FEDERAL COURT OF AUSTRALIA Australian Airline Flight Engineers Association v Ansett Australia Ltd [2000] FCA 1299 INDUSTRIAL LAW – interlocutory injunction to restrain lockout of employees – employer locking out employees to coerce them to agree to alter the terms upon which it contracted to employ them – whether employer immune from legal liability in respect of the lockout on the ground that it is protected action – whether immunity extends to initiation of bargaining period and notice of the lockout – whether an implied term of contract of employment that employer would not take steps to enable it to lockout its employees to coerce them to agree to alter their contractual rights - whether employer genuinely tried to reach agreement with the employees – whether interlocutory injunctions should be refused on ground that the employees' loss is compensable in damages Workplace Relations Act 1996 (Cth) ss 170MI(2), 170ML(3), 170ML(5), 170MO(5), 170MP(3), 170MT and 170NC Trade Practices Act 1974 (Cth) s 51AA ACI Operations Pty Ltd v Automotive Food Metals, Engineering and Kindred Industries Union [2000] FCA 393 - considered Construction, Forestry, Mining and Energy Union v Yallourn Energy Pty Ltd [2000] FCA 1070 - applied Australasian Meat Industry Employees' Union v G & K O'Connor Pty Ltd [1999] 91 IR 356 - cited Commonwealth v Verweyen (1990) 170 CLR 394 – cited Butt v McDonald (1896) 7 Q.L.J. 68 - cited Ansett Transport Industries v Commonwealth (1977) 139 CLR 54 - cited Camberwell v Camberwell Centre (1994) 1 VR 163 - cited Australian Paper Ltd v Communications, Electrical, Electronic, Energy, Information Postal, Plumbing and Allied Services Union of Australia 81 IR 15 - cited AUSTRALIAN AIRLINE FLIGHT ENGINEERS ASSOCIATION AND ANOR v ANSETT AUSTRALIA LIMITD V 678 of 2000 JUDGE: MERKEL J DATE: 12 SEPTEMBER 2000 PLACE: MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V 678 OF 2000 BETWEEN: AUSTRALIAN AIRLINE FLIGHT ENGINEERS ASSOCIATION FIRST APPLICANT MICHAEL O'GRADY SECOND APPLICANT AND: ANSETT AUSTRALIA LIMITED (ACN 004 209 410) RESPONDENT JUDGE: MERKEL J DATE OF ORDER: 12 SEPTEMBER 2000 WHERE MADE: MELBOURNE THE COURT ORDERS THAT the application of the applicants for an interlocutory injunction be refused. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V 678 OF 2000 BETWEEN: AUSTRALIAN AIRLINE FLIGHT ENGINEERS ASSOCIATION FIRST APPLICANT MICHAEL O'GRADY SECOND APPLICANT AND: ANSETT AUSTRALIA LIMITED (ACN 004 209 410) RESPONDENT JUDGE: MERKEL J DATE: 12 SEPTEMBER 2000 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 The applicants are claiming an interlocutory injunction restraining the respondent ("Ansett") from locking out thirteen long term employees of Ansett ("the flight engineers") until 22 September 2000. The applicants claim that the lockout of the flight engineers is in contravention of the Workplace Relations Act 1996 (Cth) ("the Act"); is a breach of contract; is unconscionable conduct in breach of s 51AA of the Trade Practices Act 1974 (Cth) ("the TPA"); and that Ansett is estopped from engaging in such conduct. 2 The dispute the subject of the present proceeding has arisen as a result of a letter sent, inter alia, to each of the flight engineers on 15 September 1988 ("the 1988 letter agreement"). The letter, which was signed by the Joint Chairman and Joint Managing Director of Ansett constituted one part of an overall agreement in relation to technological change. The agreement was made between Ansett and its flight engineers, who had been opposing Ansett's introduction of aircraft with two pilots which meant the withdrawal of flight engineers from aircraft operated by Ansett. As part of the resolution of the dispute Ansett, inter alia, guaranteed continuity of employment of the flight engineers on the terms set out in the letter. Under those terms the flight engineers were guaranteed employment until their normal retirement age of 60 years on the basis of maintaining the current salary relativity that existed between Ansett pilots and flight engineers. The flight engineers were also entitled to choose not to bid for re-training or voluntary early retirement. 3 For present purposes, it is unnecessary to outline the history of the employment relationship between Ansett and its flight engineers since 15 September 1988. It is sufficient to state that, generally, Ansett honoured the terms of the 1988 letter agreement until recently when it appears to have embarked upon a series of steps to free itself of the obligations undertaken by it in that agreement. One of those steps involved the dismissal of the flight engineers. That led to Federal Court proceedings in 1999, which were settled by re-instatement of the flight engineers on terms that they agreed, inter alia, to undertake a training and redeployment program as directed by Ansett if they do not elect to take a voluntary early retirement. A further step was the giving by Ansett on 28 October 1999 of notice of the initiation of a bargaining period under s 170MI(2) of the Act. The notice stated that Ansett intends to try and make an agreement under Div 2 of Pt VIB of the Act with the Australian Airline Flight Engineers Association ("the Association") in relation to the terms and conditions of employment of the flight engineers, including the removal of, or variation to, the obligations of Ansett under the 1988 letter agreement. 4 Subsequently, Ansett gave two notices, pursuant to s 170MO(5) of the Act, of its intention to lockout the flight engineers. The first notice related to a lockout of the flight engineers from 19 July to 18 August 2000. The second notice, which was given on or about 14 August 2000, related to a lockout of the flight engineers from 21 August 2000 to 22 September 2000. The interlocutory injunction is sought to restrain the second lockout from continuing. 5 In ACI Operations Pty Ltd v Automotive Food Metals, Engineering and Kindred Industries Union [2000] FCA 393 at [22]-[33] I outlined the scheme under the Act which provides legal immunity in respect of any industrial action that is protected action. In particular, I observed at [33] that the statutory scheme enabled parties to take protected action, but no other action, with the "intent to coerce" persons to make, vary or terminate agreements under Div 2 or Div 3 of Pt VIB: see s 170NC. I also observed in Construction, Forestry, Mining and Energy Union v Yallourn Energy Pty Ltd [2000] FCA 1070 at [13]-[14] that, in general, the outcome of an application for an interlocutory injunction to restrain industrial action will commonly depend on the strength or weakness of the prima facie case of the applicant that the action sought to be restrained is not protected action. 6 The ground advanced in argument by the applicants in support of their contention that the lockout is not protected action is that prior to the lockout Ansett had not "genuinely tried to reach agreement" with the Association or the flight engineers with the consequence that, pursuant to s 170MP(3), the lockout is not protected action. Counsel for the applicants conceded that he had some difficulty in making out his submission in the light of the decision of Marshall J in Australasian Meat Industry Employees' Union v G & K O'Connor Pty Ltd [1999] 91 IR 356 where, at 361-362, his Honour observed that a genuine endeavour to reach agreement did not require a party to cease to take a hard line or to moderate its demands. 7 For present purposes it is unnecessary to consider, precisely, what is embraced by the requirement that the employer locking out employees must, prior to the lockout, have "genuinely tried to reach agreement" with the organisation of employees or the employees with whom it had been dealing in relation to the matter. Whether in a particular case there was a genuine endeavour to reach agreement will, essentially, be a question of fact. Plainly, where the right to take protected action under the Act is exercised for purposes other than those for which that right was conferred the pre-condition, of a genuine endeavour to reach agreement, is unlikely to have been met. 8 It is unnecessary to explore these matters further as I am satisfied that, on a prima facie case basis, the evidence falls a long way short of establishing that prior to the lockout Ansett did not genuinely try to reach agreement with the Association or the flight engineers in relation to varying the terms of employment of the flight engineers. Whilst it is clear that Ansett is taking a hard line in the negotiations it is also clear that it has embarked upon a course of trying to reach agreement, albeit on terms that are favourable to it rather than on terms that are favourable to the Association or the flight engineers. Although I would not go so far as to say that the Association has not established that there is an issue to be tried on this question, I am of the view that its case of a failure to comply with s 170MP is not strong. 9 It was also contended by the applicants, with some force, that the lockout was a breach of Ansett's contract of employment of the flight engineers. It is plain that a purpose of Ansett is to remove or vary the obligations imposed upon it under the 1988 letter agreement. Indeed, it is taking protected action under the Act to achieve that purpose. The problem with the applicants' contention is that the object of taking protected action under Div 8 of Pt VIB of the Act is to bring about changes to the terms of employment of employees. Section 170MT provides that, save for certain exceptions that are not presently relevant, no action lies in respect of any industrial action that is protected action. Accordingly, an allegation that a lockout, that is protected action, is in breach of contract is of no avail to the applicants as no action lies in respect of protected action as such, even if it is in breach of contract. 10 More specifically, s 170ML(5) provides that where an employer locks out employees from their employment in pursuance of a lockout notice given under s 170ML(3), the employer "is entitled to refuse to pay any remuneration to the employers in respect of the period of the lockout". Thus, the Act accepts that a lockout by an employer is likely to be in breach of contract but immunises it from that claim under ss 170MT and 170ML(5). The prima facie case that the lockout, as such, ought to be enjoined as it is in breach of contract is therefore not a strong one because of the immunity conferred under those sections. 11 It was also contended by the applicants that the overall conduct of Ansett in relation to the lockout was unconscionable and, therefore, in breach of s 51AA of the TPA. In particular, reliance was placed upon an observation of Deane J in the Commonwealth v Verweyen (1990) 170 CLR 394 at 441 that unconscionable conduct will commonly involve the use of, or insistence upon, a legal entitlement to take advantage of another's special vulnerability or misadventure. It was contended by the applicants that the flight engineers, by agreeing in 1988 not to oppose the introduction of aircraft on the ground that they only had two pilots and no flight engineer, gave up all of their industrial rights and bargaining power in respect of that issue in return for the guarantees given in the 1988 letter agreement. It was said that for Ansett to later renege on those guarantees, by locking out the flight engineers as part of a campaign to terminate the 1988 letter agreement, was unconscionable as the flight engineers no longer had any industrial power to resist Ansett's current demands. 12 Ultimately, for the purposes of s 170MT the "unconscionable conduct" case is indistinguishable, in any relevant sense, from the breach of contract case. If the lockout is, as appears to be the case, protected action then it is immune from action under s 170MT for breach of contract, unconscionability and estoppel. The statutory immunity under s 170MT is in respect of action "under any law (whether written or unwritten) in force in a State or Territory in respect of any industrial action that is protected action". There is also some difficulty in contending that taking advantage of the protected action provisions under the Act, as such, is such an affront to ordinary minimum standards of fair dealing (see Deane J in Commonwealth v Verweyen at 441) that it is unconscionable to do so. It has been said that the protected action provisions have been structured to allow "maximum freedom consistent with a civilised community to take industrial action in aid of negotiation of agreements without legal liability for that action": Australian Paper Ltd v Communications, Electrical, Electronic, Energy, Information Postal, Plumbing and Allied Services Union of Australia 81 IR 15 at 18 per North J. Once again, it is unnecessary to determine this issue finally against the applicants. I am satisfied that any prima facie case for relief on this ground is not a strong one. 13 The final claim for injunctive relief, on the basis that Ansett is estopped from locking out the flight engineers as a result of the representations or obligations undertaken by it in the 1988 letter agreement, is also not a strong one because of the immunity conferred under s 170MT. 14 Accordingly, I am satisfied that the prima facie case of the applicants to be entitled to injunctive relief to restrain the continuation of the lockout on the grounds argued by the applicants is not strong. As explained above, in such circumstances the balance of convenience favours the refusal of the grant of relief that would interfere with the integrity of the bargaining process provided for under the Act. Further, apart from loss of wages, for which the employer is not liable under s 170ML(5) if the lockout is protected action, the evidence on balance of convenience on the part of the applicants is sparse. In any event, the damage which the flight engineers fear by reason of the lockout until 22 September 2000 is compensable in damages if they ultimately succeed in establishing their claims. 15 The above matters, cumulatively, have led me to conclude that the interlocutory injunction sought to restrain the continuation of the present lockout should be refused. However, it does not follow that the flight engineers are altogether without remedy in respect of Ansett's endeavours to remove or vary the contractual obligations undertaken by it in the 1988 letter agreement, as varied by the recent agreement resolving the Federal Court proceeding. It was not disputed by Ansett, for the purposes of the present interlocutory application, that the 1988 letter agreement is a binding agreement. Rather, Ansett contends that the Act entitles it to take protected industrial action (ie locking out its employees) to coerce them into agreeing to renounce or vary that agreement. 16 While the statutory scheme enables protected industrial action to be taken to change the terms of employment of employees it does not follow that an employer is free to do so irrespective of its pre-existing contractual obligations to its employees. 17 Section 170MT appears to confer immunity in respect of protected action but it may not confer immunity in respect of the anterior conduct engaged in by an employer to enable it to engage in that action. It is significant that the immunity conferred under s 170MT is not in respect of the anterior steps of initiating a bargaining period or the giving of notice of intended industrial action; rather, it is "in respect of" the protected action. If the anterior steps are taken in breach of a contractual obligation then the taking of those steps may be actionable. 18 As the 1988 letter agreement was made prior to the enactment of the Act, the exercise of a right under the Act could not breach an express term of the agreement. However, the law of contract has accepted that a contractual term may be implied that prevents one party from so conducting itself that it will deprive the other party of the benefits of the contract. Thus, a party may be implied to have agreed "to do all such things as are necessary on his part to enable the other party to have the benefit of the contract" (Butt v McDonald (1896) 7 Q.L.J. 68 at 70-71 per Griffith CJ). See generally Cheshire and Fifoot, Law of Contract 7th Aust Ed (1997) at [10.39]-[10.40]. It has also been said to be a "general rule that a party to a contract made on the footing of a continuance of a state of things may not by any act within its power or control do anything to destroy or diminish that situation" (Ansett Transport Industries (Operations) Pty Ltd v The Commonwealth of Australia (1977) 139 CLR 54 at 61 per Barwick CJ; Camberwell v Camberwell Centre (1994) 1 VR 163 at 186-187 per Marks and Gobbo JJ). More generally, it may be contended that where a party is obliged by a contract to perform a particular act, for the presumed advantage of the other, the former party may not be free to act in a manner which deprives the latter of the benefit that party was expecting to receive from performance of the act in question even if that act is not specifically proscribed by the contract (Greig and Davis, The Law of Contract, (1987) at 535-536). 19 Another possible contention is that Ansett, by a course of conduct, has renounced its obligations under the 1988 letter agreement and has thereby repudiated that agreement. Even if such conduct only amounts to an anticipatory breach it may nevertheless afford the flight engineers a right of action in contract in respect of the conduct of Ansett leading up to its lockout. 20 It is unnecessary for present purposes to explore the boundaries of the immunity "in respect of" protected action under the Act. It is sufficient to state that I am far from satisfied that the immunity entitles Ansett to engage in a course of conduct, in breach of its contractual obligations, in order to coerce the flight engineers to renounce their contractual rights under the 1988 letter agreement. As these matters were not explored in submissions it is appropriate to go no further than stating that my refusal of the present application is without prejudice to any subsequent application by the applicants for appropriate injunctive relief on the ground that any further notice of a lockout (eg one of a longer, or for an indefinite, duration) is in breach of the contractual rights of the flight engineers. If such an application is made the precise boundaries of the protection given by s 170MT will have to be more fully explored. 21 Accordingly, for the above reasons the application for injunctive relief is refused. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Merkel. Associate: Dated: 12 September 2000 Counsel for the Applicant: Mr R Hinkley Solicitor for the Applicant: Mahonys Counsel for the Respondent: Dr CN Jessup QC with Mr CB O'Grady Solicitor for the Respondent: Clayton Utz Date of Hearing: 11 September 2000 Date of Judgment: 12 September 2000