Case: McLennan v Surveillance Australia Pty Ltd [2005] FCAFC 46 ; (2005) 142 FCR 105
Outcome: applied
Finally, her Honour referred to and followed the decision of the Full Court of this Court in McLennan v Surveillance Australia Pty Ltd [2005] FCAFC 46 ; (2005) 142 FCR 105 which considered an Australian Workplace Agreement ("AWA") and held a training bond that was inconsistent with an AWA was unenforceable. I will consider this decision further later in these reasons. 26 This appeal raised three questions relevant to the question of the enforceability of the Training Bond and, in particular, the ability of REX to recover $7,500 from Mr Clarke: (1) the proper construction of the Training Bond and, in particular, whether it was inconsistent with the Certified Agreement and therefore unenforceable; (2) whether the decision of the Full Court in McLennan was distinguishable; (3) whether her Honour fell into error in " failing to recognise that, once [REX had] discharged its onus of proof (on the balance of probabilities) by proving that [Mr Clarke had breached] the Training Bond, the onus of proof shifted to [Mr Clarke] to prove his defence (on the balance of probabilities) that the Training Bond was inconsistent with any and which part of the Certified Agreement and, to that extent, was invalid and unenforceable ". As will become apparent, these questions and the answers to them are interrelated. 27 It is necessary to turn to consider the provisions of the Workplace Relations Act dealing with certified agreements. Certified agreements are a creature of statute. The relevant provisions are primarily to be found in Pt VIB of the Workplace Relations Act (ss 170L to 170NI). However, other parts of the Workplace Relations Act are relevant including Pt VIE (the no-disadvantage test), Pt VIII (compliance) and Pt XV (matters referred by Victoria). 28 The object of Pt VIB of the Workplace Relations Act is to " facilitate the making, and certifying by the Commission, of certain agreements, particularly at the level of a single business or part of a single business" : s 170L. That object is consistent with the overall object of the Workplace Relations Act: see s 3 and in particular, para 3(e). The term " single business " is defined in s 170LB, so far as is relevant, as " a business, project or undertaking that is carried on by an employer ". Section 170LB(2) provides that if two or more employers carry on a business, project or undertaking " as a joint venture or common enterprise ", the employers are taken to be one employer. In the present case, s 170LB(2) applies. 29 Division 2 of Pt VIB sets out the requirements that must be satisfied for applications to be made to the Commission to certify an agreement. Critically, " there must be an agreement, in writing, about matters pertaining to the relationship between" an employer and all persons who (at the time the agreement is in operation) are employed in the single business of the employer: s 170LI. As Black CJ and Moore J noted in McLennan at [42] and [43] when considering the analogous provision in relation to AWAs (s 170VF of the Workplace Relations Act), it is clear that not only does the certified agreement need not deal in a comprehensive way with terms and conditions of employment, it is not expected to do so. 30 There are two types of certified agreements agreements between employers and an organisation of employees (s 170LJ) and agreements between employers and employees (s 170LK). We are concerned with the former. 31 Under Div 4 of Pt VIB, the Commission must certify an agreement unless it is satisfied that the requirements of s 170LT are not met: s 170LT(1). The agreement must pass the no-disadvantage test set out in Pt VIE: s 170LT(2). An agreement passes the no-disadvantage test if " it does not disadvantage employees in relation to their terms and conditions of employment ": s 170XA(1). Subject to a number of provisions which are presently not relevant, s 170XA(2) provides that an agreement disadvantages employees in relation to their terms and conditions of employment only if its approval or certification would result, on balance, in a reduction in the overall terms and conditions of employment of those employees under, in this case, relevant awards. The relevant award is determined in accordance with s 170XF. It was not in dispute that the relevant award in this case was the same award considered by the Full Court in McLennan at [11]. 32 The effect of certified agreements is dealt with by Divs 5 and 6 of Pt VIB. A certified agreement comes into operation when it is certified and, subject to other sections which are presently not relevant, remains in operation at all times afterwards: s 170LX(1). It binds the employer and all persons whose employment is, at any time when the agreement is in operation, subject to the agreement: s 170M(1). The Letter of Offer expressly provided that Mr Clarke's position and conditions of employment were " in accordance with the [Certified Agreement]" . It also bound the Australian Federation of Airline Pilots ("the AFAP") who made the agreement with REX: s 170M(2). 33 Variations to certified agreements were provided for in Div 7 of Pt VIB. A certified agreement cannot be varied except by one of the means specified in s 170MD(7). One method of varying a certified agreement is in writing by agreement between the employer and the AFAP: s 170MD(1). However, any variation has no effect unless the Commission approves it (s 170MD(2)) and the Commission must not approve the variation unless it is satisfied that the variation passes the no-disadvantage test: s 170MD(3)(b). The manner in which both certified agreements and variations to them are negotiated is prescribed by Div 8 and Div 9 of Pt VIB. 43 Finally, the submission is contrary to the fact that the Workplace Relations Act recognises, and the authorities establish, that a certified agreement not only need not deal in a comprehensive way with terms and conditions of employment, it is not expected to do so: see s 170LI of the Workplace Relations Act and McLennan at [42] and [43]. 44 Although it is not possible to contract out of a statutory instrument ( Josephson at 700; Kidd v Savage River Mines (1984) 6 FCR 398 at 409-410; Byrne v Australian Airlines Limited [1995] HCA 24 ; (1995) 185 CLR 410 at 421; Textile, Clothing and Footwear Union of Australia v Givoni Pty Ltd (2002) 121 IR 250 at [23] to [33] and McLennan at 125), that does not prevent an employment contract conferring additional benefits upon an employee over and above those conferred by a statutory instrument: Givoni at [29] to [35] and the authorities referred to. These latter cases were concerned with awards, however the same principles apply to certified agreements: see Ardmona Foods Ltd at [16] and [31]; Amcor Ltd v Construction, Forestry, Mining and Energy Union ("CFMEU") [2003] FCAFC 57 at [34] and Amcor Ltd v CFMEU [2005] HCA 10 ; (2005) 214 ALR 56 at [144] per Callinan J. 47 The question was not whether the Certified Agreement was comprehensive it clearly was not. The question was whether the term of the Training Bond, by which Mr Clarke agreed to pay $7,500 to REX if he left REX's employment within a specified time, was a matter pertaining to the relationship between REX and the pilots that the Certified Agreement dealt with and if so, whether that term effectively altered or varied the rights and obligations concerning that matter or those matters in the Certified Agreement to the disadvantage of Mr Clarke? If the answer is yes, then consistent with the decision of the Full Court in McLennan it was not open to REX to seek to recover $7,500 from Mr Clarke because "... [b]y clear implication, the [Workplace Relations] Act prohibits the alteration of such rights or obligations which might disadvantage the employee by means other than those provided in the Act and renders ineffectual any agreement which purports to do so" : McLennan at [48]. 48 Mr Clarke submitted that the term of the Training Bond by which Mr Clarke agreed to pay $7,500 to REX if he left REX's employment within a specified time was referable to two matters pertaining to the relationship between REX and the pilots covered by the Certified Agreement training and termination. I agree. So much was made abundantly clear by the express terms of the Letter of Offer incorporating the Training Bond. However, that of itself is not sufficient. The question is whether that term of the Training Bond effectively altered or varied the rights and obligations concerning that matter or those matters in the Certified Agreement to the disadvantage of Mr Clarke. That requires a comparison between the relevant term or terms of the Certified Agreement and the specified term of the Training Bond. 49 In relation to the 'matter' of training, under cl 23 of the Certified Agreement, REX was not only responsible for arranging facilities to enable Mr Clarke to reach and maintain proficiency in such ground courses and such aeronautical skills as were required by REX (cl 23.1) but it was obliged to " pay all costs associated with obtaining and for renewing such rating or endorsement " (cl 23.2). The Training Bond altered or varied that matter to the disadvantage of Mr Clarke at a price of $7,500. That view is reinforced when one recalls that the Commission was required to assess the Certified Agreement against the terms of the relevant award: (see par [31] above) and, under cl 19.1 of that award, " all facilities and other costs associated with attaining and maintaining those qualifications [were] the responsibility of the employer ": McLennan at [11]. 50 Even if the Letter of Offer and the Training Bond did not alter or vary the 'matter' of training to the disadvantage of Mr Clarke, it did alter or vary the 'matter' of termination to the disadvantage of Mr Clarke. Under the Certified Agreement, the employment was terminable by Mr Clarke giving four weeks' written notice. Under the Letter of Offer incorporating the Training Bond, the employment was terminable by Mr Clarke giving four weeks' written notice and incurring a debt of $7,500 payable to REX on the same day that the employment terminated. 51 The facts in this case may be characterised in a variety of ways - the Training Bond effectively altered or varied the rights and obligations concerning a matter dealt with by the Certified Agreement to the disadvantage of Mr Clarke by means other than those imposed by the Workplace Relations Act; the Training Bond imposed an additional burden on Mr Clarke by means other than those imposed by the Workplace Relations Act; the Training Bond was an attempt to contract out of the Certified Agreement. Adopting any one of those characterisations, the Training Bond was unenforceable. 52 In McLennan, the Full Court considered a similar issue but in the context of another statutory instrument an AWA. The Court considered the training bond inconsistent with an AWA and therefore unenforceable. During the course of argument, Counsel for REX submitted (but subsequently abandoned the submission) that the decision of the Full Court was plainly wrong. It was not. On 11 August 2005, the High Court refused Special Leave to appeal on the basis that (without endorsing all of the reasoning of the Full Court) the conclusion reached by the Full Court was correct: Surveillance Australia Pty Ltd v McLennan [2005] HCATrans 603 (11 August 2005). 53 REX also submitted that the decision in McLennan was distinguishable because it dealt with a different statutory instrument and because there were some factual differences. In my view, that submission should also be rejected. The differences in statutory instrument relied upon by REX (that the AWA is an employment agreement between an employer and an individual employee as opposed to a collective instrument such as the Certified Agreement, that the variation to the AWA was made between the same parties whereas the variation by the Letter of Offer was not and that under AWAs the employee loses the safety net completely) did not provide any basis for distinguishing McLennan . In relation to the last matter referred to by REX, although an AWA (but not a certified agreement) applies to the exclusion of any award that would otherwise apply (s 170VQ(1)), a certified agreement does prevail over them to the extent of any inconsistency (s 170LY(1)) and does prevail over State awards and State industrial agreements to the extent of any inconsistency (s 170LZ(1)). 54 Moreover, the statutory architecture and express provisions of Pt VIB (dealing with certified agreements) and Pt VID (dealing with AWAs) are not significantly different and do not lead to a different result. Adopting what the Full Court said in McLennan at [47]: " Having regard to [the] protective legislative framework, it is unlikely that the legislature intended that the parties to [a certified agreement] could reach agreement under the umbrella of that protection about matters pertaining to the employment relationship, obtain [certification from the Commission] thereby removing protection which might be afforded by an award (made under the Act or a State award) or afforded by State law, and thereafter bargain without similar protection to reach a collateral agreement (enforceable under the common law) imposing additional burdens on an employee in relation to matters dealt with by the [certified agreement]. Indeed it is for this reason (and probably one other) that the [Workplace Relations] Act contains procedures with that protection for parties to [a certified agreement] to reach, and obtain approval for, a variation agreement. The other reason would be to allow the parties to [a certified agreement] to add to the [certified agreement] provisions concerning a matter not then dealt with by the [certified agreement]." 56 In adopting and applying the language of the Full Court in McLennan at [48], where a certified agreement deals with a particular matter pertaining to the relationship between an employer and an employee, then the parties to and those bound by the certified agreement can only alter their rights and obligations in relation to that matter in a way which might disadvantage the employee, by entering into and obtaining approval for the variation agreement in the manner presented by the Workplace Relations Act: see also McLennan at [50]. 57 Similarly, none of the factual differences between the decision in McLennan and the facts of this case assist REX. The facts of the present case are, if anything, more compelling than the facts in McLennan in one critical respect. Unlike the AWA in McLennan , cl 23.2 of the Certified Agreement obliged REX to "pay all costs associated with obtaining and for renewing such rating or endorsement. This will include all licensing fees and Civil Aviation Safety Authority charges ." No similar provision existed in McLennan : see [15]. 58 For these reasons, the Appeal should be dismissed. 59 REX also submitted that her Honour erred when, on 1 March 2006, she ordered costs against REX on the basis that the complaint was a proceeding instituted in the Magistrates' Court " without reasonable cause " under s 347 of the Workplace Relations Act. 60 Section 347 of the Workplace Relations Act provides: "A party to a proceeding ( including an appeal ) in a matter arising under this Act (other than an application under section 170CP) shall not be ordered to pay costs incurred by any other party to the proceeding unless the first-mentioned party instituted the proceeding vexatiously or without reasonable cause." (Emphasis Added) 65 The issue is finely balanced. As I have sought to explain, the actions of REX seeking to recover the Training Bond were, in my view, contrary to the statutory object of certified agreements in Pt VIB of the Workplace Relations Act and the decision of the Full Court dealing with analogous provisions in McLennan . The attempts to distinguish McLennan failed. However, in the circumstances of this case, I am not persuaded that the proceeding was commenced vexatiously or without reasonable cause. I would set aside the costs order of the Industrial Division of the Magistrates' Court of Victoria of 1 March 2006. 66 The respondent sought costs of the appeal and on an indemnity basis. That application is refused. This is an appeal to which s 347 of the Workplace Relations Act applies: see para [60] above. I am not persuaded that the appeal was instituted vexatiously or without reasonable cause. There will be no order as to costs in relation to the appeal. I certify that the preceding sixty-six (66) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon. Associate: Dated: Counsel for the Appellant: Mr N Green QC with Mr R Dalton Solicitor for the Appellant: Trindade Farr &amp; Pill Lawyers Counsel for the Respondent: Mr J Snaden Solicitor for the Respondent: Peter Hull &amp; Associates Date of Hearing: 18 June 2007 Date of Judgment: 29 June 2007 AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback URL: http://www.austlii.edu.au/au/cases/cth/FCA/2007/957.html