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Federal Court of Australia - Full Court Decisions |
Last Updated: 28 February 2007
FEDERAL COURT OF AUSTRALIA
Commonwealth Bank of Australia v Finance Sector Union of Australia
WORKPLACE RELATIONS – freedom
of association – prejudicial alteration of position – prohibited
reason – entitlement to benefit
of industrial instruments – whether
prejudicial alteration – whether ascertainable class of employees –
certified
agreements – obligation to consult – whether breach of
certified agreements – validity of certified agreement –
penalties
– whether manifestly
excessive
Corporations Act 2001
(Cth) s 911A
Federal Court of Australia Act 1976 (Cth) s
16
Financial Services Reform Act 2001 (Cth)
Workplace Relations
Act 1996 (Cth) ss 170LI, 170LK, 170LT, 170MD, 170NHA, 170XA, 178,
178(1), 298K(1), 298K(1)(c), 298L(1), 298L(1)(h), 298V, 347 and 356
Alfred v Walter Construction Group
Limited [2005] FCA 497 cited
Amcor Ltd v Construction, Forestry,
Mining and Energy Union [2005] HCA 10; (2005) 222 CLR 241 distinguished
Australian
Nursing Federation & Ors v Alcheringa Hostel Inc [2004] FCA 375; (2004)
136 FCR 530 cited
Australian Workers’ Union v BHP Iron-Ore Pty Ltd [2001] FCA 3;
(2000) 106 FCR 482 referred to
Australian Workers Union v Johnson
Matthey (Aust) Ltd [2000] FCA 728 cited
Automotive, Food, Engineering,
Printing & Kindred Industries Union v DMG Industries Pty Ltd [2000] FCA 1492; (2000) 102
IR 175 cited
BHP Iron Ore Pty Ltd v Australian Workers’ Union [2000] FCA 430;
(2000) 102 FCR 97 distinguished
Blair v Australian Motor Industries
Ltd (1982) 61 FLR 283 cited
Branir Pty Ltd v Owston Nominees
(No 2) Pty Ltd [2001] FCA 1833; (2001) 117 FCR 424 referred to
Childs v
Metropolitan Transport Trust (1981) IAS Current Review 946
cited
Community and Public Sector Union v Telstra Corporation Ltd [2001] FCA 267;
(2001) 107 FCR 93 applied
Construction, Forestry, Mining & Energy
Union v Coal & Allied Operations Pty Ltd (No 2) [1999] FCA 1714; (1999) 94 IR 231
cited
CPSU, the Community and Public Sector Union v Telstra Corporation
Ltd (2000) 99 IR 238 referred to
Electrolux Home Products Pty Ltd v
Australian Workers’ Union [2004] HCA 40; (2004) 209 ALR 116 referred
to
Employment Advocate v National Union of Workers [2000] FCA 965; (2000) 99 IR 376
cited
Evans v Minister for Immigration and Multicultural and Indigenous
Affairs [2003] FCAFC 276; (2003) 135 FCR 306 cited
Finance Sector Union of Australia v
Commonwealth Bank of Australia [2004] FCA 257 referred to
Li Pei Ye v
Crown Limited [2004] FCAFC 8 referred to
Linehan v Northwest Exports
Ltd [1981] FCA 199; (1981) 57 FLR 49 cited
Maritime Union of Australia v CSL Australia
Pty Ltd [2002] FCA 513; (2002) 113 IR 326 cited
Maritime Union of Australia v
Geraldton Port Authority [1999] FCA 899; (1999) 93 FCR 34 cited
Minister for
Aboriginal Affairs v Peko-Wallsend Limited [1986] HCA 40; (1986) 162 CLR 24
cited
Park v Brothers [2005] HCA 73; (2006) 222 ALR 421 applied
Patrick
Stevedores Operations No 2 Proprietary Limited v Maritime Union of Australia [1998] HCA 30;
(1998) 195 CLR 1 cited
Poulet Frais Pty Ltd v The Silver Fox Company
Pty Ltd [2005] FCAFC 131; (2005) 220 ALR 211 referred to
R v Glickman (unreported,
Victorian Court of Criminal Appeal, 19 December 1979) cited
Squires v
Flight Stewards Association of Australia (1982) 2 IR 155 cited
The
Commonwealth of Australia v Amann Aviation Pty Limited [1991] HCA 54; (1991) 174 CLR 64
cited
United Firefighters Union v Country Fire Authority (unreported,
Industrial Relations Court, Vic, North J, No 659 of 1996,
24 December 1996) referred to
COMMONWEALTH
BANK OF AUSTRALIA ACN 123 123 124 AND COMMONWEALTH SECURITIES
LIMITED ACN 067 254 399 v
FINANCE SECTOR UNION OF
AUSTRALIA
VID 70 OF
2006
SPENDER, BRANSON AND
MARSHALL JJ
28 FEBRUARY 2007
MELBOURNE
|
AND:
|
THE COURT ORDERS THAT:
1. The appeal be stood over to a date to be fixed for the purposes of the making of orders giving effect to these reasons.
2. The parties provide to the Associate of Marshall J, by 14 March 2007, an agreed minute of the orders to be made or if agreement has not by then been reached, the minutes of orders for which they respectively contend and brief outlines of submissions in support of those orders.
Note: Settlement
and entry of orders is dealt with in Order 36 of the Federal Court Rules.
|
ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF
AUSTRALIA
|
|
BETWEEN:
|
COMMONWEALTH BANK OF AUSTRALIA ACN 123 123 124
First Appellant COMMONWEALTH SECURITIES LIMITED ACN 067 254 399 Second Appellant |
|
AND:
|
FINANCE SECTOR UNION OF AUSTRALIA
Respondent |
|
JUDGES:
|
SPENDER, BRANSON AND MARSHALL JJ
|
|
DATE:
|
28 FEBRUARY 2007
|
|
PLACE:
|
MELBOURNE
|
REASONS FOR JUDGMENT
SPENDER J
1 On 9 September 2005, Merkel J (‘the primary judge’) gave reasons for judgment on an application by the Finance Sector Union of Australia against the Commonwealth Bank of Australia (‘CBA’) and Commonwealth Securities Limited (‘CommSec’).
2 The primary judge found that CBA had contravened s 298K(1) of the Workplace Relations Act 1996 (Cth) (‘the Act’) by the making and implementation of a staffing decision relating to the creation of a business unit with the Commonwealth Group of Companies, known as Premium Financial Services (‘PFS’) and that CBA had contravened s 178 of the Act by breaching various provisions of certified agreements requiring disclosure of information to the FSU. His Honour also found that the Commonwealth Securities Development Agreement 2002 (‘the CommSec Development Agreement’) had not been validly certified by the Australian Industrial Relations Commission (‘the AIRC’).
3 On 16 December 2005, after hearing submissions, including submissions directed to penalties, the primary judge made a number of declarations, and ordered that a total penalty of $600,000 be imposed on the first respondent for its breaches of s 298K(1)(c) of the Act and a total penalty of $150,000 be imposed on the first respondent under s 178(1) of the Act in respect of its breaches of certified agreements.
4 The primary judge ordered that the total penalties of $600,000 and $150,000 be paid to the FSU.
5 Both Branson and Marshall JJ (whose reasons for judgment I have had the benefit of reading) are of the view that appeals against contraventions should be dismissed. Marshall J would also dismiss the appeal against the penalties imposed, while Branson J is of the view that the total penalty of $600,000 for the breaches of s 298K of the Act is manifestly excessive, and would substitute in that regard a total penalty of $300,000. Branson J would otherwise dismiss the appeal.
6 I would allow the appeal in respect of the alleged contraventions of s 298K(1), and of the contraventions in respect of alleged breaches of the clauses in the Enterprise Bargaining Agreements, for the reasons which follow.
7 Subsection 298K(1) relevantly provided:
‘An employer must not, for a prohibited reason, or for reasons that include a prohibited reason, do or threaten to do any of the following:
(a) ...
(b) injure an employee in his or her employment;
(c) alter the position of an employee to the employee’s prejudice;
(d) ...
(e) ...’
8 By a notice of appeal filed on 24 January 2006, CBA and CommSec appealed from the whole of the judgment of the primary judge given on 16 December 2005. In particular, the grounds of appeal assert that:
‘Merkel J erred in concluding that the bank contravened s 298K(1) of the Act by the making and implementation of the PFS decision.’
9 The Notice of Appeal describes the term ‘The PFS decision’ as:
‘a reference to the decision of the First Appellant ("the Bank") in May 2002 that the Second Appellant ("CommSec") should be the employer to engage new employees and over time, to engage existing employees of the Bank in the Bank’s Premium Finance Services business unit.’
10 The Notice of Appeal also asserts that:
‘9. Merkel J erred in concluding that the Bank contravened clauses 17.3.2 and 17.3.4 of the Commonwealth Bank of Australia (Core) Enterprise Bargaining Agreement 2002 [‘the 2002 Core Agreement’] and clauses 18.3.2 and 18.3.4 of the Commonwealth Bank of Australia Customer Service Division Enterprise Bargaining Agreement 2000 [‘the 2000 Customer Service Agreement’].’
10. Merkel J should have found that the clauses referred to in paragraph [9] had no application as the PFS Decision did not "give rise to potential redundancy and/or redeployment situations".’
11 And further that:
‘13. Merkel J erred in fixing a penalty of $600,000 for contravention of s.298K, Merkel J imposed a penalty which is manifestly excessive and which failed to have regard, or sufficient regard, to relevant considerations ...’
12 And further:
‘18. In fixing a penalty of $150,000 pursuant to s.178 of the Act, Merkel J imposed a penalty which was manifestly excessive and which failed to have regard, or sufficient regard, to relevant considerations...’
13 It is not clear to me, even if at this stage, whether CBA disputes that there were contraventions of cl 39.3 and 39.4 of the Commonwealth Bank of Australia (Core) Enterprise Bargaining Agreement 2000 and of cll 37.1, 37.2, 37.3 and 37.4 of the 2002 Core Agreement. It does appear that CBA seeks to argue that the breaches of s 178 of the Act should have been considered by the primary judge as constituting one single breach, and attracting a penalty not greater than $10,000: vide pars 14, 15, and 19 of the Notice of Appeal.
14 In my opinion, the primary judge erred in concluding that the bank had contravened s 298K(1) of the Act by the making and implementation of the PFS decision. In my opinion, the making and implementation of the PFS decision did not ‘injure any employee of CBA in his or her employment’, or ‘alter the position of an employee of CBA to the employee’s prejudice’. Since one of those consequences is required by the very words of the statute to constitute a contravention, there is no contravention in this case, where neither requirement is made out.
15 His Honour also erred, in my opinion, in concluding that the bank breached the respective clauses of those certified agreements. In my view, the making and implementation of the PFS decision did not ‘give rise to potential redundancy and/or redeployment situations,’ nor did it constitute ‘change which is likely to impact on employees and/or their work environment’.
16 It follows that, in my opinion, the orders as to penalties ought also to be set aside.
17 Having regard, however, to the difference of opinion between Branson J and Marshall J as to whether the total penalty at $600,000 in respect of contraventions of 298K(1) of the Act is manifestly excessive, that penalty is, in my opinion, ‘manifestly excessive’. Neither CBA nor CommSec had previously been found liable for any contravention of s 298K(1) of the Act, and the highest penalty that had ever previously been imposed for a contravention of that s 298K of the Act was a little under $75,000.
18 Section 16 of the Federal Court of Australia Act 1976 (Cth) relevantly provides:
‘16 Court divided in opinion
If the Judges constituting a Full Court for the purposes of any proceeding are divided in opinion as to the judgment to be pronounced, judgment shall be pronounced according to the opinion of the majority, if there is a majority, but, if the Judges are equally divided in opinion:
(a) in the case of an appeal from a judgment of the Court constituted by a single Judge, or of the Supreme Court of a State or Territory – the judgment appealed from shall be affirmed; and
(b) in any other case – the opinion of the Chief Justice or, if he or she is not a member of the Full Court, the opinion of the senior Judge who is a member of the Full Court, shall prevail.
19 So to permit the orders of this Full Court to be dispositive of the appeal, and because I agree with Branson J that the total penalty of $600,000 for contravention of s 298K(1) of the Act is manifestly excessive, I agree with the proposal of Branson J that the appropriate total penalty to be imposed for contraventions of s 298K of the Act is $300,000.
20 I would allow the appeal in respect of the Declarations 1 to 4, and the appeal from the Orders 6, 7, and 9 of Merkel J made on 16 December 2005.
21 I would allow the appeal from Order 8 of Merkel J made on 16 December 2005, and order that the order be varied by substituting ‘$300,000’ for ‘$600,000’ in that order.
22 There should be a consequential variation in Order 10 of those orders by substituting ‘$300,000’ for ‘$600,000’ in that order.
23 I agree with Branson J that the primary judge was right to conclude that the AIRC was not authorised to certify the CommSec Development Agreement 2002, that agreement not being an agreement of the kind required by s 170LI of the Act for an application for certification to be made to the Commission.
24 I respectfully agree with her Honour’s reasons in regard to this aspect of the appeal.
Prohibited Reason
25 Section 298K(1) provides that an employer must not for a prohibited reason, or for reasons that include a prohibited reason, alter the position of the employee to the employee’s prejudice. By s 298L(1)(h), conduct is for a ‘prohibited reason’:
‘ ... if it is carried out because the employee concerned is entitled to the benefit of an industrial agreement.’
26 Section 298V is a reverse onus provision: it requires the person who is alleged to have engaged in conduct for a prohibited reason to prove otherwise.
27 I agree with Justice Branson’s conclusion that because of the conduct of CBA at the trial, and in particular, statements by Mr Middleton QC, the first of CBA’s Senior Counsel at the trial, and with Mr Ellicott QC, who replaced Mr Middleton as CBA’s Senior Counsel, it is not now open to the CBA to contend that having the benefit of CBA industrial agreements was not an operative reason for the making of the PFS decision.
28 It is not at all surprising to me that there should have been no real challenge by Senior Counsel who appeared for CBA at trial to the proposition that the PFS decision was taken and implemented, because existing employees of CBA had the benefit (and indeed the restraints, particularly of wage bands) of industrial agreements.
29 The Financial Services Reform Act 2001 (Cth) (‘the Financial Services Reform Act’) inserted Chapter 7 into the Corporations Act 2001 (Cth), which commenced on 27 September 2001, the date of assent. Section 911A provided that a person who carried on a financial services business was required to hold an Australian financial services licence covering the provision of the financial services. There was a transitional period which operated to 11 March 2004.
30 Given the requirements of that Act and the realisation by CBA that a successful wealth-creation culture within the bank required a structure and an environment that was incentive-driven, with successful qualified financial advisers being handsomely rewarded, the creation of the PFS, in the view of CBA, called for employees in that section to be committed to that culture.
31 This could be achieved, over time, by requiring that persons filling new positions in PFS were to be employees of Commsec, with individual agreements. So too with a transfer to a position in PFS. CommSec had the necessary licences which CBA originally did not, and CommSec had, for a number of years, performed the function of stockbroking, an activity highly relevant to the wealth management business of the new Premium Financial Services business unit. The organisational arrangement had the effect that if an employee of CBA wished to work in the PFS business unit, there would be a new employer, and new terms and conditions.
32 That arrangement, it was thought, had benefits for CBA overall, in that ‘success breed success’, and if financial advisers prospered individually by the opportunity of incentive based remuneration, so would the volume of funds under advisement or management in PFS.
33 Experience in the real world teaches that where the horse is Self-Interest, at least one knows that the jockey is trying. Adam Smith in ‘An Inquiry into the Nature and Causes of the Wealth of Nations’ (1776) was of the same view.
34 Equally, CBA would have been aware that unless successful financial advisers were handsomely rewarded, they would be poached by competitors in the ‘wealth creation’ industry.
35 The case by the FSU in the pleadings was originally not confined to the issue found by the primary judge against the CBA, namely whether the conduct of the CBA in relation to the managerial employees employed by CBA in the PFS Business Unit was a contravention of s 298K of the Act. That confining of the FSU’s case came about as the result of the urging of the primary judge, and was a position to which the FSU was, very reluctantly, persuaded to adopt.
36 Nonetheless, in the primary judge’s reasons for judgment of 9 September 2005, his Honour expressed the view that the ‘PFS decision was intentionally directed by CBA at the managerial employees employed by it in the PFS Business Unit’.
37 The declaration of contravention which his Honour made identified the employees whose positions his Honour found had been altered to their prejudice as ‘each of the employees employed in the positions described as Executive Manager, or Relationship Manager, or Assistant Relationship Manager, as at September 2002, and identified in PP 20 to 26 of Exhibit EM1 to the affidavit of Elvie Manaog sworn 30 September 2005’. That reference is to 259 named employees of CBA who held one or other of the positions of Executive Manager, Relationship Manager, or Assistant Relationship Manager.
38 Both the primary judge and Marshall J have characterised the conduct of CBA quite vituperatively. The primary judge said that the conduct was a scheme which was ‘essentially an industrial regulation avoidance scheme possessing an ingenuity that is reminiscent of the tax avoidance schemes of the 1970s’.
39 At par 30 the primary judge said:
‘In my view, CBA’s conduct struck directly at the freedom of association that Pt XA protects...’
And, at
par 31, that:
‘.. the conduct was engaged in by one of Australia’s largest corporations solely in pursuit of its self interest and profit, and so it would appear, without a proper regard of the legality of its conduct.’
40 The primary judge expressed the view at par 43 about penalty:
‘The penalty that is appropriate in all the circumstances is one that deters not only CBA, but also other employers, from implementing schemes analogous to that created by CBA in order to prejudicially alter the position of employees because of their entitlements under industrial instruments made under the WR Act.’
41 It is relevant to note that at this stage also that his Honour said at par 44 that the penalty would have been significantly higher if ‘there had been specific evidence of actual financial harm suffered by its employees as a result of its unlawful conduct’. This reflects the fact that the evidence did not establish that any employee, as a result of the making and implementation of the PFS Agreement, had suffered financial harm: the contrary seems to have been the case.
42 Marshall J agrees with the primary judge that there was ‘an industrial regulation avoidance scheme’. His Honour expressed the view: ‘The breaches in this matter were egregious and the conduct wilfully defiant.’
43 I disagree with these descriptions. They reflect a serious misunderstanding of what CBA was hoping to achieve in a changing commercial environment. CBA’s purpose in setting up the PFS unit, with Commsec as employer and with individual agreements, was not to punish existing CBA employees because they had the benefit of industrial agreements. It was to create a successful wealth creation and financial advice unit, which would have the capacity to resist defections to competitors in that field.
44 The primary judge failed to appreciate what, in fact, the PFS decision involved, and the commercial context in which that decision was made.
45 In my judgment, as the following reasons hope to demonstrate, the conduct of CBA did not alter the position of any employee of CBA to that employee’s prejudice. Whatever change in the position of a person who accepted employment in PFS by Commsec and who was previously employed by CBA was the result only of the voluntary acceptance by that employee of an offer of employment from a new employer CommSec, which employment was on different terms and conditions from the terms and conditions attaching to the person’s former employment by CBA.
46 The reasons by the primary judge ignore the significance of the Financial Services Reform Act, and the paradigm shift in focus by the Commonwealth Bank group of companies from traditional banking to financial advice and wealth creation. In my opinion, the PFS decision was taken to implement this shift.
47 In my judgment, the making and implementation of that PFS decision did not alter the position of any employee of CBA to their disadvantage.
48 The Financial Services Reform Act required all persons and entities providing financial services to be licensed with the Australian Securities and Investment Commission (‘ASIC’). There was a transitional period which operated until 11 March 2004, during which time the CBA group entities prepared its licence applications and developed a strategy for implementation of its disclosure and licensing obligations.
49 On 20 December 2001, the Chief Executive Officer of the CBA, Mr David Murray, issued an Executive Letter headed ‘Changes to Organisational Structure’. This letter is of crucial importance, in my opinion.
50 The letter said:
‘Changes to organisational structure
Today the Bank announced changes to the organisational structure that will take effect by the end of February.
To align product development and service delivery more fully with the Bank’s customer segments, we have created four new business divisions that each focus on a particular customer base. These are:
1. Retail Banking Services – headed by John Mulcahy (formerly Head of Australian Financial Services) will meet the financial needs of personal and small business customers seeking accessible and affordable banking. It incorporates the former Customer Service Division and parts of the former Australian Financial Services.
2. Premium Financial Services – headed by Michael Katz (formerly Head of Institutional Banking) to bring together the Bank’s existing wealth management businesses to provide customised products and services for clients with more complex financial needs.
...
This structure not only improves the Bank’s focus on wealth management, but enables us to better meet the needs of all customers whether seeking a simple transaction service to complex business arrangements and institutional customers.’
51 The question and answers attached to that executive letter included the following:
‘Q Why change the previous structure?
A Given the changes that have occurred in the financial services industry, and particularly in the Commonwealth Bank over the last two years, this structure supports the Bank’s strategic direction, and in particular, is in line with our critical imperative to meet customer need.
...
Q Why has the Premium Financial Services Business Unit been created?
A Wealth management is a key growth area for the Bank and the development and design of customised product and delivery mechanisms is critical if the Bank is to consolidate and grow its position in the market. This is a new business unit dedicated to this customer segment. It will use the existing resources of the Group to build new and exciting solutions for these customers.’
(Emphasis added.)
52 The conduct said to constitute a contravention of s 298K was the making and implementation of a decision by Mr Michael Katz, who said, in an affidavit filed by the FSU in the proceedings before the primary judge:
‘Use of CommSec as employer
27 Having determined that the PFS business should run off a CommSec base, I determined in or about May 2002 that CommSec should also be the employer of choice to engage new (as in non-Bank) employees, and over time, to engage existing employees of the Bank, in the PFS business unit.
28 I determined that CommSec, and not the Bank, should be the employer because of the advantages that would flow to the PFS business in the following areas:
(a) Branding;
(b) Licensing issues; and
(c) The provision of ... an adaptable platform of employment conditions.’
53 A document called ‘CommSec Employment Framework’ of December 2002 sets out the business model for the PFS, and the Employment Model:
‘The Business Model
The Change in focus
Lending based relationships
Wealth based relationships
Banking
Investment Insurance
Broking’
‘Employment Model
|
Employment Model 1
|
Employment Model 2
|
|
(Preferred)
1. Employment Company – Use ComSec Vehicle
2. Obtain 170 LK certified agreement
3. All new PFS staff employed by new company (some transition
arrangements needed)
|
1. CBA Group Award and Enterprise Agreement covers half of PFS
2. ComSec Award and 170 LK covers half of PFS
3. Maintain two separate workforces’
|
54 The transition from ‘lending-based relationships’ to ‘wealth-based relationships’ required employees to be able to provide financial advice. This, in turn, required compliance with the requirements of PS 146.
55 Under PS 146, which is a policy statement issued by ASIC, financial products are divided into two tiers for the purpose of giving advice:
‘(a) Tier 1 – complex products such as securities, managed investments, derivatives, life insurance, debentures, term investments over 2 years, superannuation and retirement and saver accounts; and
(b) Tier 2 – basic deposit products, general insurance, foreign exchange, and non-cash payment facilities (for example, direct debit).’
56 An affidavit was filed by Paul Rickard, who is the Executive General Manager, Premium Banking and Investment Services – Premium Business Services (‘PBS’). PBS had been intimately involved in what was PFS since 28 February 2002. PBS is a business unit within the bank group of companies, which came into existence in May 2004 by combining the PFS and Institutional and Business Services Units of CBA.
57 Mr Rickard says that an employee of CommSec who holds the position of ‘personal adviser’ does not perform the same role as bank employees who hold the position of ‘relationship manager’ within PBS (previously PFS). The main difference between the two roles is that the personal adviser is accredited to provide tier 1 financial products advice under PS 146, or has an expectation that he or she will seek to become accredited to provide tier 1 product advice. Being qualified to provide tier 1 financial advice enables the adviser to discuss a range of wealth management ideas and innovative products with clients beyond standard banking products.
58 In order to be accredited to provide financial advice of this nature, individuals must have completed full time study courses over a period of time. By way of comparison, the provision of tier 1 financial advice does not form, and has never formed, part of the role of a relationship manager.
59 The information provided by a relationship manager to customers of the bank regarding the availability of financial products is confined to basic CBA lending and deposit products which fall under tier 2 of PS 146.
60 Mr Rickard says:
‘... The Bank’s objective in establishing PFS was to provide a tailored service to more affluent personal clients and to differentiate these clients, who were generally more financially astute, from the Bank’s retail clients who were serviced by Retail Banking Services.’
61 He says that the client service streams of Capital Premium Banking and Executive Banking formed part of PFS.
62 With the creation of PFS in March 2002, there were four business units within the Bank Group servicing clients with different requirements. Those business units were:
‘(a) Retail Banking Services, which serviced the financial needs of personal clients, generally with incomes of $100,000 and below, and small business clients;
(b) PFS, which brought together the Bank Group’s existing wealth management businesses and serviced high end personal customers generally with incomes of $100,000 and above, including a substantial proportion of CommSec’s clients; and
(c) Institutional and Business Services (IBS), which catered to middle market business clients and institutional clients; and
(d) Investment and Insurance Services, which brought together the Bank Group’s funds management, master funds, superannuation and insurance businesses. This included Colonial First State, Commonwealth Investment Management, Colonial Insurance and CommInsure.’
63 It is clear that brokering services were a significant part of the business model of PFS. The ‘provision of an adaptable form of employment conditions’ has to be seen in the context that it was contemplated that the provision of financial advice and wealth creation would play an important part in the organisational and structural change spoken about by Mr Murray.
64 If the CBA Group of Companies were to be successful in the giving of financial advice, it was necessary that those giving the advice be rewarded by an appropriate level of remuneration. The existence of an incentive-based ‘platform’ coincided with the objective of growing the wealth-creation aspect of the business, as well as immunising the successful financial advisers from being successfully poached by competitors in that same industry.
65 It is not correct to say that the positions of Relationship Manager, employed by CBA with the employee enjoying the benefits (and burdens) of a certified agreement, and the position of a personal adviser employed by CommSec were equivalent positions. The position description of a ‘personal adviser’ stipulated that a tertiary qualification was mandatory.
66 The evidence of Ms Sequeira is that in the period following September 2002, when CommSec first offered what were termed ‘Clause 12 Agreements’ to persons to be employed in the PBS, CommSec offered employment only to those persons who took up the opportunity to undertake training to be PS 146 compliant, and who successfully completed such training.
67 The implementation of the PBS decision is not properly to be described as having the consequence that promotional advancement and transfer opportunities were no longer available to CBA employees unless they resigned their employment and commenced employment with CommSec under Clause 12 agreements. In a sense, the giving of financial advice, the accompanying rewards, and opportunities to advance in the financial advice area were ‘outsourced’ by CBA to CommSec.
68 In Patrick Stevedores Operations (No 2) Pty Ltd and others v Maritime Union of Australia and others [1998] HCA 30; (1998) 195 CLR 1 (‘Patrick Stevedores’) at p 18, par 4, there is the suggestion that to constitute prejudicial alteration of position within the meaning of s 298K(1)(c), the circumstances must amount to an ‘adverse affection of, or deterioration in, the advantages enjoyed by the employee before the conduct in question’.
69 It is, of course, the terms of the section which determine what is the prohibited conduct, and frequently alternative descriptions, or synonyms, for the statutory words are not helpful.
70 In my opinion, the opportunity to access promotion or transfer within CBA in the field of financial advice and as employees of CBA, did not constitute ‘an advantage’ that was enjoyed by any of the CBA employees. None of the employees had an entitlement to transfer or to promotion as an employee of CBA under any industrial instrument or contract governing their employment.
71 I derive support for my view that the making and implementation of the PFS decision did not ‘injure any employee in his or her employment’, or ‘alter the position of any employee to the employee’s prejudice’, from the observations of Smithers J in Childs v Metropolitan Transport Trust (1981) IAS Current Review 946, where Smithers J said:
‘It seems to me that the word "position" should be read rather to refer to a man’s employment position in all its attributes and that to find what those attributes are in any particular case, you look at the terms of employment, the terms of the agreement in relation to the particular employment. Fear of alteration of any of those terms or of the entitlements thereunder would be as potent a factor inhibiting an employee from operating the Act as fear of dismissal, or loss of pay or something in the nature of an immediate injury. I think therefore that cancellation or repudiation of a term of employment which has been agreed upon, cancellation or repudiation by an employer which the employee is in no position, legal or otherwise, to resist or oppose, although he may get some legal rights in relation to it, by withdrawal of a promise of secure employment in a position for an agreed term is an alteration in the employee’s position within the meaning of [the then equivalent of 298K(1)].’
(Emphasis added.)
72 Even more plainly, Smithers J said at p 948:
‘I cannot help thinking that "injury" refers to deprivation of one of the more immediate practical incidents of his employment, such as loss of pay or reduction in rank.’
73 Philip Evatt J adopted and applied the views of Smithers J in Blair v Australian Motor Industries Ltd (1982) 61 FLR 283, stating at p 290:
‘It is clear in my view that the words [‘or alter his position to his prejudice’] were added to the section to overcome a situation in which an employer did something short of dismissing an employee but which was something which could be said to be harmful to him in his employment.’
74 In Squires v Flight Stewards Association of Australia (1982) 2 IR 155, Ellicott J said:
‘... The words "injure in his employment" are in the context of s. 5 words of wide import. I do not regard them as referring only to financial injury or injury involving the deprivation of rights which the employee has under a contract of service. They are, in my view, applicable to any circumstances where an employee in the course of his employment is treated substantially differently to the manner in which he or she is ordinarily treated and where that treatment can be seen to be injurious or prejudicial.’
(Emphasis added.)
75 In this case, an employee of CBA entitled to the benefit of industrial instruments was not treated substantially differently to the manner in which he or she was ordinarily treated prior to the implementation of the PFS decision. It follows that there was no treatment which was injurious or prejudicial to the employee. The comparison is between the position of an employee prior to the PFS decision, with that person’s position subsequent to that decision. The comparison is not between the position of an employee of CBA before the PFS decision with that person’s later position as an employee of CommSec, should that person accept the offer of employment by CommSec: See Maritime Union of Australia and Others v Geraldton Port Authority and Others [1999] FCA 899; (1999) 93 FCR 34.
76 It is correct to state, as the primary judge found at par 4 in the first reasons for judgment that:
‘CBA’s intention was that over time, CommSec employees, rather than CBA employees, were to provide the PFS business unit’s services to CBA’s customers.’
77 It is consistent with the desire that those persons involved in the giving of financial advice should be engaged in a ‘flexible’ or incentive-based remuneration environment that the position was (as both CBA and CommSec admitted on the pleadings) that after May 2002 no new employees at manager level or below were created by CBA, and CBA did not create any new positions or fill any vacant positions in relation to the employment of employees at manager level or below in PFS. CommSec admitted on the pleadings that after May 2002, it had created all new positions and engaged all new employees to work in PFS at manager level or below.
78 The position in my judgment is accurately summarised by the primary judge’s reasons at 57, where his Honour said:
‘... prior to the PFS decision, employees in the positions of Relationship Manager and Assistant Manager had significant promotional, advancement and transfer opportunities within CBA’s PFS business unit. From the making and implementation of the PFS decision in September 2002 onwards, those promotional, advancement and transfer opportunities became foreclosed to those employees unless they resigned from CBA and took up employment with CommSec. While it is correct that the resignation was voluntary, it is clear that the decisions not to create any new CBA positions in PFS, and to fill PFS vacancies using CommSec employees, were intended to induce, and did induce, existing CBA employees in the PFS business unit to take up employment with CommSec if they wished to advance their careers in the PFS business unit.’
79 The short point is, in my view, that there was no entitlement in any employee remaining with CBA to promotional advancement and transfer opportunities in the PFS Business Unit. It is simply not correct to say, as the primary judge said at par 95 of his first reasons, that:
‘...CBA altered the criteria for access to those opportunities by imposing a requirement that, for that access, the relevant employees had to resign from CBA.’
80 Even if there was ‘an alteration of the criterion for access’ that was ‘imposed by CBA’, that alteration was neither an ‘injury to an employee of CBA in his or her employment’ nor ‘an alteration of the position of an employee of CBA to the employee’s prejudice’, as a contravention of s 298K(1) of the Act relevantly requires.
81 None of the cases supports the proposition that transfer or promotion opportunities constitute ‘an advantage enjoyed by any of the relevant employees’ for the purposes of s 298K(1)(c).
82 Linehan v Northwest Exports Ltd [1981] FCA 199; (1981) 57 FLR 49 at pp 61-62 involved the loss of annual and sick leave payments.
83 Martime Union of Australia and Others v Geraldton Port Authority and Others [1999] FCA 899; (1999) 93 FCR 34 at pars 257 to 260 involved a reduction in overtime payments. Nicholson J said:
‘257 Rostering arrangements are provided for in cl 23 of the Award. By subcl (1) an employer may roster employees in accordance with the Award to perform irregular shiftwork. Although subcl 22(2) provides the agreement of the employee and the GPA is needed for a change in status from designation as a day worker to irregular shift worker or vice versa it has not been contended that any employee has a right to perform irregular shiftwork. The case for the applicants is presented on the basis that it is a fact they have been engaged on irregular shiftwork and hence enjoyed the levels of overtime reflected in the above table.
From consideration of this evidence I make the following findings:
(1) There is no evidence of a denial of overtime to the second applicants or to the MUA employees. That was the injury or prejudicial alteration which was pleaded. It is not made out.
(2) There is no contention there has been a denial of a right or entitlement on the part of either the second applicants or the MUA employees to earn overtime.
(3) There is no evidence that any one of the second applicants or the MUA employees have been singled out nor is it contended that the action said to injure them in employment or prejudice their position is constituted by "singling out". However, I do not consider s 298K(1) is only applicable to conduct in which an employee is singled out.
(4) There is no evidence to the end of the relevant period (26 March 1999) that there has been any present reduction in overtime paid to the second applicants or the MUA employees. Consequently no present loss of overtime is established in respect of any of them.
(5) It is more probable than not that the overtime able to be earned by the second applicants and the MUA employees in the future will be reduced below that which they earned to 26 March 1999. It is not possible to quantify the extent of the reduction with certainty because of at least the following factors:
(a) the month by month variation in the availability of overtime work at the Geraldton Port exemplified in particular by February 1999.
(b) the fact that there will be a lesser number of persons sharing in the overtime.
(c) the continuing effect of the undertakings given in this proceeding in the figures for February and March 1999.
(d) the fact that MUA employees are able to participate in earning overtime from stevedoring.
(e) the uncertainty concerning the likely extent of overtime available in respect of mooring and unmooring work.
Is there an injury in employment or prejudicial alteration to position?
258 Clause 24 of the Award does not guarantee any particular level of overtime. There is therefore no definite benchmark derivative from the Award against which to measure injury or prejudice.
259 The evidence of the overtime in the above Table gives some guidance. On the authorities previously referred to it is likely that the probable reduction will reduce the earnings of the second applicants and the MUA employees from overtime below the average levels earned during the 21 month period prior to the changes for which figures are available as reflected in the Table.
260 In my opinion the prospect of reduction in overtime earnings of the second applicants and the MUA employees comes within the understanding in the case law of the concept of prejudicial alteration to their positions. The change in that respect is one which qualifies therefore as conduct pursuant to s 298K(1)(c).’
(Emphasis added.)
84 Patrick Stevedores involved conduct by an employer, which, absent court orders, would have led inevitably to the dismissal of the employees. The High Court said at pp 33 – 34, par 37:
‘Given the weakened financial structure of the employer companies, the commercial death knell of those companies was sounded by the termination of the Labour Supply Agreements by Patrick Operations, the refusal of further funding by Patrick Holdings, the fixing by the security trustee on 7 April 1998 of the charge over any debts actually or contingently owing to the employer companies by Patrick Holdings and the non-payment of the receivable of $16 million or $17 million. If the power of the Federal Court to prevent the frustration of its process was to be effective, extraordinary orders were needed to ensure that, if the employees were successful in the final hearing, the employer companies, from which the employees derived such security of employment as they had, could be maintained in existence as stevedores or as the continuing suppliers of labour in the stevedoring business. If that could not be done, the conduct of the Group which had altered the position of the employees to their prejudice would lead inevitably to the dismissal of the employees.’
85 Similarly, Community and Public Sector Union and Another v Telstra Corporation Ltd [2001] FCA 267; (2001) 107 FCR 93 involved a threat to employment security of those employees who were employed under an award or certified agreement. Those employees had an entitlement to be subject to redundancy only in accordance with a process which rated their eligibility for redundancy on the basis of prescribed criteria. It was therefore a diminution in that entitlement if their exposure to redundancy was to be based on the consideration that they had not signed an individual agreement.
86 In each of these cases, the basis of the Court’s finding of prejudicial alteration has been adverse affection of an entitlement regulated by relevant industrial instrument or contract of employment, or alternatively, conduct which goes to the heart of employment security.
87 This is not such a case. In my opinion, this case is indistinguishable from BHP Iron Ore v Australian Workers’ Union [2000] FCA 430; (2000) 102 FCR 97 (‘BHP Iron Ore’). In BHP Iron Ore, the employer imposed a condition on employees who wished to access higher salaries and conditions of employment that they accept employment under an individual employment agreement. The Full Court held that this condition did not constitute conduct for the purposes of s 298K(1)(c), because the offer had been made indiscriminately to all employees, and the offer did not change, in either absolute or relevant terms, the remuneration or any of the conditions of employment of the employee to whom the offer was made.
88 The present case, in my opinion, is even stronger. In the present case, there is absolutely no change to either the remuneration or terms of conditions of an employee of CBA in PBS after the PFS decision. An opportunity to take up employment with CommSec, if suitably qualified, involved a change of employer, but the fact of that offer, which was open to all of the 259 employees, did not change in either absolute or relevant terms remuneration or any of the conditions of employment of the employee of CBA. In other words, in the present case CBA made an indiscriminate offer to any of its employees who satisfied the requisite qualification requirements to advance themselves by accepting employment in a position within CommSec. All of the 259 employees were given an opportunity in late 2002 to embark upon the training necessary to be PS 146 compliant. Some employees were not interested in taking up the offer; other employees did take up the offer of training, and subsequently became employed by CommSec.
89 In my judgment, the present case is indistinguishable from BHP Iron Ore.
90 I turn now to consider whether the PFS decision involved a breach of the specified clauses of the two certified agreements.
91 It is common ground between the parties that CBA did not consult with FSU or notify or inform it of the PFS decision.
92 The primary judge found that as a consequence, CBA breached a number of clauses of certified agreements, in particular, cll 17.3.2 and 17.3.4 of the 2002 Core Agreement and cll 18.3.2 and 18.3.4 of the Commonwealth Bank of Australia Customer Service Division Enterprise Bargaining Agreement 2000 (‘the 2000 Financial Services Agreement’). These breaches depend, in effect, on the correctness of the conclusion by the primary judge that the PFS decision ‘gave rise to potential redundancy and/or redeployment situations’.
93 The primary judge also concluded that CBA had contravened cll 39.1 to 39.4 of the 2002 Customer Service Agreement, and cll 37.1 to 37.4 of the 2002 Core Agreement. The primary judge concluded that the making and implementation of the PFS decision constituted ‘major change’ within the meaning of the respective cll 39 and 37.
94 While the clauses are not in identical terms, they fall broadly into two groups.
95 The first group involves where a work area practice or function is being reviewed by the bank. If that review ‘could give rise to redundancy or redeployment situations, the bank will also inform the FSU’. Similarly, the statement ‘where redundancy situations occur, the bank will make reasonable efforts to redeploy the employees concerned’.
96 It is sufficient, for present purposes, if I set out cl 17.3 of the 2002 Core Agreement:
‘17.3 Consultative Processes
17.3.1 Where the Bank advises employees that it will review a work area, practice or function that could give rise to redundancy or redeployment situations, the Bank will also inform the FSU and make its representatives available for discussion on the proposals.
17.3.2 When the Bank has reviewed a work area, practice or function, the Bank will inform the FSU of the outcome and provide the FSU with the following information –
(i) details of the new employee structure applicable to the area and an explanation of the impact;
(ii) details of the positions to be abolished including position numbers where available; and
(iii) details of the proposed date of implementation of the new structure.
17.3.3 Where a review results in the closure of a Branch, the Bank will inform the FSU of the closure at least one working day before the employees at the Branch or any other parties external to the Bank are informed and the Bank will provide to the FSU details of the employee structure and the anticipated date of closure.
17.3.4 The FSU will have a period of two weeks from the time the information in terms of subclause 17.3.2 is provided to seek discussions with the Bank on the proposals and to comment on the review findings. The Bank will make its representatives available for discussions prior to implementing any findings. ...’
(Emphasis added.)
97 No argument was directed to the question of whether cl 17.3.1 of the 2002 Core Agreement imposed an obligation on CBA to inform FSU, only if CBA had advised employees of a relevant review.
98 The second series of clauses deals with an obligation to consult where there is an issue of ‘major change’. By way of illustration, cl 37 of the 2002 Core Agreement provides:
‘37. Consultative Processes
37.1 The Bank and the FSU recognise the importance of consultation and co-operation on major issues.
37.2 "Consultation" is defined as either party seeking the views of the other on major change issues before decisions are made, providing an opportunity of influence on the final outcome. "Major change" is defined as change which is likely to impact significantly on employees and/or their work environment.
37.3 The Bank and the FSU agree that consultation on major change shall occur as follows: ...’
(Emphasis added.)
99 In my judgment, the PSF decision did not ‘give rise to potential redundancy or redeployment situations’. There was no position of an employee of CBA that was made redundant or was abolished. There was no redeployment of employees to CommSec.
100 Further, (although less clearly), the making and implementation of the PFS decision in the context of the structural reorganisation of the wealth creation activity of the CBA Bank Group is not properly to be regarded as ‘change which is likely to impact significantly on employees and/or their work environment’. Unless an employee chose to apply for a position with CommSec in the PFS business unit, there was no impact on that employee or their work environment. If there was such an application by the employee for a position with CommSec, that ‘change’ is not of CBA’s making, but is the result of the voluntary choice of the person applying for the CommSec job.
101 It is, in my view, simply wrong on the evidence to regard the position of existing managerial employees of CBA as having ‘equivalent’ positions as personal advisers in CommSec.
102 I would set aside the declarations of contraventions of the breaches of the various clauses of the Enterprise Bargaining Agreements.
103 As earlier indicated, I would allow the appeal in respect of the Declarations 1 to 4, and the appeal from the Orders 6, 7, and 9 of Merkel J made on 16 December 2005.
104 I would allow the appeal from Order 8 of Merkel J made on 16 December 2005, and order that the order be varied by substituting ‘$300,000’ for ‘$600,000’ in that order.
105 There should be a consequential variation in Order 10 of those orders by substituting ‘$300,000’ for ‘$600,000’ in that order.
Associate:
Dated: 28
February 2007
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ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF
AUSTRALIA
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BETWEEN:
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COMMONWEALTH BANK OF AUSTRALIA ACN 123 123 124
First Appellant COMMONWEALTH SECURITIES LIMITED ACN 067 254 399 Second Appellant |
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AND:
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FINANCE SECTOR UNION OF AUSTRALIA
Respondent |
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JUDGES:
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SPENDER, BRANSON AND MARSHALL JJ
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DATE:
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28 FEBRUARY 2007
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PLACE:
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MELBOURNE
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REASONS FOR JUDGMENT
BRANSON J
INTRODUCTION
106 Each of the appellants is part of the CBA Group of Companies. Commonwealth Securities Ltd (‘CommSec’) is a wholly owned, but not guaranteed, subsidiary of the Commonwealth Bank of Australia (‘CBA’).
107 The CBA was responsible for changes to the organisational structure of the CBA Group including the creation of a business unit known as Premium Financial Services (‘PFS’) which became operational on 1 March 2002. PFS was created by the amalgamation into a single division of a business unit from CBA’s Retail Banking arm, namely Premium Banking, and a combined business unit known as Equities, which included CommSec and Executive Banking, from CBA’s Institutional Banking arm.
108 Shortly after the creation of PFS, Michael Katz, a Group Executive of CBA and the Chairman of CommSec, decided ‘that CommSec should ... be the employer of choice to engage new (as in non-Bank) employees, and over time, to engage existing employees of the Bank, in the PFS business unit.’ It is convenient to refer to this decision as ‘the PFS decision’. Mr Katz identified the ‘provision of an adaptable platform of employment conditions’ as a reason for the PFS decision. The primary judge noted that, unlike CBA, CommSec had a workforce that was not unionised and the respondent (‘the Union’) had no representative role or function within CommSec.
109 The learned primary judge held that by making and implementing the PFS decision, CBA contravened s 298K(1)(c) of the Workplace Relations Act 1996 (Cth) by altering the positions of certain of its employees to their prejudice for a prohibited reason, namely that the employees were entitled to the benefit of one or more industrial instruments. The employees whose positions his Honour found had been altered to their prejudice were CBA employees who were, as at September 2002, employed in the positions of Executive Manager, Relationship Manager or Assistant Relationship Manager in PFS.
110 The primary judge additionally concluded that:
(a) CBA had contravened s 178 of the Act by breaching various provisions of certified agreements which required disclosure of information to the Union; and
(b) the order of the Australian Industrial Relations Commission certifying the Commonwealth Securities (CommSec) Development Agreement 2002 (‘the CommSec Agreement’) was void and of no effect.
111 His Honour made certain declaratory orders, required CBA to make offers of re-employment to certain of its former employees who had become employees of CommSec, restrained CBA from inducing or attempting to induce any of its relevant employees to take up employment with CommSec and imposed penalties on CBA for breaches of s 298K(1)(c) and s 178 of the Act.
112 The appellants challenge the whole of the judgment of the primary judge.
THE SECTION 298K DECISION
Statutory Provisions
113 Section 298K(1) forms part of Division 3 of ‘Part XA – Freedom of Association’ of the Act. It provides that an employer must not, for a prohibited reason, or for reasons that include a prohibited reason, alter the position of an employee to the employee’s prejudice. Conduct is for a prohibited reason if it is carried out because the employee concerned is entitled to the benefit of an industrial instrument (s 298L(1)(h)).
114 Section 298V relevantly provides:
‘If:
(a) in an application under this Division relating to a person’s ... conduct, it is alleged that the conduct was ... carried out for a particular reason ...; and
(b) for the person ... to carry out the conduct for that reason ... would constitute a contravention of this Part;
it is presumed ... that the conduct was ... carried out for that reason ... unless the person ... proves otherwise.’
Concession re Prohibited Reason
115 By its third further amended statement of claim the respondent to this appeal alleged that the PFS decision was made and implemented for the reason, or for reasons that included the reason, that those individuals who were employed by CBA in PFS as managers or below were entitled to the benefit of CBA industrial instruments.
116 CBA submitted on appeal that the primary judge should have found that the fact that CBA employees had the benefit of CBA industrial instruments was not a reason for the making of the PFS decision. This submission is inconsistent with the way in which CBA conducted its case at trial. When the primary judge asked Mr Middleton QC, CBA’s senior counsel at trial, whether he disputed that avoidance of the industrial regulation of the bank was a reason for the PFS decision, Mr Middleton replied, ‘No’. Later Mr Middleton referred to the statutory definition of ‘prohibited reason’ in s 298L(1) and the reverse onus provision of s 298V and told his Honour:
‘So in our submission, your Honour, as clear as I can make it, the purpose or motive is really not a matter which is hotly contested in this case.’
CBA’s final submissions to the primary judge on liability did not seek a finding that the conduct in question was not carried out for a prohibited reason.
117 Subsequently Mr Ellicott QC replaced Mr Middleton as CBA’s senior counsel. Mr Ellicott did not in this regard seek to put CBA’s case differently from the way it was put by Mr Middleton. The transcript records that during the course of the hearing on penalty Mr Ellicott said to the primary judge:
‘... it was clear on the – both on the statement that had been made in Mr Katz’s affidavit which was admitted, tendered by the union, as to what that decision was and that a prohibited purpose was involved in it. That was the end of it. That is the prohibited purpose.’
118 It is therefore not surprising that, although CBA did not formally admit that the PFS decision was made for a prohibited purpose, it made no attempt to rebut the presumption for which s 298V provides. It did not, for example, call Mr Katz to give evidence that the operative reasons for the PFS decision did not include that the CBA employees enjoyed benefits under industrial instruments (cf Maritime Union of Australia v CSL Australia Pty Ltd [2002] FCA 513; (2002) 113 IR 326 at [38]- [61]).
119 Notwithstanding that this appeal is an appeal by way of rehearing, CBA is bound by its conduct at first instance. It is therefore not open to it to submit that the primary judge should have found that the fact that CBA employees had the benefit of CBA industrial instruments was not an operative reason for the making of the PFS decision (see Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; (2001) 117 FCR 424; Poulet Frais Pty Ltd v The Silver Fox Company Pty Ltd [2005] FCAFC 131; (2005) 220 ALR 211 at [45]; Li Pei Ye v Crown Limited [2004] FCAFC 8 at [74]- [84]).
120 In any event, on the evidence before him, the primary judge was plainly correct in concluding that CBA had not rebutted the s 298V presumption. That presumption is not rebutted merely because the circumstances in which the relevant conduct is carried out are consistent with the conduct not being carried out for a prohibited reason; the presumption is rebutted only where there is sufficient evidence to allow a positive finding to be made that none of the operative reasons for the conduct was a prohibited reason (Maritime Union of Australia v CSL Australia Pty Ltd at [60]). His Honour was not in a position to make such a positive finding because no evidence was adduced from Mr Katz who alone, as CBA admitted, made the PFS decision.
Was the PFS Decision Directed at Individual Bank Employees?
121 The primary judge was satisfied that the PFS decision:
‘was intentionally directed by CBA at the managerial employees employed by it in the PFS business unit’.
The declaration of contravention which his Honour made identified the employees whose positions had been altered to their prejudice as:
‘each of the employees employed in the positions described as Executive Manager, Relationship Manager or Assistant Relationship Manager as at September 2002 and identified in pp 20-26 of exhibit "EM-1" to the affidavit of Elvie Manaog sworn on 30 September 2005’.
Pages 20-26 of exhibit ‘EM1’ to the affidavit of Elvie Manaog, which was received in evidence only on the question of the appropriate penalty, if any, to be imposed on CBA, identified by name the 259 employees of CBA who held one or other of the positions of Executive Manager, Relationship Manager or Assistant Relationship Manager.
122 CBA submitted on appeal that the primary judge should have found that the PFS decision was not directed at any individual CBA employees.
123 In BHP Iron Ore Pty Ltd v Australian Workers’ Union [2000] FCA 430; (2000) 102 FCR 97, on appeal from a grant of interlocutory relief, the Full Court observed at [35]:
‘It has to be borne in mind, in construing s 298K, that it proscribes conduct by "an employer" directed to "an employee" or "other person" (emphasis added). That use of the singular suggests that the alleged injury or alteration of position has to be examined in the light of the circumstances of each individual employee. (It is not the point that in the interpretation of statutes, the singular ordinarily includes the plural; here we are concerned with the indications of legislative intention to be discerned from the actual language used.) It is also significant that the conduct struck at by each paragraph of s 298K is expressed by an active verb: "dismiss", "injure", "alter the position", "refuse to employ", and "discriminate". That implies that the proscription is essentially against an intentional act of the employer directed to an individual employee or prospective employee.’
124 Subsequently, the trial judge in Australian Workers’ Union v BHP Iron-Ore Pty Ltd [2001] FCA 3; (2000) 106 FCR 482 at [52]- [54] cited the above observation of the Full Court and said:
‘Section 298K(1) is, upon this view, concerned with the conduct of an employer that is directed to an individual employee. This does not mean that in dismissing one employee who is a union member for a prohibited reason, an employer commits a civil wrong, and that wrong is not committed if, for the same reason, the employer dismisses all employees who are union members. The Full Court was directing its attention to the nature of the injury contemplated by the provision. That is, the conduct in question must injure an employee individually in the sense that it would have injured him or her, regardless of whether it was actually done to an individual employee or a group of employees. The relevant inquiry is whether an employer has, by the employer’s conduct, injured the position of an employee individually: cf Community and Public Sector Union v Telstra Corporation Ltd (2000) 99 IR 238 at 245-246 [24] per Finkelstein J. The Full Court must have intended to exclude conduct that injured individuals only when directed to a class of employees.
Before s 298K(1) can apply, it must be possible to say of an employee that he or she is, individually speaking, in a worse situation after the employer’s acts than before them; that the deterioration has been caused by those acts; and that the acts were intentional in the sense that the employer intended the deterioration to occur.’
125 The issue of whether conduct was directed at individual employees also arose for consideration in Community and Public Sector Union v Telstra Corporation Ltd [2001] FCA 267; (2001) 107 FCR 93 (‘Telstra’). In that case the conduct in issue was the sending of an e-mail to managers and team leaders concerning the way staff reductions were to be implemented. The Full Court at [21] noted that Telstra relied on the observation made by the Full Court in BHP Iron Ore Pty Ltd v AWU at [35] in contending that the e-mail was not an intentional act directed at any individual employee. The Full Court in Telstra observed at [21]:
‘... the observation of the Full Court also holds true where the act is intentionally directed at a number of unidentified employees. The e-mail in its terms discriminated against each employee of Telstra who was employed under an award or a certified agreement. Accordingly, liability arises where the conduct is directed at a number of ascertainable employees as well as against a particular employee.’
126 Assuming for present purposes that the conduct in question in this case altered the position of each of the 259 employees to that employee’s prejudice, his Honour was plainly correct to conclude that the conduct was directed at a number of ascertainable employees. This is demonstrated by the exhibit to Ms Manaog’s affidavit, which identifies and names each of the 259 employees in respect of whom, on his Honour’s finding, Mr Katz had determined that CommSec should be their future employer of choice.
Was the Position of Each Employee Altered Prejudicially?
127 A determination of whether the positions of the managerial employees employed by CBA in PFS had been altered to the employees’ prejudice called for a comparison of the employees’ positions as employees of CBA before the making and implementation of the PFS decision with their positions as employees of CBA thereafter. Any comparison of the position of an employee of CBA before the PFS decision with that person’s later position as an employee of CommSec was irrelevant to the determination which the primary judge was required to make (Maritime Union of Australia v Geraldton Port Authority [1999] FCA 899; (1999) 93 FCR 34 at [244]).
128 The primary judge found that:
‘A consequence of the PFS decision was that CommSec, which previously had only carried out stockbroking and associated advisory services for CBA customers, would employ and then provide to CBA the employees who were to work in CBA’s PFS business unit. CBA’s intention was that over time, CommSec employees, rather than CBA employees, were to provide the PFS business unit’s services to CBA’s customers. However, the PFS business unit was to remain "part of the bank" and the employees working in that unit were to continue "to work for the bank."’
129 His Honour additionally found:
‘CommSec’s role was essentially that of a labour hiring agency which provided its employees to provide services within a business conducted by another entity. CBA reimbursed all of the costs and expenses incurred by CommSec in providing the services of the employees.’
130 The above findings were, at least in part, based on admissions made by the appellants. CBA admitted on the pleadings that, since May 2002, it had not engaged any new employees at manager level or below and did not create any new positions or fill any vacant positions in relation to the employment of employees at manager level or below in PFS. CommSec admitted on the pleadings that, since May 2002, it had created all new positions and engaged all new employees to work in PFS at manager level or below.
131 His Honour’s reference to CommSec’s role being essentially that of a labour hire agency reflected evidence given by Paul Gordon Rickard, the Executive General Manager Premium Banking and Investment Services with the Premium Business Services business unit of CBA and a director of CommSec. The Premium Business Services business unit came into existence in May 2004 when PFS and the Institutional and Business Services unit of CBA were combined. Mr Rickard told his Honour that CommSec operated autonomously from CBA and that its business was in the stockbroking industry. Mr Rickard also told his Honour that PFS was part of CBA. Mr Rickard agreed that insofar as CommSec had a business beyond its core business of stockbroking that business was the business of providing employees to CBA on a reimbursement of costs basis. Mr Rickard’s evidence in this regard found support in the unchallenged evidence of Joseph Catania. Mr Catania worked as a Relationship Manager in PFS from the time that it was created until July 2003. He gave evidence that he did not ever see a person who identified himself or herself as from CommSec providing supervision and direction to a Personal Adviser or Associate Adviser; he did not observe a single occasion when a Personal Adviser or Associate Adviser reported to or was supervised by a person who described himself or herself, or was identifiable to him, as being from CommSec.
132 His Honour explained how the PFS decision prejudicially altered the position of each of the 259 employees in the following way:
‘... the prejudicial alteration came about because it was integral to the making and implementation of the PFS decision that employees remaining with CBA were to lose the promotional, advancement and transfer opportunities in CBA’s PFS business unit that, but for the PFS decision, would have otherwise accrued to them in the normal course of their employment. CBA altered the criteria for access to those opportunities by imposing a requirement that, for that access, the relevant employees had to resign from CBA. ... Of course, the relevant employees were able to access those opportunities, and indeed, were induced by CBA to access those opportunities, as employees of CommSec. However, to do so they were required to resign as employees of CBA ...’
133 The appellants contended on appeal that the PFS decision did not alter prejudicially the position of any CBA employee individually. They drew attention to the observation of Kenny J in the passage from AWU v BHP Iron-Ore Pty Limited cited in [124] above, and also to the following observation of Finkelstein J in CPSU, the Community and Public Sector Union v Telstra Corporation Ltd (2000) 99 IR 238 at 245 [24]:
‘... it is necessary to assess the position of each individual employee in order to decide whether that employee has been injured or has had his position prejudicially altered. The implication is that the subject for investigation is the actual effect of the conduct about which complaint has been made.’
134 As referred to in [125] above, Telstra concerned an e-mail sent to managers and team leaders which, at a time when redundancies within Telstra were imminent, indicated that employees on individual contracts should be treated more favourably than those employed on awards or certified agreements in a redundancy situation. The Full Court concluded at [16] that the e-mail constituted an instruction that employees employed under awards or certified agreements were to be discriminated against in the redundancy process. It further concluded at [22] that by sending the e-mail Telstra had altered the position of those employees to their prejudice. The Full Court’s reasons for the latter conclusion are found in [19] which states:
‘Before the sending of the e-mail Telstra’s employees employed under awards and certified agreements enjoyed the benefit of being subject to redundancy only in accordance with a process which rated their eligibility for redundancy on the basis of merit, which was to be determined by application of the five principal criteria stipulated for the resource rebalancing process. There was an adverse affection of, or deterioration in, that benefit after the sending of the e-mail as a result of the additional detrimental criterion applicable to employees employed under awards or certified agreements. The detrimental criterion was real and substantial for the employees whom it affected.’
135 The appellants contend that Telstra is readily distinguishable from this case. They argued:
‘Telstra’s conduct injured each employee individually by reducing his/her job security. This can be contrasted with the present case. Here the making and implementation of the PFS decision was not intentionally directed at any individual employee and did not, in its terms, injure any employee individually, in the sense that it would have injured him or her whether directed to the employee individually or as a member of a group.’
136 The appellants argued that the evidence indicated that high quality employees were required for PFS, whether recruited from existing CBA employees or externally from the finance industry. They placed reliance on unchallenged evidence that of the approximately 370 employees recruited by CommSec between July 2002 and April 2003, 223 were recruited externally and 147 were recruited from CBA. They also placed reliance on evidence and findings of his Honour which indicated that, for a CBA employee to become an employee of CommSec in a newly created position, the employee had to resign from his or her employment with CBA and enter into an employment agreement with CommSec.
137 As mentioned above, consideration of whether the PFS decision altered the position of any CBA employee to his or her prejudice requires analysis of the impact, if any, of the PFS decision on the individual 259 employees whom his Honour concluded experienced a prejudicial alteration of their position. This analysis is not advanced by consideration of the evidence which indicated, as for present purposes I am willing to assume that it did, that the PFS decision was made to facilitate the recruitment of high quality employees to PFS. The need for high quality recruits to PFS is a matter relevant to the purpose for which the PFS decision was made; it is not relevant to the question of whether that decision altered the position of any CBA employee to his or her prejudice.
138 The critical issue for the determination of this Court is whether, as his Honour found, CBA altered the positions of the 259 CBA employees to the employees’ prejudice within the meaning of s 298K by rendering it impossible for them to obtain advancement and promotion (in the case of the Relationship Managers and Assistant Relationship Managers) or transfer (in the case of the Executive Mangers, Relationship Managers and Assistant Relationship Managers) within PFS while remaining employees of CBA.
139 In Patrick Stevedores Operations No 2 Proprietary Limited v Maritime Union of Australia [1998] HCA 30; (1998) 195 CLR 1 at [4] the majority of the High Court said of s 298K(1) that:
‘Paragraph (a) covers termination of employment; par (b) covers injury of any compensable kind; par (c) is a broad additional category which covers not only legal injury but any adverse affection of, or deterioration in, the advantages enjoyed by the employee before the conduct in question.’
Their Honours thereby implicitly approved the approach adopted by Ellicott J in Squires v Flight Stewards Association of Australia (1982) 2 IR 155. In that case his Honour was concerned with s 5(1) of the Conciliation & Arbitration Act 1904 (Cth) which was in comparable terms to s 298K of the Act. At 164 his Honour observed:
‘The words "injure in his employment" are in the context of s. 5 words of wide import. I do not regard them as referring only to financial injury or injury involving the deprivation of rights which the employee has under a contract of service. They are, in my view, applicable to any circumstances where an employee in the course of his employment is treated substantially differently to the manner in which he or she is ordinarily treated and where that treatment can be seen to be injurious or prejudicial.’
140 As mentioned above, the question of whether or not the PFS decision resulted in deterioration in the advantages enjoyed by the 259 affected CBA employees calls for their positions as CBA employees before and after the decision was made and implemented to be compared. Before the PFS decision they were employed, with the benefit of certain industrial instruments, within the PFS organisational structure with the possibility, although by no means the guarantee, of transfer and promotion within PFS. After the PFS decision transfer and promotion within PFS were only available to them if they resigned their employment and accepted employment with a new employer who was not a party to the relevant industrial instruments. Put colloquially, as CBA employees they ceased so far as PFS was concerned to hold career positions and found themselves holding dead-end positions. It seems likely that it was for this reason that, as the evidence suggested, opportunities for training previously available to certain CBA employees were lost as a result of the PFS decision (see [147] below).
141 The positions of the 259 affected CBA employees were in an important respect different from the positions of the employees of BHP Iron Ore Pty Ltd considered by the Full Court in BHP Iron Ore Pty Ltd v AWU (citation at [123] above). In that case the relevant conduct of BHP Iron Ore Pty Ltd was to offer each employee improved remuneration and conditions to be embodied in individual workplace agreements; the employee was free to reject the offer and continue to enjoy the same remuneration and conditions as they enjoyed previously. The Full Court observed that the conduct of BHP Iron Ore Pty Ltd did not change, in either absolute or relative terms, the remuneration or any of the conditions of employment of the employee to whom the offer was made. By contrast, the PFS decision did not result in an offer which an employee could choose to accept or reject; its implementation effected an immediate alteration in the position of each of the 259 employees in the way identified above. They all became ineligible for transfer within PFS, and the Relationship Managers and Assistant Relationship Managers became ineligible for promotion within PFS, unless they gave up their employment with CBA. The practical significance of this change in their situations presumably varied between them depending on their suitability and desire for transfer or promotion. However, the change meant that as CBA employees they were in a substantially different position from that which they had previously enjoyed and that position was less favourable to them as CBA employees; opportunities that had been available or potentially available to them were now not available to them unless they resigned as CBA employees.
142 A comparable situation arose in United Firefighters Union v Country Fire Authority (unreported, Industrial Relations Court, Vic, North J, No 659 of 1996, 24 December 1996), a case to which the Full Court referred in BHP Iron Ore Pty Ltd v AWU. In United Firefighters Union the Country Fire Authority effectively offered a limited number of promotions to employees on condition of entry into individual employment agreements. The Full Court in BHP Iron Ore Pty Ltd v AWU at [44] observed of this offer:
‘That was to attach a new condition to employment in the service of the Authority which could be regarded as injuring each employee or altering each employee’s position to his or her prejudice.’
143 The Full Court went on to indicate approval of the observation of North J that:
‘... the requirement to sign an individual employment agreement as a prerequisite to retaining [sic] an appointment by way of promotion is to alter the position of the employee to the employee's prejudice, or to injure the employee in the employee's employment. The alteration and injury arguably flow from the fact that the requirement to sign an individual employment agreement was not previously a requirement for promotion.’
144 A difference between the circumstances under consideration in United Firefighters Union and the circumstances of this case is that the fire officers who had not signed an individual employment agreement were performing the same functions as colleagues who were being paid at a higher rate because they had signed an agreement. Nonetheless, it seems to me that the Full Court looked at the position more broadly when it approved the words of North J set out in [143] above that ‘the requirement to sign an individual employment agreement was not previously a requirement for promotion.’
145 A broad understanding of what is encompassed by altering the position of an employee to the employee’s prejudice seems to me to accord with the ordinary understanding of what constitutes a prejudicial alteration of an employee’s position. Moreover, it is immaterial, in my view, that a particular employee may never have sought promotion or transfer. A healthy as well as a sickly employee has his or her position as an employee prejudicially altered by the withdrawal of sick leave entitlements; a studious as well as a non-scholarly employee has his or her position as an employee prejudicially altered by the withdrawal of study leave entitlements. This approach is consistent with the general law’s recognition that damages may be assessed and awarded for the loss of a chance (The Commonwealth of Australia v Amann Aviation Pty Limited [1991] HCA 54; (1991) 174 CLR 64).
146 It seems to me necessarily to follow that if an employer alters the position of an employee to his or her detriment by stipulating that promotion is only available to employees who sign an individual employment agreement, an employer must also alter the position of an employee to his or her detriment if it requires that transfer or promotion is only available to employees who agree to work for another employer, with the consequent loss of the benefit of industrial instruments.
147 For the above reasons I conclude that the appellants’ reliance on suggested differences in the qualifications required for appointment to the new positions of Personal Adviser and Associate Advisers created within CommSec and the qualifications required for appointment to the positions of Relationship Manager, Assistant Relationship Manager and Executive Manager in CBA (ie the positions held by the 259 CBA employees) is misplaced. However, it is appropriate to record that the evidence reveals that of the approximately 370 employees recruited by CommSec between July 2002 and April 2003, 147 were employees who resigned from CBA and accepted employment with CommSec. Moreover, Mr Catania, a Relationship Manager, gave evidence that he worked beside Personal Advisers in an open plan office and observed that their activities were the same as his. Additionally, Mr Catania gave evidence that prior to assuming his position as Relationship Manager in November 2001 he was required to undertake that he would engage in training to become licensed to provide financial advice. However, ultimately CBA did not permit him to provide financial advice unless he resigned his employment with CBA and took up employment with CommSec as a Personal Adviser.
148 I conclude that the PFS decision altered prejudicially the position of each of the 259 CBA employees because it removed from each employee the opportunity to transfer in his or her employment with CBA to other positions within PFS. I further conclude that the PFS decision altered prejudicially the position of each of the 259 CBA employees who held the positions of Relationship Manager or Assistant Relationship Manager because it removed from each of these employees the opportunity to be promoted in his or her employment with CBA within PFS. Those who held the position of Executive Manager were not similarly affected so far as their opportunities for promotion were concerned because the senior management positions in PFS were CBA positions rather than CommSec positions.
BREACH OF CERTIFIED AGREEMENTS
149 It was common ground at first instance that CBA did not consult the Union or notify or inform it of the PFS decision. The primary judge concluded that CBA consequently breached a number of clauses of certified agreements. His Honour imposed penalties under s 178(1) of the Act in respect of those breaches.
150 The certified agreements in question were the Commonwealth Bank of Australia (Core) Enterprise Bargaining Agreement 2000, the Commonwealth Bank of Australia Customer Service Division Enterprise Bargaining Agreement 2000 (‘CBA’s 2000 EBA’) and the Commonwealth Bank of Australia (Core) Enterprise Bargaining Agreement 2002.
151 The primary judge noted that the relevant clauses in the three agreements differed slightly but that the differences were not relevant to the breaches alleged. The relevant clauses fall into two classes or sets.
152 The first set of clauses is expressed in the agreements to ‘have effect in situations where the Bank is considering or implementing change that impacts upon working arrangements and could give rise to potential redundancy and/or redeployment situations’. The three certified agreements define redundancy to mean:
‘a position redundancy where work (or a major portion of it):
(a) is no longer required to be performed; or
(b) is to be performed at a new location which requires a change in residence of the employee concerned;
as a result of re-organisation; changed business practice; technological change; downturn in business; a decision to reduce the number of employees; or a general reduction in classification levels or positions.’
153 The clauses provide for consultation between CBA and the Union in respect of proposed changes. Subclauses 18.3.2 and 18.3.4 of the CBA’s 2000 EBA, for example, provide:
‘18.3.2 When the Bank has reviewed a work area, practice or function, the Bank will inform the FSU of the outcome and provide the FSU with the following information –
(i) details of the new employee structure applicable to the area and an explanation of the impact;
(ii) details of the positions to be abolished including position numbers where available; and
(iii) details of the proposed date of implementation of the new structure.
...
18.3.4 The FSU will have a period of two weeks from the time the information in terms of subclause 18.3.2 is provided to seek discussions with the Bank on the proposals and to comment on the review findings. The Bank will make its representatives available for discussions prior to implementing any findings.’
154 The second set of relevant clauses require the CBA to seek the views of the Union on ‘major changes’ before decisions are made ‘providing an opportunity of influence on the final outcome’. A ‘major change’ is defined as ‘change which is likely to impact significantly on employees and/or their work environment.’
155 The primary judge was satisfied that prior to the PFS decision CBA was considering implementing change that impacted on the working arrangements of its employees. His Honour was also satisfied the change being considered was change which could give rise to potential redundancy and redeployment situations. He observed that as a result of the PFS decision the positions affected by the decision were, over time, to be made redundant within CBA with the likely redeployment of employees to CommSec.
156 Additionally the primary judge found that the changes which he found to have constituted a prejudicial alteration to the positions of the relevant employees were likely to impact significantly upon them and thus constituted a ‘major change’.
157 His Honour therefore concluded that CBA had breached the relevant clauses of the certified agreements and the Union was entitled to have penalties imposed under s 178(1) of the Act in respect of those breaches.
158 The appellants submitted that the primary judge was wrong to conclude that the PFS decision gave rise to a potential redundancy or redeployment situation. They argued first that the evidence pointed conclusively to the fact that, if a CBA employee chose not to resign and become an employee of CommSec, the Bank still required his or her work to be done. Secondly, the appellants argued that there was no evidence to support the primary judge’s conclusion concerning the potential redeployment of existing managerial employees to equivalent positions in CommSec. Thirdly, the appellants argued that as a CBA employee who accepted work with CommSec continued to work in the PFS business unit, albeit as an employee of CommSec, his or her ‘position’ did not become redundant (Amcor Ltd v Construction, Forestry, Mining and Energy Union [2005] HCA 10; (2005) 222 CLR 241 at [53] and [56] (‘Amcor’); Finance Sector Union of Australia v Commonwealth Bank of Australia [2004] FCA 257 at [11] and [15]).
159 Resolution of the issue of whether the PFS decision gave rise to a potential redundancy or redeployment situation within the meaning of the three certified agreements depends on the true meaning of the agreements. As Gleeson CJ and McHugh J pointed out in Amcor at [2] the meaning of the agreements turns on their language understood in the light of their industrial context and purpose (see also Gummow, Hayne and Heydon JJ at [50]-[53]).
160 The industrial purpose of the provisions considered in Amcor was to provide financial protection to employees who were retrenched. In that context, the High Court held that an employee who remained employed in the same business on the same terms and conditions notwithstanding that the identity of his or her employer changed was not entitled to a redundancy payment which was payable ‘should a position become redundant and an employee subsequently be retrenched’. The industrial purpose of the relevant provisions in this case had a quite different purpose, namely to ensure that the Union had an opportunity to make representations to CBA on behalf of its members (and perhaps potential members) ahead of the implementation of change likely to affect those members.
161 Moreover in Amcor there was no change in the terms and conditions of employment offered by the new employer and those offered by Amcor. At [52] Gummow, Hayne and Heydon JJ observed:
‘If ... there had been some change in the terms and conditions offered by the new employer from those offered by Amcor, or there had been some change in the tasks to be undertaken by the employee, there may have been some question about whether the "position" continued.’
162 In this case a CBA employee who became an employee of CommSec experienced significant changes in his or her terms of employment. Indeed, the very rationale of using CommSec as the employer of choice for many PFS positions was to have the individuals who held those positions employed on terms and conditions different from the terms and conditions which a CBA employee would enjoy.
163 In my view the primary judge was correct to conclude that in the context provided by the relevant certified agreements a position redundancy arose where work (or a major portion of it) was no longer required to be performed by an employee bound by the relevant agreement; ie by a CBA employee. This understanding is consistent with the obligation imposed on CBA to provide the Union with, for example, details of the new employee structure and of the positions to be abolished including position numbers where available. As a result of the implementation of the PFS decision, positions within the CBA employment structure were to be abolished as the holders of those positions accepted employment with CommSec. Moreover, although in a broad sense CBA (or perhaps the CBA group of companies) specified the relevant work to be performed, it did not require it to be performed by a CBA employee. The work (or a major portion of it) was thereafter to be performed by a CommSec employee.
164 Additionally, in my view, the primary judge was correct to conclude that the changes intended to flow from the PFS decision were likely to impact significantly on CBA employees in PFS. CommSec became their employer of choice so far as their then employer (ie CBA) was concerned. If they accepted employment with CommSec they would be employed on significantly altered terms and conditions. Additionally, CommSec’s workforce was not unionised and the Union had no representative role or function within CommSec.
VALIDITY OF COMMSEC AGREEMENT
165 On 23 July 2002 CommSec applied to the Australian Industrial Relations Commission under s 170LK of the Act for certification of the CommSec Agreement. The application was granted with effect from 30 July 2002. The respondent’s application to the Court claimed a declaration that the CommSec Agreement is invalid.
166 The primary judge did not declare that the CommSec Agreement is invalid; his Honour declared that the certification order of the Commission with respect to the CommSec agreement was void and of no effect. His Honour made this declaration after accepting the argument advanced by the respondent that clause 12 of the CommSec Agreement rendered it an agreement that could not validly be certified under s 170LK of the Act. His Honour held that the Commission may not certify an agreement when it does not know the terms that will ultimately be binding on the employer and the employees.
167 Clause 12 of the CommSec Agreement was in the following terms:
‘12. Individual Agreements
During the operation of this Agreement, CommSec and an employee may enter into an individual agreement that may exclude in part or whole the operation of this Agreement. Where such an agreement is reached, it will prevail over the terms of this Agreement to the extent of any inconsistency.
Such agreement must be in writing and the employee must not be worse off, on an overall basis, than he/she would have been under the terms of this Agreement.
An individual agreement made under this clause will be deemed to be part of this Agreement. A breach of an individual agreement will be taken to be a breach of this Agreement and may be enforced accordingly. Individual agreements made under this clause will only have effect during the operation of this Agreement.
An individual agreement made under this clause may be varied or terminated in accordance with the terms of the individual agreement or by agreement with CommSec.
An employee is entitled to approach his/her representative at any stage for advice or assistance.
It is the intention of CommSec and employees that individual agreements made under this clause are to facilitate a better accommodation of business and/or employee needs at the workplace level.’
168 His Honour held that the cumulative effect of ss 170LE, 170LI, 170LK, 170LT, 170LU, 170MD and 170XA of the Act was that, subject to a possible exception in respect of ‘facilitative provisions’, it was an implicit, if not explicit, requirement of the statutory scheme for certification that the agreement being certified contain all of the terms that are to have effect as a certified agreement. Were it otherwise, his Honour said, the Commission could not satisfy itself in respect of the requirements of those sections. The primary judge observed:
‘It would be antithetical to [the statutory] scheme for the AIRC to be empowered to validly certify an agreement when it had no knowledge of the terms of the cl 12 agreement that will ultimately be binding on the employer and the employees as if it were an agreement certified under the WR Act. More specifically, it is self-evident that a consequence of the certification of the CommSec Agreement, including cl 12, is that a cl 12 agreement may be given effect to as if it were a certified agreement notwithstanding that:
(a) a valid majority of employees may never have considered, let alone approved, its terms;
(b) the agreement may contain terms that do not pertain to the employee-employer relationship;
(c) the agreement may contain inconsistent, discriminatory and objectionable provisions;
(d) the AIRC, as opposed to the contracting parties, has not considered whether the agreement passes the "no-disadvantage" test;
(e) the agreement may exclude the operation of the dispute prevention or settlement procedures in the CommSec Agreement; and
(f) the agreement varies the certified agreement without the variation being considered, let alone approved, by the AIRC.’
169 The appellants contend that the primary judge erred in concluding that the Commission did not have jurisdiction to certify the CommSec Agreement. In the alternative the appellants contend that his Honour should have concluded that, save for clause 12, the certification of the CommSec Agreement was validated by s 170NHA of the Act. The appellants advanced no submissions in support of the grounds of appeal which challenged his Honour’s declaration that the certification order of the Commission was void and of no effect on the basis that the Union lacked standing to seek a declaration of invalidity and related bases.
170 In support of the first of the above contentions the appellants drew attention to the obligation placed on the Commission by s 170LT(1) to certify an agreement if it is satisfied that the requirements of that section are met. A requirement of s 170LT is that the agreement must pass the no-disadvantage test (s 170LT(2)). The no-disadvantage test is contained in s 170XA which provides:
‘(1) An agreement passes the no-disadvantage test if it does not disadvantage employees in relation to their terms and conditions of employment.
(2) Subject to sections 170XB, 170XC and 170XD, an agreement disadvantages employees in relation to their terms and conditions of employment only if its approval or certification would result, on balance, in a reduction in the overall terms and conditions of employment of those employees under:
(a) relevant awards or designated awards; and
(b) any law of the Commonwealth, or of a State or Territory, that the Employment Advocate or the Commission (as the case may be) considers relevant.’
171 The appellants placed reliance on the fact that s 170XA requires a positive conclusion by the Commission that certification would (not may) result in a reduction in terms and conditions of employment. They submitted that it was not possible for the Commission to say at the point of certification that terms and conditions of employment would be reduced because, in effect, at that time the terms of any individual agreement that might be entered into under clause 12 were unknown.
172 In my view, the plain intent of s 170XA is that the Commission must give consideration to, and form a view on, whether the agreement, if certified, would result, on balance, in a reduction in the overall terms and conditions of employment of the employees under the industrial instruments and law to which s 170XA(2) refers. The statutory requirement for the Commission to compare the overall terms and conditions of employment of the employees in relevant respects if the agreement were certified and if the agreement were not certified reveals that the Commission must be placed in a position where it can make the necessary comparison. It cannot make that comparison if the overall terms and conditions of employment of the employees, if the agreement is certified, cannot be known because they may be fixed by later agreements between the employer and individual employees. The Commission is not authorised to delegate to the parties to an agreement its responsibility under s 170LT to determine whether the agreement satisfies the no-disadvantage test (see the second paragraph of clause 12).
173 The above considerations assist a proper understanding of the requirements of s 170LI of the Act that before an application may be made to the Commission for certification ‘there must be an agreement, in writing, about matters pertaining to the relationship’ between the employer and persons whose employment is subject to the agreement.
174 An agreement about a matter pertaining to that relationship which may at any time cease to bind some or all of those whose employment is subject to the agreement because they have entered into inconsistent individual agreements which prevail over that agreement is not, in my view, an agreement in writing about that matter within the meaning of s 170LI. It is, at best, a provisional agreement about that matter linked to an agreement that the parties, or some of them, may agree something else. The manner in which a certified agreement may be varied is controlled by s 170MD of the Act. Section 170MD does not contemplate a variation that binds individual employees only. It does not contemplate a variation which does not require the Commission’s approval.
175 The appellants’ reliance on s 170NHA of the Act was misplaced. Section 170NHA was concerned to preserve the validity of certain agreements certified by the Commission prior to the judgment of the High Court in Electrolux Home Products Pty Ltd v Australian Workers’ Union [2004] HCA 40; (2004) 209 ALR 116. In that case the High Court held that an agreement purportedly certified which dealt with a matter which was not a permitted matter was not validly certified. As the primary judge rightly concluded, the reason that the CommSec agreement could not be certified extended well beyond the inclusion in it of a matter that was not a permitted matter (see [171]-[173] above). Additionally, it was no part of the Commission’s function to remake the CommSec Agreement of which clause 12 was an important aspect.
176 For the above reasons the primary judge rightly concluded that the Commission was not authorised to certify the CommSec Agreement; it was not an agreement of the kind required by s 170LI of the Act before an application for certification could be made to the Commission. Submissions founded on the assumption that each agreement entered into under clause 12 of the CommSec Agreement constitutes a purported variation of a certified agreement need not, for this reason, be further considered.
PENALTY
177 The primary judge imposed a penalty of $600 000 for contravention of s 298K of the Act and $150 000 for contravention of the consultation requirements contained in the CBA certified agreements (s 178 of the Act).
178 CBA contended that the jurisdiction, or alternatively the power, of the primary judge to fix a penalty under s 298K of the Act was limited to breaches in respect of the 149 relevant employees who were members of the Union as at the date of the commencement of the proceeding in April 2003. His Honour was plainly right, for the reasons which he gave, to reject this contention. In any event, his Honour stated that because of the importance that he attached to general deterrence, he would not have arrived at a lesser penalty if the total penalty had been confined to contraventions in respect of the Union’s members.
179 The appellants’ written submissions state:
‘(a) in fixing a penalty of $600,000 for contravention of s.298K of the Act, [the primary judge] failed to have any proper regard to the matters set out in paragraph 16(a) to (f) of the Notice of Appeal; and
(b) in fixing a penalty of $150,000 for breaches of the CBA certified agreements, [the primary judge] failed to have any proper regard to the matters set out in paragraphs 18 and 19 of the Notice of Appeal.’
180 Paragraphs 16 and 18-19 of the notice of appeal are in the following terms:
‘16 In fixing a penalty of $600,000 for contravention of s.298K, [the primary judge] imposed a penalty which was manifestly excessive and which failed to have regard, or sufficient regard, to relevant considerations, including:
(a) the previous highest penalty imposed for contravention of s.298K was $74,507.60;
(b) the fact that the Bank has never previously been found liable for a contravention of s.298K;
(c) the injunctions granted in paragraphs 6 and 8 of the Judgment ameliorate any prejudicial alteration to the position of the relevant employees as a consequence of the conduct of the Bank found to have contravened s.298K;
(d) the evidence that 72 of 73 employees who accepted offers of employment with CommSec received substantial increases in base rates of pay and bonuses resulting in increased levels of remuneration compared to that which they would have received if they had remained employees of the Bank;
(e) the fact that CommSec is a separate legal entity to the Bank and the conduct of CommSec is irrelevant to the question whether the Bank contravened s.298K; and
(f) evidence that relevant employees who remained in the employment of the Bank after September 2002 have continued to have access to promotional and transfer opportunities within the PFS Business Unit.
...
18 In fixing a penalty of $150,000 pursuant to s.178 of the Act, [the primary judge] imposed a penalty which was manifestly excessive and which failed to have regard, or sufficient regard, to relevant considerations, namely:
(a) there was no evidence before the Court that the Bank had ever previously been found liable for the imposition of a penalty under s.178;
(b) there was no evidence that any relevant employee had been made redundant or been redeployed as a consequence of the implementation of the PFS Decision.
19 In fixing a penalty of $150,000 pursuant to s.178 [the primary judge] failed to have regard to relevant considerations, namely:
(a) evidence that the union was aware of the PFS Decision in or about September 2002;
(b) notwithstanding its awareness of the PFS Decision the union did not:
(i) make any application in the Commission, either in respect of the certification of the CommSec Agreement or pursuant to dispute settlement provisions of the Commonwealth Bank of Australia (Core) Enterprise Bargaining Agreement 2002;
(ii) commence the present proceedings until April 2003.’
181 The authorities accept that the matters to be taken into account in determining whether particular conduct under the Act calls for the imposition of a penalty, and assuming that it does, the amount of the penalty, include:
(a) the circumstances in which the relevant conduct took place (including whether the conduct was undertaken in deliberate defiance or disregard of the Act);
(b) whether the respondent has previously been found to have engaged in conduct in contravention of Part XA of the Act;
(c) where more than one contravention of Part XA is involved, whether the various contraventions are properly seen as distinct or whether they arise out of the one course of conduct;
(d) the consequences of the conduct found to be in contravention of Pt XA of the Act;
(e) the need, in the circumstances, for the protection of industrial freedom of association; and
(f) the need, in the circumstances, for deterrence.
(Construction, Forestry, Mining & Energy Union v Coal & Allied Operations Pty Ltd (No 2) [1999] FCA 1714; (1999) 94 IR 231 at [8]; Australian Workers Union v Johnson Matthey (Aust) Ltd [2000] FCA 728 at [5]; Employment Advocate v National Union of Workers [2000] FCA 965; (2000) 99 IR 376 at 377 [5]; Automotive, Food, Engineering, Printing & Kindred Industries Union v DMG Industries Pty Ltd [2000] FCA 1492; (2000) 102 IR 175 at 179-180 [10]; Australian Nursing Federation & Ors v Alcheringa Hostel Inc [2004] FCA 375; (2004) 136 FCR 530 at 543-544 [44]; and Alfred v Walter Construction Group Limited [2005] FCA 497 at [10].)
182 Notwithstanding that the appeal is an appeal by way of rehearing, this Court would not disturb the penalties imposed by the primary judge merely because we might have imposed different penalties. The imposition of a penalty involves the exercise of judgment upon which sensible minds which properly understand the applicable principles, and take into account relevant considerations only, may differ. Mere difference of view as to the appropriate penalty to be imposed does not lead to a conclusion of error by the primary judge.
183 The maximum penalty which his Honour could have imposed in respect of the contravention of s 298K was $2 590 000. The penalty actually imposed was thus less than a quarter of the maximum penalty for which the legislature provided. Nonetheless it was approximately eight times greater than the highest penalty previously imposed for a contravention of s 298K. There is no reason to conclude that his Honour was not aware of this.
184 CBA did not advance any submissions in support of its implicit contention that the primary judge was bound to have regard to each of the considerations identified in paragraphs 16, 18 and 19 of the notice of appeal (Minister for Aboriginal Affairs v Peko-Wallsend Limited [1986] HCA 40; (1986) 162 CLR 24 per Mason J at 39). His Honour did have regard to many of these considerations and I am not satisfied that where he did, he paid them insufficient regard.
185 The primary judge regarded the CBA’s contravention of s 298K as egregious for at least two reasons. First, CBA’s conduct discriminated against its own managerial employees who, in good faith, agreed to EBAs or AWAs with CBA only to be discriminated against because of their entitlements under those agreements. Secondly, the conduct was engaged in by one of Australia’s largest corporations in pursuit of its self interest and profit and without proper regard to its legality.
186 His Honour was understandably concerned that the Commission may have been misled as to the workers intended to be employed under the CommSec Agreement. The inferences drawn by the primary judge that full, frank and appropriate disclosure was probably not made to the Commission and that CBA was party to, or aware of, the submissions to be made to the Commission was open to be drawn on the evidence before his Honour. Again, however, his Honour stated that he would not have arrived at a lesser penalty if CBA’s conduct before the Commission was not misleading or inappropriate.
187 His Honour noted that there was no evidence of any previous contravention by CBA of Part XA of the Act. Nonetheless he identified a need for specific deterrence particularly because CBA had not explained, nor expressed regret, contrition or remorse for its conduct. His Honour concluded that if CBA believes that the end is worthwhile ‘it may well see the risk of a potential contravention to be worth taking in the same way as it appears to have taken that risk in the present matter.’
188 However, the factor to which the primary judge attached greatest significance in respect of penalty was the need for general deterrence. His Honour concluded that the penalty needed to be imposed at a meaningful level and be such that a potentially offending corporation would see the penalty as not worth the prospect of the gain.
189 CBA complained that the primary judge did not have proper regard to the evidence led by the appellants regarding the financial benefits which have been enjoyed by those CBA employees who accepted offers of employment with CommSec. While it would have been a factor of aggravation if CBA’s conduct had led to any of its employees being significantly disadvantaged, I am not persuaded that his Honour was bound to attribute significant, if any, weight to the effect of CBA’s conduct on its former employees. The employees whose positions were altered to their prejudice by the PFS decision were those who remained CBA employees.
190 The affidavit of Ms Manaog which is referred to in [121] above, suggested that some CBA employees did have access to transfer and promotion after the PFS decision. His Honour adverted to that evidence and took the view that it was entitled to little if any weight so far as penalty was concerned as CBA may have been constrained to modify the PFS decision in particular instances to retain good employees. In my view it was open to his Honour to draw this inference. CBA did not adduce any evidence which rebutted the inference.
191 Nonetheless, although CBA has not demonstrated an identifiable error of principle affecting the penalty imposed by the primary judge under s 298K, I have formed the view that the amount of $600 000 is, having regard to previous penalties imposed under the section, manifestly excessive.
192 It may well be that it is appropriate for the level of penalties imposed under s 298K to rise and, indeed, to rise appreciably. Entities which hereafter contravene s 298K will face the risk that they may be found to have been actually or constructively warned that significantly higher penalties for contraventions of s 298K can now be expected.
193 In this case I would reduce the penalty of $600 000 imposed by the primary judge to $300 000.
194 However, I would not reduce the penalty of $150 000 imposed under s 178 of the Act. His Honour treated the multiple breaches of CBA’s certified agreements as a single breach (s 178(2) of the Act) but noted that CBA’s failure to consult with the Union continued between May 2002 (when the PFS decision was made) and 6 December 2002 when the Union was informed that there would be no positions or promotional opportunities for CBA employees in PFS. Section 178(4)(a)(iia) provides that the maximum penalty, where the penalty is imposed by the Court, is:
‘if the breach is of a term of a certified agreement and continues for more than one day – the total of:
(A) $10,000 for a body corporate ...; and
(B) $5,000 for a body corporate ... for each day for which the breach continues’.
195 The primary judge calculated that the total penalty that he was able to impose under s 178 was of the order of $1 million. His Honour noted that the Union accepted that the maximum penalty to be imposed in respect of CBA’s failure to seek its views on ‘major changes’ before decisions were made was $10 000 (see [154] above). However, his Honour took the view that s 178(4) allowed for continuing breaches to be very heavily penalised and observed:
‘CBA’s continuing breaches are at the most serious end of the spectrum of breaches of a consultation or disclosure clause as they were not only flagrant but they continued because it is likely that CBA saw it as necessary to prevent [the Union] becoming aware of the discriminatory conduct I have found to be unlawful.’
196 In my view no error in the approach adopted by the primary judge in the above regard has been identified.
197 CBA formally submitted that his Honour erred in invoking s 178(4)(a)(iia). However, I do not understand it to have pressed any argument in opposition to his Honour’s finding that CBA’s breach of its obligations to consult with the Union in respect of proposed changes continued over a period of some months.
198 CBA placed considerable emphasis on the limited number of employees found to have had their positions prejudicially affected by the PFS decision who were bound by the relevant certified agreements. However, the Union itself was a party to the certified agreements. The relevant breaches involved failures to provide information to the Union concerning the proposed new employee structure generally, including details of the positions to be abolished and the proposed date of implementation of the new structure, and failures thereafter to consult with the Union. In these circumstances his Honour was entitled to attribute little, if any, weight on the question of penalty to the limited number of individual employees prejudicially affected by the PFS decision.
199 I would not interfere with his Honour’s order that the penalties imposed be paid to the Union. I reject CBA’s argument that, in effect, this order was calculated to undermine the operation of s 347 of the Act which provides that, generally speaking, a party shall not be ordered to pay the legal costs of another party to the proceeding in a matter arising under the Act. The order made by his Honour was in accord with common practice and authorised by s 356 of the Act.
CONCLUSION
200 In would allow the appeal to the extent only of varying the penalty imposed by the primary judge pursuant to s 298K of the Act from $600 000 to $300 000. I would otherwise dismiss the appeal.
201 Since the preparation of these reasons I have had the opportunity to
read the reasons for judgment of the other members of the
Court. Having done
so, I would stand the appeal over to a date to be fixed for the purpose of the
making of orders giving effect
to the reasons for judgment of the members of the
Court. I would further order the parties to provide to the Associate to
Marshall
J an agreed minute of the orders appropriate to be made or, if
agreement cannot be reached, minutes of the orders for which they
respectively
contend together with an outline of submissions in support of those orders.
Such submissions should include submissions
concerning the operation in the
circumstances of s16 of the Federal Court of Australia Act 1976
(Cth).
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I certify that the preceding ninety-six (96) numbered paragraphs are a true
copy of the Reasons for Judgment herein of the Honourable
Justice Branson.
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Associate:
Dated: 28 February 2007
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IN THE FEDERAL COURT OF AUSTRALIA
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VICTORIA DISTRICT REGISTRY
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VID 70 OF 2006
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ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA |
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BETWEEN:
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COMMONWEALTH BANK OF AUSTRALIA
ACN 123 123 124 First Appellant COMMONWEALTH SECURITIES LIMITED ACN 067 254 399 Second Appellant |
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AND:
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FINANCE SECTOR UNION OF AUSTRALIA
Respondent |
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JUDGES:
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SPENDER, BRANSON AND MARSHALL JJ
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DATE:
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28 FEBRUARY 2007
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PLACE:
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MELBOURNE
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REASONS FOR JUDGMENT
MARSHALL J
202 The Commonwealth Bank of Australia (‘CBA’) is an icon in the finance sector of the Australian economy. In 2002, CBA divided its core business into five units. One of the units was called the Premium Financial Services (‘PFS’) business unit. In May 2002, CBA decided that its wholly-owned subsidiary, Commonwealth Securities Limited (‘CommSec’), should be the employer of employees engaged to work in the PFS business unit (‘PFS decision’). CBA decided it should do so, in part, to attain ‘(t)he provision of an adaptable platform of employment conditions’.
203 ‘An adaptable platform of employment conditions’ was code for CBA, through CommSec, setting the terms and conditions of employment of persons described by the primary judge as ‘managerial employees’ (see Finance Sector Union of Australia v Commonwealth Bank of Australia [2005] FCA 796; (2005) 147 FCR 158 (‘FSU v CBA No 1’ or ‘liability judgment’) at [38]). The primary judge correctly described it as ‘an industrial regulation avoidance scheme’ (FSU v CBA No 1 [2005] FCA 796; 147 FCR 158 at [1]). It worked as follows:
• CBA employees in PFS were employed pursuant to conditions set out in an award, certified agreements or under Australian Workplace Agreements, subject to a no disadvantage test with the award/agreement conditions providing a safety net;
• in July 2002, the Australian Industrial Relations Commission certified the Commonwealth Securities (CommSec) Development Agreement 2002 (‘CommSec Agreement’);
• at the time, the respondent, the Finance Sector Union of Australia (‘FSU’), had no presence in CommSec and CommSec’s then workforce was award free. CommSec sought the certification of the CommSec Agreement with a view to using it as the vehicle on which to base the ‘adaptable platform of employment conditions’. The ‘safety net’ in the CommSec Agreement was a relatively low rate of pay taken from the inappropriate Clerical and Administrative Employees (State) Consolidated Award (NSW); and
• clause 12 of the CommSec Agreement permitted individual agreements without regard to the terms of the CommSec Agreement. In other words, it provided CommSec with the ability to set its own industrial regulation. A side effect was to sideline the collective approach to industrial relations.
THE ISSUES
204 In the liability judgment, the primary judge decided CBA had breached s 298K of the Workplace Relations Act 1996 (Cth) (‘the Act’). His Honour held the conduct described above was undertaken for the prohibited reason that managerial employees were entitled to the benefit of industrial instruments. CBA conceded so much before his Honour, but sought to resile from that concession on appeal. I would not permit it to do so for the reasons set out at [208] to [211].
205 The primary judge held CBA’s conduct amounted to an alteration to the position of managerial employees to their prejudice. The appellants take issue with that finding. There is no basis to do so for the reasons set out at [213] to [222].
206 The primary judge held that CBA had breached relevant clauses of certified agreements requiring it to consult with FSU in the event of change which could cause redundancies and/or redeployments or that may have a significant impact on employees. No consultation occurred. The appellants contend that these clauses were not breached. For the reasons set out at [223] to [227], this contention is incorrect.
207 The primary judge imposed high fines on CBA for its conduct. The appellants claim the fines are ‘manifestly excessive’. For the reasons set out at [229] to [241], I consider the fines are appropriate, in the circumstances, having regard to the deliberate, defiant nature of the conduct.
BREACH OF PART XA OF THE ACT
Prohibited reason
208 The breach of the Act arose out of a decision by CBA to establish CommSec as the future employer of employees in the PFS business unit. At [36] of the liability judgment, the primary judge said:
‘It is clear that the operative reason for that decision was that CBA and CommSec wanted to have the employees providing the PFS business unit’s services employed by CommSec under cl 12 agreements made pursuant to the CommSec Agreement, rather than by CBA under CBA’s Industrial Instruments. Accordingly, not only am I satisfied that CBA has not discharged the onus imposed on it under s 298V, I am satisfied that the operative reason for the PFS decision was that the relevant employees were entitled to the benefit of CBA’s Industrial Instruments.’
(Original emphasis.)
209 Clause 12 of the CommSec Agreement provided for individual contracts of employment and, as the primary judge found at [9] of the liability judgment: ‘...the cl 12 agreements provided CBA and CommSec with what was, in effect, an unregulated workplace’. The industrial instruments previously applying to the managerial employees were underpinned by a safety net of award-based conditions.
210 The primary judge’s finding that CBA altered the positions of the managerial employees to their prejudice by reason of their entitlement to the benefit of one or more industrial instruments is unimpeachable. CBA conceded so much before his Honour. On appeal, CBA attempted to resile from that concession. I see no reason to permit it to do so. CBA is bound by the way it chose to run its case before the primary judge. During the hearing, his Honour asked counsel for the appellants:
‘HIS HONOUR: ...do you dispute that avoidance of the industrial regulation of the bank was a reason?
[COUNSEL]: No.’
Having made that concession at trial, CBA should not be permitted to withdraw it now. As the High Court said in Park v Brothers [2005] HCA 73; (2006) 222 ALR 421 at [34]:
‘In adversarial litigation, as a general rule, a party is bound by the conduct of his case. There are circumstances in which the interests of justice may lead an appellate court to permit a party to raise a point that was not taken at trial, but where the point is one that could have been met by calling evidence below then it cannot be raised for the first time on appeal.’
211 In this case, counsel for CBA could have raised ‘prohibited reason’ as an issue before the primary judge but ‘made a deliberate forensic decision not to do so’ (see Li Pei Ye v Crown Limited [2004] FCAFC 8 at [79]). Having regard to the evidence before the Court on that issue the concession was appropriate and proper.
Ascertainable employees
212 At [47] of the liability judgment, the primary judge said he was:
‘...satisfied that the PFS decision was intentionally directed by CBA at the managerial employees employed by it in the PFS business unit, who were, at all material times, ascertainable.’
There is no doubt, contrary to the submissions of counsel for the appellants, that in the above passage, his Honour was saying that the conduct was directed at managerial employees as a class of employees, being persons who he earlier identified at [43] as being ‘directly and immediately affected by the decision...’.
Prejudicial alteration
213 Counsel for FSU submitted that each of the managerial employees suffered an adverse affection of, or deterioration in, the transfer, promotional or advancement opportunities that were available to them previously.
214 That is, in effect, what his Honour found at [57] when he said:
‘...prior to the PFS decision, employees in the positions of relationship manager and assistant manager had significant promotional, advancement and transfer opportunities within CBA’s PFS business unit. From the making and implementation of the PFS decision in September 2002 onwards, those promotional, advancement and transfer opportunities became foreclosed to those employees unless they resigned from CBA and took up employment with CommSec. While it is correct that the resignation was voluntary, it is clear that the decisions not to create any new CBA positions in PFS, and to fill PFS vacancies using CommSec employees, were intended to induce, and did induce, existing CBA employees in the PFS business unit to take up employment with CommSec if they wished to advance their careers in the PFS business unit.’
215 As counsel for FSU submitted, as a consequence of the PFS decision, the criteria for transfer, promotion or advancement within PFS was changed by the inclusion of the new, extra requirement that a managerial employee must resign from CBA and become an employee of CommSec.
216 The prejudicial alteration affected each employee in the class, as an individual. It worked to deny them transfer, promotion and advancement if they wished to continue to be regulated by CBA industrial instruments underpinned by a safety net, rather than under cl 12 agreements. Those agreements effectively allowed CommSec to set its own industrial regulation, thereby leaving employees dependant on the good will of CommSec for future provision of employment entitlements.
217 Prejudicial alteration is a concept which is ‘broad’ and ‘covers not only legal injury but any adverse affection of, or deterioration in, the advantages enjoyed by the employee before the conduct in question’ (Patrick Stevedores Operations No 2 Proprietary Limited v Maritime Union of Australia [1998] HCA 30; (1998) 195 CLR 1 at [4]).
218 The prejudicial alteration in this case was ‘real and substantial, rather than merely possible or hypothetical’ (Community and Public Sector Union v Telstra Corporation Ltd [2001] FCA 267; (2001) 107 FCR 93 at [18]). It was not ‘merely possible’ that a managerial employee lost his or her safety net, it was gone if that employee was moved on to a cl 12 agreement. If a managerial employee did not move on to a cl 12 agreement, the opportunity for transfer, promotion and advancement, in fact a career path, was denied, usually as the price of maintaining the benefit of a safety net. This constituted discriminatory conduct which attacked the integrity of the relevant industrial instruments, with their floor of safety net conditions reinforced by a real and effective no disadvantage test.
Was there a reduction in actual entitlements?
219 On the question of penalty, the appellants put material before the primary judge about whether any of the managerial employees actually lost entitlements. That evidence contained examples of managerial employees earning greater salaries with CommSec than with CBA. However, there was no evidence about the conditions which were lost to achieve the greater salaries and, further, those salaries are set entirely at the discretion of CommSec.
220 In any event, not having been introduced on the issue of liability, the material about actual salaries in CommSec for managerial employees cannot govern the outcome of the liability issue on appeal.
Prejudicial alteration as a consequence of the appellants’ conduct
221 To submit, as the appellants have, that there is no evidence of any change in the remuneration or conditions of any individual as a result of the PFS decision is to miss the point on the issue of prejudicial alteration. The prejudicial alteration arose from the managerial employees having to transfer to CommSec and give up their award safety net if they wanted to access career opportunities. They did not have a choice whether to take up a new offer: the ‘choice’ was to lose safety net protection or lose career opportunities. The appellants’ reliance on BHP Iron Ore Pty Ltd v Australian Workers’ Union [2000] FCA 430; (2000) 102 FCR 97 (‘BHP’) is misplaced. In BHP [2000] FCA 430; 102 FCR 97, there was no attempt by the employer to undermine the safety net. In fact, in the event of any inconsistencies between the individual contracts offered and the collective agreement, the collective agreement would prevail (BHP [2000] FCA 430; 102 FCR 97 at [82] - [83]).
222 Further, in BHP [2000] FCA 430; 102 FCR 97 at [41] employees were held not to have been treated differently on account of their union membership. Here, employees have been treated differently on account of their entitlement to the benefit of industrial instruments. Those employees wishing to retain this entitlement have been denied advancement and those who have acceded to the loss of this entitlement have had access to advancement. It is as if, in BHP [2000] FCA 430; 102 FCR 97, the employer had made the continuation of union membership conditional on acceptance of the offer of an individual agreement.
BREACH OF CERTIFIED AGREEMENTS
223 The primary judge held CBA breached the provisions of certified agreements which compelled it to consult FSU about changes in work organisation which could result in redundancies and/or redeployment or impact significantly on employees. His Honour was satisfied at [123] of the liability judgment that the PFS decision ‘was one that could give rise to potential redundancy or redeployment situations’. His Honour held at [124] that:
‘...CBA was required, but failed, to inform FSU about the PFS decision, and that failure resulted in it breaching the first set of conditions in the three certified agreements.’
224 His Honour then referred to a ‘second set of clauses’ contained in one of the certified agreements. Those clauses obliged CBA to consult with FSU about the implementation of major change. His Honour said at [125]: ‘Plainly, prior to the making and implementation of the PFS decision, it was clear that the decision was likely to have the impact that it did on employees’.
225 The appellants submitted there was no evidence before the primary judge to support his Honour’s view that the PFS decision was one which ‘gave rise’ to a redundancy situation. That submission is misconceived. The situation envisaged by the relevant clauses of the certified agreements was whether the decision could give rise to a redundancy situation and not whether, after the event, it did. The PFS decision could have given rise to a redundancy and/or redeployment situation at the time it was made because an object of it was to reduce the number of CBA positions in the PFS business unit.
226 This submission of the appellants was not put at trial. Even if it is capable of being relied on, it is wrong. The relevant clauses are directed at situations occurring and not at any particular position being made redundant. The same applies to the issue of potential redeployment of managerial employees. It should have been obvious that the PFS decision, when made, may have resulted in the redeployment of employees from CBA to CommSec.
227 His Honour’s findings and determinations on the issues concerning the breach of the certified agreements should not be disturbed.
VALIDITY OF COMMSEC AGREEMENT
228 I have had the benefit of reading the reasons for judgment of Branson J. At [165] to [176] her Honour sets out her reasons for concluding that the primary judge correctly considered the Australian Industrial Relations Commission was not authorised to certify the CommSec Agreement. I respectfully agree with her Honour on that issue.
PENALTY
229 His Honour imposed a penalty on CBA of $600,000 for breaching s 298K and $150,000 for breach of the certified agreements (see Finance Sector Union of Australia v Commonwealth Bank of Australia [2005] FCA 1847; (2006) 224 ALR 467 (‘FSU v CBA No 2’ or ‘penalty judgment’) at [44] and [62]).
230 At [23] of the penalty judgment, the primary judge applied the well-known principles applicable to breaches of the Act as set out in Construction, Forestry, Mining and Energy Union v Coal and Allied Operations Pty Ltd (No 2) [1999] FCA 1714; (1999) 94 IR 231 at [8].
231 As his Honour found, the conduct of CBA was particularly serious and impacted severely on the freedom of association of the managerial employees, with respect to their entitlement to the benefit of industrial instruments. His Honour noted CBA’s lack of remorse and its failure to produce evidence that it had made an honest mistake in engaging in the discriminatory conduct.
232 In support of a lower penalty, at paragraph 16 of the notice of appeal the appellants allege the s 298K penalty was ‘manifestly excessive’ because the primary judge failed to have regard, or sufficient regard, to the following:
• the previous highest penalty for a contravention of s 298K was $74, 507.60;
• CBA had not contravened s 298K previously;
• injunctions had been made which ameliorate the conduct;
• 72 of the 73 employees who accepted offers of employment with CommSec have received increases in base pay and bonuses;
• the conduct of CommSec is irrelevant to whether CBA breached s 298K because it is a separate legal entity to CBA; and
• some employees who remained in CBA have accessed promotional and transfer opportunities.
233 The possible types of breaches and the range of possible background circumstances vary greatly such that the working out of an appropriate rate or ‘tariff’ would require the examination of a large number of penalties. Even then, a penalty apparently in excess of the ‘going rate’ does note equate to a manifestly excessive penalty. It must be ‘clearly outside the range of permissible sentences open to the sentencing judge’ (see R v Glickman (unreported, Victorian Court of Criminal Appeal, 19 December 1979) as referred to in R Fox and A Freiberg, Sentencing State and Federal Law in Victoria, 2nd ed., Oxford University Press, South Melbourne, 1999).
234 The penalty is not ‘manifestly excessive’ because it sets a new record. If the conduct deserves the new record it should attract that sum. The primary judge specifically took into account CBA’s lack of prior transgressions against s 298K. Whether a number of employees received higher pay with CommSec is irrelevant. There is no evidence of what conditions they surrendered to achieve that result. What is known is that those increases and any further increases were to be entirely at the discretion of CommSec in, what for managerial employees, was intended to be an unregulated industrial environment where they were to receive what they were given with no prospect of any arbitrated outcome or collective industrial agitation for better conditions.
235 The conduct of CBA and CommSec was part and parcel of the same chain of events. CBA used CommSec as the vehicle to deregulate the industrial relations between it and its managerial employees by implementing the PFS decision. CommSec’s separate corporate status is not a point in CBA’s favour on the penalty issue.
236 The evidence that some managerial employees have accessed promotional opportunities in CBA, after the PFS decision is, at best, sketchy. The evidence put before the primary judge on this issue was not limited to transfers or promotions within the PFS business unit. As counsel for FSU contended, the fact that CBA transferred employees out of the PFS business unit and into other areas of CBA confirms, rather than detracts from, the prejudice to the managerial employees who did not transfer to CommSec. While a handful of CBA employees may have been promoted after the PFS decision, the primary judge took this matter into account in the penalty judgment and said at [29]:
‘However, any such promotions or transfers probably occurred because it was in CBA’s interest not to lose employees it wished to retain. The fact remains that the PFS decision remains in force with the consequence that the loss of opportunities is continuing.’
237 His Honour took into account half of the matters which the appellants say he did not have regard, or sufficient regard, to in assessing the penalty for breach of s 298K. They are – no prior contraventions, increases in base pay of CommSec employees and some promotions within CBA. His Honour was obviously aware he had ordered injunctive relief. His Honour was also aware of the high range of the penalty he ordered. There is no cogent submission left to the appellants to support the view that the penalty was excessive let alone manifestly excessive. Further, there is no room for any argument that his Honour’s judgment about the penalty miscarried in any material respect.
238 The appellants submit the penalty imposed for contravention of s 298K should be calculated taking into account only the number of FSU members involved. This submission is without foundation. In the absence of evidence that the relevant industrial instruments applied only to FSU members, a non-unionist is equally entitled to his or her safety net. In any event, the argument goes nowhere because his Honour said that he would have given the same penalty had his considerations been limited to the effect of the PFS decision on FSU members only.
239 I note that Branson J would reduce the $600,000 penalty for breach of s 298K to $300,000. Her Honour considers the $600,000 penalty is manifestly excessive by reference to previous penalties imposed for breaches of s 298K. I respectfully disagree. The penalties imposed in other cases fell to be determined by reference to the facts and circumstances in those cases, including the number of employees affected. The breaches in this matter were egregious and the conduct was wilfully defiant. Nevertheless, the actual penalty imposed was only about 23 per cent of the maximum penalty available. Further, it must be borne in mind that a relatively large number of people were adversely affected by the unlawful conduct. In the context of previous s 298K cases, this is unusual, but this factor does not make the penalty manifestly excessive.
240 The appellants submit the $150,000 penalty for breach of the certified agreements is manifestly excessive. In support of that submission they refer to the lack of prior transgressions. That was a matter taken into account by the primary judge. They also refer to the lack of evidence of any redundancy or redeployment. That argument reveals the appellants still misunderstand the obligation which the relevant clauses impose – the obligation is to consult if redundancies are likely to occur, not after they have occurred or once a decision is made which may lead to redundancies. The appellants also submitted that the primary judge failed to have regard to the fact that FSU did not seek to bring the PFS decision before the Australian Industrial Relations Commission under a dispute settlement provision in cl 17 of the Commonwealth Bank of Australia (Core) Enterprise Bargaining Agreement 2002. That submission is confusing: by that time the PFS decision would have been made. In a similar vein, the appellants raise the issue of delay in FSU applying to the Court: the application was made well within the relevant time limit and could not have been commenced without the impugned decision having been made.
241 There is no basis for interfering with the primary judge’s judgment on penalty in respect of the breaches of the certified agreements.
ORDER
242 I would dismiss the appeal.
ORDER OF THE COURT
243 After preparing these reasons for judgment, I now have the benefit of reading the reasons for judgment of the other members of the Court. Justice Spender would allow the appeal. Justice Branson would reduce the penalty for breaches of Part XA of the Act. I would dismiss the appeal.
244 In view of the foregoing, I consider that it is appropriate to seek the
views of the parties as to the orders which the Court
should make on the appeal,
having regard to s 16 of the Federal Court of Australia Act 1976 (Cth)
(Evans v Minister for Immigration and Multicultural and Indigenous
Affairs [2003] FCAFC 276; (2003) 135 FCR 306 per Gray J at [33], Kenny J at [70] and Downes J
at [112]). Orders as proposed by Branson J in the last paragraph
of her
Honour’s reasons should be made.
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I certify that the preceding forty-three (43) numbered paragraphs are a
true copy of the Reasons for Judgment herein of the Honourable
Justice
Marshall.
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Associate:
Dated: 28 February 2007
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Solicitors for the Appellants:
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Counsel for the Respondent:
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Solicitors for the Respondent:
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Dates of Hearing:
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Date of Judgment:
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