agreement is a standard coal mining agreement for the South Coast of New South Wales. The rates of pay are marginally lower due to the age of the Agreement and the fact that a new agreement has not been negotiated since its nominal expiry date in 2015. The conditions of employment are very common. The “increase in hands” clause may be a “left over from a bygone era” but it is not unique. Stowe, a large electrical contractor in New South Wales has a similar cause:

“Any one employed under this agreement that is made redundant due to a down turn in labour demands when re-employed will return on the same category and level they previously received.” 32

(my emphasis)

[100] I have taken into account the financial situation of the Applicant. I note that successive annual reports of the company show a deteriorating financial position. I acknowledged that the Applicant has reached a settlement and payment plan with the Australian Tax Office and an Enforceable Undertaking with the NSW Mining Regulator.

[101] However, I do not accept that these outcomes, which were negotiated as a result of litigation being undertaken by both the ATO and the Department, provides evidence of a company that is a good corporate citizen. Allegations prevail that the Applicant is slow to pay invoices, even Mr Sharma acknowledged that there are still some delays in the Applicant paying debts:

“I accept that there has been delay in making the payments to people who are supposed to receive the payments, but to date the company has not actually defaulted completely on any payment.  Since in last six to eight months we have been behaving quite well.  We have given the enforceable undertaking to the department a couple of years and – I think 18 months ago.  We are complying with that.  We arranged a payment plan with the ATO almost the same time at that time when the undertaking was given.  We are complying with that.  We are paying employees on time.  We are meeting all the government dues on time.  So I believe that company is behaving rather better than as with the support of Jindal.  And we are clearly conveying our messages and we are giving them details of what is required, how much we need.  Of course, there is some delays once in a while but I believe that if the company is able to start operating (indistinct) is a viable company then it will be able to comply with all the commitments it's giving.” 33

[102] I have taken into account the financial report ending in March 2019. I note that the Applicant had an operating loss of $379,230,000, despite increasing its coal production at its wholly owned subsidiary mine, Wongawilly Colliery, from 190,000 tonnes to 343,000 tonnes.

[103] I note that the 2019 Annual Report states that there is a further 241.3 MT of coal available to be mined at Russell Vale and that the expected life of the mine is 30 years. Mr Jakeman stated that the current mining application is for five years. Based on modelling, Mr Jakeman further stated that if the current agreement remains in place the Applicant will only return to profit in the fifth year of operation. Mr Jakeman agreed that for the remaining 25 years of mining, the Applicant will be profitable. I have taken this into account.

[104] For reasons unknown to me, the Applicant decided not to provide its modelling in relation to the cost savings attributed to the cancellation of the Agreement. I have undertaken a quick calculation which identified cost savings between $650 000 and $1 000 000 annually if the Agreement were to be cancelled. Whilst this is a significant amount of money for most enterprises, this saving is not going to turn around the financial position of the Applicant. I have taken this into account.

[105] The Applicant is allegedly in serious financial difficulty and owes hundreds of millions of dollars to its creditors, who are mainly the parent company of the majority shareholder or its wholly owned subsidiary. The Directors and the Auditor of the Applicant have a responsibility to ASIC and the Applicant’s shareholders. They have determined that the Applicant is a going concern. The Commission is not in the position to make comment on this issue. I accept Mr Jakeman’s commentary in relation to the ongoing financial support from the major shareholder.

[106] Whilst utilising the principle which emanated from the Full Bench decision in Aurizon, I am satisfied that the specific finding of that decision can be distinguished. Aurizon was primarily about the provisions that the Queensland Government demanded be included in any number of public service enterprise agreements prior to privatisation, including no forced redundancies for a period of 3 years.

[107] Aurizon claimed that it could not compete with its competitors due to these restrictive provisions. The Applicant in this matter has lower rates of pay and similar conditions of employment to that of its competitors. I also note that the Applicant in this proceeding has not been the subject of a sale or transfer from the public sector to the private sector but is simply party to an agreement it negotiated. I have taken this into account

[108] The Full Bench in Aurizon also gave guidance in relation to the process which will ensue following the termination of an agreement:

“[34] The evidence of Mr Robinson is characterised by a significant misunderstanding as to the effect of termination of the agreements. In assuming that Aurizon would be able to enforce bare award terms on its employees and significantly undercut Pacific National’s cost base, he has failed to appreciate the ongoing bargaining process and the likelihood of a new agreement on negotiated terms. He seemed unaware that bargaining for a new agreement could continue and the Unions and employees could avail themselves of protected industrial action to advance employee claims. While it is likely that Aurizon will be able to introduce some changes if it is free to do so, it is in our view also reasonable to expect that any new enterprise agreements while containing less operational inefficiency, will also contain similar wages and conditions of employment for employees. This is because the bargaining power of the employees and their bargaining representatives, the Unions, is not insignificant. The assumptions made by Mr Robinson in his evidence were not, in our view, sound and his evidence did not provide a great deal of assistance to us.

….……

[158] As we have earlier indicated, there is nothing inherently inconsistent with the termination of an enterprise agreement that has passed its nominal expiry date and the continuation of collective bargaining in good faith for an agreement. Neither the Unions nor Aurizon have suggested that bargaining will stop if the agreements are terminated. Neither have suggested that they will not pursue new agreements or that they will cease bargaining if the agreements are terminated.” 34

(my emphasis)

I have taken this into account

[109] I also accept the principle that provisions of an enterprise agreement do not continue ‘in perpetuity’ but the scenario in Aurizon is totally different to that which exists with the Applicant. At Aurizon, the parties had been engaged in protracted and uncompromising negotiations for 18 months. In this circumstance, despite the best intentions of SDP Hamburger, the Full Bench and myself to facilitate negotiation between the parties, the underlying issue is that the Applicant does not have any employees. Therefore, there is no way to vary the Agreement or negotiate a new agreement. Unlike in Aurizon, enterprise bargaining cannot continue tomorrow. I have taken this into account.

[110] Further, the Undertaking in Aurizon protected wage rates and the majority of conditions. The proposed Undertaking from the Applicant provides for lower wage rates than the Agreement and conditions of employment which are comparable to the Award and the NES. In my view, pragmatically, the proposed Undertaking is of little value. As Mr Sly stated, the Applicant will have to offer competitive wage rates to attract quality labour. In relation to conditions of employment, the Applicant is compulsorily required to comply with the Award and the NES. I have taken this into account.

[111] I have also taken into account that the Applicant has continuously been attempting to obtain a new mining lease to mine coal at Russell Vale since before the CEO made his commitment to staff in 2015. I accept that there was a three year gap between the commitment being made and this application. That is certainly not the fault of the employees, nor can blame be attributed to the Applicant. However, when a commitment is made that a certain action will occur the very next time that an employer recommences production, then the policy of the Applicant to act honestly and fairly must mean that such a commitment must be honoured. I know that one employee, Mr Conkey wants his job back. He wants to exercise his rights based on the commitment given by the former CEO in accordance with clause 18 of the Agreement. It would not be fair to those employees, of whom Mr Conkey is one, to now extinguish this obligation when the Applicant believes it is on the verge of gaining approval of a new lease. I have taken this into account.

[112] I have taken into account that the Agreement expired in September 2015 and that no work has been undertaken by the employees covered by the Agreement since August 2015. Under normal circumstances, such a scenario would almost always result in an application to terminate an expired agreement being approved.

[113] The majority shareholder in the Applicant is Jindal Steel and Power (Mauritius) Limited (JSPML). One of the major creditors is Jindal Steel and Power (Australia) Limited (JSPAL). Both companies are wholly owned subsidiaries of Jindal Steel and Power Limited a company that is registered in India.

[114] The Applicant has submitted that it is in dire financial trouble and needs to save every last dollar in order to make the mine viable into the future. I am not convinced of this scenario. There is no doubt that, in accordance with its annual reports, the Applicant has significant financial liabilities, a fact highlighted by the Applicant’s auditors. However, the Applicant has been quite secretive in relation to its complex financial affairs. A majority of its loans are with its parent company or an associated entity of its parent company. The annual report shows that JSPAL are paid an interest rate which is 3% above the London Inter-bank Offered Rate (LIBOR) which is an interest-rate average calculated from estimates submitted by the leading banks in London. At the date of the Hearing LIBOR was 2%. No justification was given for this high interest rate, which results in an interest only repayment in excess of $30 million a year for the Applicant. When asked why the borrowings of the Applicant continued to grow at an alarming rate in 2019, Mr Jakeman stated that he was advised by the board;

“Business.” 35

I have taken this into account.

[115] The amount of interest paid by the Applicant is based on an inflated interest charge of 5% and what was described by Mr Jakeman to be a tax minimisation scheme for the parent company and its associated entities. I have taken this into account.

Section 226(b)(ii) – Circumstances of and likely effect that termination would have on Wollongong Coal

[116] The cost of full-time labour will decrease by approximately $1.80 per hour. The Applicant will only have to provide conditions of employment in accordance of the Award and the NES. The cost of contract labour will be determined by the marketplace rather than by the Agreement. The result being lower labour costs and increased workplace flexibility. I have taken this into account.

Section 226(b)(ii) – Circumstances of and likely effect that termination would have on the employees

[117] I have taken into account that the Applicant currently has no employees.

Section 226(b)(ii) – Circumstances of and likely effect that termination would have on the CFMMEU

[118] The Respondent has argued that if the Agreement is terminated then it will set a dangerous precedent for wages and conditions in the Illawarra. I am prepared to accept that any future agreements negotiated by the Respondent may result in lower wages and conditions of employment then those which currently exist in other mines. I have taken this into account.

Conclusion

[119] The underlying goal of the Fair Work Act 2009 was the attainment of fairness in the workplace. In the second reading speech of the act, the Honourable Julia Gillard said:

“The bill being introduced today is based on the enduring principle of fairness while meeting the needs of the modern age. It balances the interests of employers and employees and balances the granting of rights with the imposition of responsibilities.”

…

“The bill aims to achieve productivity and fairness through enterprise-level collective bargaining underpinned by the guaranteed safety net, simple good faith bargaining obligations and clear rules governing industrial action.”

…

“This bill ensures balance and fairness in Australian workplaces.” 36

[120] Real questions exist as to whether the Applicant is a “going concern.” The Applicant’s auditor has raised serious concerns. Mr Jakeman agreed that the ASIC guide for directors identified three areas where the Applicant was failing to meet the director checklist for insolvency. The only reason that the Applicant continues to trade is via the guarantee provided by JSPL and its wholly owned subsidiary. The Applicant currently has a deficiency of net assets of $1 billion. 37 I agree with the Respondent that savings attributable to terminating the Agreement are of minimal magnitude compared to the amount of debt embedded in the Applicant’s annual accounts. It is a decision for the Applicant’s shareholders if they want to walk away from the hundreds of millions of dollars in tax losses and the opportunity to mine 241 million tonnes of high quality coking coal due to the provisions of an enterprise agreement that it negotiated in 2011.

[121] I am satisfied and find that the employees were given a commitment in 2015 by the Applicant that they would be re-employed if the Applicant were to resume mining at Russell Vale. It would not be fair to those employees who wish to resume their career at Wollongong Coal to extinguish this right when mining may recommence in the very near future. 

[122] The most appropriate way forward in this circumstance is for the Applicant to move forward with its current Agreement. If it chooses to employ labour directly, then the Applicant has the ability to engage in bargaining for a new enterprise agreement. The Applicant will then have an opportunity to put its proposed agreement to its employed workforce and comply with the bargaining provisions of the Act. Alternatively, it can engage its workforce in an alternative manner in accordance with the agreed provisions of the Agreement.

[123] I agree with Mr Sharma and find that it would contrary to the Respondent’s commitment to be “safe, honest and fair in all their dealings,” if the margin between the staff and the Agreement covered employees was to change unilaterally. I find that Mr Jakeman is ill informed when he says that the staff have already suffered a market rate reduction.

[124] If the principle of ‘past behaviour is a guide to future performance’ is to be applied in this circumstance, then I do not accept that the Applicant is a good corporate citizen. JSPML has been the majority shareholder of the Applicant since September 2013, not the last 6 to 8 months. It was the minority shareholder when its entire workforce was not paid for six weeks. In the last few years, the Applicant has entered into a payment plan with the ATO and an Enforceable Undertaking with the NSW Regulator. The fact that these two ongoing payment plans are current, does not exonerate their past practice. To use the words of Mr Brotherson:

“But what you've had since 2015 is some issues with the Department of Planning & Environment that have been addressed.  Any recalcitrant citizen, be it in any area of law, criminal or corporate, is allowed to address it's faults, rectify them, serve the time and move on.  We say that's where the company is at.  It's dealt with its issues with the ATO; it's got a plan in place there.  That's in the evidence of Mr Sharma.  It's got a plan in place with the Department of Planning & Environment.” 38

For the Applicant to be considered to have “served their time,” they must be able to show that they have satisfied and fulfilled their obligations to the ATO and Regulator. The enforceable undertaking continues until 2023. Mr Brotherson advised that the payment plan with the ATO is ongoing. In my view, this scenario compares with the “recalcitrant citizen” being on parole or day release - not having served their time or completely extinguished the penalties imposed for their inappropriate behaviour. The Applicant’s obligations are ongoing.

[125] Based on Mr Jakeman’s testimony, I am satisfied that the current Agreement will result in the Applicant making a profit in 26 of the next 30 years of operation. With the significant increase in mineable coal at Russell Vale, as reported in the 2019 accounts, the future of the Russell Vale mine appears highly profitable. With a forward profit projection and a substantial increase in the quantity of coal to be mined, I find that the cost of the current Agreement is of minimal effect and in line with the cost of production with other coal mines in the Illawarra region.

[126] In accordance with the objects of the Act, I can see no reason to interfere with the negotiated settlement from 2011 when the Applicant is on the cusp of gaining a new mining lease. The appropriate course of action is for the Applicant to employ its workforce in accordance with the provisions of the Agreement, undertake the necessary remediation work to make the mine ready for operation and commence bargaining with their employees while they wait for the approval to recommence mining from the Department. If the financial situation is as dire as suggested, then I am confident that an appropriate and pragmatic outcome can be achieved via these negotiations.

[127] For the reasons stated above, the Application is dismissed.

COMMISSIONER

Printed by authority of the Commonwealth Government Printer

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 1   Wollongong Coal Limited T/A Wollongong Coal [2019] FWCA 216

 2   Wollongong Coal Limited t/a Wollongong Coal [2019] FWCFB 3306 [23]

 3   ReAurizon Operations Limited; Aurizon Network Pty Ltd; Australia Eastern Railroad Pty Ltd[2015] FWCFB 540 [129] - [165]

 4   ReAurizon Operations Limited; Aurizon Network Pty Ltd; Australia Eastern Railroad Pty Ltd[2015] FWCFB 540 [130] –[131]

 5   Construction, Forestry, Maritime, Mining and Energy Union v AGL Loy Yan Pty Ltd t/a AGL Loy Yang[2017] FWCFB 1019,[29]

 6   Transcript 13 November 2019 [892] – [961]

 7   Transcript 13 November 2019 [1106] – [1308]

 8   Statement of Mr Sunjay Shama dated 9 August 2018 [26] - [27]

 9   Statement of Mr Sunjay Shama dated 9 August 2018 [52]

 10   Wollongong Coal Limited T/A Wollongong Coal [2019] FWCA 216

 11   Reply Statement of Mr Sunjay Shama dated 4 October 2018 [7]

 12   Reply Statement of Mr Sunjay Shama dated 4 October 2018 [8] (d)

 13   Reply Statement of Mr Sunjay Shama dated 4 October 2018 [11] (a)

 14   NRE No 1 Colliery Workplace Agreement 2011 Clause 7.1

 15   Transcript 13 November 2019 [352] – [355]

 16   Witness statement of Mr Wayne Sly dated 11 October 2019 [22]

 17   Witness statement of Mr Wayne Sly dated 11 October 2019 [27]

 18   Statement of Mr Robert Timbs dated 20 September 2018 Annexure 6

 19   Transcript 13 November 2019 [45] – [57]

 20   Statement of Mr Dean Conkey dated 20 September 2018 [8] - [10]

 21   Statement of Mr Dean Conkey dated 20 September 2018 [11] – [15]

 22   Statement of Mr Peter Colley dated 18 September 2018 statement [9] – [11]

 23   Wollongong Coal Limited 2019 Annual Report, page 120

 24   Transcript 28 January 2020 [1412]

 25   Transcript 28 January 2020 [1485]

 26   Transcript 28 January 2020 [1509] - [1515]

 27   ASIC Regulatory Guide 217 - Duty to prevent insolvent trading: Guide for Directors, page 21

 28   Transcript 13 November 2019 [1077]

 29   Re Kellogg Brown and Root, Bass Strait (Esso) Onshore/Offshore Facilities Certified Agreement 2000 (2005) 139 IR 34 27

 30   Construction, Forestry, Maritime, Mining and Energy Union - The Maritime Union of Australia Division [2019] FWC 7850 [40]

 31   NRE No 1 Colliery Workplace Agreement 2011 Clause 18

 32   Stowe Australia Pty Ltd - Sydney Client Services Division - Enterprise Agreement 2016 Clause 12.8

 33   Transcript 13 November 2019 [196]

 34   ReAurizon Operations Limited; Aurizon Network Pty Ltd; Australia Eastern Railroad Pty Ltd[2015] FWCFB 540

 35   Transcript 28 January 2020 [1512]

 36   Fair Work Bill 2008 - Second Reading, Julia Gillard, 25 November 2008.

 37   Transcript 28 January 2020 [1416]

 38   Transcript 13 November 2019 [1370]