Case: The Queen v Portus and Another; Ex parte Australia and New Zealand Banking Group Limited and Others [1972] HCA 57 ; (1973) 127 CLR 353
Outcome: followed
union relies on the decision of the High Court of Australia in The Queen v Portus and Another; Ex parte Australia and New Zealand Banking Group Limited and Others [1972] HCA 57 ; (1973) 127 CLR 353 and subsequent decisions of the High Court and Federal Court of Australia considered hereunder which concern the relationship of employer and employee in support of its submission that income insurance protection arises out of the relationship between employer and employee. Further, the union submits that the payments made by the employer to the insurer for income protection insurance should simply be seen as a reward for services, in the same way that a salary is a reward for services. The union relies upon the judgment of Steven J in Portus at 371 where his Honour said: The necessary quality of a subject matter demanded which is concerned with reward for work performed is, I think, that it be, of itself, inherently associated with the relationship of employer and employee and not with some other type of relationship. Reward by way of remuneration of course conforms most clearly to such a test; the payment of wages or salary is inherent in the relevant relationship. Likewise demands for, for instance, paid annual holidays or retirement benefits... would, I think, satisfy this requirement... As evidence that payments are merely another form of reward for services, the union emphasises the fact that the clause requires payments of premiums to be made by the corporation to the insurer only whilst the Maritime Officer is in the employ of the corporation, adopting the reasoning of the High Court in Re Manufacturing Grocers' Employees Federation of Australia and Another; Ex parte The Australian Chamber of Manufactures and Another [1986] HCA 23 ; (1986) 160 CLR 341 (' the Superannuation Case ') at 356. In Portus the High Court considered whether an attempt to impose an obligation on banks to pay union dues out of monies earned by employees in accordance with authorities given by such employees gave rise to an ' industrial matter ' as defined in s 4 of the Conciliation and Arbitration Act. The High Court in Portus found that the dispute arising out of such demand did not constitute an ' industrial matter ' as defined in s 4 since the payments for union dues were to be made by the employer only after income had been earned by the employee. Menzies J at 360 observed that the pivotal question was whether the imposition upon an employer of an obligation to make deductions for the purpose of making the subject payment ' affects the industrial relationship of employers and employees '. Having observed that the payment was to be made out of ' earned salaries ' his Honour at 360 said: In my opinion, the relationship that would be affected by such an obligation is a financial relationship of debtor and creditor arising from the earning of salary, not the industrial relationship in which the salary has been earned and has become payable. What is sought, in reality, is to make the employer the financial agent of the employee for the benefit of the association... In my opinion, the facts before the Court disclose a dispute which is not an industrial dispute. It is, in truth, a dispute between the association and the banks about whether or not the banks should perform for the association a dues-collecting service. See also Walsh J at 363 and Steven J at 371. In the Superannuation Case the High Court found that a demand that employers contribute to a superannuation scheme related to an ' industrial matter ' within the meaning of s 4 of the Conciliation and Arbitration Act. At 356-357 their Honours said: First, it was said that the claims are for payments in respect of which employees will have no entitlement until the relationship of employer and employee has ceased to exist. The answer was made that the employee will receive a vested interest in the money paid, albeit not in possession, when the contributions are made by the employer to the fund. Whether or not this be so, the fact that there is no immediate benefit to employees from the payments to be made by employers, at any rate in any tangible form, does not in our view mean that those payments cannot pertain to the relations of an employee with his employer... payments do not cease to be remuneration for service during the relationship merely because the benefit from them is deferred until after the service has been finally performed and the relationship has ended. The obligation of the employer to make payments ends with the relationship between him and his employee unlike the obligation of an employer to pay a pension, which necessarily extends beyond the period of employment. It is in our view of no significance that an employee receives no immediate benefit, other than such interest as he might have in the superannuation fund, from the payment of contributions to the fund by his employer... Next, it was submitted that, since the payments claimed are to be made to the trustees of superannuation funds who are third parties, they involve relationships which are not those of employers and employees. It is obvious that the relationship between an employer and the trustee of a superannuation fund is not that of employer and employee, but that is hardly to the point. As the decision in Reg. v. Portus; Ex parte A.N.Z. Banking Group Ltd . shows, the identity of the payee is ordinarily not of significance in determining whether payments made by an employer to a person other than his employee constitute an industrial matter. But the opposite is the case where the payments are to a superannuation fund, because the character of the payee and the capacity in which he receives the payments provides the very connexion with the relationship between the employer and employee which is necessary if those payments are to be an industrial matter. Because the payments are to a superannuation fund, they form, to use the words of Menzies J., an incident of the employment... There is no reason why those payments should be seen in any other way than as contributions by an employer to a fund for the benefit of an employee. No doubt the payments represent money earned in an industrial relationship, but they do not represent money to which an employee is himself presently entitled... [Footnotes omitted]. In Electrolux Home Products Pty Ltd v Australian Workers' Union [2001] FCA 1600 (' Electrolux No. 1 ') the Court considered whether a claim that the employer contribute the equivalent of 1.5 per cent of an employee's weekly wage for a scheme to protect long service leave and other entitlements in an external trust deed pertained to the relationship of employer and employee. Justice Merkel at [21] conveniently summarised the relevant principles as follows: The general approach to be adopted in determining the characterisation of an industrial claim is to look at the substance of the demand and to identify the aspect that is central to the claim, or a critical part of it, having regard to the context in which the claim is made: see Re The Amalgamated Metal Workers Union of Australia; Ex parte Shell Co. of Australia Ltd [1992] HCA 38 ; (1992) 174 CLR 345 (" Shell ") at 358-359. The claim is not to be construed as if it were a document creating legal rights and obligations: see Shell at 359. Finally, a claim can be properly characterised as pertaining to the relationship of an employer and its employees notwithstanding that parts of a claim that are machinery provisions giving effect to the claim (see Shell at 359), or ancillary aspects of it (see R v Portus; Ex parte Australia and New Zealand Banking Group Ltd [1972] HCA 57 ; (1972) 127 CLR 353 (" Portus ") at 372), may not pertain to that relationship. If a claim pertains to the requisite relationship in accordance with the above principles it is because it is in respect of a matter that pertains to that relationship. The High Court in Electrolux Home Products Pty Ltd v Australian Workers' Union [2004] HCA 40 ; (2004) 221 CLR 309 (' Electrolux No. 2 ') confirmed that the principles discussed in the preceding paragraphs apply to the Act. Gleeson CJ said at [10]: The Court [in Portus at 359, 362] approved statements in R v Kelly; Ex parte Victoria to the effect that "the relations of employers and employees" refers to the industrial relationship, and not to matters having an indirect, consequential and remote effect on that relationship. [Footnote omitted]. When considering whether the clause is connected with the relationship between an employer in its capacity as an employer and an employee in its capacity as an employee, the relationship had to be ' direct and not merely consequential ' in order to be the subject of an industrial dispute under the Conciliation and Arbitration Act: see the Superannuation Case at 353; see also Gleeson CJ's statement at [10] in Electrolux No. 2 . That is, the obligation imposed upon the corporation must arise inherently from the relationship of employer and employee. The union sought to equate the income protection insurance scheme with superannuation contributions as considered in the Superannuation Case . Superannuation contributions have been recognised as a form of payment in lieu of remuneration: see the Superannuation Case at 354; see also 355-356 wherein the Court referred to the fact that superannuation payments were commonly regarded as an aspect of the terms and conditions of employment. However, the benefit to be obtained under the clause and the circumstances in which it becomes payable are very different to a superannuation entitlement, for the reasons explained below. Firstly, the quantum of the benefit which accrues under superannuation entitlements is directly connected with the service performed by the employee. This is demonstrated by the fact that generally the greater the size of the employee's salary and the greater the length of time worked, the greater the superannuation benefit that accrues, even though receipt of such benefit is postponed until an event such as retirement occurs, and even though the exact dollar amount of the eventual benefit is unlikely to be the same as what was contributed by the employer. This was recognised by the High Court in the Superannuation Case when it said at 354: ... the superannuation schemes which are envisaged are to provide benefits either upon the accumulation principle so that the extent of those benefits will depend on the level of the contribution to the particular scheme, or as defined benefits which will be fixed... it is said that an employee will have a vested interest in the fund and thus in the contributions when they are made, although his interest will not fall into possession until he retires or otherwise establishes his entitlement. In its judgment, the Full Bench in Exel quoted in full paragraph [22] of Merkel J's judgment in Electrolux No. 1 , as set out at [21] in this judgment, and then continued at [41]: The payee in this case is an insurer which has issued a policy over the income of the employee. Does such a payment relate to "an incident of the employment"? We have no doubt that a scheme for income protection insurance, in which the employer pays the premium, pertains. In this case, there is an income protection insurance scheme which allows that if premiums rise the employer and the employee are to pay a share of the premium. In those circumstances at least, a provision for the employee's share of the premium to be deducted by the employer from the employee's wages and remitted to the insurer also pertains. We think that such a payment relates to an incident of the employment in the sense in which Menzies J. used that expression in Portus . For that reason cl.19.4 is a matter that pertains to the relevant relationship. Immediately before the passage of Steven J in Portus cited at [15] of this judgment, his Honour said: Not every demand for reward for work performed will render the subject matter of the demand an industrial matter. The matter demanded must always pertain to the employer-employee relationship... It follows that the mere assertion by the union that such payments of insurance premiums are a reward for services does not, without more, establish the necessary nexus to the employment relationship. The union's reliance on the High Court in the Superannuation Case at 356 where it said ' the obligation of the employer to make payments ends with the relationship between him and his employee ' is insufficient to establish that nexus. This particular passage was used in the context of distinguishing superannuation from pensions, which had been found in Hamilton Knight to not pertain to the relationship between employer and employee, rather than to provide a reason why superannuation could be considered to pertain to the relationship between employer and employee. As Steven J said in the passage cited above, the subject matter must still pertain to the relationship between the employer and employee. In the Superannuation Case payments were found to be in lieu of remuneration, thus providing a necessary link to the employer and employee relationship. This was also the case in Electrolux No. 1 and Exel . In the absence of similar evidence that the payments of insurance premiums by the employer were a reward for services and in view of the Court's finding that the benefits do not pertain to the relationship between employee and employer, the claim that such payments are merely a reward for services cannot be sustained. Can the clause be read down?