Construction, Forestry, Mining & Energy Union v Deputy President Hamberger [2011] FCA 719 (24 June 2011)

Last Updated: 30 June 2011

FEDERAL COURT OF AUSTRALIA

Construction, Forestry, Mining & Energy Union v Deputy President Hamberger [2011] FCA 719

Citation:	Construction, Forestry, Mining & Energy Union v Deputy President Hamberger [2011] FCA 719
Parties:	CONSTRUCTION, FORESTRY, MINING & ENERGY UNION v DEPUTY PRESIDENT HAMBERGER, DEPUTY PRESIDENT MCCARTHY, COMMISSIONER BLAIR OF FAIR WORK AUSTRALIA and NEWLANDS COAL PTY LIMITED
File number(s):	NSD 1676 of 2010
Judge:	KATZMANN J
Date of judgment:	24 June 2011
Catchwords:	INDUSTRIAL LAW – Enterprise agreement – coverage clause – whether Fair Work Australia may approve an enterprise agreement which permits employees to elect not to be covered by it – whether the Full Bench erred in holding that the right to choose means that employees are better off overall than if they were covered by the modern award – whether the Full Bench failed to consider whether the group of employees who will be covered by the award were geographically, operationally or organisationally distinct pursuant to s 186(3A), Fair Work Act 2009 (Cth) ADMINISTRATIVE LAW – Applications for writs of certiorari and mandamus – whether, if the Full Bench erred, errors were jurisdictional errors STATUTORY INTERPRETATION – Meaning of “[employees] who will be covered by the agreement” in Part 2-4, Fair Work Act 2009 (Cth)
Legislation:	Fair Work Act 2009 (Cth) ss 53, s 171, 172, 180, 181, 182, 185, 186, 187, 193, s 256A, 562, 563, 570 Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) Judiciary Act 1903 (Cth) s 39B Workplace Relations Act 1996 (Cth)

Cases cited:		Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) [2009] HCA 41; (2009) 239 CLR 27 Brackenridge v Toyota Motor Corporation Australia Ltd [1996] IRCA 628; (1996) 142 ALR 99 CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194 Commonwealth Bank of Australia v Finance Sector Union of Australia [2007] FCAFC 18; (2007) 157 FCR 329 Concut Pty Ltd v Worrell [2000] HCA 64; (2000) 103 IR 160 Construction, Forestry, Mining and Energy Union v Australian Industrial Relations Commission and Another [2007] FCAFC 32; (2007) 157 FCR 260 Craig v State of South Australia [1995] HCA 58; (1995) 184 CLR 163 Deva v University of Western Sydney [2011] FCA 199 Elias v Commissioner of Taxation [2002] FCA 845; (2002) 123 FCR 499 Kirk v Industrial Relations Commission of New South Wales & Anor [2010] HCA 1; (2010) 239 CLR 531 Re McJannet; ex parte The Australian Workers’ Union of Employees, Queensland [No 2] [1997] HCA 40; (1997) 189 CLR 654 Minister for Immigration and Multicultural Affairs v Yusuf [2001] HCA 30; (2001) 206 CLR 323 Nestle Australia Ltd v Commissioner of Taxation (Cth) (1987) 16 FCR 167 Newlands Coal v CFMEU [2010] FWAFB 7401 Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 Zhang v Canterbury City Council [2001] NSWCA 167; (2001) 51 NSWLR 589
Date of hearing:	5 April 2011
Date of last submissions:	7 April 2011
Place:	Sydney
Division:	FAIR WORK DIVISION
Category:	Catchwords
Number of paragraphs:	107

Counsel for the Applicant:	Mr S Crawshaw SC with Mr A Slevin
Solicitor for the Applicant:	Slater & Gordon

Solicitor for the First Respondent:	Australian Government Solicitor (submitting appearance)
Counsel for the Second Respondent:	Mr H Dixon SC with Mr A Gotting
Solicitor for the Second Respondent:	Blake Dawson

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
FAIR WORK DIVISION	NSD 1676 of 2010

BETWEEN:	CONSTRUCTION, FORESTRY, MINING & ENERGY UNION Applicant
AND:	DEPUTY PRESIDENT HAMBERGER, DEPUTY PRESIDENT MCCARTHY, COMMISSIONER BLAIR OF FAIR WORK AUSTRALIA First Respondent NEWLANDS COAL PTY LIMITED Second Respondent

JUDGE:	KATZMANN J
DATE OF ORDER:	24 JUNE 2011
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

Within seven days:

1. the parties bring in short minutes giving effect to these reasons; and
2. any application for costs be made by notice of motion.
   

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
FAIR WORK DIVISION	NSD 1676 of 2010

BETWEEN:	CONSTRUCTION, FORESTRY, MINING & ENERGY UNION CONSTRUCTION, FORESTRY, MINING & ENERGY UNION Applicant
AND:	DEPUTY PRESIDENT HAMBERGER, DEPUTY PRESIDENT MCCARTHY, COMMISSIONER BLAIR OF FAIR WORK AUSTRALIA First Respondent NEWLANDS COAL PTY LIMITED Second Respondent

JUDGE:	KATZMANN J
DATE:	24 JUNE 2011
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. The primary question in this case is whether an employer may lawfully provide in an enterprise agreement for employees who are covered by the agreement at the time it is made to later choose not to be covered by it.

Background

2. In September 2009 the second respondent (“Newlands”) started to bargain with the applicant (“the CFMEU”) about a proposed enterprise agreement. Negotiations continued until April 2010 when the parties reached agreement. Consequently, in May 2010 Newlands asked its employees to make the enterprise agreement (“the agreement”). The group of employees to which the agreement relates is specified in the agreement as “employees of the company engaged at Newlands Surface Operations in the classes of work included in Schedule A to the Black Coal Mining Industry Award”. 101 (of a total of 109) employees voted to approve the making of the agreement.
3. On 17 May 2010 Newlands applied to Fair Work Australia to have the agreement (entitled the Newlands Coal Surface Operations Enterprise Agreement 2010) approved. At that time the CFMEU supported the application. I should point out, however, that it had, during the period of negotiations, expressed the view that the coverage clause did not meet the requirements of the Fair Work Act 2009 (Cth) (“the Act”) but was informed by Newlands that its legal advice was to the contrary and negotiations proceeded accordingly.
4. On 20 May 2010 Fair Work Australia, through the associate to Commissioner Roe, wrote to Newlands raising concerns, amongst other things, about the coverage clause. The Commissioner was concerned that the coverage clause included a provision for new employees to elect not to be covered by the agreement and for any employee at any time to opt out of being covered by the agreement (“the opt out clause”). The Commissioner expressed doubts that this was consistent with the requirements of ss 186(3) and 186(3)(A) of the Act and indicated that he could not be sure that a current or future employee who elected not to be covered by the agreement will be better off overall for the purposes of the “Better Off Overall Test” (“BOOT”) imposed by the Act.
5. On 27 May 2010 Newlands replied to Fair Work Australia. On the question of the coverage clause it offered an undertaking that any employee who would be covered by the agreement, “except for their election in writing not to be covered, will be better off overall for the purposes of the [BOOT]”.
6. On 7 June 2010 Fair Work Australia again wrote to Newlands maintaining its concern about the coverage clause. The Commissioner indicated he would approve the agreement provided that Newlands offered a written undertaking to the effect that the opt out clause would not apply and Newlands would neither request nor accept such an election. Newlands replied on 18 June 2010, adhering to its position and urging that the matter be fixed for hearing.
7. After hearing from the parties, the Commissioner refused to approve the agreement absent an undertaking not to enforce the opt out clause: Newlands Coal Pty Ltd [2010] FWA 4811; Newlands Coal Pty Ltd [2010] FWA 4986. The second respondent (“Newlands”) appealed from the Commissioner’s decision to a Full Bench of Fair Work Australia. The Full Bench, which is the first respondent in this proceeding, by a majority (Commissioner Blair dissenting) set aside the decision of the Commissioner and approved the agreement, subject to a different undertaking: Newlands Coal v CFMEU [2010] FWAFB 7401. In this proceeding the CFMEU applies for writs of certiorari and mandamus to quash that decision and have the Full Bench redetermine it.

The coverage clause

8. The coverage clause at the centre of this case is clause 2 of the agreement. The contentious part (the opt out clause) is contained in subclause 2.2.

2. Coverage

2.1 Coverage – General

Subject to 2.2 below, this Agreement covers:

• Newlands Coal Pty Ltd (“Company”), and

• Employees of the Company who are engaged at the Newlands Surface Operations in the classes of work included in Schedule A – Production and Engineering Employees of the Black Coal Mining Industry Award 2010.
  

2.2 Employees Not Covered

This Agreement does not cover:

• Employees who are covered by an Australian Workplace Agreement (“AWA”), that has not reached its nominal expiry date; or
  
• Employees who at any time elect in writing not to be covered by the Agreement.
  

2.3 Employee Decision whether to be Covered

All persons proposed to be employed by the Company in the classes of work included in Schedule A Production and Engineering Employees of the Black Coal Mining Industry Award 2010 will be covered by this Agreement unless they elect in writing not to be covered by this Agreement.

All employees who are covered by an AWA or ITEA shall, following expiry of the nominal term of their AWA or ITEA, be covered by this Agreement unless they elect in writing not to be covered by this Agreement.

[Emphasis added.]

The proceedings below

9. The application for approval of the agreement was heard on 24 June 2010. The CFMEU informed Commissioner Roe that it supported the substance of the agreement and the approval of the agreement with appropriate undertakings that employees would not be permitted to opt out. On 29 June 2010 the Commissioner issued a decision to the effect that, unless Newlands provided a further undertaking to overcome problems with the coverage clause, the agreement would not be approved. On 6 July 2010 Newlands advised the Commissioner that it would not be providing a further undertaking. Consequently, on 7 July 2010 the Commissioner declined to approve the agreement and dismissed the application.
10. On 27 July 2010 Newlands filed a notice of appeal challenging Commissioner Roe’s decision. The CFMEU defended the Commissioner’s decision and the Australian Council of Trade Unions (“ACTU”) intervened to support it. On 1 November 2010 the Full Bench allowed the appeal, ordered that the Commissioner’s decision be quashed and, on 22 November 2010, upon receiving a further undertaking it had required of Newlands, it ordered that the agreement between the parties be approved.

Commissioner Roe’s decision

11. Commissioner Roe held that the Act does not allow an individual who is covered by an enterprise agreement and to whom the agreement applies to elect not to be covered by it. He considered that the only way an employee could cease to be covered by an enterprise agreement was if the agreement were varied, terminated or replaced by a later decision of Fair Work Australia. He said that there was no provision in the Act for an agreement to be made with employees who may be covered by the agreement, only those who will be covered by it, and that optional coverage was inconsistent with the legislative scheme and its objects. He acknowledged that, although the Act contemplated that employees would leave their employment or move to a new classification not covered by the agreement, it did not provide for opting out. He felt that if employees who later elected not to be covered by the agreement voted on the making of the agreement it would “contaminate” the process. In short, as he put it at [22], “the legislation has a scheme for dealing with employees moving in and out of agreements and the parties are not free to devise their own mechanisms by which this can occur”. He also held that the opt out clause was inconsistent with the objects of the legislation and a long line of authority which prevents contracting out of awards and statutory agreements. He said that the concept of employees opting out of agreements is inconsistent with the principles of collective bargaining and genuine agreement.
12. The Commissioner said he was also inclined to the view that the inclusion of the opt out clause meant that the agreement did not meet the BOOT because there was no guarantee that those employees who opted out would be better off than if they were covered by the modern award. He was not persuaded that an undertaking from the employer that they would be better off would offer sufficient protection for them.
13. Finally, the Commissioner was not satisfied that the group of employees who will be covered by the agreement were fairly chosen for the purposes of ss 186(3) and (3A) if an undefined group of them were able to opt out of it. He said that the process of choosing who would not be covered by the agreement could not have been fair since those voting for it could not have known who might be covered by it in the future and those who might opt out lacked common characteristics.
14. The Commissioner also considered that if employees were able to opt out of the agreement it could not be said that those who remained were geographically, operationally or organisationally distinct.

The decision of the Full Bench

15. The majority considered that the Commissioner’s approach to the opt out clause involved a misunderstanding of his role. According to the majority, his role was a limited one. It involved first considering whether he had a valid application, which involved considering whether the agreement was properly made and that merely involved determining whether a majority of valid votes were cast. If so, then, the majority said, an agreement had been made with employees who will be covered by it. They stated, in effect, that whether or not the employees were fairly chosen was irrelevant to the question of whether a valid application had been made.
16. In the alternative, if it was relevant, the majority rejected the Commissioner’s view that the process of choosing who would be covered could not have been fair as those voting for the agreement could not have known who might be covered by it in the future. They considered that there was no uncertainty about who would be covered and noted there was no evidence of any manipulation of the ballot by “precluding” (presumably it meant “excluding”) those employees who should have been covered or including those who should not. They acknowledged that the voters would not know at the time which individuals would be covered by the agreement at a future time, nor how many employees would be covered. But they considered that such a circumstance was unremarkable as employees come and go, operational changes may significantly alter the number or balance of employees covered by the agreement, or the employer might double in size or go out of business altogether. They therefore found that the Commissioner erred in concluding that the group of employees to be covered by the agreement had not been fairly chosen. Consequently, they allowed the appeal, revoked the Commissioner’s decision and went on to decide for themselves whether the application for approval of the agreement should be granted.
17. The first question posed for consideration of the Full Bench was whether an application had been made under s 185 of the Act. The majority held that it had, rejecting a submission made by the ACTU (which was given permission to intervene in the appeal) that the Act does not contemplate the existence of an enterprise agreement that might cover employees; an employee who might be covered by the agreement is not an employee who will be covered by it. They noted that under the coverage clause an employee who does not elect in writing is, and remains, covered by the agreement, whereas an employee who elects in writing not to be covered by the agreement will not be covered by the agreement but will be covered before any such election. They considered that there was no uncertainty about who will be covered: namely, all those employees in the relevant classifications with the exception of those employees on unexpired AWAs and those who made a written election not to be covered. They said that the Explanatory Memorandum to the Fair Work Bill 2008 (Cth) made it clear that the expression “employees who will be covered by the agreement” refers to the class or group of employees who are expressed to be covered by the agreement. They observed that, subject to the specific requirements contained in ss 186 and 187 of the Act, as with any other term of an agreement, it was for the parties to decide on what they agree. The majority held that “will”, in context, denoted an intention, not a certainty, that something occur. Thus, here, the employees who made the agreement will be covered by it, although they may not remain so. They noted that s 256A specifically provides for employees who are or are to be covered by an enterprise agreement to be specified by class or name. Provided that the group of employees covered by the agreement is fairly chosen, it said, there are no other restrictions on how the parties may specify the class.
18. The majority then proceeded to consider whether the agreement had been genuinely agreed to by the employees who will be covered by it. They distinguished the authorities to which the Commissioner referred and declared, without more, that it was so satisfied.
19. The next question was whether the agreement passed the BOOT. The majority found that it would. They held that the effect of the opt out clause is that each employee has a choice: either to receive the terms and conditions in the agreement, some of which are superior to those contained in the modern award, or as a minimum to receive the conditions in the award. Nevertheless, they also said that an undertaking would be necessary to satisfy them that each prospective employee would have that choice.
20. Finally, the majority found that there was no other reason why the agreement could not be approved. They reiterated that Fair Work Australia lacks a general discretion whether or not to approve an enterprise agreement and was bound to do so if the requirements in ss 186 and 187 are met.
21. The dissenting member, Commissioner Blair, accepted the arguments of the CFMEU and the ACTU and held that on a proper construction of ss 181(1) and 182(1) of the Act, an opt out clause was impermissible. He took the view that the use of the word “will” denoted a requirement and did not include an option, contrasting it with “may”. He adopted the submission of the ACTU that the Act does not contemplate agreements that might cover employees, only those that will do so.

The application to this court

22. The CFMEU now seeks writs of certiorari and mandamus quashing the decision of the Full Bench for jurisdictional error and remitting the matter to Fair Work Australia for determination according to law.

The grounds of the application

23. The grounds of the application are contained in an affidavit from the CFMEU’s solicitor, Mr Phillip Pasfield. They are that:

(a) The [majority] fell into jurisdictional error in:

(i) allowing the appeal against the first instance decision;
(ii) quashing the first instance decision; and
(iii) approving the Agreement between the Second Respondent and its employees.

(b) The [majority] erroneously decided that it could exercise its powers under the [Fair Work] Act to approve the Agreement and that the requirements and/or jurisdictional facts required for the Agreement to be made under sections 52, 53, 172(2)(a), 180(2)(a), 181(1), 182(1) and 256A of the [Fair Work] Act were established in circumstances where the Agreement was made with employees employed at the time who may not be covered by the Agreement.

(c) The [majority] erroneously decided that the requirements in sections 186(2)(a) and 188(a) of the [Fair Work] Act that the Agreement had been genuinely agreed to by the employees covered by the Agreement by compliance with section 180(2) of the Fair Work Act could be satisfied in circumstances where the Agreement was made with employees employed at the time who may not be covered by the Agreement.

(d) The [majority of the Full Bench] misconceived its duty and/or identified the wrong issue and/or applied the wrong test and/or asked the wrong question in the exercise of its jurisdiction under sections 53, 172(2)(a), 180(2)(a), 181(1) and 182(1), 186(2)(a), 186(2)(d), 186(3), 186(3A), 188(a), 188(c), 193 and 256A of the [Fair Work] Act.

(e) [S]uch other grounds that to the Court seem proper.

24. Despite the way in which the grounds are expressed in Mr Pasfield’s affidavit, senior counsel for the CFMEU made it quite clear that his client did not challenge the decision of the majority to set aside the Commissioner’s decision. Rather, the application is concerned with the decision the majority of the Full Bench made when, after setting aside the Commissioner’s decision, they went on to decide for themselves whether the agreement should be approved. In so doing the Full Bench was exercising its powers under s 607(3) of the Act, which includes a power to quash the decision under appeal and to make a further decision in relation to the matter that is the subject of the appeal.

The legislative scheme

25. The Act was passed by the Parliament in 2009. It repealed the Workplace Relations Act 1996 (Cth) (“Workplace Relations Act”) (popularly known as “WorkChoices” since the 2005 amendments).
26. WorkChoices removed the role of the independent tribunal (then the Australian Industrial Relations Commission) in the making of collective agreements. The model was essentially one of self-regulation, although the scheme retained a limited role for the Commission in the bargaining process. The Act restored the role of the independent arbiter in the making of collective agreements.
27. The Act was designed to bring about the demise of statutory individual employment agreements and to encourage enterprise-level collective bargaining. Its objects include ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions through national employment standards and modern awards (s 3(b)) and that the guaranteed safety net is not undermined by the making of statutory individual employment agreements of any kind (s 3(c)). Transitional arrangements were made for the continuation of various instruments made under the Workplace Relations Act, including Australian Workplace Agreements (“AWAs”) and individual transitional employment agreements (“ITEAs”): see Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth).
28. Chapter 2 of the Act deals with terms and conditions of employment provided under the Act – by the National Employment Standards, modern awards and enterprise agreements.
29. An enterprise agreement is defined as a “single-enterprise agreement” or a “multi-enterprise agreement” in the Dictionary in Chapter 1 of the Act. Where two or more employers have a single interest or where only one employer is involved, the agreements they make with employees or employee organisations are called “single-enterprise agreements” (s 172(2)). Otherwise, the agreements are called “multi-enterprise agreements” (s 172(2), (3)). “Enterprise” is defined as “a business, activity, project or undertaking”.
30. The core provisions are set out in Division 2 of Part 2-1. Subdivision D of Division 2 deals with the terms and conditions of employment provided by an enterprise agreement. A person must not contravene a term of an enterprise agreement (s 50). Obligations are only imposed on a person if the agreement applies to the person (s 51). An enterprise agreement applies to a person (whether an employee, employer or employee organisation) if the agreement is in operation, covers the person and no other provision of the Act provides or has the effect that the agreement does not apply to that person (s 52). An enterprise agreement covers an employee, employer or employee organisation if it is expressed to “cover (however described) the employee or employer” (s 53(1)). A reference in the Act to an enterprise agreement applying to or covering an employee is a reference to the agreement applying to the employee in relation to particular employment (ss 52(2), 53(6)). Section 53(4) provides for the circumstances in which an enterprise agreement “does not cover” an employee, employer or employee organisation. I will return to this provision later in these reasons. An enterprise agreement operates from seven days after it has been approved by Fair Work Australia or a later day if that is specified in the agreement (s 54(1)). Section 54(2) provides for the circumstances in which an enterprise agreement ceases to operate.
31. Enterprise agreements are otherwise dealt with in Part 2-4 of the Act. Division 1 is introductory. The objects of the Part are specified in s 171 as:

(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 [Fair Work Australia] 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 [Fair Work Australia] for approval of enterprise agreements are dealt with without delay.

32. Division 2 (s 172) deals with the making of an enterprise agreement. Section 172 defines the matters that may be covered by the agreement and the parties who may enter into it. It relevantly provides:

Enterprise agreements may be made about permitted matters

(1) An agreement (an enterprise agreement) that is about one or more of the following matters (the permitted matters) may be made in accordance with this Part:

(a) matters pertaining to the relationship between an employer that will be covered by the agreement and that employer’s employees who will be covered by the agreement;

(b) matters pertaining to the relationship between the employer or employers, and the employee organisation or employee organisations, that will be covered by the agreement:

(c) deductions from wages for any purpose authorised by an employee who will be covered by the agreement;

(d) how the agreement will operate.
...

Single-enterprise agreements

(2) An employer, or 2 or more employers that are single interest employers, may make an enterprise agreement (a single-enterprise agreement):

(a) with the employees who are employed at the time the agreement is made and who will be covered by the agreement; or
(b) ...

33. Division 3 (ss 173-178A(4)) deals with bargaining and representation during bargaining. Section 176 details the persons who may be “bargaining representatives”. They include the employer and an employee organisation of an employee who will be covered by the agreement if the employee is a member of the organisation. In this case the CFMEU was the bargaining representative of the employees covered by the agreement.
34. Division 4 (ss 180-201) covers approval of enterprise agreements. The process is a staged one. First, an enterprise agreement must be approved by the employees who will be covered by the agreement. This is referred to in the legislation as “pre-approval”. Secondly, the agreement must be approved by Fair Work Australia. Thus, as here, even if the parties agree, the agreement may not be approved.
35. At the first stage, an employer that will be covered by a proposed enterprise agreement may request the employees “employed at the time who will be covered by the agreement” (“the relevant employees”) to approve the agreement by voting for it: s 181(1). Before such a request is made the employer must take all reasonable steps to ensure that during the access period for the agreement, the relevant employees are given, and throughout it have access to, copies of its text and any other material incorporated by reference in it: s 180(1)-(4). In addition, the employer must take all reasonable steps to ensure that the terms of the agreement and their effect are explained to the relevant employees in an appropriate manner taking into account their particular circumstances and needs: s 180(5).
36. Section 182 defines the circumstances in which an enterprise agreement is made. Section 182(1) provides:

If the employees of the employer, or each employer, that will be covered by a proposed single-enterprise agreement that is not a greenfields agreement have been asked to approve the agreement under subsection 181(1), the agreement is made when a majority of those employees who cast a valid vote approve the agreement. [Emphasis in original.]

37. The Newlands agreement is a single-enterprise agreement that is not a greenfields agreement, that is, it is not one applying a genuine new enterprise where the employer has not previously employed any of the employees who will be covered by the agreement and who will be necessary for the normal conduct of the enterprise (see ss 172(4) and 172(2)(b)).
38. The second stage is dealt with in Subdivision B. Sections 186 and 187 set out the conditions precedent for approval of an enterprise agreement. For relevant purposes they include that:

(a) The agreement has been genuinely agreed to by the employees covered by it (s 186(2)(a));

(b) The agreement passes the BOOT (defined for relevant purposes in s 193(1) of the Act) (s 186(2)(d));

(c) The group of employees covered by the agreement was “fairly chosen” (s 186(3)).

39. In circumstances (such as those obtaining here) where the agreement does not cover all of the employees of the employer(s) covered by the agreement, in deciding whether the group of employees covered by the agreement was fairly chosen, Fair Work Australia must take into account whether the group is “geographically, operationally or organisationally distinct”: s 186(3A).
40. Section 187 lays down additional requirements that must be met before Fair Work Australia approves an enterprise agreement under s 186.
41. Section 189 provides a mechanism for enabling Fair Work Australia to approve an enterprise agreement where Fair Work Australia is not required to do so under s 186 because it is not satisfied that the agreement passes the BOOT.
42. Section 190 of the Act allows Fair Work Australia to approve an agreement to accept a written undertaking from an employer covered by the agreement in certain circumstances and s 191 provides that if Fair Work Australia approves an agreement after accepting an undertaking, the undertaking is taken to be a term of the agreement.
43. Section 192 provides that Fair Work Australia may refuse to approve the agreement if it considers that compliance with its terms may result in a person committing an offence against a law of the Commonwealth or becoming liable to pay a pecuniary penalty in relation to a contravention of a law of the Commonwealth. Section 194 sets out when a term of an enterprise agreement is “an unlawful term”.
44. Subdivision E (ss 196-200) contains approval requirements relating to particular employees and is not presently relevant.
45. Subdivision F (s 201) provides that if Fair Work Australia approves an enterprise agreement it must note certain matters in its decision and, if it accepts an undertaking under s 190(3), it must note that undertaking in its decision to approve the agreement that the undertaking is taken to be a term of the agreement.
46. Division 5 (ss 202-205) lays down the mandatory terms of enterprise agreements.
47. Division 6 (s 206) deals with base rates of pay under enterprise agreements.
48. Subdivision A of Division 7 (ss 207-216) deals with the manner and circumstances in which an enterprise agreement may be varied. The provisions reflect those dealing with the making of an enterprise agreement. Subdivision B (ss 217-218) gives Fair Work Australia the power to vary an enterprise agreement to remove an ambiguity or uncertainty, to “deal” in a limited way with disputes about proposed variations, and imposes an obligation on Fair Work Australia to review certain enterprise agreements referred to it by the Human Rights Commission. Subdivisions C and D (ss 219-227) deal with termination of enterprise agreements.
49. Division 8 (ss 228-240) deals with the role of Fair Work Australia in the bargaining process for an enterprise agreement.
50. Division 9 (ss 241-246) relates to low-paid employees and facilitates the making of enterprise agreements that meet their needs and addresses their position of disadvantage in the bargaining process.
51. Division 10 (ss 247-252) concerns single interest employer authorisations.
52. Division 11 (ss 253-257) is entitled “Other matters”. The only relevant provision is s 256A. It provides:

(1) This section applies if a provision of this Part requires or permits an instrument of any kind to specify the employers, employees or employee organisations covered, or who will be covered, by an enterprise agreement or other instrument.

(2) The employees may be specified by class or by name.

(3) The employers and employee organisations must be specified by name.

(4) Without limiting the way in which a class may be described for the purposes of subsection (2), the class may be described by reference to one or more of the following:

(a) a particular industry or part of an industry;
(b) a particular kind of work;
(c) a particular type of employment;
(d) a particular classification, job level or grade.

Jurisdiction

53. Newlands accepts that this Court has original jurisdiction pursuant to s 39B(1) or s 39B(1A)(c) of the Judiciary Act 1903 (Cth) (“Judiciary Act”) and that that extends to the writs of certiorari and mandamus. But it denies that s 562 or s 563 of the Act is the source of the Court’s jurisdiction. The point lacks merit.
54. Section 562 is in very wide terms. It provides:

Jurisdiction is conferred on the Federal Court in relation to any matter (whether civil or criminal) arising under this Act.
[Emphasis added.]

55. Section 563 provides that the jurisdiction conferred on this Court under s 562 is to be exercised in the Fair Work Division of the Court if, amongst other things, a writ of mandamus is sought against a person holding office under this Act, which is one of the remedies the CFMEU seeks in this case. The Deputy President and Commissioners hold office under the Act: ss 628 and 629.
56. As the dispute between the parties relates to the validity of a decision made under the Act concerning an agreement made under the Act by persons holding office under the Act as members of a body established by the Act, it is difficult to see why the matter does not “arise under the Act”.
57. The expression “arising under this Act” appeared in s 347(1) of the Industrial Relations Act 1988 (Cth), which precluded a costs order being made against a party to a proceeding in a matter “arising under [that] Act” unless the proceeding was instituted vexatiously or without reasonable cause. There is a similar provision in the Fair Work Act. The High Court said in Re McJannet; ex parte The Australian Workers’ Union of Employees, Queensland [No 2] [1997] HCA 40; (1997) 189 CLR 654 (“McJannet”) at 656 that the test for determining whether a proceeding is in a matter “arising under this Act” is “whether the right or the duty that is sought to be enforced owes its existence to a provision of the Act”. That test is satisfied here. The purpose of the writ of mandamus is to enforce the statutory duties imposed upon Fair Work Australia by the provisions of Part 2-4 of the Act.
58. Counsel for Newlands did not attempt to distinguish McJannet and senior counsel did not address the question at all in oral submissions.
59. Furthermore, Newlands’ position is inconsistent. It accepts that the Court has jurisdiction under s 39B(1A)(c) of the Judiciary Act, which provides that the original jurisdiction of this Court includes jurisdiction in any matter “arising under any laws made by the Parliament, other than a matter in respect of which a criminal prosecution is instituted or any other criminal matter”. The only law invoked in this case is the Fair Work Act. In Construction, Forestry, Mining and Energy Union v Australian Industrial Relations Commission [2007] FCAFC 32; (2007) 157 FCR 260 (“CFMEU v AIRC”) at [80] the Full Court said:

A matter arises under a Federal law “... if the right or duty in question in the matter owes its existence to Federal law or depends upon a Federal law for its enforcement whether or not the determination of the controversy involves the interpretation (or validity) of the law”: R v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett [1945] HCA 50; (1945) 70 CLR 141 at 154. The matter presently before the Court concerns the proper interpretation of an eligibility rule of a registered organisation under the [Workplace Relations Act] . It concerns its interpretation by the Full Bench of the Commission exercising the appellate function conferred upon it by the Act as it stood prior to the Work Choices Act. Part of the matter is said to involve the question whether the Full Bench has fulfilled its duty under the Act in determining whether [the Senior Deputy President of the Commission] was correct in her interpretation of the rule. The matter can therefore be said to be one which arises under the [Workplace Relations Act] and in respect of which this Court has jurisdiction by virtue of s 39B(1A)(c).

60. This case is relevantly indistinguishable.
61. For whatever may turn on the question, I hold that this is a matter arising under the Act and s 562 is an additional source of the Court’s jurisdiction to make the orders sought.

The argument

62. It is common ground that to succeed the CFMEU had to show jurisdictional error. Certiorari will only lie for an error of that kind. See Craig v State of South Australia (1995) 184 CLR 163 (“Craig”); CFMEU v AIRC at [81].
63. The CFMEU’s principal argument was that Fair Work Australia had no power to approve the agreement because it was not an enterprise agreement within the meaning of the Act. Cf. Commonwealth Bank of Australia v Finance Sector Union of Australia [2007] FCAFC 18; (2007) 157 FCR 329 at [173]- [176]. Unless the agreement is made with employees who will be covered by it, the CFMEU argued it was not, in truth, an enterprise agreement; Fair Work Australia was not only not obliged to approve it, it had no power to do so.
64. In the alternative it argued that when the majority of the Full Bench came to decide for themselves whether they should approve the agreement they erred in applying the BOOT and constructively failed to exercise their jurisdiction when deciding whether the group was fairly chosen, because they failed to have regard to a mandatory consideration.
65. Newlands submitted that the majority was correct in all respects. It argued that the contention that the Act precludes Fair Work Australia from approving the agreement is misconceived because:

(a) the requirements of s 180(2)(a) were met as the text of the agreement was supplied to employees who would be covered by it due to their location and classification (and no employee was excluded) (“the relevant employees”) and a copy was made available on the intranet;

(b) the requirements of s 180(3) were met as Newlands took all reasonable steps to notify the relevant employees of the time and place of the vote and the voting method to be used;

(c) the requirements of s 180(5) were met as Newlands took reasonable steps to explain the terms to the relevant employees and the explanation was appropriate given the particular circumstances of the employees; and

(d) the requirements of s 182(1) were met as a majority of the relevant employees who cast a valid vote approved the agreement and thereby made the agreement.

66. Newlands also submitted that if the majority were in error, the error did not go to jurisdiction, although it acknowledged that if an administrative decision-maker misconstrues a statute and thereby misconceives the nature of its function or the extent of its powers in the particular case, that will be a jurisdictional error. It accepted that, if the CFMEU’s principal argument were correct and the enterprise agreement did not satisfy the requirements of s 172 of the Act, then that would be a jurisdictional error.

Was this an enterprise agreement within the meaning of the Act?

67. The position of the CFMEU, succinctly put, is this. The jurisdiction of Fair Work Australia depends on the making of an enterprise agreement within the meaning of the Act, since its statutory duty under s 186(1) to approve an agreement that meets the requirements of ss 186 and 187 of the Act is contingent on there being a valid enterprise agreement. There could only be a valid enterprise agreement if the agreement was made with employees “employed at the time who will be covered by the agreement”. This agreement was not made with such a body of employees. Therefore there was no valid application for approval before the Full Bench, the order for approval was ineffective, and no enterprise agreement came into existence: Construction, Forestry, Mining and Energy Union v Australian Industrial Relations Commission and Others [1999] FCA 847; (1999) 93 FCR 317 at [128].
68. The CFMEU also argued that Fair Work Australia could not have the requisite satisfaction for approval of the agreement under ss 186(2)(a) and 188 because the agreement was not made in accordance with ss 180(2), (3) and (5) and 182(1). Section 180(2) imposes an obligation on the employer to take all reasonable steps to ensure that during the access period for the agreement “the employees ... employed at the time who will be covered by the agreement” are provided with copies of the text of the agreement and any material incorporated by reference in it, and have access throughout the period to a copy of those materials. Section 180(3) requires the employer to take all reasonable steps to notify such employees of the time and place of the vote and the voting method. Section 180(5) requires the employer to take all reasonable steps to ensure that the terms of the agreement and its effect are explained to those employees in an appropriate manner taking into account their particular circumstances and needs. Section 182(1) relevantly provides that an enterprise agreement is made when a majority of those employees who cast a valid vote approve it.
69. The first question, then, is what is meant by the expression “who will be covered by the agreement”, more particularly what “will” means in this context.
70. The starting point is to construe the words according to their ordinary meaning having regard to their context and legislative purpose. Context includes the existing state of the law and the mischief it was intended to remedy. See Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) [2009] HCA 41; (2009) 239 CLR 27 at [14]; CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408. The words should be read by reference to the language of the statute as a whole: Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 at [69].
71. The majority interpreted “will” in the expression to mean “future likelihood” (which the majority apparently took to be synonymous with an expression of present intention). The CFMEU submitted that the more appropriate meaning of “will be covered” in context is that coverage of the employees employed at the time the agreement is made is a necessary result of the agreement being made, intimating that such an interpretation provided the required degree of certainty. In any event, the CFMEU submitted that, even if the majority were correct, in this case it could not be said that it was intended that the employees who are employed at the time will be covered by the agreement if there is a clear indication in the agreement itself that they may not be. Thus, it was said, the employees who are employed at the time and participate in the vote for the agreement might be covered by it; it cannot be said they necessarily will be covered.
72. The majority’s interpretation reflected one of the meanings given to the auxiliary verb in the Macquarie Dictionary:

indicating future likelihood: I will take a taxi; she will meet us there; do you think it will rain?; you will be surprised.

73. The CFMEU’s contention reflects one of the meanings given in the Oxford English Dictionary:

expressing a determinate or necessary consequence (without the notion of futurity).

74. In my view, the construction which the CFMEU espouses is the preferable one. It more accurately reflects the sense in which the expression is used in the statute. But I do not think that this is determinative of the question of validity.
75. In ascertaining the meaning of the statutory words an examination of the existing state of the law has proved unhelpful. Section 327 of the Workplace Relations Act (now repealed) provided:

An employer may make an agreement (an employee collective agreement ) in writing with persons employed at the time in a single business (or part of a single business) of the employer whose employment will, or would but for the operation of an ITEA that has passed its nominal expiry date, be subject to the agreement.

76. I have been unable to find any authority that considered the meaning of the expression “will ... be subject to the agreement” in that section. Certainly, my attention was drawn to none.
77. Notwithstanding what the majority appear to have thought, the Explanatory Memorandum is also unhelpful on this question. They referred to paragraph 683, which states:

The use of the phrase ‘employees who will be covered by the agreement’ in clause 172 is intended to make clear that the employees covered by the agreement are not limited to those employees who were employed at the time the agreement was made. An agreement covers all employees whom it is expressed to cover (clause 53). This includes persons employed at the time the agreement was made and persons employed at a later time provided that they fall within a class or group of employees who are expressed to be covered by the agreement.

The majority said of this passage:

This makes clear that the phrase “employees who will be covered by the agreement” refers to the class or group of employees who are expressed to be covered by the agreement. It does not restrict how the agreement specifies that class or group. As with any other term of an agreement it is a matter for the parties to decide what they agree about (subject to meeting the specific requirements contained in ss. 186 and 187).
[Emphasis in original.]

79. In essence, all the majority picked up from paragraph 683 was the reference to clause 53 (now s 53 of the Act). In my view, whatever the intention of the draftsperson may have been, the use of the expression “employees who will be covered by the agreement” in s 172 does not make it clear “that the employees covered by the agreement are not limited to those employees who were employed at the time the agreement was made”, but may also include employees employed at a later time as long as they fall within the specified class. On the contrary, s 172 is concerned with the making of an enterprise agreement and the employer can hardly make an enterprise agreement with employees not yet employed, even if some time in the future they may be covered by the agreement. Objectively, the intention of the legislature in using the expression was to ensure that the employer could only make an agreement with those employees who were named or described in the agreement and whom the agreement purported to cover.
80. In its application to Fair Work Australia for approval of the agreement Newlands, when asked to specify the group of employees who will be covered by the agreement, answered this way:

The agreement covered all employees who were operationally or organisationally distinct as production and trade employees engaged in classes of work included in the Black Coal Mining Industry Award 2010, other than those employees who were not legally able to be covered as they were covered by an Australian Workplace Agreement that had not reached its nominal expiry date, or who elected in writing not to be covered by the agreement.

81. There was no evidence that anyone had elected in writing not to be covered by the agreement before the application was made to Fair Work Australia. Indeed, the case was conducted below and in this Court on the common understanding that employees could, and if so disposed would, make that election after the agreement was approved.
82. There are no statutory limits on the class of employees who may be covered by an agreement save for those imposed by ss 186 and 187. Section 53 states that an employee is covered if “the agreement is expressed to cover (however described)” him or her. Section 256A(2) enables the agreement to specify employees by class or name. In the case of descriptions by class, s 256A(4) provides some examples but expressly does not purport to limit the way this can be done. The opt out clause is not at odds with s 256A. It is merely a device for limiting the membership of the chosen class. The class is described by inclusion and exclusion. The terms of s 256A allow for the implicit exclusion of certain employees and the Act clearly contemplates that not all employees will be covered by an enterprise agreement. The CFMEU accepted that employees covered by AWAs and ITEAs could validly be excluded. Thus, the mere exclusion of a group of employees would not mean that there is no valid enterprise agreement. Nor, in my view, would the fact that the identity of those who might later be excluded is unknown at the time the agreement is made. The membership of the class will be fluid. At that time all that can be known for certain is that those employees who voted on the making of the agreement will be covered by it for as long as they remain within the class.
83. The purpose of the relevant provisions in Part 2-4 is to facilitate the making of a democratic and informed decision on whether the agreement should be made. I do not see the opt out clause as inconsistent with this intention. Section 172(2) enables employers to make enterprise agreements with those employees employed at the time the agreement is made and who will be covered by the agreement. The combined effect of ss 180-182 is that such employees – those current employees whose terms and conditions of employment will be affected by the proposed agreement – are provided with the opportunity to vote on it, and the agreement is made when a majority of them cast a valid vote in favour of it. In this case they were the employees engaged at the Newlands Surface Operations in the classes of work included in Schedule A of the relevant award who had not elected in writing not to be covered by the agreement. If the employees who voted on the agreement answered that description, then they also answered the statutory description of employees named by class. Thus, those employees who will be caught by its terms had the opportunity to vote for or against it. If, before the agreement was made, any of these employees had elected in writing not to be covered by the agreement they would not have been entitled to participate in the vote because the agreement excluded them. There is no lack of clarity or certainty about who will be covered by the agreement at the time it is made or, indeed, at any later time. The fact that at a later date employees who had voted on the agreement may choose not to be covered by it does not mean that at the time the agreement was made it was not a necessary consequence of its terms that they were covered by it.
84. The Act does not demand that those employees are covered in perpetuity by the agreement. That would be absurd. After all, as the majority observed, employees may come and go. Some may die. Some may retire or be dismissed or retrenched. Some may leave the mine for other jobs. It is true that these people would no longer be employees. Some, however, will leave the class but remain in Newlands’ employ, such as those who accept promotions to positions outside the class. Yet, at the time the agreement is made or approved, their identities will be unknown. That contingency does not signify that there is no enterprise agreement within the meaning of the Act. The CFMEU sought to equate the position of an employee who accepted a promotion with that of an ex-employee. It argued that in law a change of duties or classification leads to a termination of the old contract of employment and the making of a new one (referring to Brackenridge v Toyota Motor Corporation Australia Ltd [1996] IRCA 628; (1996) 142 ALR 99 at 106). That case, however, turned on its own facts. Concut Pty Ltd v Worrell [2000] HCA 64; (2000) 103 IR 160 at [18]- [20] and [44], to which Newlands referred, suggests a different interpretation. Whatever the position, however, these people remain employees.
85. Even so, the CFMEU submitted that the position of employees transferred to other positions was accommodated by the Act. It relied on s 53(6) which provides that a reference in the Act to an enterprise agreement covering an employee is a reference to the agreement covering the employee in relation to particular employment. But, as Newlands pointed out, s 53(6) has nothing to do with this situation. Its purpose is to deal with a situation where an employee has more than one job. It ensures that the terms of the agreement cover only the job to which the agreement refers. There are similar provisions relating to comparable references to modern awards (ss 47(3), 48(5)). If there is any doubt about that, it is removed by what is said in paragraph 205 of the Explanatory Memorandum:

This means that, if a national system employee has more than one job, each job is treated separately in determining the effect of an award or agreement on the employee’s entitlements in relation to each job. For instance, the rule that only one enterprise agreement can operate in relation to a person at a particular time (see clause 58) does not mean that two agreements cannot cover, or apply to, an employee in relation to two different jobs.

86. I agree that Fair Work Australia is not empowered to approve an agreement unless it is made in accordance with the terms of ss 180(2), (3) and (5) and s 182(1) of the Act but I am not persuaded that this is an agreement that was not made in accordance with those terms.

The application of the BOOT

87. Section 186(2)(d) of the Act requires that, before approving the agreement, Fair Work Australia (here the Full Bench) must be satisfied that the agreement passes the BOOT. Sections 189 and 190 only permit Fair Work Australia to approve an agreement that does not pass the BOOT in exceptional circumstances (and where the approval of the agreement would not be contrary to the public interest) or where there is a concern whether the agreement passes the BOOT and an undertaking would meet that concern. Otherwise Fair Work Australia may not approve the agreement.
88. Section 193 of the Act sets out the criteria for passing the BOOT in the case of an enterprise agreement like the Newlands agreement. It relevantly provides:

193 Passing the better off overall test

When a non-greenfields agreement passes the better off overall test
(1) An enterprise agreement that is not a greenfields agreement passes the better off overall test under this section if FWA [Fair Work Australia] is satisfied, as at the test time, that each award covered employee, and each prospective award covered employee, for the agreement would be better off overall if the agreement applied to the employee than if the relevant modern award applied to the employee.

FWA must disregard individual flexibility arrangement
(2) ...

When a greenfields agreement passes the better off overall test
(3) ...

Award covered employee
(4) An award covered employee for an enterprise agreement is an employee who:
(a) is covered by the agreement; and
(b) at the test time, is covered by a modern award (the relevant modern award) that:
(i) is in operation; and
(ii) covers the employee in relation to the work that he or she is to perform under the agreement; and
(iii) covers his or her employer.

Prospective award covered employee
(5) A prospective award covered employee for an enterprise agreement is a person who, if he or she were an employee at the test time of an employer covered by the agreement:
(a) would be covered by the agreement; and
(b) would be covered by a modern award (the relevant modern award) that:
(i) is in operation; and
(ii) would cover the person in relation to the work that he or she would perform under the agreement; and
(iii) covers the employer.

Test time
(6) The test time is the time the application for approval of the agreement by FWA was made under section 185.

FWA may assume employee better off overall in certain circumstances
(7) For the purposes of determining whether an enterprise agreement passes the better off overall test, if a class of employees to which a particular employee belongs would be better off if the agreement applied to that class than if the relevant modern award applied to that class, FWA is entitled to assume, in the absence of evidence to the contrary, that the employee would be better off overall if the agreement applied to the employee.
[Emphasis in original.]

89. This was not a greenfields agreement, that is, one that relates to a genuine new enterprise within the terms of s 172(2)(b).
90. The majority of the Full Bench found that the agreement passed the BOOT. They concluded that, because employees had a choice whether or not to opt out of the agreement, they were better off overall than if the relevant modern award applied. They said (at [72]):

It is not in contention that, putting the “opt out” clauses to one side, the Agreement contains terms and conditions that are superior to those contained in the relevant modern award. Employees who exercise the option not to be covered by the Agreement would lose their statutory right to those terms and conditions. They would however be covered by the terms of the relevant modern award, and would be entitled - as a minimum - to the terms and conditions contained therein. Clearly, the Agreement cannot lead to an employee being disadvantaged in relation to the modern award - but are they “better off overall”? The effect of the “opt out” clause is that each employee has a choice - either receive the terms and conditions contained in the Agreement or opt out and be entitled - as a minimum - to receive the conditions of the modern award. Indeed one can consider it in reverse. Each employee can choose to be covered by the award or to receive the terms and conditions contained in the Agreement. Put that way it is clear that such an employee - as long as he or she has a genuine choice - is better off than someone who is simply covered by the modern award. We should add that the undertaking proffered by the employer that it would not be made a condition of employment that a prospective employee “opts out” would be necessary for us to be satisfied that each prospective employee will have this choice.
[Emphasis in original.]

91. Newlands defended the decision, noting that there was no dispute between the parties that the wage rates to be paid under the agreement exceeded those in the modern award and conferred benefits not available under the award. Newlands pointed out that there was no role for the BOOT with respect to employees who are not or who cease to be covered by the agreement. The reference to choice was, in effect, gratuitous. But, as the majority recognised (and Newlands’ submissions overlook), s 193(1) requires that at the “test time” each award covered employee and each prospective award covered employee would be better off overall. The test time is when the application for approval is made to Fair Work Australia: s 193(6). It is not the time after the election not to be covered by the agreement is made. The purpose of the BOOT is to guarantee the benefit of its superior terms to employees who at that time are covered by the agreement and prospective employees who would be covered. A right to choose not to be covered is not a benefit or entitlement conferred by the agreement. It is a right to forfeit the benefits or entitlements which the agreement guarantees. What the majority described was no benefit at all. For these reasons I am satisfied that the majority fell into error.
92. But was it a jurisdictional error? Newlands argued otherwise and compared the alleged error considered in Craig (a supposed misunderstanding of the majority decision in Dietrich v The Queen [1992] HCA 57; (1992) 177 CLR 292), which the Court held would have been within jurisdiction. Yet, Craig was concerned with an alleged error on the part of an inferior court, not an administrative tribunal, where the scope for jurisdictional error is much narrower.
93. In Craig at 176-180 the Court contrasted the position of an administrative tribunal (like Fair Work Australia). At 179 it said:

If such an administrative tribunal falls into an error of law which causes it to identify a wrong issue, to ask itself a wrong question, to ignore relevant material, to rely on irrelevant material or, at least in some circumstances, to make an erroneous finding or to reach a mistaken conclusion, and the tribunal’s exercise or purported exercise of power is thereby affected, it exceeds its authority or powers. Such an error of law is jurisdictional error which will invalidate any order or decision of the tribunal which reflects it.

94. This passage was approved in Minister for Immigration and Multicultural Affairs v Yusuf [2001] HCA 30; (2001) 206 CLR 323 (“Yusuf”) at [82] per McHugh, Gummow and Hayne JJ, Gleeson CJ agreeing at [1], which was concerned with such a tribunal. The majority in Yusuf emphasised that the list of errors that will go to jurisdiction is not exhaustive and the same point has been made in other cases, such as Kirk v Industrial Relations Commission of New South Wales [2010] HCA 1; (2010) 239 CLR 531 (“Kirk”) at [71].
95. Newlands focused on the qualifying words “and the tribunal’s exercise or purported exercise of power is thereby affected”, implying that not every error of the kind described will affect the tribunal’s exercise or purported exercise of its power. But this is a misconception about what the Court was saying in Craig. That is apparent on a careful analysis of the distinction between inferior courts and administrative tribunals that the Court was drawing in that case at 176-180, and to which the Court referred in its more recent judgment in Kirk at [67]-[68]. In Yusuf the majority made the point clearly when they said (at [83]):

[I]t is important to recognize that, if the Tribunal identifies a wrong issue, asks a wrong question, ignores relevant material or relies on irrelevant material, it “exceeds its authority or powers”. If that is so, the person who purported to make the decision “did not have jurisdiction” to make the decision he or she made, and the decision “was not authorised” by the Act.

96. Here, the majority of the Full Bench purported to apply the statutory test but did not in fact do so. As I said earlier, the BOOT is concerned with the terms and conditions that will apply to employees, not to the means by which they will acquire them. The exercise of the election means that the employee may be no better off than if the modern award applied. That this circumstance was reached by the exercise of a choice could not alter that fact. The CFMEU argued that the majority misconstrued s 193, took into account an irrelevant consideration (that the fact that the employee may be no better off comes about as the result of a choice) and thereby misconceived the nature of the function they were exercising. Another way of describing what happened is to see it as a failure on the majority’s part to apply themselves to the question which the law prescribes, which is certainly a jurisdictional error as it constitutes a constructive failure to exercise jurisdiction (Ex parte Hebburn Ltd; Re Kearsley Shire Council (1947) 47 SR (NSW) 416 at 420, applied in Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194 at [31] and in numerous other decisions). Although they give the appearance of having asked the right question (are the employees better off overall?), they really posed a different question: does the fact that the employees may choose whether or not to be covered by the agreement mean that they are better off overall? However one may characterise this error, it seems to me that it goes to jurisdiction because it affects the exercise or purported exercise of the power of Fair Work Australia to approve the making of an enterprise agreement, one of its core statutory responsibilities.

The “fairly chosen” issue

97. The CFMEU’s final argument was that the majority failed to apply the provisions of s 186(3A) of the Act in deciding for itself whether the group of employees covered by the agreement was fairly chosen, a matter about which they were required to be satisfied under s 186(3). That is to say, the majority failed to consider whether the group of employees to be covered by the agreement was “geographically, operationally or organisationally distinct” as required by s 186(3A), and therefore constructively failed to exercise their jurisdiction. The argument is correct.
98. Newlands contended that earlier in the majority’s reasons (at [53]-[54]) – in the course of dealing with where the Commissioner went wrong – they did consider whether the group had been fairly chosen and noted that later (at [77]) they expressly found that the requirements of s 186 had been met.
99. At [53]-[54] the majority said only:

Giving employees the power to decide whether they will be covered by an agreement or not does not strike us as unreasonable. The employee who exercises the choice is hardly disadvantaged by doing so, nor are those employees who choose to remain under the agreement.

The Commissioner was in error in concluding that the group of employees to be covered by the agreement had not been fairly chosen.

100. At [77] the majority said:

We have found that the Commissioner was in error in failing to find that the group of employees to be covered by the agreement had been fairly chosen. The Commissioner does not appear to have found that any of the other requirements set out in ss.186 and 187 had not been met. In any case, we are satisfied that those requirements have been met. On that basis [Fair Work Australia] is obliged to approve the agreement.

101. Newlands accepted that s 186(3A) applies. In its application for approval of the agreement it answered “no” to the question whether the agreement covered all of its employees. Yet the majority decision contained one reference only to s 186(3A) and that was in the context of answering the first question: whether an agreement had been made for the purpose of s 185.
102. Newlands submitted that the cursory way in which the issue was dealt with in the reasons can be explained by the fact that before the Commissioner there was never an issue that the group had been fairly chosen. Even if that were so, however, it would not relieve them from their statutory task. They had to be satisfied for themselves and before reaching such a state of satisfaction they had to consider whether the group was geographically, operationally or organisationally distinct. But it was not so. Both parties addressed the Commissioner at length on the point. Indeed, the Commissioner referred in his reasons (at [63]) to “extensive submissions from Newlands and from the CFMEU on the issue of Section 186(3) and (3A)”. The transcript of the argument was not only before me but also before the Full Bench. The point counsel for the CFMEU squarely made (with which the Full Bench did not deal) was that the effect of the opt out clause was to create two distinct groups within the one organisational area with no sound basis for distinguishing between them.
103. Section 186(3A) imposes an obligation on Fair Work Australia, in deciding whether the group was fairly chosen, to take into account whether the group of employees covered by the agreement is geographically, operationally or organisationally distinct. In other words these are factors Fair Work Australia is bound to consider. A failure to do so will give rise to jurisdictional error. It is not enough for it to state that it is satisfied that the requirements have been met. Here, the majority made no finding about whether or not the group was geographically, operationally or organisationally distinct. Without reaching a view about that, it could not perform its statutory task. This is not merely a case of failing to give adequate reasons. To take a matter into account means to evaluate it and give it due weight: Nestle Australia Ltd v Commissioner of Taxation (Cth) (1987) 16 FCR 167 at 184 per Wilcox J, cited with approval by Hely J in Elias v Commissioner of Taxation [2002] FCA 845; (2002) 123 FCR 499 at [62]. If the matter does not rate a mention, it is difficult to see how it can be said that it was taken into account, especially when the authorities indicate that mere advertence will not be enough. See, for example, Zhang v Canterbury City Council [2001] NSWCA 167; (2001) 51 NSWLR 589 at [64].
104. Since no finding had been made on whether the group was geographically, operationally or organisationally distinct, I do not accept that the majority considered the issue. The passages relied upon by Newlands do not mention these matters and the point upon which the majority decision rested evinces no consideration of them. In this case, the inference to be drawn is that they were overlooked. Cf. Yusuf at [34]-[35], [69].

Conclusion

105. I am satisfied that the majority of the Full Bench fell into jurisdictional error in deciding to approve the agreement. I will therefore set aside the orders of the Full Bench made on 1 November 2010 and in place of them make orders of the nature sought by the CFMEU. But the orders must be made against the right entity. Here, the CFMEU named as the first respondent the individual members who constituted the Full Bench on the appeal. That was wrong. Perram J dealt with this very issue in Deva v University of Western Sydney [2011] FCA 199 where his Honour correctly observed that in an application for prerogative relief arising out of a decision of the Full Bench of Fair Work Australia, Fair Work Australia should be a party to the proceeding, rather than the individuals constituting the Full Bench at the particular time. At [23] his Honour said:

... [Fair Work Australia]’s joinder, rather than the particular members comprising the Full Bench, would have been appropriate for two reasons. First, the decision maker was [Fair Work Australia] in the sense that the power was exercised by it and not the members comprising it on the particular occasion. Secondly, [Fair Work Australia] as an entity “consists” of all its members (s 575(2) Fair Work Act) so that the decision maker is, as a matter of formality, all of the members of [Fair Work Australia]. The Fair Work Act provides for the power of [Fair Work Australia] (that is, all of the members) often to be exercised by single members or full benches but this should not obscure the true identity of the repository of the power. Consequently, an application for prerogative relief in a case such as the present requires the joinder of the decision maker – here all of the members of [Fair Work Australia] for the time being. [Fair Work Australia] is both a convenient and statutorily mandated shorthand for that group of officers of the Commonwealth. This, I believe, underpins the similar conclusion by McHugh J that the Refugee Review Tribunal is the proper respondent in constitutional writ proceedings: SAAP v Minister for Immigration and Multicultural and Indigenous Affairs [2005] HCA 24; (2005) 228 CLR 294 at 310 [43].
[Emphasis in original.]

106. The application should therefore be amended to substitute Fair Work Australia for the named first respondent before the writs the CFMEU seeks can be issued and the form of the orders sought should be amended to reflect this change.

Costs

107. The view that I have taken about the jurisdictional point would suggest that no order as to costs should be made (see s 570 of the Act). But Newlands indicated that it wanted to be heard on the question of costs. In the circumstances, I direct that any application for costs be made by notice of motion within seven days, failing which I will make no order as to costs.

I certify that the preceding one hundred and seven (107) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Katzmann.

Associate:

Dated: 24 June 2011