Australian Maritime Officers Union v Sydney Ferries Corporation [2009] FCAFC 145 (15 October 2009)

Last Updated: 20 October 2009

FEDERAL COURT OF AUSTRALIA

Australian Maritime Officers Union v Sydney Ferries Corporation

[2009] FCAFC 145

INDUSTRIAL LAW – workplace agreement – income protection provision – whether pertaining to the relations of employers and employees.

WORDS AND PHRASES – "pertain to the employment relationship", "prohibited content".


Workplace Relations Act 1996 (Cth) ss 358, 356(1)(f)
Workplace Relations Regulations 2006 (Cth) reg 8.7


Re Alcan Australia Limited; Ex parte Federation of Industrial, Manufacturing and Engineering Employees [1994] HCA 34; (1994) 181 CLR 96 considered
Re Amalgamated Metal Workers’ Union of Australia; Ex parte The Shell Company of Australia Limited [1992] HCA 38; (1992) 174 CLR 345 cited
Electrolux Home Products Pty Limited v The Australian Workers’ Union [2004] HCA 40; (2004) 221 CLR 309 considered
Federal Firefighters’ Union v Minister of State for the Capital Territory [1982] FCA 125; (1982) 62 FLR 341 cited
Hamilton Knight; Ex parte The Commonwealth Steamship Owners Association [1952] HCA 38; (1952) 86 CLR 283 considered
Re Manufacturing Grocers’ Employees Federation of Australia; Ex parte Australian Chamber of Manufactures [1986] HCA 23; (1986) 160 CLR 341 considered
Ex parte Master Builders’ Association of New South Wales; Re Industrial Commission of New South Wales [1971] 1 NSWLR 655 considered
R v Kelly; Ex parte The State of Victoria [1950] HCA 7; (1950) 81 CLR 64 cited
R v Portus; Ex parte ANZ Banking Group Ltd [1972] HCA 57; (1972) 127 CLR 353 considered


AUSTRALIAN MARITIME OFFICERS UNION v SYDNEY FERRIES CORPORATION
NSD 267 of 2009

BLACK CJ, JESSUP AND BUCHANAN JJ
15 OCTOBER 2009
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 267 of 2009

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	AUSTRALIAN MARITIME OFFICERS UNION Appellant
AND:	SYDNEY FERRIES CORPORATION Respondent

JUDGES:	BLACK CJ, JESSUP AND BUCHANAN JJ
DATE OF ORDER:	15 OCTOBER 2009
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The appeal be upheld.

2. The order of the trial judge be set aside and in lieu thereof it be declared:

"A. Subclause 12.8.9 of the Sydney Ferries Corporation Maritime Officers Enterprise Agreement 2006 – 2008 does not contain prohibited content within the meaning of s 358 of the Workplace Relations Act 1996 (Cth).

B. Upon its own admission, Sydney Ferries Corporation breached the said provision by failing to insure its maritime officers for income protection in respect of long term illness or injury."

3. The matter be remitted to the trial judge to deal with the question of penalty for breach of the provision.

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

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 267 of 2009

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	AUSTRALIAN MARITIME OFFICERS UNION Appellant
AND:	SYDNEY FERRIES CORPORATION Respondent

JUDGES:	BLACK CJ, JESSUP AND BUCHANAN JJ
DATE:	15 OCTOBER 2009
PLACE:	SYDNEY

REASONS FOR JUDGMENT

THE COURT:

Background to the appeal

1 In a workplace agreement ("the Agreement") made under the Workplace Relations Act 1996 (Cth) ("the Act") on 7 August 2006 the respondent ("SFC") agreed:

...to insure its Maritime Officers for income protection insurance for long term illness and injury equivalent to 75% of his/her salary after a three month qualifying period commencing as soon as practicable after the lodgement of the Agreement.

2 SFC did not honour the agreement which it made. The appellant ("AMOU") commenced proceedings against SFC in this Court alleging breach of the Agreement and asking that penalties be imposed on SFC. SFC defended itself by claiming that the clause it had agreed to was void and unenforceable. The contention was based upon the operation of s 358 of the Act which rendered a workplace agreement void to the extent that it contained "prohibited content". Prohibited content was to be identified by regulation (s 356(1)(f) of the Act).

3 Shorn of exceptions which are not relevant to the present proceedings and of additional definitions, the regulations provided that a term of a workplace agreement was prohibited content "to the extent that it deals with a matter that does not pertain to the employment relationship" (reg 8.7 of the Workplace Relations Regulations 2006 (Cth)). Defining prohibited content in that way engaged some complex jurisprudence in the area of industrial law. The concept of matters pertaining to an employment relationship has long been used in statutory formulations identifying matters within the province of industrial tribunals, or about which there might be industrial regulation. In R v Kelly; Ex parte The State of Victoria [1950] HCA 7; (1950) 81 CLR 64, one of the seminal cases on that question, the High Court said (at 84):

The words ‘pertaining to’ mean ‘belonging to’ or ‘within the sphere of,’ and the expression ‘the relations of employers and employees’ must refer to the relation of an employer as employer with an employee as employee. (Emphasis added.)

4 The primary judge recorded the essence of the appellant’s argument about whether the agreed term contained prohibited content, as presented at first instance, in the following way:

[10] The union acknowledges that the income protection insurance proposed by the clause would operate to provide benefits to an employee whether the event giving rise to the disability arose from service as an employee or from an event unrelated to the employment. The union also acknowledges that the proposed insurance benefits would not operate until the happening of the disability or illness and that the insurance benefits can continue after the employment has ceased. [11] The union submits however that the benefits payable pursuant to the clause constitute part of the relationship of the employer and employee since income protection relates to an incident of employment. [12] The union further submits that the fact that the income protection benefit might become payable to employees arising from circumstances unrelated to the employment relationship does not lead to the conclusion that those payments cannot pertain to the relations of an employer with his employee and that it is of no significance that no immediate benefit is derived by the employee from payments made by the employer. ... [15] Further, the union submits that the payments made by the employer to the insurer for income protection insurance should simply be seen as a reward for services, in the same way that a salary is a reward for services...

5 The primary judge then undertook a careful review of the relevant authorities, the more important of which we discuss shortly. He reached the following conclusions about the claim which the appellant was seeking to enforce:

[39] ... It is not sufficiently connected to the employment relationship and consequently cannot be said to pertain to the relationship between [the] corporation in its capacity as an employer, and the Maritime Officers in their capacity as employees. The scope of the clause has the consequence that insurance benefits could be payable arising out of circumstances having no direct connection to the employee’s relationship with the employer. For this reason, the clause cannot be justified even on the more abstract level that the preservation of a disabled employee’s salary is a matter that pertains to employment.

and:

[42] ... In the absence of ... evidence that the payments of insurance premiums by the employer were a reward for services and in view of the Court’s finding that the benefits do not pertain to the relationship between employee and employer, the claim that such payments are merely a reward for services cannot be sustained.

Contextual Limitations

6 In the proceedings at first instance SFC defended itself against the accusation that it had breached the agreed term and, as a result, the Agreement. It was successful in its defence. The filing of the appeal put its defence again in issue. A short time before the appeal was to be heard, SFC’s solicitors announced to the Court, by letter, that SFC proposed to take no part in the appeal. When the appeal was heard SFC did not appear. As a result, although the point at issue is an important one, the Court was denied the usual assistance it would have expected from a public authority about the legal issues which arose for consideration. On the appeal we had the benefit of assistance from senior counsel for the appellant and for the Minister for Employment and Workplace Relations, who exercised a statutory right to intervene in view of the general importance of the matter, but their energies were directed principally in support of the appeal.

7 As will appear we have reached a view about the legal issues which leads us to a different conclusion from the primary judge. However, we wish to emphasise that our conclusion should be seen as directly related to the particular clause we were required to consider, in its actual setting and in circumstances where our deliberations were not assisted by a considered contribution from a contradictor. The actual setting in which the agreed term appears includes the fact that the maritime officers, for whose benefit the agreed term operates, are subject to specific regimes and medical standards which may become more rigorous. Unlike many occupations, a failure to meet revised standards would, under the Agreement, generate an entitlement to the benefit of provisions otherwise designed for redundancies.

8 Although we are satisfied that the circumstances revealed by the present appeal lead comfortably to the conclusions we shall now explain, we do not intend to lay down any general rule, at this stage, concerning "income protection" provisions.

The authorities

9 In R v Portus; Ex parte ANZ Banking Group Ltd [1972] HCA 57; (1972) 127 CLR 353 ("Portus") the High Court considered an industrial claim that employers pay union dues out of salaries earned by employees. The fact that the payments were to be made to third parties from entitlements which had already been earned was an important element in the discussion. The leading judgment was given by Menzies J (with whom Barwick CJ and McTiernan J agreed). Menzies J said (at 360):

In this case, to bring the dispute within the description of ‘industrial dispute’, counsel for the association rely upon two propositions, one broad and the other narrower, each relating to the imposition upon banks of an obligation to pay union dues out of moneys earned by employees in accordance with authorities given by such employees. First, it was contended that a dispute whether employers should, as a matter of obligation, disburse earned salaries in accordance with the authority of the employee who had earned that salary is an industrial dispute. Alternatively, it was contended that, in any event, a dispute whether employers should, as a matter of obligation, pay out of earned salaries, union dues of any employee who authorized such payment is an industrial dispute. Each contention, it seems to me, involves the same critical question, namely, whether the imposition upon an employer of an obligation to make deductions and payments from salary in accordance with the authority of the employee to whom the salary has become due and payable affects the industrial relationship of employers and employees. The identity of the payee does not seem to me to be significant in determining the character of such a dispute, unless, of course, the payment relates to an incident of the employment such as a deduction for and payment to a superannuation fund. In my opinion, the relationship that would be affected by such an obligation is a financial relationship of debtor and creditor arising from the earning of salary, not the industrial relationship in which the salary has been earned and has become payable. What is sought, in reality, is to make the employer the financial agent of the employee for the benefit of the association.

10 The High Court considered a similar industrial claim in Re Alcan Australia Limited; Ex parte Federation of Industrial, Manufacturing and Engineering Employees [1994] HCA 34; (1994) 181 CLR 96 ("Alcan"). In an apparent attempt to avoid the fatal issue identified in Portus, a second demand was advanced to the effect that wages should be increased by an amount equivalent to union dues. The High Court confirmed the earlier approach in Portus even though it accepted that a claim for deduction of union dues which was authorised by employees probably fell within the popular conception of "industrial dispute". The Court said (at 107):

The considerations which lead to the conclusion that a dispute as to deduction of union dues (at least, where authorized by individual employees) is an industrial dispute within s 51(xxxv) of the Constitution, tend in favour of the conclusion that the subject matter does not pertain to the relationships of employers and employees in their capacity as such. Those considerations, which depend on the nature and role of trade unions in Australia, show that although the subject matter pertains to a relationship between employers and employees, it is a relationship involving employees as union members and not at all as employees. That appears even more clearly if, as earlier suggested, the industrial character of the claim for the purposes of s 51(xxxv) comes about only in the case of a claim for employee-authorized deductions. Finally and so far as the statutory definition of ‘industrial dispute’ is concerned, the character of a claim for the deduction of union dues is not altered simply because it is bound up with a claim for a wage increase equivalent to the dues to be deducted.

11 On this occasion the difficulty appeared to be that the relationship in question was one with employees as union members rather than simply as employees. By contrast, in Re Manufacturing Grocers’ Employees Federation of Australia; Ex parte Australian Chamber of Manufactures [1986] HCA 23; (1986) 160 CLR 341 ("Manufacturing Grocers") the High Court found that a claim for payment into superannuation funds for the benefit of employees did pertain to the relations of employers and employees as such. The High Court said (at 353):

The words ‘pertaining to’ in the definition of industrial matters mean ‘belonging to’ or ‘within the sphere of’ and the expression ‘the relations of employers and employees’ refers to the relation of an employer as such with an employee as such: R. v. Kelly; Ex parte Victoria; Reg. v. Commonwealth Industrial Court Judges; Ex parte Cocks. The matters which will answer that description have been dealt with from time to time and the propositions to be derived from the cases are collected by Mason J. in Federated Clerks’ Union (Aust.) v. Victorian Employers’ Federation. For present purposes, it is sufficient to say that a matter must be connected with the relationship between an employer in his capacity as an employer and an employee in his capacity as an employee in a way which is direct and not merely consequential for it to be an industrial matter capable of being the subject of an industrial dispute. (Citations omitted.)

12 However, a limitation should be noted. The Court said (at 355):

What is important for the purposes of this case is that the claims made are, as we have said, no more than demands for the payment during the currency of an award of employer contributions to superannuation schemes which will take an approved form. It is because the claims are in this limited form that it is, in our view, impossible to sustain the argument that they are not made with respect to industrial matters, whatever may have been the position had the claims been made in a more elaborate form.

13 Importantly, the Court also said, referring to Portus, (at 357):

Because the payments are to a superannuation fund, they form, to use the words of Menzies J., an incident of the employment. Nor can it be said that the payments contemplated by the claims in the present case will be made by the employer as the agent for the employee. There is no reason why those payments should be seen in any other way than as contributions by an employer to a fund for the benefit of an employee. No doubt the payments represent money earned in an industrial relationship, but they do not represent money to which an employee is himself presently entitled. They must be regarded as having been made to the fund by the employer in his capacity as employer and not as an agent acting on behalf of an employee.

14 In Electrolux Home Products Pty Limited v The Australian Workers’ Union [2004] HCA 40; (2005) 221 CLR 309 ("Electrolux") the High Court rejected an argument that a claim by a trade union that an employer should deduct a "bargaining agent’s fee" from the wages of employees and pay it to the union was a matter pertaining to the relationship between employers and their employees. The Court applied the reasoning in Alcan and Portus. Gleeson CJ referred to the judicially settled meaning of the phrase to be applied in that case (as in the present) and then said (at [9]):

In one sense, anything that is capable of being made the subject of an agreement between an employer and employees could be said to be a matter pertaining to their relationship. An employer could agree, for example, to make regular donations to a particular political party. The established principle, however, is that, in the context with which this legislation is concerned, it is matters which affect employers and employees in their capacity as such that ‘pertain to the relations of employers and employees’.

15 A majority of the Court held that claim did not pertain to the relations of employers and employees and that Parliament’s use of the concept must be regarded as informed by the weight of authority (e.g. per Gummow, Hayne and Heydon JJ at [162]).

16 In Hamilton Knight; Ex parte The Commonwealth Steamship Owners Association [1952] HCA 38; (1952) 86 CLR 283 ("Hamilton Knight") a majority of the High Court took the view that a claim which sought, amongst other things, payment of compensation to an employee for personal injury, illness or accident arising out of or in the course of the employment pertained to the relations of employers and employees (see per Dixon CJ at 295-6, per Webb J at 307-8 and per Kitto J at 328-9). Another claim in that case, for pensions to take effect after employment had ceased, was struck down but, as explained in Manufacturing Grocers (at 349-351), that was not because, in the view of a majority of the Court, the claim did not pertain to the relations of employers and employees but for the reason that it sought an award which would operate beyond a five year limit established by statute. Such a complication does not arise in the present case.

17 Hamilton Knight was applied by the New South Wales Court of Appeal when it upheld the validity of an award made by the Industrial Commission of New South Wales granting accident pay (an extra payment by employers to finance an insurance scheme to provide additional "accident pay", or "make up pay", for employees receiving workers compensation) (Ex parte Master Builders’ Association of New South Wales; Re Industrial Commission of New South Wales [1971] 1 NSWLR 655 ("the Accident Pay Case")).

18 The particular form of the payment considered in the Accident Pay Case, and its destination, owed much to the transient nature of employment in the building industry and the perceived need to create a fund out of which payment of accident pay might be made. In more permanent forms of employment it became common to award an obligation against employers to directly make up the shortfall between workers compensation payments and ordinary pay. One such award was examined for validity by this Court in Federal Firefighters’ Union v Minister of State for the Capital Territory [1982] FCA 125; (1982) 62 FLR 341, although not by reason of a challenge which raised the issue for present attention. After the Accident Pay Case there does not seem to have been such a challenge.

The agreed term

19 The term which was agreed by SFC requires payments by way of insurance premiums which would operate to protect employees’ income in the event of long term illness or injury. It does not suffer from the defect that it seeks payment out of entitlements which have already accrued to employees. A matter of considerable importance is that the agreed term provides a benefit to employees during their employment, even though it might also generate a benefit to them after employment has ceased. No obligation is imposed on SFC, or any immediate right created for employees, outside the period of employment. Even a post-employment benefit would depend upon the happening of an entitling event (accident, injury or illness) during a period when a policy was in force – ie during employment pursuant to an agreed obligation to pay the necessary premiums.

20 Assessment of the character of the agreed term must take place in a context where there are few hard and fast rules about what does, and what does not, pertain to an employment relationship. Ultimately, the question is one of appropriate characterisation based on all the relevant circumstances. The primary judge came to the view, illustrated by the conclusions we extracted earlier, that the agreed term did not pertain to the relations of employers and employees. We have reached a different view. In particular, we attach less significance, than did the primary judge, to the features he found decisive. In reaching our view we have not found it necessary to consider whether the payments required by the agreed term can be characterised as a reward for services.

21 As a general rule, a payment made to, or for the benefit of, an employee by an employer is normally presumed to pertain to their relations unless it falls into a category identified as outside the relationship. Neither the fact that an injury or illness does not arise directly from attendance at work (or going to or from work), nor the fact that an entitlement might be generated which subsists after employment ceases, are necessarily indicative of a matter that does not pertain to the relations of employers and employees. There are examples of such entitlements which indisputably pertain to the relations of employers and employees and which have similar features to the agreed term. Three such examples will suffice to make the point.

22 Sick leave is an example of protection against loss of income arising from circumstances or incidents away from the workplace. The fact that payments may continue after employment has ceased, pursuant to insurance arrangements, is a characteristic of workers’ compensation schemes. The notion of economic security after the cessation of employment, funded by employer payments during employment, is the hallmark of superannuation and pension schemes, many of which contain arrangements which are activated by medical incapacity to continue working although an ordinary retirement age has not been reached.

23 A term directed to the protection of income in the event of illness or injury may pertain to the relationship of employers and employees in the same way as those other forms of employment benefit and may do so where the protection endures after the obligation to make the payment which secures it has ended. Whether or not the term pertains to the relationship of employers and employees depends upon all the circumstances.

24 What of the decided cases? Much of the debate at first instance took place by reference to the facts and circumstances of earlier cases, none of which provide a direct analogy with the agreed term. However, the circumstances of the present case are much closer in principle to Manufacturing Grocers than any of Portus, Alcan or Electrolux. The agreed term in the present case does not suffer from the defect identified in Portus and Alcan. It does not direct a payment from a pre-existing entitlement to satisfy an obligation arising outside the employment relationship. Neither is it directed, as in Electrolux, to ensuring that a payment is made by employees to a union, regardless of choice or of union membership. The agreed term operates during the employment relationship only. There is no obligation upon SFC to pay a premium in respect of a non-employee. The circumstance against which an employee would be protected is the loss of income arising from the employment relationship.

25 Under the regulations the agreed term contains prohibited content only to the extent that it does not pertain to the relations of employers and employees. There are some uncertainties about the precise content of the agreed term and the specific obligations which it imposes but, as was the case in Manufacturing Grocers, it is in part because the agreed term is not expressed in more elaborate terms that it is not correct to say it does not pertain to the relations of employers and employees. Whether, if some more elaborate provision was advanced it might not pertain to the relations of employers is not, at present, to the point. Re Amalgamated Metal Workers’ Union of Australia; Ex parte The Shell Company of Australia Limited [1992] HCA 38; (1992) 174 CLR 345 provides an example of provisions claimed about superannuation arrangements at a level of detail which exposed some provisions as ones not pertaining to the relationship of employers and employees. Furthermore, neither the trial judge, nor the Court on the appeal, was asked to give any consideration to what might constitute full compliance with the agreed term. Breach of the term was admitted. The proceedings were dismissed only because the trial judge found that the term, as drafted, had no valid operation. Whatever uncertainties may remain about the precise content of the obligation imposed by the term, it is not invalid by reason that it contains only prohibited content, as presently drafted.

26 Despite the careful analysis of the authorities by the trial judge, in our view ultimately the wrong conclusion was reached. The appeal should be upheld. The order of the trial judge should be set aside and declarations made in lieu thereof that the agreed term does not contain prohibited content and has been breached by SFC. The matter must be remitted to the trial judge to assess any penalty for breach of the Agreement.

I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Black and Justices Jessup and Buchanan.

Associate:

Dated: 15 October 2009

Counsel for the Appellant:	S Crawshaw SC with M Gibian
Solicitor for the Appellant:	J Wydell, Australian Maritime Officers Union
Counsel for the Respondent:	The Respondent did not appear
Counsel for the Minister for Employment and Workplace Relations:	R McKenzie QC with A B Gotting
Solicitor for the Minister for Employment and Workplace Relations:	Blake Dawson

Date of Hearing:	21 August 2009
Date of Judgment:	15 October 2009