Australian Licenced Aircraft Engineers' Association v Ansett Australia Limited [2003] FCA 249 (26 March 2003)

Last Updated: 27 March 2003

FEDERAL COURT OF AUSTRALIA

Australian Licenced Aircraft Engineers' Association v Ansett Australia Limited

[2003] FCA 249

CORPORATIONS - administration under Pt 5.3A of the Corporations Act 2001 - whether claim barred where deed of company arrangement - whether a union is a creditor in relation to union fees deducted by employer - where amount paid prior to deed of arrangement - where claim not in relation to alleged debt

INDUSTRIAL LAW - whether discretion exists as to exercise of jurisdiction pursuant to s 413 and s 413A of the Workplace Relations Act 1996 (Cth) and whether should be exercised - interrelationship with Corporations Act 2001 - interpretation of certified agreement and award

Corporations Act 2001 (Cth) ss 444D, 444E

Workplace Relations Act 1996 (Cth) ss 413, 413A

Finance Sector Union of Australia v Commonwealth Bank of Australia [2000] FCA 1468; (2000) 106 IR 158 cited

Finance Sector Union of Australia v Commonwealth Bank of Australia (2001) 106 IR 172 cited

AUSTRALIAN LICENCED AIRCRAFT ENGINEERS' ASSOCIATION v ANSETT AUSTRALIA LIMITED (subject to deed of company arrangement)

N 1158 OF 2002

GYLES J

SYDNEY

26 MARCH 2003

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 1158 OF 2002

BETWEEN:	AUSTRALIAN LICENCED AIRCRAFT ENGINEERS' ASSOCIATION APPLICANT
AND:	ANSETT AUSTRALIA LIMITED (subject to deed of company arrangement) RESPONDENT
JUDGE:	GYLES J
DATE OF ORDER:	26 MARCH 2003
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

The applicant bring in short minutes of order to give effect to this judgment.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 1158 OF 2002

BETWEEN:	AUSTRALIAN LICENCED AIRCRAFT ENGINEERS' ASSOCIATION APPLICANT
AND:	ANSETT AUSTRALIA LIMITED (subject to deed of company arrangement) RESPONDENT

JUDGE:	GYLES J
DATE:	26 MARCH 2003
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1 This is an application under s 413 and s 413A of the Workplace Relations Act 1996 (Cth) by the Australian Licenced Aircraft Engineers' Association for the following orders:

"An order declaring that, on the proper interpretation of clause 21, Redundancy Clause, of the Ansett Australia Union Collective Bargaining Agreement 1999 ("EBA IV"):

(i) Any employee of the respondent to whose employment EBA IV and the Licenced Aircraft Engineers' (Ansett Australia Ltd) Award 1995 ("the Award") apply ... made compulsorily redundant shall be paid redundancy entitlements in accordance with whichever of the following is most beneficial to the employee:

(a) The redundancy payment formula set out in clause 21(c) of EBA IV;

(b) The redundancy payment provisions set out in clause 41, Redundancy, of the Award; or

(c) The provisions of the document entitled Ansett Airlines of Australia and Subsidiary Airlines - Non-Voluntary Redundancy Plan and dated 3 May 1991 ("the May 1991 Policy").

(ii) Where an employee of the respondent to whose employment EBA IV and the Award apply is paid redundancy entitlements pursuant to clause 21(c) of EBA IV, such employee shall be provided with notice, or payment in lieu thereof, according to the greater of the following:

(a) 4 weeks' notice; or ...

(b) the relevant period of notice prescribed by clause 41(b) of the Award.

(iii) The 104 weeks' pay cap on redundancy entitlements prescribed by the second dot point in clause 21 (c)(ii) of EBA IV is not applicable to an employee who is paid redundancy entitlements pursuant to clause 41 of the Award or the May 1991 Policy."

2 It appears from that proposed order there are three relevant instruments to consider:

(1) Ansett Australia Union Collective Bargaining Agreement 1999 ("1999 EBA");

(2) Licenced Aircraft Engineers' (Ansett Australia Limited) Award 1995 ("the Award"); and

(3) Ansett Airlines of Australia and Subsidiary Airlines - Non-Voluntary Redundancy Plan ("the CR May 1991 Policy").

Reference was also made in the evidence to an Ansett Australia Redundancy Manual, but I have not found it necessary to refer to it, even if it were properly admissible to do so.

3 Section 413 and s 413A of the Workplace Relations Act 1996 (Cth) are as follows:

"413(1) The Court may give an interpretation of an award on application by:

(a) the Minister; or

(b) an organisation or person bound by the award.

(2) The decision of the Court is final and conclusive and is binding on the organisations and persons bound by the award who have been given an opportunity of being heard by the Court."

"413A(1) The Court may give an interpretation of a certified agreement on application by:

(a) the Minister; or

(b) an organisation or person bound by the certified agreement; or

(c) an employee whose employment is subject to the agreement.

(2) The decision of the Court is final and conclusive and is binding on:

(a) the organisations and persons bound by the agreement; and

(b) the employees whose employment is subject to the agreement;

who have been given an opportunity of being heard by the Court."

4 Ansett Australia Limited ("Ansett") was one of two major Australian airline operators for many years, and employed thousands of personnel of various job descriptions, including some hundreds of licenced aircraft engineers, most of whom were members of the applicant union. On 12 September 2001 administrators were appointed to Ansett pursuant to Pt 5.3A of the Corporations Act 2001 (Cth) ("the Act"). On 2 May 2002 Ansett executed a Deed of Company Arrangement pursuant to Div 10 of Pt 5.3A.

5 At the outset, Ansett moved for the following orders:

"2. That this proceeding be struck out;

3. In the alternative, that the hearing of this proceeding be stayed unless the applicant obtains the leave of the Court in accordance with section 444E(3)(c) of the Corporations Act 2001;

4. In the alternative, that the hearing of this proceeding be stayed to enable Deed Creditors of the Respondent to seek leave to intervene in this proceeding;

5. That the Applicant pay the Respondent's costs of this application;

..."

6 Section 444D(1) is as follows:

"A deed of company arrangement binds all creditors of the company, so far as concerns claims arising on or before the day specified in the deed under paragraph 444(4)(i)."

The reference to s 444(4)(i) is a reference to s 444A(4)(i) and the day was 12 September 2001. Section 444E (so far as is relevant) is as follows:

"(1) Until a deed of company arrangement terminates, this section applies to a person bound by the deed.

...

(3) The person cannot:

(a) begin or proceed with a proceeding against the company or in relation to any of its property; or

(b) begin or proceed with enforcement process in relation to property of the company; except:

(c) with the leave of the Court; and

(d) in accordance with such terms (if any) as the Court imposes.

(4) In subsection (3):

"property", in relation to the company, includes property used or occupied by, or in the possession of, the company."

7 On 17 October 2001 the Federal Secretary of the applicant wrote to the administrators of Ansett in the following terms (omitting formal parts):

"According to our records our last payment received from Ansett Australia for membership union dues, paid by payroll deduction was on 24 August 2001 for the month of July.

We therefore have a debt owed by Ansett to the value of $34741.08 approximately for a period of six (6) weeks.

Enclosed are the appropriate documents for your information."

Enclosed was a formal proof of debt whereby the applicant claimed that the company was indebted to it in the sum of $34,741.08 for "outstanding P.R.D. Union dues".

8 On about 29 October 2001 an amount of $32,883.15 was paid by Ansett to the applicant for "Ansett employee union payments" for the period of August and up to 13 September 2001.

9 It is contended on behalf of Ansett that the applicant was a creditor at the relevant date and so is bound by the Deed (s 444D(1)) and cannot begin a proceeding against the company or begin a proceeding in relation to any of the property of the company except with the leave of the Court (s 444E subs (1) and subs (3)).

10 It is contended on behalf of the applicant that, notwithstanding its proof of debt, it was not a creditor at the relevant date at all. It is submitted that the monies claimed were union dues deducted from the pay of the relevant employees who were members of the union and so comprised a portion of the wages or salaries of the employees rather than constituting a debt to the applicant. I am not satisfied that the argument on behalf of the applicant is correct. The inference that I would draw is that the company had, with the authority of the employee, deducted the monies for union dues, which were held after collection for the benefit of and to the use of the applicant. The company was effectively agent for the applicant for this purpose. I can see no reason to doubt that the applicant could have (in the absence of administration) sued for the monies on the common money counts. In any event, a cogent explanation, backed up by evidence, would need to be given to depart from the formal claim by the applicant to be a creditor. None was proffered.

11 It is then submitted on behalf of the applicant that s 444D(1) only binds a creditor so far as concerns claims arising on or before the specified day, that the only claims of that description were met on or about 29 October 2001, and that thereafter the applicant was not a creditor of Ansett in any relevant sense. This was linked to the submission that s 444E(3) only applies in relation to pre-administration claims as a creditor, whereas the present proceeding is not by a creditor and is not in pursuit of a pre-administration claim. In my opinion, each of these submissions is sound and s 444E does not apply to this proceeding.

12 Ansett opposed leave being granted if it were required under s 444E. If there is a discretion as to whether to exercise jurisdiction pursuant to s 413 and s 413A of the Workplace Relations Act, it seemed to me that the arguments against the grant of leave would also be relevant to the decision whether to exercise that jurisdiction. Counsel did not refer me to any authority where the question as to whether the jurisdiction is discretionary has been discussed. It was submitted for the applicant that there was no apparent instance where the Court had not exercised the jurisdiction. I favour the view that there is a discretion, but, as I have decided that there is no sufficient reason not to exercise the jurisdiction, there is no need to come to any final view on that issue.

13 One of the administrators outlined in evidence Ansett's position in the following way:

"If the Applicant's construction of the Ansett Australia Union Collective Bargaining Agreement 1999 ("EBA IV") is accepted by the Court and the orders sought by the applicant in this proceeding are made, the Respondent would be required to pay an estimated extra $7.8 million in notice and severance entitlements to those employees who are eligible to be members of the Applicant. To date, with the exception of the Applicant, all other unions which represent the former employees of the Respondent have accepted the Respondent's construction of employees' notice and severance pay entitlements under EBA IV. If the orders sought by the applicant were granted by the Court, then in my opinion it is likely that a number of other unions would bring similar claims, which I estimate would amount to an additional $15.1 million in notice and severance pay entitlements being payable. Payments of this magnitude would inevitably lead to a reduction in the returns which all creditors of the respondent might ultimately receive, including employee creditors. In my opinion, it is my responsibility as a voluntary administrator of the Respondent to ensure that all creditors of the Respondent are apprised of this proceeding and its possible ramifications, so they have the opportunity to seek leave to intervene in this proceeding and raise whatever arguments they wish to raise in respect of the Applicant's claim."

This was expanded upon during argument. Counsel for Ansett also pointed out that whilst there would be no doubt that Ansett would be bound by the result of the proceeding, there would be a real question as to whether individuals and other unions than the applicant would be bound by the result. Reference was also made to the undesirability of the corporations law regime being interfered with by this extraneous jurisdiction.

14 In my opinion, there is no reason in principle why a bona fide dispute as to the interpretation of an award or certified agreement should not be resolved by the appropriate means for doing so. To do so is not to interfere with or obstruct the corporations law regime which will govern the working out of the practical effect of the certified agreement or award when properly interpreted. Settling the dispute as to interpretation in this fashion is economical and does not incur unnecessary costs.

15 The issue concerning whether other parties will be bound is best dealt with, at a practical level, by taking steps to ensure that those who are directly affected are given the opportunity of being heard, bearing in mind s 413(2) and s 413A(2). With the assistance of the parties, a regime was established to seek to achieve that result. I need not set those steps out in this judgment. Whether those steps are effective is not a matter for me to decide in this proceeding. In the result, other unions appeared and ultimately simply supported the position taken by Ansett.

16 As there is a live and genuine dispute as to the interpretation of the relevant instruments, the jurisdiction should be exercised (cf Finance Sector Union of Australia v Commonwealth Bank of Australia [2000] FCA 1468; (2000) 106 IR 158 at [42]; Finance Sector Union of Australia v Commonwealth Bank of Australia (2001) 106 IR 172 at [20]). The preliminary motion by Ansett is dismissed. I turn to consider the substance of the application.

17 The 1999 EBA is to be read and interpreted in conjunction with (inter alia) the Award, provided that, in the event of inconsistency, the 1999 EBA prevails. The terms of the Award are to be applied as terms of the 1999 EBA. The 1999 EBA was amended by order of the Australian Industrial Relations Commission effective from 11 December 2001 and for relevant purposes the amended form will be taken into account.

18 The critical clause in the 1999 EBA as amended was as follows:

"21. REDUNDANCY CLAUSE

(a) Preamble - Compulsory Redundancy

The company and the Unions agree to seek to manage all necessary staff reductions in a manner aimed at minimising the need for compulsory redundancy. Where the company decides to use these redundancy provisions to terminate the employment of employees, then as soon as practicable after so deciding, and before the terminations take place, the relevant Unions will be advised of the decision, together with:

* the reasons for the compulsory redundancy;

* the number and categories of the employees likely to be affected; and

* the time when, or the period over which, the company intends to carry out the termination.

Further, prior to termination of employment and prior to the final determination, the company will meet as a minimum its statutory obligations to consult Unions on measures to avert or minimise the redundancies, and implement measures (such as redeployment) to mitigate the adverse effects of any resulting terminations.

(b)

The new Business Recovery Redundancy Program has been developed to replace the existing compulsory and voluntary policies and became effective from 1 November 1998. It will apply to employees covered by this Agreement where Ansett deems a redundancy to have occurred or where an application for voluntary redundancy is accepted.

The policy will specifically replace all previous redundancy policies within Ansett.

Where compulsory redundancy is necessary and an employee would be disadvantaged under the new program either the previous CR policy (ie the May 1991 "Ansett Airlines of Australia and Subsidiary Airlines Non-Voluntary Redundancy Plan and Procedures Document") or award entitlements will apply. (emphasis added)

Clause 12 [Transmission of Business] will not operate in respect of an employee or ex-employee who receives a payment under this clause.

(c) Entitlements

The following is a table of the entitlements of the policy

(i) Redundancy Payment

Years of Service	Redundancy Payment	Travel Entitlement
0-5 years	2 weeks pay* per year of service	1 trip total for either employee or eligible** (domestic or Ansett International) to be taken within 1 year
5-15 years	2 weeks pay* per year for first 5 years, then 4 weeks pay* per year thereafter	6 trips total to be taken within 3 years by the employee or between the employee and eligibles** (Can include 2 Ansett International trips)
15 + years	2 weeks pay* per year for first 5 years then 4 weeks pay* per year for 5-15 years, then 6 weeks pay* per year thereafter	Unlimited trips for employee plus 4 trips per annum for eligibles** (Can include 2 Ansett International trips per annum in total for employee and/or eligibles**)

* All payments are calculated using the weekly pay excluding shift penalties, overtime or allowances.

** Eligible family members for family status staff are spouse, de facto and dependent children under 18 years of age. Eligible family members for single status staff are parents, brothers and sisters.

Employees over 50 receive a Retiree Card while those under 50 receive a Former Employee ID Card.

All travel is subload and non-upgradeable. Fares are at Ansett domestic concessional rates prevailing at the date of leaving and at the fixed Ansett International fares at the time of travel.

Example of BRP Redundancy Policy

22 years of service

0-5 years 5-15 years 15-22 years	5 years x 2 weeks 10 years x 4 weeks 7 years x 6 weeks	10 weeks 40 weeks 42 weeks
Total 92 weeks (plus notice)

(ii) New Business Recovery Redundancy Program

* Replaces the existing voluntary and compulsory redundancy policies.

* All payments are capped at 104 weeks including the notice period.

* The policy is effective from 1 November 1998.

* Notice period is 4 weeks or as otherwise specified in the relevant Award. (emphasis added)

(iii) Long Service Leave

* Accrued long service leave will be paid at the applicable rate.

(iv) Superannuation

* As per the retrenchment provisions of the applicable trust deed.

(v) Annual Leave

* Accrued annual leave is paid at the appropriate rate, plus either 17.5% loading or applicable shift penalty.

(vi) Other issues

* For redundancies processed under the new BRP Redundancy Plan, there will be a maximum redundancy payment of $175,000 per employee.

* Regular casuals who can establish continuous service with Ansett will be eligible under this clause." (emphasis added)

19 The relevant portion of the Award is as follows:

"41 - REDUNDANCY

Statement of intent

(a) (i) The employer recognises the concern expressed by the unions relating to the job security and will seek to ensure that job security is maintained.

(ii) The employer agrees that retrenchments shall not be declared until such time as all aspects of such retrenchments have been discussed with the union/s in an endeavour to obviate the retrenchments.

(iii) In the event that retrenchments are inevitable, regard will be given to the principles of:

(1) last on first off;

(2) consideration for employees who are approaching normal retirement age; and

(3) preference of re-employment to retrenched employees.

(iv) The employer and the union agree that where practicable retraining opportunities will be provided to employees declared redundant.

(v) The employer shall take reasonable steps to arrange or assist in obtaining suitable alternative employment for employees who would otherwise be retrenched.

(vi) The employer and the union agree that disputes relating to this clause may be referred to the Australian Industrial Relations Commission for resolution.

Period of notice

(b) Employees with at least one year's completed service to whom this clause shall apply, shall be given not less than the following period of notice exclusive of the period of notice prescribed by clause 5 of the award.

Completed years of service Period of notice

one to four years four weeks

five to nine years eight weeks

ten and above twelve weeks

Provided that employees may terminate their employment in accordance with clause 5 when necessary to commence alternative employment.

Definitions

(c) (i) "Employee" means a person who has been employed on a full-time basis for a period of one year or more and does not include persons employed on a temporary basis.

(ii) "Redundancy" means a declaration by the employer that an employee or employees are surplus to labour requirements because the quantity of the work has diminished.

(iii) "Retrenchment" means the termination of employment of an employee by an employer for reason of redundancy.

(iv) "Payment" means the weekly rate appearing in clauses 6 and 7 of the award.

...

Payment (as defined herein)

(j) The following scale of payments shall apply on termination due to redundancy:

(i) a minimum of four weeks pay;

(ii) two weeks pay for each year of service up to and including five years service and three weeks pay for each completed year of service in excess of five years;

(iii) plus pro rata payment for additional completed month of service.

Provided that no employee shall receive payment in excess of the amount payable had he/she remained in the employ of the employer until normal retirement date.

National standards/legislation

(k) Leave is reserved to the unions to re-open discussion with employers in the event of changes in national standards or legislation which affects national standards."

20 The relevant portion of the CR May 1991 Policy is as follows:

"2. BENEFITS

A Payment

1. Employees Under Age 55.

In addition to an employee's superannuation entitlement:-

(i) Employees will receive payment based on the following scale for completed years of service:

i) 3 weeks' pay for each year of service up to and including 5 years with a minimum of 4 weeks' pay.

ii) 4 weeks' pay for each year of service in excess of 5 years.

(ii) Service will be pro rated to completed years and months.

(iii) Payment is calculated on the employee's normal award base rate and is exclusive of shift, overtime and all special allowances.

2. Employees over age 55

In addition to an employee's superannuation entitlement:

(i) An ex gratia payment (eligible termination redundancy payment) will apply. A payment of 18% of Final Average Salary for the last year - Final Average Salary x 1, for each year of potential service remaining for an employee before attaining the age of 65.

Savings - Where an employee has had a reduction in rate of pay in the final year, then the Highest Average Salary for one year within the final three years shall apply, calculated on the same basis as Final Average Salary x 1, ie defined as FAS for Superannuation purposes.

(ii) Where an employee aged over 55 has less than 10 years' service the benefits will be one tenth of that described in (i) above for each year of service.

(iii) The ex gratia payment is in lieu of weeks' pay for years of service formula, therefore no "weeks pay for years of service" will apply for employees over age 55.

(iv) Payment will be pro-rated to completed years and months.

3. Notice Period

The date of termination for an employee will be determined by the company and a four week period of notice will apply in lieu of specific award provisions.

or

4. Award Provisions

In circumstances where total current award provisions are greater than those specified in this agreement, then the employee may take the total award entitlement, eg The Aircraft Industry Award 1980 Redundancy clause provides for a weeks per years of service formula and a graduated notice period. If that total award provision is greater for an individual then that greater provision will be applied. Provided that either the Award provision in total or this Plan in total shall be used. Provided also that Clause 5(b) of this document shall always apply.

...

5. GENERAL

...

(b) An employee cannot receive more by way of compensation under this Plan than would have been received had the employee worked until normal age retirement."

The attached Procedures Document provides that the period of notice shall be four weeks.

21 The principal question of interpretation which arises is whether, as contended by Ansett, the cap of 104 weeks included in cl 21 of the amended 1999 EBA applies in the event that the rider as to no disadvantage in the same clause operates and the benefits provided for by the other instrument apply. It is contended for Ansett that the 1999 EBA as amended remains the operative agreement which governs the relationship, and should apply according to its terms. Furthermore, it is submitted that the cap or limitation is not just part of the calculation for determining entitlement pursuant to the 1999 EBA. It is a separate provision having wider operation.

22 In my opinion, counsel for the applicant is correct in submitting that this interpretation is untenable. The "no disadvantage" rider is based upon the premise that there are three separate regimes for administering compulsory redundancy. The first is the new Business Recovery Redundancy Program ("BRP") provided for by the 1999 EBA itself. The second is the CR May 1991 Policy. The third is the Award. As counsel for the applicant points out, each regime had its own structure, including limits. In my opinion, there is no escape from the conclusion that the 104 week cap is one (and only one) aspect of the BRP and that the benefits to be obtained under that program (including the cap) must be compared (in the case of a particular employee) with the operation of the previous CR May 1991 Policy regime as a whole, with its limits, and with the Award entitlements as a whole with their limits. The other capping provision in the 1999 EBA of $175,000 per employee illustrates the point - it is expressly for redundancy processed under the BRP and is indistinguishable in this respect from the 104 week cap. This effectively deals with the first two questions of interpretation.

23 The other question of interpretation relates to the period of notice. The argument for the applicant is that cl 21(c)(ii) of the 1999 EBA provides an entitlement to a notice period of "four weeks or as otherwise specified in the relevant Award" and that the Award provides for more than four weeks in certain circumstances and will thus apply in those circumstances. It is submitted that the sub-clause operates as follows:

(a) Absent any inconsistent Award notice provision, the redundant employee receives four weeks' notice (or pay in lieu);

(b) Where there is an Award specification of notice not being four weeks, then the employee receiving the BRP benefit will receive notice as so specified. In other words, a redundant employee receiving benefits under the BRP will have the benefit of a period of notice greater than four weeks if such period be prescribed for that employee by the Award.

24 It is submitted for Ansett that this interpretation is inconsistent with the position taken by the applicant (which I have upheld) in relation to the other questions, that there are three separate regimes, each to be looked at separately. It is also submitted that the 1999 EBA is to prevail in the event of inconsistency with the Award.

25 In my opinion, the applicant's contention is correct. In this instance, the actual terms of the BRP expressly incorporate the notice provisions of the relevant Award into the BRP. It is not a case where there is a clash of regimes or any inconsistency between them. The Award provides for more than four weeks in relation to completed years of service greater than four. In such a case, the Award provision would operate. It is clear enough from the context, particularly the "no disadvantage" provisions, that the Award would operate by incorporation into the BRP where it makes provision additional to that of the BRP. That operation, however, would be subject to the other provisions of the BRP.

26 I thus conclude that the applicant is entitled to the substance of the relief which it seeks. I will discuss the precise form of order with counsel.

I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles.

Associate:

Dated: 26 March 2003

Counsel for the Applicant:	MLD Einfeld QC and A Hatcher
Solicitor for the Applicant:	Jones Staff & Co
Counsel for the Respondent:	M Cashion SC and CRC Newlinds
Solicitor for the Respondent:	Arnold Bloch Leibler
Date of Hearing:	10 February 2003
Date of Judgment:	26 March 2003