FEDERAL COURT OF AUSTRALIA Greater Dandenong City Council v Australian Municipal, Clerical and Services Union [2001] FCA 349 INDUSTRIAL LAW – Freedom of association – Outsourcing of services – Home and community care services provided by local government council – Decision by council to engage in competitive tendering – Council received tenders from in-house team and an outside company – Price differential caused by lower wages and penalty rates payable under industrial instrument binding outside tenderer than that binding council – Tender awarded to outside tenderer – Council employees dismissed – Whether council dismissed any employee or altered position of any employee to the employee's prejudice because the employee was "entitled to the benefit of an industrial instrument or an order of an industrial body" – Whether the words "entitled to the benefit" refer only to the existence of an instrument or order or include reference to the content of the instrument or order – Whether Council discharged the onus under s 298V to negative the rebuttable presumption that its conduct was engaged in for a prohibited reason - Whether case is affected by the constitutional immunity of State of Victoria – Order of trial Judge for reinstatement of dismissed employees – Whether Judge's exercise of discretion miscarried. Workplace Relations Act 1996, ss 298A, 298B, 298F, 298K, 298L(1)(h), 298U, 298V Patrick Stevedores Operations No 2 Proprietary Limited v Maritime Union of Australia (1998) 195 CLR 1 – applied Kelly v Construction, Forestry, Mining and Energy Union (No 3) (1995) 63 IR 119 - cited Davids Distribution Pty Ltd v National Union of Workers (1999) 91 FCR 463 - cited Grayndler v Cunich (1939) 62 CLR 573 - considered Grayndler v Broun [1928] AR (NSW) 46 - considered Pearce v WD Peacock & Co Ltd (1917) 23 CLR 199 - cited General Motors Holden Pty Ltd v Bowling (1976) 12 ALR 605 - cited Davis v Amalgamated Television Services Pty Limited (1998) 81 IR 364 – cited Moss v Fantil Pty Limited (1994) 58 IR 118 - cited Eaton v McKenzie (1916) 12 Tas LR 94 - considered Klanjscek v Silver (1961) 4 FLR 182 - considered Musgrove v Murrayland Fruit Juices Pty Ltd (1980) 47 FLR 156 - cited Construction, Forestry, Mining and Energy Union v BHP Steel (AIS) Pty Ltd [2000] FCA 1008 - cited Maritime Service of Australia v Burnie Port Corporation Pty Ltd [2000] FCA 1189 - cited Burnie Port Corporation Pty Ltd v Maritime Union of Australia [2000] FCA 1178 - cited Victoria v Commonwealth of Australia (1996) 187 CLR 416 - considered Konrad v Victoria (1999) 91 FCR 95 - applied Short v Hercus (1993) 40 FCR 511 - considered The Queen v Industrial Commission (SA); Ex parte Adelaide Milk Supply Co-operative Ltd [1977] SAIR 1202 - considered Maritime Union of Australia v Geraldton Port Authority (1999) 93 FCR 34 - considered State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (In liq) (1999) 160 ALR 588 - cited Taylor v Johnson (1983) 151 CLR 422 - cited Chen v Minister for Immigration and Multicultural Affairs [2000] FCA 1901 - cited Community and Public Sector Union v Telstra Corporation Ltd [2001] FCA 267 - applied Jones v Dunkel (1959) 101 CLR 298 - considered Connington v Council of Municipality of Kogarah [1913] AR (NSW) 40 - considered Hunt v Railway Commissioners for New South Wales; Ex parte Brown-Smith [1928] AR (NSW) 151 - cited Environment Agency v Empress Car Co (Abertillery) Ltd [1999] 2 AC 22 - cited J & G Knowles and Associates Pty Ltd v Commissioner of Taxation (2000) 96 FCR 402 - cited Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151 - cited Cowley v Dunn (1916) 16 Tas L R 94 - cited Rodriguez v United States, 480 US 522 - cited Australian Workers' Union v BHP Iron-Ore Pty Ltd [2001] FCA 3 - cited Hope v Bathurst City Council (1980) 144 CLR 1 - cited Australian Broadcasting Tribunal v Bond (1990) 170 CLR 356 - cited Tracy Village Sports & Social Club v Walker (1992) 111 FLR 32 - cited Municipal Council of Sydney v Commonwealth (1904) 1 CLR 208 - cited Meriwether v Garrett 102 US 472 - cited Mersey Docks v Cameron (1865) 11 HLC 443 - cited Superannuation Fund Investment Trust v Commissioner of Stamps (SA) (1979) 145 CLR 330 – cited Townsville Hospital Board v Townsville City Council (1982) 149 CLR 282 - cited Registrar of the Accident Compensation Tribunal v Federal Commissioner of Taxation (1992) 178 CLR 145 - cited GREATER DANDENONG CITY COUNCIL v AUSTRALIAN MUNICIPAL, CLERICAL AND SERVICES UNION V765 of 2000 WILCOX, MERKEL and FINKELSTEIN JJ 4 APRIL 2001 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIAN DISTRICT REGISTRY V765 of 2000 ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: GREATER DANDENONG CITY COUNCIL APPELLANT AND: AUSTRALIAN MUNICIPAL, CLERICAL AND SERVICES UNION FIRST RESPONDENT WENDY PHILLIPS SECOND RESPONDENT JUDGES: WILCOX, MERKEL and FINKELSTEIN JJ DATE OF ORDER: 4 APRIL 2001 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. Order 3(II) of the orders made by Madgwick J on 10 November 2000 be varied by substituting for the words "within 28 days of the date of this order" the words "on or before 4 May 2001". 2. Order 3(VII) of the said orders be varied by substituting for the words "on 8 December 2000" the words "on a date to be appointed by Madgwick J". 3. Otherwise, the appeal be dismissed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIAN DISTRICT REGISTRY V765 OF 2000 ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: GREATER DANDENONG CITY COUNCIL APPELLANT AND: AUSTRALIAN MUNICIPAL, CLERICAL AND SERVICES UNION FIRST RESPONDENT WENDY PHILLIPS SECOND RESPONDENT JUDGES: WILCOX, MERKEL and FINKELSTEIN JJ DATE: 4 APRIL 2001 PLACE: MELBOURNE REASONS FOR JUDGMENT WILCOX J 1 This is an appeal against a decision of a Judge of this Court (Madgwick J) that the appellant, Greater Dandenong City Council ("the council"), infringed s 298K(1)(a) and (c) of the Workplace Relations Act 1996 ("the Act") in relation to persons employed by the council in the provision of home and community care services. The trial judge's decision, Australian Municipal, Administrative, Clerical and Services Union v Greater Dandenong City Council [2000] FCA 1231, is now reported at 101 IR 143. 2 The applicants at first instance were the Australian Municipal, Administrative, Clerical and Services Union ("the union"), a registered organisation of employees, whose members included all but a few of the relevant employees, and Wendy Phillips, an affected employee who sued as a representative party, pursuant to Part IVA of the Federal Court of Australia Act 1976, on behalf of all persons employed by the council on 17 May 1999 in the provision of home and community care services. The union and Ms Phillips are respondents to this appeal. 3 The respondents at first instance were the council, the present appellant, and Glad Pty Ltd, a company trading as "Silver Circle". No orders were made against Glad Pty Ltd and the company is not a party to the present appeal. During the hearing before Madgwick J, Glad Pty Ltd was usually referred to as "Silver Circle". I will follow that course. The relevant statutory provisions 4 Section 298K appears in Part XA of the Workplace Relations Act. Subsection (1) provides: "(1) 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) dismiss an employee; (b) injure an employee in his or her employment; (c) alter the position of an employee to the employee's prejudice; (d) refuse to employ another person; (e) discriminate against another person in the terms or conditions on which the employer offers to employ the other person." 5 Section 298L identifies various items of conduct that constitute a "prohibited reason", for the purposes of s 298K. The item relied on in this case is conduct carried out because the employee "is entitled to the benefit of an industrial instrument or an order of an industrial body": see s 298L(1)(h). 6 Section 298U specifies the relief available in this Court in respect of a breach of Part XA of the Act. The Court is empowered, if it considers it appropriate in all the circumstances of the case, to impose a penalty, to order reinstatement of an employee, to order payment of compensation and/or to grant injunctive relief. 7 Section 298V of the Act creates a rebuttable presumption, in an application under Division 6 of Part XA, that the respondent's conduct was carried out for the particular reason alleged in the proceeding against that respondent. The facts 8 At the hearing of the appeal, there was no challenge to the findings of primary facts made by Madgwick J. Accordingly, it is appropriate to summarise the facts of the case by reference to those findings. 9 At material times, the council was bound by an award of the Australian Industrial Relations Commission, Victorian Local Authorities Interim Award 1991 ("the award), and an agreement certified under Part VIB of the Act, the Greater Dandenong City Council Enterprise Bargaining Agreement 1998 ("the certified agreement"). It is common ground that each of these instruments was an "industrial instrument", within the meaning of s 298L(1)(h) of the Act: see the definition of "industrial instrument" in s 298B(1). 10 The council was constituted under the Local Government Act 1989 (Vic). Under that Act, the council's functions included the provision of "health, education, welfare and other community services including … Aged, disabled and disadvantaged persons services": see item 2 of Schedule 1 of the Act. The council in fact provided such services; including, particularly, home and community care for the disabled, frail and aged. These services, which are often called "HACC", include general home care and assistance, as well as the assessment of the need of persons for whom assistance is sought and the provision of more specialised in-home care as required. Immediately prior to 23 May 1999, the council employed approximately 75 persons in connection with HACC services. 11 In 1994 the Local Government Act was amended (by the Financial Management Act 1994 (Vic)) in such a way as to introduce incrementally a regime of compulsory competitive tendering for Victorian local government. In 1994-95 councils were required to have "competitive arrangements" in respect of 20% of their expenditure; in 1995-96, 50%. Madgwick J explained the effect of the new provisions, ss 208B, 208C and 208D, in this way: "'competitive arrangements' are, relevant to present purposes, either contracts for the supply of goods or services to the Council or 'in-house agreements' by members of a Council's staff for such supply. In either case the arrangement is to be entered into by the Council after either a 'competitive process' conducted by the Council or approval by the Minister under s 208F for stated reasons. A 'competitive process' requires public written tenders and the award of the contract to one of the tenderers. It is clear that the successful tenderer need not have made the lowest tender: s 208C(1)(c)." 12 In March 1996 the council foreshadowed the seeking of tenders for the provision of HACC services. An in-house bid team was formed. Ms Phillips was provided with a document prepared by council management which recommended that the in-house team enter into a Local Area Work Agreement, pursuant to cl 9 of the certified agreement, in order to reduce the labour costs that would be payable if the in-house bid was successful. It was apparently the view of some members of council management that, unless there was a reduction in the amounts payable for penalty rates and travelling times, as compared with the amounts payable under the certified agreement, an in-house bid would be unable to compete with external bids. However, members of the bid team were not prepared to accept a reduction in the conditions contained in the certified agreement. So the in-house bid was prepared on the basis of existing terms and conditions. 13 Tenders closed on 23 December 1998. Two tenders were received: the in-house bid and a bid from Silver Circle. Each tender was prepared on the basis of providing a fixed number of hours of HACC service over a three year period. Leaving aside penalty rate payments, the in-house tender was for a price of $7,770,665 and the Silver Circle tender was for $6,610,429. 14 The council appointed an evaluation committee to assess the bids by reference to four criteria: financial stability (pass/fail), price (45%), capability to develop and deliver specified outcomes (25%) and management capability qualifications (30%). The committee passed both tenderers in respect of financial stability and found little difference between them in relation to capability and management. However, there was a big difference in relation to price. Silver Circle's price advantage was accentuated by the committee's belief that the in-house tender would generate a greater penalty rate cost, because of higher rates, than would the Silver Circle tender. The committee recommended that council accept Silver Circle's tender. 15 Silver Circle was bound by a consent award of the Australian Industrial Relations Commission, the Home and Community Care Award 1995 ("the HACC award"). 16 The report of the evaluation committee was considered at a council meeting held on 22 February 1999. There was lengthy debate, during which extensive reference was made to the cost difference between the two tenders and to the fact that this difference arose because the wage and penalty rates under the certified agreement were higher than those under the HACC award binding Silver Circle. 17 The council's chief executive officer, Mr Heine, told council that, if it selected the Silver Circle tender, all council's HACC employees would need to be made redundant. He forecast that, in this eventuality, Silver Circle would engage all the retrenched staff, at least for the first three months of the contract, in order to fulfil its obligations thereunder. 18 At the end of the debate, by a majority of seven to three, the council resolved to accept the Silver Circle tender. 19 On the following day, 23 February 1999, council's HACC staff were told they would become redundant on 21 May 1999. 20 By a letter dated 30 April 1999, the council changed the retrenchment date to 23 May 1999. On that day the employment of all council's HACC employees was terminated for reasons of redundancy. 21 In relation to employment with Silver Circle, Madgwick J found: "Also on 23 February a meeting was held by Silver Circle at which all the HACC workers were invited to apply for employment with Silver Circle. Such employment was to be offered, it was explained, on a three month probationary basis, and was to be governed by the Silver Circle Award. It had been known to agents of the Council that, if Silver Circle succeeded, such an offer would be made. Some of the HACC workers were offered and accepted employment with Silver Circle. As a result, these workers were then paid significantly less for doing virtually identical work. Ms Philips gave evidence that she was providing the same services and even had the same clients." The reasoning of Madgwick J 22 Madgwick J noted it was not in dispute that the HACC workers were dismissed by the council on 23 May 1999. He also referred to comments about s 298V made by Gaudron J in Patrick Stevedores Operations No 2 Proprietary Limited v Maritime Union of Australia (1998) 195 CLR 1 at para 123 and by Moore J in Kelly v Construction, Forestry, Mining and Energy Union (No 3) (1995) 63 IR 119 at 130. Madgwick J concluded at para 36: "Accordingly, it is prima facie to be presumed that the employees concerned were dismissed (or otherwise subjected to s 298K conduct) for the reason that they are entitled to the benefits of the relevant industrial instruments, or at least that such was one of the reasons for their dismissal. It was therefore incumbent upon the respondent to demonstrate the contrary." 23 At para 37 Madgwick J rejected a contention by the council that, before s 298V comes into operation, an applicant must prove the existence of facts constituting the cause of action under s 298L; including that the alleged reason was in fact operative. He noted a statement of Cooper J and myself, in Davids Distribution Pty Ltd v National Union of Workers (1999) 91 FCR 463 at para 109, that s 298V "enables the allegations to stand as sufficient proof of the fact unless the employer proves otherwise" (Madgwick J's emphasis). 24 Madgwick J noted (at para 38), and apparently accepted, evidence given by the council's human resources manager that the fact that HACC employees were entitled to the benefit of the certified agreement was not a motivating factor in the council's decision to call for competitive tenders. However, his Honour commented (at para 39) that the reason for calling tenders was immaterial, the decisive matter was the reason for the terminations. 25 Madgwick J accepted that the decision to accept the Silver Circle tender was made by the council, whereas the decision to terminate the HACC employees was made by Mr Heine. But he commented (at para 41): "Despite the fact that a few vacancies elsewhere in the Council's operations were available to some HACC staff after the Council's decision, it is clear that for all practical, present purposes, the employees' dismissal was made unavoidable by the Council when it accepted the Silver Circle bid. In terminating the employment of most and making attempts to redeploy some HACC employees, including paying them their redundancy entitlements, Mr Heine was in reality simply implementing the Council's earlier decision. Although the final decision was technically his (s 94A of the LGA provides that the CEO is responsible for dismissing Council staff) the Council was the employer and Mr Heine was acting in accordance with the Council's wishes, as indicated by the councillors' decision; Mr Heine was not acting on his own behalf but on behalf of the Council." 26 After some discussion about the proper approach to evaluation of the council's reasons for accepting the Silver Circle tender, Madgwick J said (at paras 55 to 59): "There is no doubt that the price differential between the bids was a reason for the Council's acceptance of the Silver Circle bid, although price alone does not, of course, constitute a prohibited reason. However, a strong inference does arise that the dismissals occurred, in part, because of the employees' Award and Agreement entitlements. The suggestion that the competitive tendering imperatives and Silver Circle's price constituted the only real and operative reason for the Council's decision is unpersuasive. It is clear from s 208C(1)(c) of the LGA that the Council was not obliged to accept the lowest priced bid, and even had it been, the Act, as federal legislation, would have prevailed, pursuant to s 109 of the Constitution, over the requirements of the LGA. More importantly, no evidence was led … to suggest that any decision-maker believed that he or she was so obliged. While the relative price of the bids was of great significance to the Council's decision, and price of itself is not sufficient to constitute a prohibited reason, in the circumstances of this bid, the only significant factor going to establish that price differential was the HACC workers' entitlements under the Award and Agreement. Further, it is likely that it was well-known to all councillors that the discrepancy between the Council's and Silver Circle's industrial instruments accounted for the great part of the price disparity. Councillors are political figures, elected and usually relying upon support groups that keenly follow matters of local politics. In reality, they would have been unlikely, in my opinion, not to know the main reasons why the CCT process might constitute a realthreat to the continuation of the Council's employment of a significant part of its workforce. Further still, representatives of the Council's middle management had, albeit at least partially in the HACC workers' own interests, as those representatives conceived those interests, tried to induce them to forego some of the benefits that the Award and the Agreement provided for them. It is, in my opinion, inconceivable that the middle management view had not permeated to the Council's decision-makers (of both the formal and perhaps informal varieties). The majority Councillors are very likely to have known and to have shared that view. They are also very likely to have shared a further view that was abroad, that the HACC workers were unreasonable in declining to agree to a voluntary diminution of their Award and Agreement entitlements and that they had only themselves to blame for being unable to undercut or match the Silver Circle bid." [Original emphasis] 27 After commenting that the council called evidence from only one of the councillors who voted to accept the Silver circle bid, Madgwick J said (at para 62): "That no other such witness was called suggests that none could have provided evidence contrary to the powerful inference already apparent from the available evidence that the Council was motivated by the HACC workers' entitlements. That inference may therefore be more confidently drawn: Jones v Dunkel." [(1959) 101 CLR 298] 28 Madgwick J concluded this portion of his reasons by saying (at para 65): "For these reasons the respondent has failed in a factual sense to establish that a reason for the dismissal or any other s 298 [sic: 298K] conduct … of the HACC workers was not because of their entitlement to the benefits of the Award and Agreement. On the contrary, in my opinion the Council's decision was, in part, so motivated. In my view, an actual, operative and significant reason for the Council's actions was that the substantial majority of the HACC staff were entitled to the benefits of the Award and the Agreement." 29 Madgwick J turned to the reach of s 298L(1)(h). He said (at paras 66 to 68): "There are arguably two ways of reading s 298L(1)(h). It may mean either: (i) all that is prohibited is s 298K conduct wholly or partly motivated by the very fact that the employee concerned is entitled to something, whatever it may be, under an industrial instrument that could be called a benefit, or; (ii) conduct is also prohibited if motivated by the level, degree or extent of the entitlement. The first interpretation fixes upon the mere fact of entitlement, the second on the nature of the entitlement. If the first meaning is correct, then the respondent Council must succeed. It plainly had, by its agents, no intention at all to discourage the HACC workers from having some kind of entitlements under an industrial instrument per se. However, textually, the use of the term 'benefit' and the employee's 'entitlement' to it, tends against this construction. The express concept is not whether motivation for the s 298K conduct is simply regulation of the parties' entitlements by award or agreement, but whether it is the employee's 'entitlement' to 'benefit' thereunder. Moreover, if this is the correct meaning of the paragraph, its application is confined to the conduct of employers who ideologically object to the intrusion into their enterprises of any 'award or agreement … made under or recognised by' any Commonwealth or State (or Territory) statute: …. It is unlikely that, on such a crucial subject, Parliament would have concerned itself with such fringe eccentricities; employers (and employees) are concerned with the nature of entitlements, not the mere formality of their existence. The seeming difficulty about the second available meaning is that the provision may catch some employers who have no ideological aversion to award coverage of their employees, or to trade unionism among them, but who simply wish to cut costs where they find that a significant reason for present costs is the level of entitlements under an industrial instrument. On analysis, this supposed difficulty is only to say that, in some situations, questions of degree, characterisation and judgment will be called for. These potential uncertainties are hardly novel or significant obstacles to any entrepreneur or undertaking. In any case, it is a 'problem commonly encountered' in statutory interpretation that 'nice questions of degree' may be involved: Superannuation Investment Fund Trust v Commissioner of Stamps (SA) (1979) 145 CLR 330 per Stephen J, at 348 – 350." [Original emphasis] 30 His Honour pointed out (at para 69) that the expense of an employee's performance of work will often be a genuine reason for action by an employer. But he drew a distinction between a case in which an employer determined he or she could not afford to pay an award increase and closed the business (where there would usually be no breach of s 298L(1)(h)) and a case where an employer dismissed an employee who was paid an award wage and promptly hired another person to do the work at an lesser wage. 31 Madgwick J referred (at paras 70-71) to what was said by Evatt J in Grayndler v Cunich (1939) 62 CLR 573 at 594 and 596 and concluded that the second of the two ways of interpreting s 298L(1)(h) "is clearly to be preferred". 32 The High Court of Australia determined Grayndler v Cunich on a procedural issue; only Evatt J addressed the legal issues underlying the case. Nonetheless, the case played a significant role in Madgwick J's reasoning; so it should be noted. 33 Cunich was prosecuted under s 9 of the Commonwealth Conciliation and Arbitration Act 1904 in relation to the dismissal of two employees. Cunich had a policy of not employing unionists. The policy was apparently based on the then rule that only members of a relevant union were entitled to benefits prescribed by an award. The dismissed workers had recently joined the Australian Workers' Union and thereby become entitled to award rates of pay. Those rates were higher than their previous rates. The magistrate found that the employees were dismissed because they had lawfully entitled themselves to the benefit of the award, and this represented an additional liability for Cunich. However, the magistrate dismissed the information because he regarded himself as bound by a decision of the New South Wales Industrial Commission (Grayndler v Broun [1928] AR (NSW) 46) that a comparable State provision was not intended "to prevent an employer from meeting that position and relieving himself of the burden" by dismissing the relevant employees. Evatt J thought the Commission's decision was wrong. At 595 he said: "… we are not investigating a case where a business or department is being closed down, but a case where an employer has determined (1) that the enterprise as a whole shall be conducted entirely upon conditions of private bargaining which are less favourable to employees than award conditions, and also (2) that every employee who qualifies himself to obtain the better award conditions shall immediately be dismissed. This is one of the obvious cases which sec 9 was designed to cover." 34 After dealing with some other matters, Madgwick J considered the meaning of s 298K(1)(c) of the Act. At para 85 he referred to Patrick Stevedores wherein Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ at para 4 referred to para (c) of s 298K(1) as "a broad additional category which covers not only legal injury but any adverse affectation of, or determination in, the advantages enjoyed by the employee before the conduct in question". Madgwick J also noted (at para 86) part of a passage in para 32 of the joint judgment: "The conspiracy alleged - more accurately, the conspiracies alleged - were to engage in two examples of contravening conduct. The first alleged conspiracy was an agreement to reorganise the Group whereby the position of the employees would be altered to their prejudice for reasons which included the reason that the employees were members of the MUA. This would be a conspiracy in contravention of par (c) of s 298K(1). The second alleged conspiracy, which has not yet been brought to completion, was an agreement to take action whereby the employees would be dismissed (by the employer companies) for the reason, or for reasons which included the reason, that the employees were members of the MUA. This would be a conspiracy in contravention of par (a) of s 298K(1)." [Madgwick J's emphasis] 35 At para 88 Madgwick J held the certainty that the HACC employees would be dismissed as a result of the councillors' resolution was, in the language of para 4 of Patrick Stevedores, an "adverse affection of, or determination in, the advantages" enjoyed by the employees before the relevant conduct. 36 Madgwick J considered para (b) of s 298K(1) had no application in this case. But he found against the council in respect of both para (a) and para (c) of the subsection. At paras 94 to 96 his Honour summarised his views in this way: "In this case, to recapitulate, the employer was concerned as to the comparative expense of its employees performing the HACC work, and knew that the entitlements of those employees to the benefit of the relevant industrial instruments were the main reasons for that comparative expense. The employer also believed that the main reason why the expense might be reduced was that the independent contractor's employees would be unable to access entitlements of similar value. Further, the employer knew that it was probable that at least some of the contractor's employees would come from the ranks of the employer's own subject employees and that the work would be performed in substantially the same ways. Finally, the employer's agents had attempted to have the employees voluntarily reduce their entitlements. The decisive action was taken only after reference to the employees' decision to accept that they were, in effect, labourers unworthy of their present hire. In my opinion, these facts lead to a positive inference that an operative, if subsidiary, reason for the Council's actions was that the subject employees had those very entitlements. At the very least, in my opinion, it can safely and without injustice be said that the Council has failed to discharge its s 298V onus of proof of the contrary. As submitted by the respondent, it is clear from the oral evidence of Mr Heine and Mr Trestrail that the Council acted throughout the tender process in subjective good faith, and without an anti-union attitude. However, the bona fides of the Council's officers is here relevant only to the quantum of any penalty, not to liability for it, although in some cases the employer's attitude to such matters will be of assistance to negate a prescribed reason." 37 In paras 97 to 125 Madgwick J dealt with, and rejected, an argument advanced on behalf of the council to the effect that the implied constitutional immunity against interference by Commonwealth laws with a State's capacity to function as a State operated, in the circumstances of this case, to prevent the application of ss 298K and 298L of the Act. That argument was repeated before us and I will return to it. 38 Finally, at para 126, Madgwick J turned to remedies. He held "there are plainly mitigating circumstances (so) a nominal penalty will suffice". His Honour observed (in para 127) that, where reinstatement is sought for proven, unlawful termination of employment, "it should generally be regarded as the primary remedy and awarded, except where it would be impracticable so to do, or where there are other just and compelling reasons against that course". In the present case, he said, there was no material to show it would be more than inconvenient for the council, and attended with some expense, to reinstate the relevant employees. He said: "Whatever, if anything, might be the implications for the Council's legal relations with Silver Circle is not something that principle would permit to be used against the wronged employees. There is nothing impracticable about ordering reinstatement. 39 At paras 128 and 129 Madgwick J considered, and dismissed, discretionary arguments against reinstatement: that the proscribed reason was merely influential in the council's dismissal decision, rather than the sole or primary reason; and that the employees had displayed unreasonable rigidity in wishing to retain the conditions of work prescribed by the certified agreement. He then said (at para 130): "I have also considered whether reinstatement would be an available and appropriate remedy if my conclusion about the breach of s 298K(1)(a) is incorrect, so that the only breach is of s 298K(1)(c). At least in the circumstances of this case, where the offending alteration of the employees' position was the creation of circumstances in which they would certainly be dismissed and no longer enjoy reasonable security of their employment, it seems to me that affirmative answers to these questions must be given." 40 However, some time had elapsed since the dismissals. Madgwick J thought some employees might now prefer compensation to reinstatement. So his Honour ordered a conference concerning remedies. 41 On 10 November 2000 Madgwick J made formal orders in which he: (i) noted that seven named group workers had opted out of the proceedings; (ii) made a declaration that the council contravened s 298K(1)(c) of the Act on 22 February 1999 by resolving to contract out the HACC services on which the group workers were employed; (iii) made a declaration that the council contravened s 298K(1)(a) of the Act on 23 May 1999 in dismissing the group members; (iv) ordered the reinstatement, within 28 days, of 47 named group workers, such reinstatement being with deemed continuity of employment; (v) referred issues concerning compensation for the reinstated employees, and the other group workers, to a conference before a Registrar; (vi) imposed a single penalty of $100; and (vii) stood over other issues connected with compensation. The appeal 42 Prior to any formal orders being made, the council had filed a notice of appeal against Madgwick J's decision. His Honour ordered the appeal be expedited. He refused a stay of the reinstatement order. 43 The council filed a notice of motion, returnable before the Full Court, seeking a stay of the reinstatement order pending the appeal. The Full Court, as presently constituted, heard that motion on 23 November 2000. At that time both parties sought, and undertook to be ready for, an early hearing of the appeal. On that basis, the Court stayed the operation of the reinstatement order until the hearing of the appeal or any earlier order of the Court. 44 Upon the hearing of the appeal, on 11 December 2000, Mr F Parry and Mr B Lacy appeared for the council. Mr M Bromberg and Ms R Doyle appeared for the union and Ms Phillips. Mr J H Dixon SC and Mr J Tuck appeared on behalf of the Minister for Employment, Workplace Relations and Small Business, intervening pursuant to s 471 of the Act. The Minister's submissions were confined to issues of construction of the Act; in particular ss 298K and 298L. At the conclusion of the hearing of the appeal, the Court extended the stay until the delivery of judgment. 45 Counsel raised three main issues in support of the council's appeal. The first issue concerned Madgwick J's interpretation, and application to this case, of s 298L(1)(h) of the Act. The second contention was that Madgwick J erred in failing to find a constitutional immunity in respect of the application of ss 298K and 298L, in the circumstances of this case. The third point raised by the appellant related to the primary judge's decision to order reinstatement. I will deal separately with each of these issues. The proper interpretation of s 298L(1)(h): an historical survey 46 The major issue in the appeal concerns the proper interpretation of s 298L(1)(h). At para 29 above, I set out the "two ways of reading" the paragraph identified by Madgwick J. The issue is whether the conduct referred to in s 298K(1) must have been undertaken because the employee was entitled to the benefit of an industrial instrument or order, regardless of its content – that is, what Madgwick J called "the mere fact of entitlement" - or whether it is sufficient that the conduct was a response to the content of a particular instrument or order. 47 The council and the Minister argue for the first alternative. In doing so they rely heavily upon the legislative history of ss 298K and 298L. 48 Section 9(1) of the Commonwealth Conciliation and Arbitration Act, as enacted in 1904, was in these terms: "No employer shall dismiss any employee from his employment by reason merely of the fact that the employee is an officer or member of an organization or is entitled to the benefit of an industrial agreement or award. Penalty : Twenty pounds." 49 Counsel for the council suggest that, in this formulation, the words "entitled to the benefit" mean "entitled as a matter of law under the Act and not entitlement to particular benefits under the instrument". They go on: "In a system where the role of organisations was paramount and the legislative scheme contemplating awards binding on employers and organisations and their members (see s.29) then it is clear that the reference to entitlement to the benefit of an award was to complement the protection of members of organisations. After all, one could become entitled to the benefit of an award by joining the organisation." 50 Counsel also draw attention to the standing provision in 1904 Act. Section 123 of that Act provided: "An employee entitled to the benefit of an award may, at any time within 6 years from any payment becoming due to him under the award, but not later, sue for the amount of the payment in the Court …" Counsel comment: "This sentence is consistent with the construction advanced by the Appellant – the term 'benefit' is used to describe the state of being covered by an award". 51 The Commonwealth Conciliation and Arbitration Act was amended in 1914 by repealing the original s 9 and substituting a new provision. It included subs (1) as follows: "(1) An employer shall not dismiss an employee, or injure him in his employment, or alter his position to his prejudice, by reason of the circumstance that the employee – (a) is an officer or member of an organization, or of an association that has applied to be registered as an organization ; or (b) is entitled to the benefit of an industrial agreement or an award; or (c) has appeared as a witness, or has given any evidence, in a proceeding under this Act. Penalty : Fifty pounds." It will be noted the range of proscribed conduct was broadened and the word "merely" omitted. However, the new provision retained the formula "entitled to the benefit". 52 Counsel for the appellant say that, in 1904 and 1914, "[t]he concern of Parliament was with the protection of organizations at a time when awards could only bind employers in respect of union members"; a situation that persisted until the Metal Trades Case in 1935. They cite a comment of Isaacs J, in Pearce v WD Peacock & Co Ltd (1917) 23 CLR 199 at 205, about s 9 being one of the means of effectuating the statutory object of facilitating and encouraging the organization of representative bodies of employers and employees and the submission of industrial disputes to the Federal Arbitration Court. 53 In 1947 the Commonwealth Conciliation and Arbitration Act was amended in such a way that the old s 9 became s 5. Paragraphs (a) and (c) of the section were expanded to cover additional conduct, but para (b) was left unchanged. The paragraph still referred to an employee being "entitled to the benefit" of an industrial agreement or award. This situation continued unchanged until the repeal of the Conciliation and Arbitration Act (as it had become in 1950) in 1988. 54 Dealing with this period, counsel for the council cite an observation of Mason J (with whom Gibbs, Stephen and Jacobs JJ concurred) concerning s 5(1) and (4) of the Conciliation and Arbitration Act in General Motors Holden Pty Ltd v Bowling (1976) 12 ALR 605 at 616: "The two subsections are, broadly speaking, designed to protect an officer, delegate or member of an organization against discrimination by his employer. They have a legislative history which extends back to the turn of the century when the trade union was a more fragile institution than it is today and when it stood in need of a large measure of protection from employers." Counsel comment: "Clearly the fact of entitlement to the benefit of an industrial award was inextricably linked with the rights to union membership and the role of organizations." 55 In the statute that replaced the Conciliation and Arbitration Act, the Industrial Relations Act 1988, the relevant provision was s 334. That section further expanded the list of prohibited reasons but retained the notion of entitlement to benefit. Paragraph (e) of s 334(1) covered the situation where "the employee … is entitled to the benefit of an award or an order of the Commission". The word "award" was defined by s 4 of the 1988 Act so as to include a certified agreement. The definition was later expanded to cover an enterprise flexibility agreement. 56 As counsel point out, the 1996 amendments to the Industrial Relations Act, that transformed it into the Workplace Relations Act 1996, included significant amendments to the protections available to employees. Importantly, in counsel's submission, the words "award or an order of the Commission" were replaced by a reference to "an industrial instrument", a term that is widely defined. It covers awards and agreements made under State or Territorial law. Counsel say: "… the 'benefit' of the industrial instrument no longer necessarily arises under the Act but can be under an industrial law of the Commonwealth, State or Territory. Again it is not the benefits in the industrial instrument that is the focus but the fact of entitlement as the benefit of the instrument under whatever law underpins that benefit." 57 Counsel for the council also mention s 298F(2) of the Act which, they say, "provides the appropriate constitutional underpinning of s 298K and s 298L(1)(h)". Section 298F(2) provides: "This Part applies to conduct carried out with a purpose or intent relating to: (a) the fact that an award, a certified agreement or an AWA applies to a person's employment; or (b) the fact that the person is bound by an award, a certified agreement or an AWA." 58 Counsel for the council observe that outsourcing is not new; Australian businesses have been contracting out functions for many years. They say the legislation has to be construed against that background; a wide interpretation of s 298L(1)(h) will render unlawful a long-accepted commercial practice. 59 The submissions made on behalf of the Minister add little to those of the council. Counsel emphasise the significant changes to industrial law effected by the 1996 amendments. They also refer to two New South Wales decisions, Davis v Amalgamated Television Services Pty Limited (1998) 81 IR 364 and Moss v Fantil Pty Limited (1994) 58 IR 118. However, those decisions are of little assistance; they deal with differently worded statutory provisions. 60 The submissions made on the issue of interpretation by counsel for the respondents concentrate on the decided cases. The point under present consideration appears never to have been the subject of judicial discussion. However, counsel for the respondents argue it is implicit in all the reported cases that the words "entitled to the benefit" of an award etc cover a case where the prescribed conduct is taken because of the content of the award etc. They have not been able to find any case where the issue has been whether the employer took action because of the mere fact of the award, as distinct from its content. 61 The earliest reported case appears to be a decision of the Full Court of the Supreme Court of Tasmania: Eaton v McKenzie (1916) 12 Tas LR 94. The case was concerned with the application of s 9(1)(b) of the Commonwealth Conciliation and Arbitration Act 1904, as amended in 1914. Both appellants were master builders carrying on business in Hobart. They were parties to an award, made by the Commonwealth Court of Conciliation and Arbitration in 1913, that governed the working conditions of builders' labourers. They each employed builders' labourers and paid them wages calculated in accordance with the award. On 18 May 1916 the Court varied the award, so as to increase the rate of wages payable thereunder as from midnight on 1 June 1916. Shortly before that time – in one case on 31 May, in the other on the afternoon of 1 June – each appellant dismissed all his builders' labourers. Both appellants were convicted of contraventions of s 9(1)(b). The Full Court unanimously affirmed the convictions. Dealing with the case of the appellant McKenzie, Nicholls CJ said at 95-96: "To me it seems quite plain that the appellant dismissed the respondent for the reason that the respondent was one of those entitled to the benefit of an award which would, next day, cause his wages to be increased. The appellant gave no evidence of inability to pay, of dismissal by reason of reduction of hands in the course of regulation of the work, or of any other cause besides the award. He said, 'If the award had not been varied, I should have carried on as usual.' It seems to be the fact that he can carry on, despite the variation." At 97 Crisp J said: "Many motives may influence employers in dismissing their employees; they may not be able to pay the wages, they may decline to pay them in any event, they may dismiss for purely political reasons, but if the magistrate in the particular case before him sees that the real basic reason for the dismissal was the award, then his duty is to convict. If an employer finds that he cannot pay the wages fixed by the award, there is nothing in the Act to compel him to do so, or to punish him if he decides to go out of business. In my opinion an employer who is satisfied that to pay the wages awarded means ruin to himself, and who, in consequence, dismisses his men or any of them, has not dismissed them because of the award but because he could not pay. It may be said that the award is at the root of his decision in any event, but while that is so I still think there may be a material distinction between the case of the employer who says, 'I cannot pay', and that of him who says, 'I will not pay'. In this case, on a review of the evidence, I think the magistrate could not help finding that the real reason for the dismissal was the award." 62 It will be noted that the dismissed men had long been covered by the award. They were not dismissed because they were covered, but because of a change in the content of the award, so as to increase their wages. 63 The next case, in chronological order, is Grayndler v Cunich, to which reference has already been made. It seems the two dismissed employees had recently become union members, and thereby become entitled to higher wages. In holding that the employees were dismissed because they had become entitled to the benefit of the award, the magistrate did not distinguish between the fact of the award and its content, although he did note that the employer "was saddled with an additional liability by reason of the men having joined the union". Evatt J seems to have thought the content of the award was the material factor. He said at 594: "Mere membership of the union was only of indirect concern to the employer. Had the award prescribed conditions which were less favourable than those which obtained on the job, the employer would either have been pleased with those who, by joining the union, obtained worse conditions, or at least would not have intervened. Fitzgerald was dismissed, as finding 7 plainly shows, solely because the defendant had to pay him more wages so soon as he became entitled to the more favourable award conditions." 64 Klanjscek v Silver (1961) 4 FLR 182 was a decision of the Commonwealth Industrial Court (Spicer CJ, Joske and Eagleston JJ). In that case the content of the award was a critical issue. The defendant carried on business as a shirt manufacturer. At the relevant time she employed 25 people, 13 of them as piece-workers. The piece-workers were paid the piece-work rate prescribed by the (Federal) Clothing Trades Award 1960 together with a flat rate of 36 shillings per week. At a time of business downturn, the employer proposed to the piece-workers that their wages should be reduced by eliminating the flat rate payment. The resultant wages would still be above the minimum wage specified in the award; however, under the award, it was necessary for the employees to consent to any reduction in wages. They refused to consent and were dismissed. The Court dismissed a charge of contravention of s 5 of the Conciliation and Arbitration Act, holding the dismissals were not by reason of the fact that the employees were entitled to the benefit of the award but because the business operations had become unprofitable. At 186 the Court said: "… we have to consider the case on the basis that, unless the employees, through their representative, agreed to a reduction of rates, they were entitled, by virtue of the award, to the benefit of the existing rates, and that this fact was an element in the dismissal of the employees, since if they had not been so entitled Silver would have continued to employ them at a lower rate, which would, however, still have been within the limits imposed by the award. We therefore have to consider whether a dismissal in such circumstances is a breach of the section." 65 After referring to the history of s 5 and some decisions under its New South Wales equivalent, the Court said at 187: "… we think that, at least, the section should not be considered as intending to penalize an employer who closes down his operations because his operations have become unprofitable, even though the minimum rate prescribed by the award is one of the factors in this result. A fortiori, where the employer is willing to continue to operate in accordance with the award, provided only that his employees will consent to reduce the existing piece-work rates to a lower rate which is still above the minimum, the employer commits no offence. In such a case he is not actuated by the reason that the employees are entitled to the benefit of the award, but by the reason that his operations have become unprofitable." 66 If s 5 of the Conciliation and Arbitration Act only covered a case where an employee was dismissed because of the fact of an award, as distinct from its content, the Commonwealth Industrial Court gave itself unnecessary trouble in Klanjscek v Silver. As there was no suggestion that the employer objected to the fact that the employees were covered by the Clothing Trades Award, the Court could have dismissed the information on that simple ground. 67 A similar comment may be made about Musgrove v Murrayland Fruit Juices Pty Ltd (1980) 47 FLR 156, a decision of the Federal Court. In that case Smithers J dismissed an information under s 5(1)(b) of the Conciliation and Arbitration Act, but only because, on the facts, he rejected the contention that the employer dismissed the prosecutor for taking a lunch break prescribed by the award. His Honour considered whether there was a direct connection between this award entitlement and the dismissal. If he had thought the offence was committed only where there was a link between the dismissal and the fact of an award, as distinct from its content, it would not have been necessary to address that question. As there was obviously no such link, the information would have been dismissed on that basis. The proper interpretation of s 298L(1)(h): conclusions 68 I have mentioned all known decisions dealing with the Commonwealth legislative antecedents of s 298L(1)(h). They are surprisingly few in number, considering that the antecedents go back to 1904. Of course, there may be other decisions that neither counsel nor I have located. But what is striking about the known cases is that it has always been thought necessary for the court to determine whether the employer's conduct was related to the existence of particular award conditions. It seems no court has ever thought the reach of the relevant provision was restricted to a case where the employer had an ideological or principled objection to an employee being covered by an award, as distinct from an aversion to some term of the award. 69 The approach taken in respect of the antecedents of s 298L(1)(h) does not necessarily apply to the current provision. Theoretically, at least, it is conceivable that Parliament intended s 298L(1)(h) to have a reach and application different from its predecessors. It is necessary to construe the present provision in its own legislative context. However, to the extent that judicial decisions concerning the predecessor provisions are relevant to resolution of the issue of construction, they favour the argument of the respondents rather than that of the council or the Minister. 70 Section 298K and 298L appear in a Part of the Act (Part XA) entitled "Freedom of Association". The objects of that Part are stated in s 298A, which reads as follows: "As well as the objects set out in section 3, this Part has these objects: (a) to ensure that employers, employees and independent contractors are free to join industrial associations of their choice or not to join industrial associations; and (b) to ensure that employers, employees and independent contractors are not discriminated against or victimised because they are, or are not, members or officers of industrial associations." 71 During the course of argument, reference was made to the title and objects of Part XA. The suggestion was that they support the view that the words "benefit of an industrial instrument or an order of an industrial body" refer to the fact that the employee is entitled to benefit by such an instrument or order, as distinct from the content of the instrument or order; in other words that the employee has an association with the instrument or order. However, this argument takes too narrow a view of the concept of freedom of association. It fails to appreciate the link between a person's freedom to engage with others in collective industrial action and that person's entitlement to enjoy the fruits of such action. I referred to this link in Construction, Forestry, Mining and Energy Union v BHP Steel (AIS) Pty Ltd [2000] FCA 1008. In that case the respondent refused to proceed with a proposal that a person take a position at its steel works, on a "job swop" basis, unless the person repaid the value of award benefits he had recently received in respect of his retrenchment at the respondent's colliery. The case was conducted, on both sides, on the basis that s 298L(1)(h) is concerned with particular award benefits. In discussing a decision of Moore J concerning s 334 of the Industrial Relations Act, I said at para 48: "It is fundamental to the notion of freedom of association that employees should be free to join, or refuse to join, industrial organisations; and not be subject to discriminatory action or victimisation on account of their choice. Likewise, it is fundamental that employees should be free, if they choose to do so, fully to participate in the affairs of registered organisations and in lawful actions designed to protect and further the interests of such organisations and their members. Once again, they must not be penalised for taking that course. Similarly, employees should be allowed, without penalty, to take advantage of entitlements provided by, or under, the Act, including award benefits. To victimise, or discriminate against, an employee who insists on obtaining and receiving award benefits, is to offend notions of freedom of association; such an action undermines the right of collective action." 72 This passage was cited with approval by Ryan J in Maritime Service of Australia v Burnie Port Corporation Pty Ltd [2000] FCA 1189 at paras 51 and 52. His Honour's decision was reversed by a Full Court for other reasons: see Burnie Port Corporation Pty Ltd v Maritime Union of Australia [2000] FCA 1178. However, the Full Court did not express disagreement with Ryan J's adoption of what I had said. 73 The point made by counsel for the council about the form of s 298F(2) has a superficial attraction. That subsection refers to conduct carried out with a purpose or intent relating to the fact that an award etc applied to a person's employment, or that the person is bound by an award etc. However, the role of s 298F(2) must be borne in mind. The circumstances referred to in that subsection are but one of a series of circumstances that give rise to the application of the Part: see ss 298D to 298H. 74 Counsel for the council and counsel for the Minister both contended the interpretation adopted by Madgwick J would have unacceptable consequences. They stated, correctly, that the potential application of s 298L(1)(h) is wider than was the potential application of the corresponding provisions in the Conciliation and Arbitration Act and Industrial Relations Act. Section 298L(1)(h) refers to "the benefit of an industrial instrument" and this term is defined by s 298B(1) so as to mean: "… an award or agreement, however designated, that: (a) is made under or recognised by an industrial law; and (b) concerns the relationship between an employer and the employer's employees, or provides for the prevention or settlement of a dispute between an employer and the employer's employees." The term "industrial law" is defined to mean: "… this Act or a law, however designated, of the Commonwealth or of a State or Territory that regulates the relationships between employers and employees or provides for the prevention or settlement of disputes between employers and employees." Counsel comment: "Clearly the definition of industrial instrument covers a much wider range of instruments than was ever covered in the past. It extends to awards or agreements made under State Law. These instruments were never covered or referred to in the past. This greatly extends the scope of Part XA to protect the position of employees entitled to the benefit of such instruments." 75 However, the fact that the paragraph now applies to a wider range of instruments is not a reason for departing from the settled interpretation of the words "is entitled to the benefit of". The expansion is probably because of parliamentary concern to extend Commonwealth freedom of association protection as far as possible. 76 In their written submissions, counsel for the council said: "It may be recalled that the scope of s.298K(1) is potentially quite wide. It can cover taking away overtime, moving from one position to another, not giving work to irregular employees, and certainly dismissal. Is it to be the position that once one of the reasons for such conduct is the existence of a wage increase in an award a new provision in an award for a regime of hours, higher penalty rates etc that such normal business decisions become unlawful. The potential scope of s.298K(1) with s.298L(1)(h) is enormous on this reading. Is that what the legislature intended in 1904? Is that what the legislature intended in 1996?" 77 I agree the scope of s 298K(1) is wide. There may be occasions upon which the application of the interpretation adopted by Madgwick J, and favoured by me, will lead to an apparently harsh result. That is not a new observation. In Eaton v McKenzie, in 1916, Nicholls CJ said at 96 it had been "urged for the appellant, with much force, that this law, if construed according to the plain and usual meanings of its words, will produce consequences sometimes absurd and sometimes oppressive". The Chief Justice said he believed that to be true; nonetheless he dealt with the case on the basis of those meanings. He obviously thought the court should leave it to the legislature to take whatever action was needed to cope with any absurdity or oppression that might emerge. That Parliament did not find this necessary but, on the contrary, repeatedly re-enacted the formula "entitled to the benefit of", supports the impression, that might anyway be gleaned from the paucity of decided cases, that Nicholls CJ's view was overly pessimistic. 78 In considering the effect on outsourcing of the trial judge's interpretation, it is important to note, as we have seen, that this interpretation is consistent with the interpretation that has invariably been applied to s 298L(1)(h) and its statutory predecessors; yet, as counsel for the council themselves emphasise, outsourcing is a long-standing phenomenon in Australia and has expanded markedly in recent years. This has been done without giving rise to a plethora of cases in which reliance has been placed on s 298L(1)(h). Perhaps the explanation is that outsourcing usually involves much more change than in the present case. 79 Although the details vary from case to case, outsourcing typically involves the engagement of a contractor who carries out a function or operation, previously undertaken by the enterprise itself, in a more efficient way; perhaps by the use of more sophisticated equipment, perhaps by using specialised labour. It will generally be possible for an outsourcing employer, accused of s 298K(1) conduct for a s 298L(1)(h) reason, to negative that reason by proving other reasons for the decision to outsource. What makes this case unusual is that the functions to be undertaken by Silver Circle were exactly the same as those previously undertaken by the council and would be performed by many of the same people and in virtually the same way. It was not suggested that new equipment would be used; the only envisaged "efficiency" was a saving in costs by moving the labour force from the certified agreement to the HACC award. 80 In my opinion Madgwick J was correct in adopting the second of the two interpretative approaches identified by him. Section 298L(1)(h) does not apply only to conduct motivated by the fact that an industrial instrument or order applies to an employee. It applies, also, where the employer is motivated to engage in proscribed conduct because of the content of the instrument or order. The application of this interpretation 81 As I have mentioned, counsel for the appellant do not challenge the findings of primary facts made by Madgwick J. However, they submit that, even if his interpretation of s 298L(1)(h) was correct, Madgwick J erred in its application. Counsel say: "… the learned Judge focussed simply on one meeting of Council on 22 February 1999 and did not give any consideration to the legislative regime binding on the Council, the recommendation by the panel nor the role of the Chief Executive Officer. This led to an inquiry that was too narrow and a finding on the facts that was incorrect." 82 In elaborating this submission, counsel observe that the meeting of council on 22 February 1999 was only one of a sequence of events, that commenced with the decision in March 1996 to select HACC services for tender and ended with the termination of the HACC employees' employment on 23 May 1999. Counsel emphasise the report of the evaluation committee and point out that, at the trial, counsel for the union and Ms Phillips indicated he would make no criticism of the council for failing to adduce evidence from the four officers who constituted the evaluation committee; counsel told Madgwick J "our central focus is on the decision of the councillors". 83 Counsel for the appellant say their opponent at the trial was entitled to take that course, but this did not justify Madgwick J confining his attention to the council meeting. In their written submissions, they say his Honour's focus was too narrow: "The learned Judge gave no weight or consideration to: (a) the obligation to engage in compulsory competitive tendering on the Appellant. It had no choice but to comply with State law. (b) Home Care was selected for such tendering in 1996 and the Appellant followed the process in the legislative scheme. (c) There was a panel set up that assessed the tenders in compliance with the legislative scheme. The Respondents said they would not rely on their reasons. That is very well for them but no reason for the learned Judge to simply ignore this step in the decision making process. (d) The Council accepted the recommendation of the panel and the CEO." 84 Counsel go on: "Consideration of all the circumstances reveals that the Councillors were apt to query the reasons for the disparity in the tender prices. The Councillors were considering the CEO's recommendation following upon a process of management endeavours to promote a more competitive in-house bid. It is not unreasonable and in fact entirely rational that they should have adverted to the obvious disparity in prices and to seek an explanation for it. Little wonder that the Councillors should be surprised by the difference, particularly as the same union that represented the home care workers in the Council was a party to the other award. However, once the Councillors were aware of the fact of the disparity and the reason for it the Act did not require them to reject the recommendation for the more advantageous bid merely because the advantage was due to award differences. Price was but one of two other criteria in which Silver Circle was superior on the bid. But the reality is that the dye had been cast back in 1996. The price difference that was revealed in the separate bids was a matter that the Councillors but briefly turned their minds to on 22 February 1999 in their consideration of the recommendation of the CEO. The real issue was whether, in all of the circumstances, the Appellant dismissed the home care workers, or prejudicially altered their positions, for a prohibited reason. Whether the conduct was for a prohibited reason could not be ascertained by confining the inquiry to the decision of the Council on 22 February 1999. That decision and the reasons for it could be understood properly only after looking at all of the circumstances." 85 Counsel for the appellant also point out that it was resolved, on 22 February 1999, to accept the Silver Circle tender subject to two conditions: successful completion of the proposed transition plan and confirmation from Silver Circle of completion of a planned capital injection. Counsel point out that the contract between the council and Silver Circle did not arise until fulfilment of the two conditions. They say: "The HACC workers' positions would be affected only if Silver Circle fulfilled the conditions precedent and ultimately took up the contract with the Appellant. A consequence of the fulfilment of those conditions would be that the Appellant would enter into an agreement with Silver Circle to provide the HACC services, Silver Circle would take up the contract and the positions of the HACC workers in the Council then would become redundant. The positions of each of the HACC workers would be redundant not because of an intentional act by the Appellant to change their positions to their prejudice but rather because Silver Circle fulfilled the conditions precedent to acceptance of their offer to the Appellant to provide the HACC services and a contract was made for Silver Circle to perform the services. Consequently, the learned Judge has erred in finding that the positions of the home care workers were altered to their prejudice by the resolution on 22 February 1999." 86 Counsel also argue: "To the extent that there was any alteration of the home care workers' positions, and of the dismissal, they were not effected by the intentional act of the council on 22 February 1999, but rather the consequences of it … The resolution did not alter the home care workers positions to their prejudice for two reasons. First, the acceptance of the Silver Circle bid was subject to a condition precedent. Second, their terms of employment and the entitlements incidental to it were not cancelled or repudiated by the resolution." 87 I agree with counsel that the council meeting of 22 February 1999 was only one of a sequence of events that resulted in the termination of the employment of the HACC employees. It would be wrong to focus on that meeting to the exclusion of other events in the sequence. However, Madgwick J did not make that error. He recounted the whole sequence of events, commencing with the enactment of the 1994 legislation requiring councils to engage in compulsory competitive tendering. He referred to the March 1996 decision to apply this procedure to the provision of HACC services, the discussions concerning an in-house bid, the appointment and report of the evaluation committee, the council meeting and its aftermath. There is no reason to think his Honour overlooked any of that history when determining whether or not he was satisfied that the council did not contravene s 298K(1)(a) or (c) of the Act. 88 It is correct to say that Madgwick J gave particular attention to the council meeting of 22 February 1999. That is not surprising; if the council had reached a different conclusion in relation to acceptance of the Silver Circle tender, there would have been no reason to terminate the employment of council's HACC employees; this case would not have arisen. It is also correct to say that the termination was not effected by council itself, at that meeting, but by Mr Heine as council's chief executive officer. However, in taking that step, Mr Heine was simply implementing council's decision. As the evidence cited by his Honour demonstrates, the councillors who attended the 22 February meeting were well aware that the inevitable result of a decision by them to accept the Silver Circle tender would be the dismissal of most (if not all) of council's HACC employees. Nonetheless, council accepted the Silver Circle tender. Mr Heine then took the action that they expected, and intended, him to take. 89 The council's decision directly and immediately caused the employees' position to be altered to their prejudice: see s 298K(1)(c). The prejudice would not ripen into dismissal unless two conditions were satisfied, but the prejudice immediately arose. And the council's decision was the operative cause of Mr Heine's termination action: see s 298K(1)(a). While it is true that the HACC employees' terms of employment "were not cancelled or repudiated by the resolution", they were cancelled as a direct and foreseen consequence of the resolution. 90 It is factually incorrect to say, as do counsel for the appellant (see para 85 above), that the HACC employees were not made redundant "because of an intentional act by the Appellant to change their positions to their prejudice". Council intentionally took a course that it knew would alter the employees' position to their prejudice. Upon the basis of Madgwick J's findings, a principal reason why it took that course was that, whilst employed by the council, the HACC employees were entitled to the benefit of the award and certified agreement while employees of Silver Circle (even if they were the same people) would not be so entitled. 91 It is important to note that counsel for the council do not submit the decision of their client was uninfluenced by Silver Circle's price advantage; they concede it was one of the criteria the council took into account. Nor do counsel suggest that Silver Circle's price advantage was other than a reflection of the differences in the terms and conditions of the industrial instruments respectively binding the council and Silver Circle. Under those circumstances, it seems to us, to put the matter at its lowest, that it was open to Madgwick J to reach the conclusion (as he did at para 65 of his reasons) that the council "has failed in a factual sense to establish that a reason for the dismissal or any other [s 298K] conduct … was not because of the [HACC workers'] entitlement to the benefits of the [award and certified agreement]". 92 The findings of ultimate facts made by Madgwick J were based on inferences derived by his Honour from his findings of primary fact. The outline of submissions filed on behalf of the council contained no challenge to those inferences. The only points raised, in relation to the findings of ultimate facts, were those discussed above. Consequently, counsel for the union and Ms Phillips dealt only with those matters. 93 During oral argument, and in response to some observations from the Bench, counsel for the council suggested Madgwick J erred in the drawing of inferences. However, they put no argument in favour of that suggestion. Accordingly, I do not regard it as a matter falling for present consideration. In my opinion, Madgwick J did not fall into any error in relation to the application of the interpretation of s 298L(1)(h) that he (correctly) adopted. Constitutional immunity 94 In Re Australian Education Union; Ex parte State of Victoria ("AEU") (1995) 184 CLR 188, the High Court considered a submission that s 51(xxxv) of the Constitution does not authorise the exercise by the Australian Industrial Relations Commission of any power in relation to industrial disputes between a State, exercising governmental functions, and its employees. The Court did not uphold the whole of that submission but it accepted some limitations in the reach of the Commonwealth's legislative power. In their joint judgment at 231, Mason CJ, Brennan, Deane, Toohey, Gaudron and McHugh JJ said: "The limitation consists of two elements: (1) the prohibition against discrimination which involves the placing on the States of special burdens or disabilities ("the limitation against discrimination") and (2) the prohibition against laws of general application which operate to destroy or curtail the continued existence of the States or their capacity to function as governments." The first element is not invoked in the present case; the council relies on the second element. 95 Counsel for the council contend their client must be regarded as the State of Victoria for the purposes of the doctrine of constitutional immunity. Madgwick J accepted that proposition, but his decision to do so is disputed by the union and Ms Phillips. 96 In relation to the second element of the limitation, the six Justices in AEU said (at 232) the "exercise of Commonwealth power 'to control the States' would be an exercise of power inconsistent with the continued existence of the States as independent entities and their capacity to function as such". At a later point (on the same page) their Honours mentioned an argument put by South Australia (an intervener) that referred to impairment of a State's "integrity" or "autonomy". They went on: "Although these concepts as applied to a State are by no means precise, they direct attention to aspects of a State's functions which are critical to its capacity to function as a government. It seems to us that critical to that capacity of a State is the government's right to determine the number and identity of the persons whom it wishes to employ, the term of appointment of such persons and, as well, the number and identity of the persons whom it wishes to dismiss with or without notice from its employment on redundancy grounds. An impairment of a State's rights in these respects would, in our view, constitute an infringement of the implied limitation. On this view, the prescription by a federal award of minimum wages and working conditions would not infringe the implied limitation, at least if it takes appropriate account of any special functions or responsibilities which attach to the employees in question." 97 At 233 the Justices also mentioned the critical importance of a State government's ability: "… not only to determine the number and identity of those whom it wishes to engage at the higher levels of government, but also to determine the terms and conditions on which those persons shall be engaged. Hence, Ministers, ministerial assistants and advisers, heads of departments and high level statutory office holders, parliamentary officers and judges would clearly fall within this group. The implied limitation would protect the States from the exercise by the Commission of power to fix minimum wages and working conditions in respect of such persons and possibly others as well." 98 AEU was considered, in the context of a teachers' redundancy award, by a Full Court of the Industrial Relations Court of Australia (Wilcox CJ, Lee and Madgwick JJ) in Re Australian Education Union; Ex parte Victoria (1996) 73 IR 250. That decision contains an extensive discussion about the reach of the AEU doctrine. The Court distinguished between statutory provisions and awards that fetter the ability of a government to determine the identity of the persons whom it wishes to employ and ordinary industrial legislation that imposes burdens, including financial burdens, on State governments in common with others. 99 It is not contended that the application of ss 298K and 298L to the council's employees would impair the entitlement of the council to determine the number and identity of those whom it wished to engage "at the higher levels of government"; it is accepted that HACC employees are not at that level. However, it is argued they affect the capacity of the council to govern because they inhibit the reorganisation of council's service delivery. Counsel say: "The decision to outsource the HACC services cannot be construed in isolation from the process associated with compulsory competitive tendering. It must be seen in the context of the operational requirements of the State to maintain a competitive service. Thus the Council by its resolution on 22 February 1999 adopting, as it did, the management recommendation regarding the successful tender, gave effect to the operational requirement of the State to maintain a competitive service. Appellant could not compete with the successful tender. The reason it could not compete was because of the individual entitlements under the award imposed a greater burden for the Council than the burden of the successful tender under a different award." 100 Counsel do not argue ss 298K and 298L are invalid. They say the council's immunity limits the operation of s 6 of the Act. That section provides that the Act binds the Crown in right of the Commonwealth, each of the States, the Australian Capital Territory and the Northern Territory. 101 Although Madgwick J accepted the council should be regarded as an emanation of the State of Victoria and, therefore, an entity entitled to the State immunity propounded in AEU, he thought the immunity did not apply to ss 298K and 298L. He was influenced to that conclusion by Victoria v Commonwealth of Australia (1996) 187 CLR 416, in which the High Court considered a challenge to the constitutional validity of many of the amendments made to the Industrial Relations Act by the Industrial Relations Reform Act 1993. The amendments included the insertion into the Industrial Relations Act of a new Division (Div 3 of Part VIA) circumscribing termination of employment. The Court unanimously held the new Division, apart from a couple of provisions, to be constitutionally valid. The Court also unanimously held it was binding on the States, except in relation to termination on account of redundancy and terminations, on any ground, of employees at the higher levels of government: see ss 511 to 521. This conclusion extended to s 170DF of the Industrial Relations Act, which the Court considered separately: see ss 529 to 533. Section 170DF forbade an employer to terminate an employee's employment for any one of many specified reasons, each of which involved some form of discrimination. Some of the reasons were similar in substance to those mentioned in s 298L(1) of the Workplace Relations Act. Madgwick J thought the High Court's ruling about s 170DF was important; it established that anti-discrimination provisions bound the States, subject only to two exceptions: employees at the higher levels of government (an exception that was conceded to be inapplicable) and redundancy (an exception that Madgwick J thought not to apply to this case, upon proper analysis.) 102 It is not necessary to list all the cases in which reference has been made to AEU and Victoria v Commonwealth. However, it is useful to mention Konrad v Victoria (1999) 91 FCR 95, a case in which a Full Court of this Court held that Div 3 of Part VIA of the Industrial Relations Act applied to the employment of Victorian police officers. At 104 North J said that s 170EE of the Industrial Relations Act, which authorised reinstatement orders, would be "invalid if it operates to destroy or curtail the capacity of a State to function as a government": He explained: "In Re AEU the High Court held that the Act was invalid insofar as it prevented a State from dismissing employees on grounds of redundancy. Several factors may explain this view. Redundancy arises when an employer has no further need for a job to be done. Large scale redundancies in the public service have occurred in recent years. They have followed fundamental restructuring of the work of the public service. The result has been that State governments no longer require many jobs to be done which had previously been done. To impede a State in a fundamental reorganisation of its workforce may be seen as intruding into its ability to implement a structure for government administration, and to compel it to retain employees which it does not need. In that sense it is quite distinguishable from, for example, the termination of an employee for disciplinary reasons. Such a termination does not relate to the structuring of the State workforce but rather relates to the composition of the workforce by persons conforming to appropriate behavioural standards. Thus, the reasoning that may have led the High Court to determine that the Act could not apply to terminations by the States on grounds of redundancy does not apply to terminations for other reasons." 103 It follows from these observations, with which I agree, that it is a matter of critical importance, in the application of a statutory provision against a State, to determine whether the true effect of that provision is to inhibit terminations of employment on account of redundancy (in which case the statutory provision is inapplicable to the State) or whether it is truly concerned with the general regulation of employment practices; for example, the prohibition of unacceptable discrimination. 104 In considering that question, it is necessary to look at the realities of the situation. The point was made by Madgwick J. He said (at paras 119-120): "A State cannot lawfully decide, in the face of a Commonwealth provision such as that in the Victoria Case, that it does not want to employ, say, any union members and then, having identified those members, brand them 'redundant', so as to attract the AEU constitutional immunity in respect of the State's 'right to determine … the … identity of the persons whom it wishes to dismiss … on redundancy grounds'. Likewise, the Council (as an assumed emanation of the State of Victoria) cannot lawfully select for dismissal persons such as the HACC staff, on grounds proscribed by s 298L(1)(h) and then claim the constitutional immunity for their dismissal on supposed redundancy grounds. Sections 298K and 298L(1), according to their terms, are concerned to prevent various forms of employer conduct: they do not deal with dismissals on the ground of redundancy. The point may be made in a slightly different context. Suppose that a State as the employer, in a particular enterprise of ten persons, has a shortfall in demand and a proportionate reduction in the required amount of operational labour, to the equivalent of two employees. The State is, in general, constitutionally entitled to declare two employees redundant, whatever any Commonwealth law may say. This entitlement however does not allow the State to select those two employees for redundancy because they are women, or are union members, or on any ground proscribed by an otherwise applicable Commonwealth law. In this regard, in Victoria v Riordan (unreported, Industrial Relations Court of Australia, 26 July 1996) at [22], a Full Court of the Industrial Relations Court of Australia said: 'It could not possibly be contended that the proscription of discrimination on those grounds impairs the capacity of a State to govern.' " 105 Madgwick J went on (at para 122) to point out that, in this case: "… the prohibited reason preceded and caused the supposed redundancy; but for the impugned decision there would have been no such redundancies. The Council cannot be protected against engaging in prohibited conduct merely because it declared "redundancy" to be the reason for dismissal. The real reason for dismissal was the Council's decision (made in part for a proscribed reason) to outsource the HACC services, not because of an absence of work." 106 His Honour noted the description of redundancy given by the Australian Conciliation and Arbitration Commission in the Termination, Change and Redundancy Case (1984) 8 IR 34 (cited by Burchett J in Short v Hercus (1993) 40 FCR 511 at 521). The Commission referred to a definition given by Bray CJ in The Queen v Industrial Commission (SA); Ex parte Adelaide Milk Supply Co-operative Ltd [1977] SAIR 1202 at 1205. A key element of that definition, the Commission said, was "that the employer no longer requires to have the work done by anyone". Madgwick J commented that, having regard to the fact that the word "redundancy" has had a well-settled meaning in Australia since at least 1984, it "is inconceivable that in AEU the Justices of the High Court were using the term redundancy in any other sense". The same observation may be made about Victoria v Commonwealth where, it must be assumed, their Honours used the word "redundancy" to refer to a situation where the employer no longer required the work to be done by anyone. That, of course, was not the situation in the present case. 107 In relation to government employment, it may be necessary to add a gloss to these remarks. In Konrad North J spoke of recent "fundamental restructuring of the work of the public service", with the result that "State governments no longer require many jobs to be done which had previously been done". He may not necessarily have meant the governments no longer required the work to be done by anyone. A State, or an emanation of a State, may make a policy decision to outsource a function, previously undertaken by its own employees, and then to terminate the employment of those employees. Although the State still wants the work to be done, so in one sense there is not a redundancy situation, as a matter of policy it no longer wants it to be done by its own employees. In such a situation, it seems to me, the AEU principle may apply. 108 However, this gloss has no application to the facts of the present case. The council did not make a policy decision to outsource its HACC services. Its only policy decision was to engage in competitive tendering. It was willing to receive and consider a tender prepared by its own employees. If the price had been right, it would have been happy to continue to provide the HACC services through its own employees. The only reason for its decision to move to an outside contractor was that contractor's price advantage. 109 Having regard to my view that State immunity cannot, in any event, attach in this case, it is unnecessary to consider the respondents' notice of contention disputing Madgwick J's determination that the council is to be regarded as an emanation of the State of Victoria for the purposes of the doctrine propounded in AEU. 110 In my opinion, upon the basis of the findings of fact made by him, Madgwick J was correct to hold that the council contravened s 298K of the Act. Reinstatement 111 The submissions made by the council in relation to Madgwick J's reinstatement order are put on a limited basis. Counsel do not quarrel with his Honour's statement of general principle about the primacy of the reinstatement remedy: see para 38 above. But they argue "[t]he passage of time between the last day of the hearing and the date of the judgment was such as to compel consideration of further developments before determining the issue of reinstatement or remedy generally". Counsel advert to the fact that Madgwick J realised some employees might no long require reinstatement and provided for that. But they complain his Honour "failed to take into account the possibility of any change in the situation of the Council". Counsel say Madgwick J ought to have allowed their client to reopen its case and call further evidence on the question of the appropriateness of reinstatement orders. 112 I agree it would have been inappropriate for the trial judge, after a lengthy reservation of judgment, to proceed immediately with an order for reinstatement of the affected employees, without affording the council an opportunity of alerting him to any situational changes that may have occurred in the meantime. However, Madgwick J did not take that course. 113 Madgwick J delivered his reserved judgment on 4 September 2000. On that day, he did not make a reinstatement order. The course he took was to direct a conference of the parties in relation to remedies, with a requirement they report to the Victorian District Registrar of the Court within 21 days. He envisaged mediation of any differences on remedies and gave liberty to apply. 114 Apparently the parties could not agree about remedies. I do not know whether there was a mediation conference; if so, it was obviously unsuccessful. So the parties went back to Madgwick J. The council tendered, and the judge admitted, what counsel for the present respondents describe as "voluminous evidence" concerning the position of the council and of Silver Circle. The primary purpose of this evidence was to support an application for a stay, but its effect was to update Madgwick J generally, before he made his final orders. 115 On 10 November 2000 Madgwick J delivered ex tempore reasons for judgment in which he refused the stay application: see Australian Municipal, Administrative, Clerical Services Union v Greater Dandenong City Council [2000] FCA 1638. In those reasons he commented upon the updating material that had been tendered to him since delivery of his reasons on 4 September. He was not very impressed with the material. He observed "a good deal of it appears exaggerated" and that "on its face, much of the material does not appear to make sense". He preferred an analysis of costs offered by counsel for the union and Ms Phillips. 116 I am not concerned, for present purposes, with the validity or otherwise of Madgwick J's criticisms of the updating material tendered by the council. The important point is that Madgwick J had all that material before him prior to making his final orders, including the reinstatement order. When he made his final orders, Madgwick J knew what had happened (from the council's viewpoint) during the time judgment had been reserved. 117 It is important to note the council does not complain to us of the view Madgwick J took of its material. This Court is not asked to review the way in which his Honour exercised his discretion having regard to that material. Indeed, the relevant material has not been placed before us. The only submission made to us concerning the reinstatement order is that Madgwick J made the order without allowing the council to update its position. That submission is factually incorrect. Disposition 118 I find against the council in respect of each of the issues it raised on the appeal. The appeal should be dismissed, It is, however, necessary for the Court to take into account the fact that the period of 28 days specified by Madgwick J for reinstatement of the employees has now elapsed. I propose that the orders made by his Honour be varied so as to require reinstatement by 4 May 2001, being one month after the making of this Court's order. 119 Counsel for the union and Ms Phillips seek an order for costs against the Minister. They say s 347 of the Act does not preclude the making of such an order. I agree. Nevertheless, I would not depart from the usual practice that a costs order is not made in favour of, or against, an intervener. The situation might be different if the Minister's unsuccessful intervention had substantially prolonged the duration of the hearing, or otherwise imposed significant costs on a party. However, it did not. I certify that the preceding one hundred and nineteen (119) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Wilcox. Associate: Dated: 4 April 2001 IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V 765 OF 2000 On appeal from a single judge of the Federal Court of Australia BETWEEN: GREATER DANDENONG CITY COUNCIL APPELLANT AND: AUSTRALIAN MUNICIPAL, CLERICAL AND SERVICES UNION FIRST RESPONDENT WENDY PHILIPS SECOND RESPONDENT JUDGES: WILCOX, MERKEL AND FINKELSTEIN JJ DATE: 4 APRIL 2001 PLACE: MELBOURNE REASONS FOR JUDGMENT MERKEL J: 120 The background to the present appeal is set out in the other judgments. At the outset it is appropriate to deal with the main issue argued before the primary judge and on the appeal by the appellant, Greater Dandenong City Council ("the Council"). 121 The Council contended that ss 298K(1) and 298L(1)(h) of the Workplace Relations Act (Cth) (1996) ("the Act") only operate to prohibit discriminatory conduct by an employer against an employee where the conduct is engaged in because the employee has an entitlement under an industrial instrument or order. Thus, it was said that if the conduct is engaged in because of the content of any entitlement of an employee under an industrial instrument or award, that conduct is not a breach of the Act. 122 Section 298K(1), which is in Pt XA of the Act, relevantly provides that an employer must not, for reasons that include a prohibited reason, dismiss an employee (s 298K(1)(a)) or alter the position of an employee to the employee's prejudice (s 298K(1)(c)). The prohibited reason alleged in the present case is that the relevant employees are "entitled to the benefit of an industrial instrument or an order of an industrial body" (s 298L(1)(h)). By virtue of s 298V it is presumed that the conduct complained of under s 298K was carried out for a prohibited reason unless the respondent proves otherwise. In discharging that onus the respondent must establish, on the balance of probabilities, that the prohibited reason was not an operative reason for its conduct: see Maritime Union of Australia v Geraldton Port Authority (1999) 93 FCR 34 at 69. 123 The issue is whether, as the Council contends, properly construed, s 298L(1)(h) is concerned only with the fact of the employee's entitlement and not with its content. It is common ground that if the Council's construction is correct it must succeed on the appeal as it has not been contended by the respondents that the fact, rather than the content, of the relevant employees' entitlements was an operative reason for the Council's conduct which the respondents allege contravened s 298K(1). 124 The operation of s 298L(1)(h) was recently considered by a Full Court in Burnie Port Corporation Pty Ltd v Maritime Union of Australia [2000] FCA 1768 ("Burnie Port"). Although the construction contended for by the Council was not the subject of argument in that case, it was assumed by both the primary judge and the Full Court that s 298L(1)(h) was concerned with an employee's entitlements under industrial instruments and orders: see [20] and [25]. In Burnie Port the Full Court concluded that, for the purposes of s 298L(1)(h), an entitlement to the benefit of an industrial instrument or order meant an existing entitlement under the instrument or order that was enforceable as a matter of legal right. An industrial instrument is not enforceable as such; rather the entitlements arising under particular provisions of an industrial instrument are enforceable. 125 Section 298B(1) defines an "industrial instrument or order" for the purposes of Pt XA. An "industrial instrument" is defined as meaning: "an award or agreement, however designated, that: (a) is made under or recognised by an industrial law; and (b) concerns the relationship between an employer and the employer's employees, or provides for the prevention or settlement of a dispute between an employer and the employer's employees." 126 An "industrial law" is defined as meaning: "this Act or a law, however designated, of the Commonwealth or of a State or Territory that regulates the relationships between employers and employees or provides for the prevention or settlement of disputes between employers and employees." 127 An order of an "industrial body" means an order of the Australian Industrial Relations Commission or of a court or commission exercising powers and functions under an industrial law that correspond with those conferred on the Commission. 128 It is clear from the above definitions that the ambit of an entitlement that can arise under an "industrial instrument or order" is so broad that it is almost impossible to conceive of any legislative purpose or policy that would be served by confining s 298L(1)(h) to the fact of an entitlement under an industrial instrument or order without regard to its content. Apart from ss 298K(1) and 298L(1)(h), the main significance of an employee being entitled to the benefit of an industrial instrument or order under the Act is that, generally, a breach or failure to comply with a provision of an award or a certified agreement will render the employer liable to the imposition by the Court of a monetary penalty (s 178(1)) and to the payment of any underpaid amounts (ss 178(6) and 179). Similarly, breach of a provision of an Australian Workplace Agreement will render the employer liable to a monetary penalty (s 170VV(1)), damages (s 170VW) and injunctive relief (s 170VZ). Thus, using the Act as the example for present purposes, the employee has a legal entitlement to have an employer comply with each of the provisions of an industrial instrument that is applicable to the employee. The fact of an entitlement to the benefit of an instrument or order is of little or no relevance to any particular employee until the entitlement is linked to the content of a particular entitlement arising under the provisions of the instrument or order. In that legislative context it is not surprising that the Full Court in Burnie Port assumed that s 298L(1)(h) is concerned with existing entitlements of employees arising under an industrial instrument or order. Further, the assumption is consistent with the decisions of the courts in Eaton v McKenzie (1916) 12 Tas LR 94 ("Eaton v McKenzie") and Klanjscek v Silver (1961) 4 FLR 182 ("Klanjscek") where similar assumptions were made in respect of statutory predecessors to s 298L(1)(h). 129 The Council's proposed construction of s 298L(1)(h) is also not assisted by resort to the general objects of the Act set out in s 3, or to the additional particular objects of Pt XA, set out in s 298A in relation to freedom of association. As was explained in Burnie Port at [27], the legislature has not expressed any preference in the Act for one form of industrial regulation over another. Thus, whatever may have been the situation in respect of previous forms of industrial regulation under the Act or its predecessors, the "freedom of association" of employees who are currently protected from discriminatory treatment under ss 298K and 298L(1)(h) is the freedom from discrimination by reason of an employee having the benefit of entitlements arising under a particular industrial instrument or order. It is irrelevant whether the industrial instrument or order is an award, a certified agreement, an Australian Workplace Agreement or some other form of industrial instrument or order under the Act or a corresponding State Act. To contend, as the Council does, that the object of the Act is served by protecting only the fact of the employee's entitlement, without regard to its content, would leave employees with a particular entitlement under an industrial instrument or order unprotected against discrimination by reason of that entitlement. 130 In the context of Pt XA and s 298K, the Council's construction of s 298L(1)(h) is also not supported by the ordinary and natural meaning of the words used, nor by any discernible legislative policy or intention. Further, as has been demonstrated by Wilcox J and by Finkelstein J, it is also not supported by an historical analysis of the sub-section's statutory predecessors and decisions of the courts concerning their operation. 131 Accordingly, the Council's construction of s 298L(1)(h) is to be rejected. 132 The real issue on the appeal is whether the Council breached s 298K(1) by resolving to outsource its home and community care services ("HACC") to a private company, Glad Pty Ltd which traded as "Silver Circle" ("Silver Circle"). If a municipal council agrees to outsource services to private enterprise merely because the price is less than the cost to the Council of its staff providing the same services, the Council will not be acting in breach of s 298K of the Act. The important question arising in the present appeal is whether the Council will be acting in breach of the section if the reason for the lower price is the higher rates payable by the Council to its employees under awards or certified agreements binding the Council. 133 There appears to have been little dispute about the primary facts at trial and, on the appeal, the Council did not challenge the primary judge's findings in respect of those facts. Indeed counsel appearing for the Council opened the appeal by stating that "there isn't significant debate with regard to the facts in the matter". However, in the course of the hearing of the appeal the Council sought to argue that the primary facts found by Madgwick J justified his conclusions that: · an operative, if subsidiary, reason for the Council's actions and, in particular, its resolution to accept Silver Circle's tender for the HACC services was the higher award and industrial agreement entitlements of the Council's HACC employees; · the Council had failed to discharge its s 298V onus of proof of the contrary. 134 The respondents contended that neither the Council's grounds of appeal nor its extensive written submissions filed in support of those grounds challenged either the primary or the ultimate findings of fact, including the facts inferred, by the primary judge. 135 The Council's grounds of appeal are so general in relation to the primary judge's factual findings that it is difficult to identify with any precision what conclusions (if any) of the primary judge were being challenged. The issue sought to be argued by the Council, while arguably within the grounds of appeal, was not properly articulated in any of those grounds. The Council's written submissions obliquely raised the issue but did so in the context of claiming that the primary judge erred in focusing on the Council meeting and failing to consider all of the circumstances that led to the acceptance of Silver Circle's tender. Nevertheless, the Council's written submissions, if not its notice of appeal, addressed the question of whether the primary judge was in error in determining that the Council had not discharged the onus under s 298V. 136 The issue was articulated by the Council at the hearing of the appeal, although it was subordinated to, and probably distracted by, the Council's construction argument. In particular, the Council argued before both the primary judge and the Full Court that Silver Circle's tender was accepted by the Council in accordance with the tender process and, in particular, because of Silver Circle's lower price. It contended that, even accepting or assuming that the cause of the Council's higher price was the higher award ("the Award") and industrial agreement ("the Agreement") rates payable to HACC employees, its conduct could not have constituted a breach of ss 298K(1) and 298L(1)(h). At the hearing the respondents put their submissions against the Council's argument. Further, the Council's argument does not challenge the primary facts found by Madgwick J and is founded primarily upon the primary judge's assessment of objective facts and inferences to be drawn from them, rather than upon any conclusions that depended on credibility considerations or impressions about the demeanour of any witness. Thus, in determining whether the assessment of the primary judge was properly made, the appellate court is in as good a position as the trial judge to determine the issue (State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (In liq) (1999) 160 ALR 588 at 621 per Kirby J), although in doing so it is to give due weight to the conclusions of the primary judge (Taylor v Johnson (1983) 151 CLR 422 at 426 Mason A.C.J., Murphy J and Deane J). 137 In the circumstances I consider that the Council's argument should be permitted to be raised on the appeal and be considered on its merits. The issue is one that has been fairly fought out at trial and on the appeal, it raises a question of law of considerable importance to the parties, and the raising of the issue has not unfairly prejudiced the respondents: cf Chen v Minister for Immigration and Multicultural Affairs [2000] FCA 1901 at [3], [85] and [105]-[106]. 138 In order to deal with the issue raised by the Council it is necessary to set out in detail the primary judge's findings, which were as follows. 1. "…[T]he applicants' case was that the Council accepted a tender from a company, Glad Pty Ltd (trading as Silver Circle) ('Silver Circle'), to perform the HACC work at a lower price than the Council could perform the work… This, the case ran, was because the Council would need to observe the terms and conditions of the [Victorian Local Authorities Interim Award 1991 ('the Award')] and the [Greater Dandenong City Council Enterprise Bargaining Agreement 1998 ('the Agreement')] whereas the Council…believed that Silver Circle would not be so bound, and could remunerate its intended employees by reference to the considerably less favourable terms [to the employees] of another award, the Home and Community Care Award 1995 ('the Silver Circle Award'), to which Silver Circle was a party. The necessary and intended consequence of the acceptance of that tender would be and, as events transpired, was the termination of the employment of the [HACC] staff… The Award and the Agreement applied to all the relevant [HACC] employees. As the Agreement was a certified agreement under the Workplace Relations Act it, as well as the Award, is…an 'industrial instrument' [for the purposes of]…s 298L(1)(h) of the Act… It was common ground that the Award and Agreement provided wages and conditions for employees entitled to the benefits of those instruments considerably more favourable [to those employees] than the wages and conditions prescribed by the Silver Circle Award, and that it would be considerably more costly for an employer to comply with the former instruments than with the latter." ([8], [21] and [22]) 2. "The [Council] is constituted as a City Council under the Local Government Act 1989 (Vic) ('the LGA'). … By s 8 and Schedule 1 of the LGA it is provided that a 'Council has functions' which include 'health, education, welfare and other community services including ... (b) Aged, disabled and disadvantaged persons services.' The HACC service involves the provision of home and community care for the disabled, the frail and the aged. The work includes the provision of general home care and assistance, the provision of more specialised in-home care, the assessment of the needs of persons for whom assistance is sought, and the administration of the service generally." ([10], [11] and [12]) 3. "…The Council held no general philosophy adverse to unionism or to award coverage for the employees in question. Indeed, the Chief Executive Officer of the Council, Mr Heine, had a personal view that, despite the prevailing emphasis on efficiency and competitiveness, as a general rule, improvements should not be demanded of employees by way of undermining their terms and conditions of employment. …" ([9]) … 4. "In the [context of a]…general policy environment [of requiring compulsory tendering for government services], the Local Government (Competitive Tendering) Act 1994 (Vic) was passed. It amended the LGA and introduced a regime of 'compulsory competitive tendering' ('CCT') for local government throughout Victoria: see Div 3 of Part 9 of the LGA, 'Specific Functions, Powers and Restrictions'. The system was introduced incrementally. In 1994-95 councils were required to be party to 'competitive arrangements' accounting for 20% of their expenditure. In 1995-96 the requisite amount was 30%, and by 1996-97 it was 50%. Section 208A of the LGA now provides that each Council must ensure that in any financial year it is a party to 'competitive arrangements' having a total value of 50% or more of its total operating and capital expenditure. Sections 208B, 208C and 208D explain that 'competitive arrangements' are, relevant to present purposes, either contracts for the supply of goods or services to the Council or 'in-house agreements' by members of a Council's staff for such supply. In either case the arrangement is to be entered into by the Council after either a 'competitive process' conducted by the Council or approval by the Minister under s 208F for stated reasons. A 'competitive process' requires public written tenders and the award of the contract to one of the tenderers. It is clear that the successful tenderer need not have made the lowest tender: s 208C(1)(c)." ([19]-[20]) … 5. "As far back as March 1996 Council management had advised the HACC employees of its decision to seek tenders for the provision of HACC services. Management encouraged the HACC employees to form an in-house bid team and to prepare a bid in accordance with the tender specifications. An in-house bid team was convened for this purpose. During the preparation of the in-house bid, Ms Phillips was provided with a document prepared by Council management recommending that the in-house team should enter into a Local Area Work Agreement ('LAWA') in order to reduce the labour costs payable under the in-house bid. A LAWA is a mechanism, outlined within clause 9 of the Agreement, allowing for divergence from the terms of the Agreement, with respect to discrete groupings of Council staff, after, amongst other things, approval of the union and a majority of the staff affected. In particular, the view was taken by various members of Council management that, unless the penalty rates and amounts paid for time travelled between clients, both payable under the Agreement, were reduced, the in-house bid would be unable to compete with external bids. It is clear, however, that Mr Heine was himself opposed to the reduction of employment conditions. Members of the bid team did not endorse a reduction in the conditions contained in the Agreement, and therefore the in-house bid was prepared on the basis of the existing terms and conditions. On 23 December 1998 tenders closed. Two bids were received: the in-house bid and the Silver Circle bid. The bids were prepared on the basis of providing a fixed number of hours of HACC service over a three year period. The in-house bid tendered at a price of $7,770,665 and Silver Circle tendered at $6,610,429 (penalty rates were not included in these bids). Council management appointed a panel, the Evaluating Committee, to prepare a report evaluating the two tenders in accordance with various weighted criteria: financial stability (pass/fail); price (45%); capability to develop and deliver specified outcomes (25%), and; management capability qualifications (30%). The final version of the report summarised the 'overall position' in chart form, comparing the strengths of the Silver Circle bid relative to the in-house bid: price – 1.22: 1.03; capability – 1.03: 1.00; management – 1.20: 1.05; total – 3.45: 3.08. The report stated that: 'the difference contributing most to Silver Circle's overall rating is price.' In drawing its conclusions about price, the panel estimated the cost of penalty rates over the three year period, based upon the respective wage regimes contained in each bid, and took into account the competition and redundancy payments. The report stated that the in-house bid 'included a wider range of penalty rates that would be payable by Council. These penalties are applied more frequently at higher rates, all resulting in a significantly higher cost.' The report recommended that Council accept the Silver Circle offer." ([25]-[27]) … 6. "On 22 February 1999 Council met to consider, amongst other things, the Evaluation Committee report. Prior to the meeting there was a briefing, attended by all councillors, to discuss the Evaluation Committee report. Councillors Wilson and Melham gave oral evidence that, at the briefing, a matter of concern had been the major difference in the net cost between the bids because of the relative penalty rates contained in each. At the meeting the recommendation of the Evaluating Committee was moved by Councillor Kelly and seconded by Councillor Harris. The following comments were recorded on transcript: 'Councillor Kelly: I find it strange that we have got opposition, because … this report is quite extensive … everything within this contract seems to me certainly to have been gone over many times, not only by Councillors but certainly by officers … I just need to go through a couple of things that have certainly caught my eye and I suppose the one of most interest is certainly that figure on page 9 where … after taking the penalty rates we have a difference of something like $1.56 million, which is of an advantage towards that Silver Circle company, and I suppose that certainly as we read through this report could be the major criteria I suppose for the selection group choosing Silver Circle … [W]hen we look at … page 8 and we look at the penalty rates that are to be charged, I think … there is a fair difference there through from Silver Circle's using 50% applied rate … so I think when we look at the Greater Dandenong Bid Team's some of the criteria there of 150% on public holidays seems to be just a little bit unrealistic for us to ask ratepayers to take on board… Councillor Reid: The reason … coming up tonight primarily is cost. $1.56 million in savings… Councillor Melham: Silver Circle have shown that in terms of overtime that … public holiday pay [is] different … that's $37,000 against $440,000 for the inhouse bid. Why is that? ... Could the inhouse bid provide the staff or pay the staff the same rating that Silver Circle would pay on public holidays? Group Manager: Through our current employment … arrangements with our own staff, that would be award conditions they currently enjoy; Silver Circle have a special award, which is a federal award, which restricts … their overtime or penalty rates. Our staff and the figure that has been put in around those penalties, which as I said are part of our award and I don't believe, unless there was a major change, which we had looked at, that that could have happened. Councillor Melham: Is [it the case] that … you look at it from the business point of view and provide the best value for money? Group Manager: Yes that is quite correct… Mr Heine (CEO): I believe the situation is that if Silver Circle were successful this evening … they would continue with all existing home care staff for the first three months of the contract, they would be made redundant by the Council when the contract was engaged, so our staff ceased their employment with Council received redundancy payments… Mr Heine (CEO): So the way in which the process will work is that irrespective of whether our staff are re-employed by Silver Circle, they will be made redundant. That's assuming that Council votes for Silver Circle to get the business… Mr Heine (CEO): We are taking the position that there is a definite cut-off of employment, cessation of employment, so the redundancy package is paid." By a vote of seven to three, the Council accepted the recommendation of the report to accept the Silver Circle bid, subject to the completion of further steps. Councillor Melham gave evidence that it was his understanding that the respective penalty rates had formed at least part of the basis for the difference in the tender bids." ([28]-[29]) 7. "The comments of Mr Heine, according to the transcript extracts set out above, indicate that Council's decision was premised upon the redundancy of the HACC workers. On 5 March 1999 Mr Heine wrote to Mr Cochrane, the Branch Secretary of the Union, stating that: 'It is regrettable the Dandenong Community Team did not win this tender… In my view, the single largest impediment to the success of the Dandenong community care team being successful in winning this tender was the lack of an agreed LAWA.' On 23 February 1999 a staff meeting was held at which the HACC staff were advised that they would become redundant as of 21 May 1999. On 30 April 1999 the Council sent letters to the HACC staff advising them that their employment was to be terminated, for reasons of redundancy, with effect on 23 May 1999. Also on 23 February a meeting was held by Silver Circle at which all the HACC workers were invited to apply for employment with Silver Circle. Such employment was to be offered, it was explained, on a three month probationary basis, and was to be governed by the Silver Circle Award. It had been known to agents of the Council that, if Silver Circle succeeded, such an offer would be made. Some of the HACC workers were offered and accepted employment with Silver Circle. As a result, these workers were then paid significantly less for doing virtually identical work. Ms Philips gave evidence that she was providing the same services and even had the same clients. Despite the fact that a few vacancies elsewhere in the Council's operations were available to some HACC staff after the Council's decision, it is clear that for all practical, present purposes, the employees' dismissal was made unavoidable by the Council when it accepted the Silver Circle bid. In terminating the employment of most and making attempts to redeploy some HACC employees, including paying them their redundancy entitlements, Mr Heine was in reality simply implementing the Council's earlier decision…. ([30]-[32] and [41]) … 8. "Having regard to the legislative imperatives imposed by the CCT regime, and in particular s 208A of the LGA, and to the earlier litigation that resulted from the parks bid, it was said that Council's acceptance of the Silver Circle bid was based solely on the fact that Silver Circle appeared, on the face of the Evaluation Committee report, to offer a more economic service. … There is no doubt that the price differential between the bids was a reason for the Council's acceptance of the Silver Circle bid, although price alone does not, of course, constitute a prohibited reason. However, a strong inference does arise that the dismissals occurred, in part, because of the employees' Award and Agreement entitlements. The suggestion that the competitive tendering imperatives and Silver Circle's price constituted the only real and operative reason for the Council's decision is unpersuasive. … While the relative price of the bids was of great significance to the Council's decision, and price of itself is not sufficient to constitute a prohibited reason, in the circumstances of this bid, the only significant factor going to establish that price differential was the HACC workers' entitlements under the Award and Agreement. Further, it is likely that it was well-known to all councillors that the discrepancy between the Council's and Silver Circle's industrial instruments accounted for the great part of the price disparity. Councillors are political figures, elected and usually relying upon support groups that keenly follow matters of local politics. In reality, they would have been unlikely, in my opinion, not to know the main reasons why the CCT process might constitute a real threat to the continuation of the Council's employment of a significant part of its workforce. Further still, representatives of the Council's middle management had, albeit at least partially in the HACC workers' own interests, as those representatives conceived those interests, tried to induce them to forego some of the benefits that the Award and the Agreement provided for them. It is, in my opinion, inconceivable that the middle management view had not permeated to the Council's decision-makers (of both the formal and perhaps informal varieties). The majority Councillors are very likely to have known and to have shared that view. They are also very likely to have shared a further view that was abroad, that the HACC workers were unreasonable in declining to agree to a voluntary diminution of their Award and Agreement entitlements and that they had only themselves to blame for being unable to undercut or match the Silver Circle bid. This conclusion is to be drawn despite the position of Mr Heine, the General Manager, who as I have noted did not share the enthusiasm prevailing in some quarters for reducing lowly-paid employees' industrial entitlements. Mr Heine was in a curious position: his obligations to external tenderers, such as Silver Circle, meant that he had, in jargon fashionable in some legal quarters, to put himself in a Chinese box. He therefore felt unable to, and did not, play the leadership role in advising the in-house bid team that, one infers, he would and may well successfully have otherwise done. As emphasised by counsel for the applicants, Silver Circle's bid did not propose to utilise new technology nor, to any significant degree, to implement novel management techniques or methods. Neither was it suggested that Silver Circle would otherwise perform the work more efficiently than the in-house bid, since both bids were prepared upon the same number of hours worked by the service-providers, namely, the HACC staff or their replacements. The major and decisive factor in the Silver Circle bid's acceptance was its price. The major and decisive factor in the difference in price was that, as everyone conceived it, Silver Circle would remunerate the workers doing HACC work under the Silver Circle Award and not the Council's industrial instruments. Despite this evidence, the respondent chose to call only one of the councillors who voted to accept the Silver Circle bid. Some sensible allowance might be made in the Council's favour as to the weight to be attributed to the Council's failure to call a full five councillors, on account of time considerations. However, that only one was called really cannot, in light of the other available evidence, be overlooked. That no other such witness was called suggests that none could have provided evidence contrary to the powerful inference already apparent from the available evidence that the Council was motivated by the HACC workers' entitlements. That inference may therefore be more confidently drawn: Jones v Dunkel. In any case, Councillor Melham's evidence, in cross-examination, was not helpful to the respondent." ([53]-[55] and [56]-[63]) … 9. "For these reasons the respondent has failed in a factual sense to establish that a reason for the dismissal or any other s 298 conduct (as to which, see below) of the HACC workers was not because of their entitlement to the benefits of the Award and Agreement. On the contrary, in my opinion the Council's decision was, in part, so motivated. In my view, an actual, operative and significant reason for the Council's actions was that the substantial majority of the HACC staff were entitled to the benefits of the Award and the Agreement." ([65]) 10. In this case, to recapitulate, the employer was concerned as to the comparative expense of its employees performing the HACC work, and knew that the entitlements of those employees to the benefit of the relevant industrial instruments were the main reasons for that comparative expense. The employer also believed that the main reason why the expense might be reduced was that the independent contractor's employees would be unable to access entitlements of similar value. Further, the employer knew that it was probable that at least some of the contractor's employees would come from the ranks of the employer's own subject employees and that the work would be performed in substantially the same ways. Finally, the employer's agents had attempted to have the employees voluntarily reduce their entitlements. The decisive action was taken only after reference to the employees' decision to accept that they were, in effect, labourers unworthy of their present hire. In my opinion, these facts lead to a positive inference that an operative, if subsidiary, reason for the Council's actions was that the subject employees had those very entitlements. At the very least, in my opinion, it can safely and without injustice be said that the Council has failed to discharge its s 298V onus of proof of the contrary." ([94]-[95]) 139 The critical issue upon which the outcome of the case turned was whether the resolution of the Council on 22 February 1999 to accept Silver Circle's HACC tender, in preference to the Council's in-house tender, altered the position of the HACC employees to their prejudice for reasons that included their entitlement to the benefit of the provisions of the Award and the Agreement (ss 298(K)(1)(c) and 298L(1)(h)). The resolution made it inevitable that almost all of the HACC staff would be redundant and would face dismissal. Thus, when they were dismissed, it was as a result of the redundancy that flowed from the Council's acceptance of Silver Circle's tender. 140 Subsection 298K(1)(c) was recently considered by a Full Court in Community and Public Sector Union v Telstra Corporation Ltd [2001] FCA 267. The Court said at [17]-[18]: "17. The question is whether…Telstra had altered the position of any of its employees to the employee's prejudice within the meaning of s 298K(1)(c). In Patrick Stevedores ([195] CLR at 18) the majority of the High Court held that the sub-section covers 'not only legal injury but any adverse affection of, or deterioration in, the advantages enjoyed by the employee before the conduct in question'. The majority also observed (at 20) that the reorganisation of companies within the Patrick Group resulted in the security of the employer companies' businesses being 'extremely tenuous' with the 'security of the employees' employment [being] consequentially altered to their prejudice'. The reorganisation did not directly affect or alter any legal rights or obligations of the employees but it left their future employment less secure. Although this issue was not in dispute, the majority appears to have had no difficulty in accepting reduced security of future employment as falling within s 298K(1)(c) because it brought about an adverse affection of, or a deterioration in, the advantages enjoyed by the employees before the reorganisation. 18. Where the alteration of position is alleged to be indirect or consequential, as in Patrick Stevedores and in the present case, a difficult question may arise as to whether a prejudicial alteration of position has in fact occurred. Answering that question may involve questions of degree. It is sufficient for present purposes to say that if the prejudicial alteration is real and substantial, rather than merely possible or hypothetical, it will answer the description in s 298K(1)(c). 141 As dismissal of the Council's HACC employees was an inevitable consequence of the resolution of the Council to accept Silver Circle's tender, the security of employment of the Council's HACC employees was altered to their prejudice in a real and substantial manner upon the resolution being passed. Madgwick J was plainly correct in concluding that the Council resolution had altered the position of the Council's HACC employees to their prejudice within the terms of s 298K(1)(c) and that their subsequent dismissal was an inevitable consequence of that alteration. Thus, his Honour correctly focused his attention on the Council's reasons for accepting Silver Circle's tender as the critical issue in the case. I do not accept that Madgwick J considered that question without regard to the context of the Council's procedures and its statutory obligations in relation to the tender process or that he confined his consideration of it to the Council meeting and the factors that might have motivated individual councillors to vote as they did. 142 The Council adduced a substantial body of evidence in relation to the process by which the Silver Circle tender was accepted, including the full transcript of the relevant Council meeting. While it was open to the Council to call all of the Councillors who voted to accept Silver Circle's tender, there was little dispute about the primary fact upon which the respondents relied. This fact was that the Council, by a majority, voted to accept Silver Circle's lower price for essentially the same HACC services, knowing that the difference in price lay, primarily, in the higher Award and Agreement rates payable by the Council to its HACC employees. In these circumstances, save for one aspect, I do not regard the present case as one in which an adverse inference should be more confidently drawn against the Council by reason of its failure to call all of the majority councillors: see Jones v Dunkel (1959) 101 CLR 298. 143 The aspect in respect of which the approach in Jones v Dunkel can have relevance relates to the findings by the primary judge that the majority Councillors might have been motivated by the view that the HACC employees were unreasonable and had only themselves to blame for being unable to undercut or match the Silver Circle bid. I return to this issue later in these reasons. 144 A difficulty in cases involving s 298L(1)(h) can arise from the fact that an increased award entitlement may result in a particular employer's business becoming unprofitable or less profitable. In such circumstances the courts have not found it an easy task to determine whether the dismissal of the employee is because of the increased award entitlement or because of the employer's business having become unprofitable. 145 In three early New South Wales decisions (Connington v Council of Municipality of Kogarah [1913] AR (NSW) 40 ("Connington"), Grayndler v Broun [1928] AR (NSW) 46 ("Grayndler v Broun") and Hunt v Railway Commissioners for New South Wales; Ex parte Brown-Smith [1928] AR (NSW) 151 ("Hunt")) the view was expressed that the statutory scheme did not intend to take away from an employer the right to reorganise its business and reduce its staff when an award increased expenses. In Hunt v Railway Commissioners (at 154) Street J went so far as to suggest that the statutory scheme did not intend to take away from the employer "the right to readjust his business in order to meet the position created by any award". Although the Council relies on those cases to support its proposed construction of s 298L(1)(h), when the circumstances of the three cases are considered they do not stand for any such principle. 146 In Connington the employee was dismissed for making a claim that was believed by his employer to be greater than his award entitlement. Although Heydon J accepted that the claim might "arguably" have been within the award, he stated that it was clear that the employee was not dismissed by reason of the fact that he was entitled to the benefit of the award. 147 In Grayndler v Broun the employees in question were dismissed because, upon joining the Union, their wage rates increased from ten shillings to sixteen shillings per day. The issue was whether they were dismissed by reason of the fact that they were members of a trade union. Street J stated (at 49) that the employer could not pay the increased rates and did not attempt to engage non-union labour to replace the dismissed employees. His Honour found that the reason for the dismissal was that the employer could not afford to pay the increased wages. 148 However, Street J also stated (at 49) that the section in question: "…was never intended to take away from the employer the right to reorganise his business and reduce his staff when an award increases his expenses." 149 Hunt was concerned with whether an employee had been dismissed by reason of the fact that he claimed the benefit of an award to which he was entitled. Street J held (at 154) that the relevant section was not breached as the reason for the dismissal was not because the employee had made a "justifiable claim under the award in respect of certain definite work done by [him] and a certain definite claim made by him in respect of that work". 150 Although the three NSW decisions suggest that care should be taken before a court decides that a reorganisation of an employer's business to meet higher award rates breaches the relevant section, they do not go so far as to hold that a dismissal by reason of a higher award rate to which the employee is entitled is not a breach. 151 In Eaton v McKenzie the Full Court of the Supreme Court of Tasmania considered whether an employer, who dismissed certain employees after their award was varied to give them an increase in wage rates, dismissed the employees for the reason that they were entitled to the benefit of an award. The evidence of the employer was that he dismissed the employees as "a matter of principle" because of their increased award wage rates. The employer's evidence was that if the award rates had not been increased he would have carried on business as usual and would not have dismissed the employees in question. 152 Nichols CJ observed (at 95-96) that, on the employer's evidence, it was quite plain that he had dismissed the employees in question for the reason that they were entitled to the benefit of the award increase which the employer was seeking to avoid. His Honour stated (at 95-96) that the employer "gave no evidence of inability to pay, of dismissal by reason of reduction in hands in the course of regulation of the work, or of any other cause besides the award". A similar approach was taken by Crisp J who observed (at 97) that there is nothing in the Act that would compel an employer to pay award wages he cannot afford to pay or to punish the employer if he decides to go out of a business he can no longer afford to run. In such circumstances Crisp J observed that the employer has not dismissed the employees "because of the award" but "because he could not pay". Ewing J (at 98) agreed that the real and only reason for the dismissal was the entitlement to the benefit of the award. 153 In Grayndler v Cunich (1939) 62 CLR 573 certain employees were dismissed because, as the magistrate found, their employer "was saddled with an additional [award] liability by reason of the men having joined the Union". The magistrate also found (at 586) that the men were not dismissed because they were members of the union but "because they had lawfully entitled themselves to the benefit of the award". However, following Grayndler v Broun, the magistrate held that the case that the dismissal was for the reason that the employee "is entitled to the benefit of…an award" had not been made out. As the appeal to the High Court was struck out as incompetent (with Evatt J dissenting), only Evatt J considered the substantive question. 154 Evatt J stated (at 588) that: "…[this] was not a case of an employer who was closing down his business or merely decreasing his staff, but a case where, requiring a certain amount of labour power to pick the fruit from his orchard, the employer in the first place systematically excluded members of the Australian Workers' Union from employment, then dismissed each and every one of his employees so soon as they joined the union and became entitled to the benefits of the award." 155 On the substantive question Evatt J said (at 594-595): "…the magistrate erred in following and applying the case of Grayndler v Broun. It must be remembered that sec. 9 of the Commonwealth Conciliation and Arbitration Act is one of the key sections of the Act. If an employee can be dismissed or prejudiced because, by joining a union, he becomes entitled to better conditions contained in an award of the Federal court, the whole system of industrial arbitration would be threatened with destruction… Mere membership of the union was only of indirect concern to the employer. Had the award prescribed conditions which were less favourable than those which obtained on the job, the employer would either have been pleased with those who, by joining the union, obtained worse conditions, or at least would not have intervened. Fitzgerald was dismissed…solely because the defendant had to pay him more wages so soon as he became entitled to the more favourable award conditions. Moreover, sec. 9(4) of the Act compelled the defendant to satisfy the magistrate that he was not actuated by the circumstance that such employee had become entitled to the benefit of the award. So far was the defendant from doing this that his evidence showed positively that his one concern was to prevent his employees getting the benefit of the award, and that he was prepared to dismiss any employee who became so entitled. As I have already pointed out, we are not investigating a case where a business or department is being closed down, but a case where an employer has determined that the enterprise as a whole shall be conducted entirely upon conditions of private bargaining which are less favourable to employees than award conditions, and also that every employee who qualifies himself to obtain the better award conditions shall immediately be dismissed. This is one of the obvious cases which sec. 9 was designed to cover." [Footnotes omitted] And at 596-597: "In my opinion, the case of Grayndler v. Broun was wrongly decided so far as it laid down that an employer is entitled to dismiss an employee entitled to an award merely because his reason in doing so is that he does not wish to be saddled with the heavy burden of the award rates. If this general principle were accepted a vital provision would be completely excised from the statutory scheme. … Upon the findings of the magistrate which are borne out by the evidence, and which I accept and indorse, he erred in holding that because the employer desired to save himself the expense involved in paying the higher award rate, he could not be guilty of contravening the section. I hold that, on the contrary, this desire is merely corroborative of the undoubted fact that the employer was quite ready and willing to retain Fitzgerald in his service so long as he remained disentitled to the award benefits and the employer did not have to pay them." [Footnotes omitted] 156 The final case is Klanjscek in which the employer, finding his operations unprofitable, offered to continue his employees' employment if they accepted a reduced rate of pay. Under the applicable award, unless the employees agreed to reduce the current award rates to the previously applicable award rates, they were entitled to be paid the higher rate. The employees were dismissed after the offer was rejected. 157 The Commonwealth Industrial Court (Spicer CJ, Joske and Eggleston JJ) stated the issue (at 184): "In the case of an award which is only binding on employers in relation to members of a union employed by them it is not difficult to conceive of cases in which an employer might dismiss an employee entitled to the benefit of the award with a view to employing one who was not so entitled. In such a case it might not be difficult to reach the conclusion that the union member so dismissed was dismissed because he was entitled to the benefit of the award. But where the employer is unable to engage any other person in place of the person dismissed except upon the terms prescribed by the award, it is difficult to imagine a case in which entitlement to the benefit of the award could be the sole or the dominant reason for dismissal. In this case, however, it is said that the reason for the dismissal was the circumstance that under the provisions of the award the relevant employees were, in the absence of agreement by them to the contrary, entitled to receive as part of their piece-work rates the sum of 36s., the payment of which Silver wished to discontinue, and that where the entitlement to a particular benefit is an element in the reasons for dismissal the offence created by the section is established." 158 The Court (at 186) accepted that, if the parties had reached agreement on the lower rates sought by the employer, the reduced rates would become the applicable award rates but, if they did not, the employer was bound to pay the higher rate. The Court said (at 186): "In these circumstances, we have to consider the case on the basis that, unless the employees, through their representative, agreed to a reduction of rates, they were entitled, by virtue of the award, to the benefit of the existing rates, and that this fact was an element in the dismissal of the employees, since if they had not been so entitled Silver would have continued to employ them at a lower rate, which would, however, still have been within the limits imposed by the award. We therefore have to consider whether a dismissal in such circumstances is a breach of the section." 159 The Court concluded (at 187): "It was decided under the New South Wales section that the section was not intended to take away from the employer the right to re-organize and reduce his staff when an award increases his expenses (see Grayndler v. Broun following Connington v. Kogarah) and although some criticism of this decision was voiced by Evatt J. (Grayndler v. Cunich) we think that, at least, the section should not be considered as intending to penalize an employer who closes down his operations because his operations have become unprofitable, even though the minimum rate prescribed by the award is one of the factors in this result. A fortiori, where the employer is willing to continue to operate in accordance with the award, provided only that his employees will consent to reduce the existing piece-work rates to a lower rate which is still above the minimum, the employer commits no offence. In such a case he is not actuated by the reason that the employees are entitled to the benefit of the award, but by the reason that his operations have become unprofitable." [Footnotes omitted] 160 The determination of the operative reason or reasons for conduct alleged to be in breach of s 298K(1) will always be a question of fact. However, the cases discussed above offer useful assistance in relation to the operation of s 298L(1)(h). 161 An employer will have breached ss 298K(1) and 298L(1)(h) where the dismissal or other prejudicial conduct is for the reason that the employer is not prepared to pay the award entitlement of the employee. As an employer is obliged to pay award rates, the employer is expected to be capable of organising its business so as to be able to meet its award obligations. The mere fact that an award increase cannot be passed on or is inconvenient does not relieve the employer of the constraints of ss 298K(1) and 298L(1)(h). Thus, the section can extend to prejudicial conduct which is carried out for the reason that the award rates have made the employer's business less profitable. However, profitability in this context can involve questions of degree. Thus, where the reason for the prejudicial conduct is that the employer is unable to pay the award entitlement or the employer's business is not capable of operating at a profit by reason of the entitlement, it is likely that the section will not have been breached. Although I have referred to award entitlements, obviously the same observations apply to other industrial instruments, including certified agreements and Australian Workplace Agreements. 162 Klanjscek also demonstrates that where an employer, to avoid dismissing the employees because of inability to pay, has made an offer to employees to agree to reduce their entitlement in the manner provided for by the award, the employer's endeavour to operate within the award can be a relevant factor in discharging the onus of establishing the dismissal was because of the employer's inability to pay and not because of the employees' award entitlements. 163 It is also appropriate to observe that common sense answers in determining the reason for engaging in conduct, as with causation issues, can differ according to the purpose for which the question is asked: see Environment Agency v Empress Car Co (Abertillery) Ltd [1999] 2 AC 22 at 29 per Lord Hoffman and J & G Knowles and Associates Pty Ltd v Commissioner of Taxation (2000) 96 FCR 402 at [26]-[27]. In the present case, if the dismissed Council employees were asked the reason for their dismissal, they could understandably say it was because they did not agree to reduce their Award or Agreement entitlements. On the other hand, the Council could understandably say it was because of Silver Circle's lower price. As was pointed out in J & G Knowles at [27], the answer to the question can be assisted by having regard to the purposes or object of the statutory provision under which question arises. In that regard, as explained earlier, the object of the sections in question in the present case is to protect employees' freedom of association by protecting them from discrimination by reason of their entitlements under an industrial instrument or order. 164 Further, the cases demonstrate that s 298K is not concerned with the cause of the prejudicial conduct. Rather, it is concerned with the employer's reason or reasons for engaging in that conduct. Thus, there can be a significant difference between the employer's subjective reason for engaging in prejudicial conduct and the objective circumstances that led to the employer engaging in the conduct. Where the employer's reason is inability to pay the award entitlement, the conduct will not breach s 298K(1) because the circumstance that led to the employer engaging in that conduct was the employees' increased award entitlements. 165 There are a number of special features of the present case that are relevant to the application of the above observations. 1. The Council was under a statutory obligation to accept competitive tenders for at least 50% of its total operating and capital expenditure. 2. In pursuance of that obligation the Council set in train a tender process for its HACC services and appointed an Evaluating Committee to assess the Council's in-house tender and Silver Circle's tender in accordance with weighted and objectively ascertained criteria, which included a 45% weighting for price. The Council was obliged to conduct its evaluation fairly in accordance with its specified procedures: see Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151 ("Hughes Aircraft") at 185. 3. Council management had encouraged the HACC employees to form an in-house bid team and recommended that the team arrange for the employees to enter into a Local Area Work Agreement ("LAWA") within cl 9 of the Agreement to enable the staff bid to be competitive. The bid team was not prepared to endorse a reduction in entitlements pursuant to a LAWA and prepared the in-house bid on the basis of the existing Award and Agreement terms and conditions. 4. The evaluation panel, applying the weighted criteria, assessed the Silver Circle tender at 3.45 compared with 3.08 for the in-house tender. The panel estimated that the difference that contributed most to Silver Circle's overall rating "is price" and recommended that the Council accept Silver Circle's tender. 5. The Council resolved by a majority of seven to three to accept the panel's recommendation. The majority councillors were aware that the only significant factor in establishing the price differential was the Council's HACC employees' higher Award and Agreement entitlements. The majority councillors were of the view that the HACC staff had acted unreasonably in not agreeing to reduce those entitlements in order to make their bid more competitive. The councillors were also aware that redundancy of the Council's HACC staff was an inevitable consequence of the resolution, although it was expected that Silver Circle would engage the HACC staff made redundant. 6. Save for the lower price Silver Circle's tender offered no significant technological, managerial or other advantages in relation to the service it was to provide. 166 On the basis of the above facts Madgwick J drew a positive inference that, although the main reason for the Council's acceptance of Silver Circle's tender was its lower price, an operative, if subsidiary, reason was the HACC employees' Award and Agreement entitlements. There are a number of difficulties that arise in respect of that inference. 167 In my view the proper inferences to be drawn from the primary facts found by the primary judge are that an operative reason for the Council's resolution to accept Silver Circle's tender was its lower price and that a circumstance that led to it accepting the lower price was the higher Award and Agreement entitlements of the HACC employees. While the higher entitlements may be causally linked to the Council's acceptance of the Silver Circle tender, the evidence does not support the primary judge's conclusion that they were an operative reason for the Council's acceptance of the tender. No councillor or Council document stated that the entitlements were a reason for the Council's acceptance. The inference drawn by the primary judge to the contrary was based on an approach that, erroneously, failed to distinguish between the operative reason for the Council acting and the circumstances that led to the price of the in-house bid being higher than the price of the Silver Circle bid. The fact that the councillors were aware of, or considered, those circumstances does not make them a reason for their decision. This is not a case of a Council not being prepared to pay Award or Agreement entitlements or seeking to discriminate against its employees by reason of those entitlements. Rather, it is a case of a Council, that is required by law to engage in a competitive tendering process, accepting the most competitive tender which met the objective criteria it specified. 168 The primary judge was correct in finding that the Council was under no obligation to accept the lowest tender: Local Government Act 1989 (Vic) ("LGA") ss 186(4) and 208C(c). It does not follow, however, that the Council was not required to engage in the tender process in accordance with the LGA and the procedures specified by it. The obligations of a party calling for tenders were considered in Hughes Aircraft, in which Finn J (at 185) held that when a tender process had been specified and agreed to by all parties it amounted to a contract concerning the procedures that were to be followed and the criteria to be applied in awarding the contract. His Honour also found (at 190) that there was an implied term in the tender contract that the party calling for tenders would conduct its evaluation fairly and in a manner that would ensure equal opportunity to the parties who had submitted tenders. 169 The Council's obligations in the present case may, in a sense, be more easily defined than those of the private contractor in Hughes Aircraft because the competitive public tender process was prescribed by statute: see Pt 9 Div 3 of the LGA. Of course, the issue is not whether the obligations are enforceable; rather, it is whether the primary judge ought to have accepted the Council's evidence that the only reason it accepted Silver Circle's tender was because it believed it was complying with its statutory obligations in relation to the tender. The primary judge appears to have given very little consideration to the Council's beliefs in relation to its obligations concerning the tender process in his evaluation of the Council's reasons for accepting Silver Circle's tender. His Honour appears to have regarded the Council as having a very broad discretion to accept or reject any tender because it was not obliged to accept the lowest tender. In fairness to his Honour his attention does not appear to have been drawn to the decision in Hughes Aircraft. 170 Further, the Council's endeavours to encourage its HACC employees to enter into a LAWA under the Agreement in order to enable the in-house tender to be competitive, support, rather than undermine, the Council's reliance upon the criteria imposed by the competitive tendering process as the reason for its decision to accept Silver Circle's tender. 171 For the above reasons the factors relied upon cumulatively by Madgwick J in inferring that the evidence established that the position of the HACC employees was altered to their prejudice for reasons that included their Award and Agreement entitlements did not justify that inference. 172 It does not follow, however, that the Council is entitled to succeed in its appeal as it must also establish that his Honour erred in arriving at the ultimate conclusion that the Council failed to discharge the onus under s 298V to negative the rebuttable presumption that the impugned conduct was engaged in for the prohibited reason alleged against the Council. 173 His Honour's ultimate conclusion was based, in part, on the finding that the majority councillors were likely to have held the view that the Council's HACC staff acted unreasonably in not agreeing to reduce their Award and Agreement entitlements and had only themselves to blame for being unable to undercut or match the Silver Circle bid. His Honour, in recapitulating his findings, again referred to that matter, stating that the Council resolution was taken only after the employees' decision to accept "that they were, in effect, labourers unworthy of their present hire". The last statement is not easy to follow. His Honour may have intended it to mean that the Council viewed the HACC employees as "unworthy of their present hire" in the sense that the employees, by insisting on their Award or Agreement entitlements, were insisting on unrealistic wage rates. While that is not what his Honour said, the overall effect of his findings is that the majority councillors held the view that the HACC staff had acted unreasonably in not agreeing to reduce their Award or Agreement entitlements and that they were to blame for the consequences of their failure to be competitive by matching or undercutting Silver Circle's rates. 174 While his Honour did not state that that view was a reason for the Council resolving to accept the Silver Circle rather than the in-house tender, he relied on that factor, together with the other factors he summarised, to conclude that the Council had not discharged its onus of establishing that the Award and Agreement entitlements were not a reason for the Council's decision. 175 It is not unrealistic to expect that some Councillors might have acted on the view that the HACC employees had acted unreasonably and had therefore forfeited the right to the loyalty that the Council might have otherwise owed them in relation to the continuity of their HACC employment. If a reason for the majority councillors resolving to accept Silver Circle's tender was that the HACC employees had acted unreasonably in not reducing their Award and Agreement entitlements and therefore had only themselves to blame for their tender being rejected in favour of Silver Circle's tender, then the employees' position would have been altered to their prejudice for reasons that included the reason that they insisted on retaining the benefit of their Award and Agreement entitlements. 176 In my view it was incumbent on the Council to adduce evidence that negatived any such reason. In the present context that means that the Council was required to establish that it was not a reason for accepting Silver Circle's tender that it was motivated in part by the majority Councillors' view that the HACC staff, by unreasonably insisting on retaining their Award and Agreement entitlements, only had themselves to blame for Council's decision to reject their bid. That topic was raised in cross-examination with Councillor Melham who said that it was "not necessarily" his view that the HACC employees should have reduced their entitlements to be competitive, but that they "should look at themselves to provide the best value for the best dollar" and "try to provide the best value for the service". It may have been this evidence that Madgwick J was referring to when he said that Councillor Melham's evidence, in cross-examination, "was not helpful to the [Council]". 177 The Chief Executive Officer and Councillor Melham stated in their affidavits that Silver Circle's bid was accepted "purely in order to comply with [the Council's] purposes and obligations pursuant to the [LGA]". That evidence was challenged at trial by counsel for the respondents and does not appear to have been accepted by the primary judge as the only reason for the Council's conduct. As explained above, the appellant did not dispute any of the primary factual findings of Madgwick J. 178 Counsel appearing for the Council did not take the Court to any evidence of the Council that the employees' insistence on maintaining their entitlements was not a motivating reason of the majority councillors. As explained above, in so far as the general assertions of the Chief Executive Officer and Councillor Melham in their Affidavit might be relied upon, his Honour did not appear to accept that evidence. The view of the majority councillors' motivations was not unrealistic, appears to have been raised as part of the respondents' case and was not addressed directly by the Council's evidence. Although there may be reasonable doubt about these matters s 298V requires that the doubt be resolved against the Council. 179 Further, the failure of the Council to call any councillor other than Councillor Melham entitled his Honour and, if it be necessary, this Court to rely upon a Jones v Dunkel approach to be more confident in not drawing an inference in the Council's favour that its evidence rebutted the presumption against it. 180 Accordingly, I am satisfied that the Council has not established that the evidence accepted by the primary judge warranted the conclusion that the Council had discharged the onus cast upon it under s 298V. It must follow that, although the Council has demonstrated error by the primary judge in the positive inference he drew, it has not demonstrated that his Honour erred in ultimately concluding, in reliance upon s 290V, that the Council breached ss 298K(1)(c) and 298L(1)(h) when it resolved to accept Silver Circle's tender. 181 Madgwick J also found (at [65]), that the Council's decision to dismiss the HACC employees breached s 298K(1)(a). On the assumption that the reason for the dismissals cannot be distinguished from the reason for accepting Silver Circle's tender, for the reasons set out above it must follow that the inference drawn by his Honour against the Council in respect of the dismissals also cannot stand. It is arguable, however, that his Honour ought to have been satisfied that the evidence established that the reason for the dismissals was redundancy, rather than the employees' entitlements. Ultimately, it is unnecessary to resolve that question as I do not regard the failure of the respondents' case under s 298K(1)(a) to be of significance to the relief to which they would be entitled in respect of their case under s 298K(1)(c). In that regard I agree with the primary judge's observations (at [130]) where his Honour stated: "I have also considered whether reinstatement would be an available and appropriate remedy if my conclusion about the breach of s 298K(1)(a) is incorrect, so that the only breach is of s 298K(1)(c). At least in the circumstances of this case, where the offending alteration of the employees' position was the creation of circumstances in which they would certainly be dismissed and no longer enjoy reasonable security of their employment, it seems to me that affirmative answers to these questions must be given." 182 I am also of the view that the Council's argument that ss 298K(1) and 298L(1)(h) impair its capacity to function as an agency of the State is without substance. It can be accepted that the Council is an emanation or agency of the State for the reasons given by Finkelstein J. I do not accept, however, that ss 298K(1) and 298L(1)(h), as I have interpreted them, operate to unduly limit, impair or interfere with the Council's capacity to carry out its governmental functions by its own employees or by independent contractors. As explained earlier in these reasons, the sections do not operate to prevent or fetter the Council's capacity to outsource services pursuant to the competitive tendering processes prescribed by the LGA, nor do they prevent or fetter the Council's capacity to restructure the manner in which it delivers its services. A prohibition against the Council engaging in discriminatory conduct against its employees by reason of their entitlements under an industrial instrument binding upon the Council does not unduly impede the functioning of the Council. The prohibition is analogous to prohibitions under Commonwealth and State law against discriminatory conduct against an employee by reason of sex, race or disability. That situation is not altered by the power conferred on the Court under s 298U(b) of the Act, where there has been a contravention of s 298K(1), to order re-instatement of an employee where it is appropriate to do so in all the circumstances of the case: see Konrad v Victoria (1999) 91 FCR 95 at 104 and 107. 183 Finally, I agree with Wilcox J that the Council's complaints about the primary judge's alleged failure to consider the case put by the Council against re-instatement are not well-founded. In my view no error has been demonstrated in relation to the manner in which his Honour exercised his discretion concerning the relief to be granted. 184 Accordingly, for the above reasons, I agree that the appeal should be dismissed. I also agree with the other orders proposed by Wilcox J. I certify that the preceding sixty-five (65) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Merkel. Associate: Dated: 4 April 2001 IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V 765 of 2000 On appeal from a single judge of the Federal Court of Australia BETWEEN: GREATER DANDENONG CITY COUNCIL Appellant AND: AUSTRALIAN MUNICIPAL, CLERICAL AND SERVICES UNION and WENDY PHILIPS Respondents JUDGES: WILCOX, MERKEL & FINKELSTEIN JJ DATE: 4 APRIL 2001 PLACE: MELBOURNE REASONS FOR JUDGMENT FINKELSTEIN J 185 In Victoria, every municipal council is required to conduct a competitive process for the supply of goods and services or the undertaking of works to, for, or by the council in respect of at least 50 per cent of its total expenditure, subject to certain immaterial exceptions: Local Government Act 1989 (Vic), ss 208A and 208B. In respect of every contract for more than $50,000, a competitive process is one by which tenders for the provision of the relevant goods or services are called for, either by public notice or by invitation: s 208C. Existing employees of a council are entitled to submit a tender: s 208D. The council must consider all tenders that are received by the closing date for their submission and must award the contract to one of the tenderers, although the contract need not be awarded for the lowest tender: s 208C(1). 186 The provisions for competitive tendering were introduced into the Local Government Act because of a belief that statutory monopolies were in need of reform. The view was that if a government business is forced to compete with, or is transferred to, the private sector there will be an improvement in the efficiency of that business. Whether or not such a policy offers any significant public benefit is not for the court to consider, but the implementation of the policy does raise significant legal questions which must be resolved. 187 In pursuance of its statutory obligation, the appellant invited tenders for the provision of home and community care services (usually referred to as HACC). One tender was received from Clad Pty Ltd, which trades under the name Silver Circle. The only other tender was received from the employees of the appellant who provided home and community care services on its behalf. I shall refer to this as the "in-house tender". The tender by Silver Circle offered to provide the relevant services over three years for $6,610,429. The in-house tender was for $7,770,665. 188 The tenders were considered by the appellant. It observed that Silver Circle was able to tender a lower price because its costs were less than those that would be incurred by the employees who submitted the in-house tender. Silver Circle could offer the relevant services at a lower cost because the industrial award and certified agreement that covered the appellant's employees provided for higher wages than the award that operated in respect of the employees of Silver Circle. The appellant knew that it was the intention of Silver Circle to retain many of the appellant's employees who would necessarily be made redundant if its tender were accepted. In that event those employees would receive a lower wage for performing the same work. 189 The appellant accepted the tender submitted by Silver Circle. It then moved to dismiss fifty-four employees for redundancy. Many of the dismissed employees took up employment with Silver Circle, as had been anticipated. 190 The respondent union argues that the dismissal of the employees was for a "prohibited reason" and was therefore in contravention of s 298K(1) of the Workplace Relations Act 1996 (Cth). That section relevantly provides that "[a]n employer must not, for a prohibited reason … (a) dismiss an employee; [or] (c) alter the position of an employee to the employee's prejudice;…". Conduct will be for a "prohibited reason" if, among other reasons, it is "carried out because the employee … is entitled to the benefit of an industrial instrument or an order of an industrial body": s 298L(1)(h). Each of an award and a certified agreement is an "industrial instrument" for the purposes of this provision: see the definition of "industrial instrument" in s 298B. 191 The trial judge found that "an actual, operative and significant reason for [the appellant's] actions was that the substantial majority of the HACC staff were entitled to the benefits of the award and the agreement". Although he did not say so expressly, it is to be assumed that the "actions" to which the trial judge referred included the appellant's acceptance of the Silver Circle tender and dismissal of its employees. It followed, so the trial judge found, that there was a contravention of s 298K. In this connection, the trial judge said that the section prohibited conduct "if motivated by the level, degree or extent of the entitlement" under an industrial instrument. The appellant had argued that s 298L(1)(h) only prohibits conduct motivated by the very fact that an employee has an entitlement under an industrial instrument, without regard to the nature of that entitlement. This argument was rejected. 192 As the proper construction of ss 298K and 298L(1)(h) is the principal issue with which this appeal is concerned, it is helpful to know their history, as these provisions are not new. Sections 298K and 298L have their origins in New South Wales. On 28 June 1900, the Attorney-General, Mr Wise (a Federalist member of parliament and later a judge of the Supreme Court), introduced the Industrial Arbitration Bill into the Legislative Assembly. The Bill made provision for the registration of industrial unions, the making and enforcing of industrial agreements, the establishment of a court of arbitration to hear industrial disputes, the enforcement of awards and other objects. Clause 26 of the Bill dealt with unlawful dismissal. It read: "If an employer, during the time that a dispute is pending or an award or order of the court or an industrial agreement is binding on him, dismisses from his employment any employee who is interested in such dispute, entitled to the benefit of such award, order, or agreement by reason merely of the fact that the employee is a member of an industrial union, trade union, or branch, or is entitled to the benefit of such award, order, or agreement, such dismissal shall be deemed to be a breach of the award, order, or agreement. In every case it shall lie on the employer to satisfy the court that such employee was so dismissed by reason of some facts other than those abovementioned in this section." A member of the Labor Party, Mr Cook, moved an amendment to cl 26 for it to read: "If an employer dismisses from his employment an employee by reason merely of the fact that the employee is a member of an industrial union, trade union, or branch, such dismissal shall be deemed to be a breach of the act." The Attorney-General accepted the amendment, subject to certain modifications, so that cl 26 took the following form: "If an employer dismisses from his employment any employee by reason merely of the fact that the employee is a member of an industrial union, trade union, or branch, or is entitled to the benefit of an award, order or agreement, such employer shall be liable to a penalty not exceeding twenty pounds for each employee so dismissed. In every case it shall lie on the employer to satisfy the court that such employee was so dismissed by reason of some facts other than those abovementioned in this section." The Bill was passed in the Legislative Assembly and was sent to the Legislative Council. 193 When the Bill was read in the Council (by which time cl 26 had been renumbered cl 28), the following exchange concerning the clause took place between Mr Wise (who by then had become a member of the Council) and Dr Cullen (a member of the Freetrade Party who was later the Chief Justice of the Supreme Court): "Mr Wise: A similar clause was in the bill, and it was amended in this way. Dr Cullen: Not a similar clause. No clause provided that a man should be under a penalty for dismissing a man because he was a trade-unionist. There was a clause which stated that a person was under a penalty for dismissing a man who already had an award of the court in his favour in a dispute; … If he dismisses a man because he is entitled to the benefit of an award, order or agreement, he is liable to a penalty not exceeding Ł20. As I have said, supposing there is no award against him at all, and there has been no dispute between himself and his workmen. Supposing there has been no trial before the Court of Arbitration, and no award; but someone else has a dispute … and the court has decided that a certain amount is the proper amount of wages to be paid, and the man says, 'I cannot afford to pay that amount,' he is liable. Mr Wise: The hon. and learned member is clearly mistaken there, because the proviso says that he is only liable if he dismisses a man merely on account of the fact that he is a unionist. Dr Cullen: Is it not, practically, the same thing? Mr Wise: I do not think so. It must be remembered that this measure has to be interpreted by reasonable men. Dr Cullen: I understand that the distinction which the hon. and learned member draws is this: That the court will have to decide whether a man can really afford to pay certain wages, and whether it is a mere pretence that he cannot afford to pay them. Even that goes a long way. He cannot then dismiss men without running the risk of being brought before the court, and having a decision of the court as to whether he can afford to pay the wages which he himself thinks he cannot pay. An Hon. Member: He can dismiss men if he has no work for them! Dr Cullen: For not having work for them on the terms upon which the court thinks all the employers of the country ought to employ their workmen. Then – I accept my hon. and learned friend's correction – he cannot be punished if he can show that he cannot afford to pay the wages." 194 The Bill did not gain the support of the Legislative Council. However, following a Royal Commission into the working of compulsory conciliation and arbitration laws, a new Bill was introduced in 1901. Clause 38 of the new Bill took the form of cl 28 of the 1900 Bill and, with some minor amendments, became s 35 of the Industrial Arbitration Act 1901 (NSW), which provided: "If an employer dismisses from his employment any employee by reason merely of the fact that the employee is a member of an industrial union, or is entitled to the benefit of an award, order or agreement, such employer shall be liable to a penalty not exceeding twenty pounds for each employee so dismissed. In every case it shall lie on the employer to satisfy the court that such employee was so dismissed by reason of some facts other than those abovementioned in this section; Provided that no proceedings shall be begun under this section except by leave of the court." 195 The 1901 Act ceased to have effect on 30 June 1908 (see s 47) and it was replaced by the Industrial Disputes Act 1908 (NSW). Section 44 of the 1908 Act was, in all relevant respects, identical to the former s 35. The 1908 Act was repealed and replaced by the Industrial Arbitration Act 1912 (NSW). The 1912 Act made provision for unlawful dismissal in s 52. That section provided: "If an employer dismisses from his employment any employee by reason of the fact that the employee is a member of … a trade union, … or is entitled to the benefit of an award or of an industrial agreement, the court may order such employer to pay a penalty not exceeding twenty pounds for each employee so dismissed…". 196 The effect of s 52 was considered by the NSW Court of Arbitrationin Connington v Council of Municipality of Kogarah [1913] AR (NSW) 40. The council was prosecuted for the alleged unlawful dismissal of an employee. The employee claimed that he had not been paid his proper wages. The council said it had not dismissed the employee because he was entitled to the benefit of an award but because he had made an unwarranted claim for wages. Heydon J noted the difference between s 52 and the corresponding section in the previous enactment, namely that the word "merely" had been removed. He said of this change (at 40) that under the previous enactment, "if it was shown he dismissed him substantially for that fact, but there was something else, perhaps of a very trivial description, which was a make-weight, and counted in the dismissal, the prosecution could not succeed." As regards s 52 generally Heydon J said (at 44): "[I]t seems to me evident that the section was not intended to take away from the employer the right to reorganise and reduce his staff when an award increases his expenses. Yet, in a way, that is dismissing men because they are entitled to the benefit of an award. When I first read over this section it seemed to me, seeing that employers must retain that right, that it would be very difficult to find a case in which an employer would be fairly open to a fine." 197 Section 52 was substantially amended by the Industrial Arbitration (Amendment) Act 1926 (NSW). For present purposes, it is necessary only to notice one aspect of the new section. It now provided that "If an employer dismisses an employee … by reason of the fact that the employee is a … member of a trade … union … or claims some benefit of an … award to which he is entitled … the court or industrial magistrate may order him to pay a penalty not exceeding fifty pounds." The meaning of this provision was considered in two reported cases. In Grayndler v Broun [1928] AR(NSW) 46, three employees who worked on the defendant's farm enrolled themselves as members of the Australian Workers' Union and became entitled to the full benefit of an award. It was alleged that when the defendant was told that his men wanted the award rate he said: "I cannot afford to pay it. I will have to let the sheep starve." Later he told the men he could no longer employ them because they were members of the union and he could not afford the pay award wages. Street J found that the men were dismissed not because of the fact that they were unionists but because the defendant could not afford to pay the higher wages. He then considered whether dismissing the men in those circumstances was a breach of s 52. As to this Street J said (at 49): "…I think – to adopt the language of Heydon J in the case of Connington v Council of Municipality of Kogarah [1913] AR 40 – that this section was never intended to take away from the employer the right to reorganise his business and reduce his staff when an award increases his expenses. Here was a case where the fact that these men by joining the Union had entitled themselves to the benefit of the award was going to increase the employer's expenses very considerably. He did not apparently attempt to engage non-union labour from outside, but he accepted the position that he could not pay those rates. There is no doubt that s 52 is intended to apply where a man is dismissed because he is a member of a union, but I think that the real object of s 52 is to prevent victimisation – to prevent the capricious use of an employer's power to discharge employees simply because he dislikes the fact of them having joined a union. But where you find an employer is saddled with a heavy additional liability by reason of the men having joined a union and that they by joining the union have imposed upon him an additional burden if he continues to employ them, then I do not think the section was intended to prevent the employer from meeting that position and relieving himself of the burden as far as he could by dismissal of the men concerned." 198 In Hunt v Railway Commissioners for New South Wales; Ex parte Brown-Smith [1928] AR(NSW) 151, application was made for leave to prosecute the defendant for dismissing an employee because he claimed the benefit of an award. The award provided that after two years' service an employee should be appointed to the permanent staff. It was alleged that an employee had, on four separate occasions, requested permanency but instead was dismissed. Street J said (at 153): "Section 52 in its present form requires that a prosecution and a conviction can only follow where an employer dismisses an employee by reason of the fact that the employee claims some benefit under an award to which he is entitled. The word 'claims' had been inserted in this section by the Amending Act, No. 14 of 1926, and in the earlier sections as far back as 1921 it did not appear. From one point of view every person who holds himself out as willing to enter into an engagement of service with an employer, and does in fact enter upon that service, claims the benefit of an award. … I think this is too wide a construction to be put upon the word 'claims' as used in section 52." Later, after referring to Connington v Council of Municipality of Kogarah, Street J continued (at 154): "And the dismissal must, I think, be a dismissal by an employer really as a matter of victimisation, or the capricious use of his power to dismiss in order, to retaliate upon the employee for his having dared to assert a claim to rights under the award. For instance a clear case of that sort would be the case suggested in Connington v Council of Municipality of Kogarah, where differential rates were payable according to the different classes of work done by men in the Council, and the employee asserted as a matter of fact, and correctly, that he had done some work during the day entitling him to a higher rate, and for reason of making that claim and insisting upon it the employer dismissed him. I do not think that the wide meaning I originally suggested should be put upon the words in s 52, because otherwise it would prevent any dismissal at all of any person who was entitled to the benefit of an award. In other words, there would be taken away from the employer the right to readjust his business in order to meet the position created by any award, and I think, therefore, that some narrower construction must be put upon this word." 199 According to these cases, to decide whether an employee has been unlawfully dismissed, it is necessary to ascertain the true motive for, or purpose of, the dismissal. If there is some legitimate reason for the dismissal, such as the desire to avoid bankruptcy or the need to maintain a profitable operation, the dismissal will be lawful. It matters not that the cause of the impending bankruptcy or the unprofitable trading is the high rate of wages payable under an award or certified agreement. That is to say, although the benefits produced by an award or certified agreement have caused the problem which the employer seeks to address, that does not necessarily make those benefits the "reason" or motive for his act. 200 Upon federation, the Commonwealth parliament was given power to make laws with respect to conciliation and arbitration: Constitution, s 51(xxxv). In the exercise of this power, it enacted the Commonwealth Conciliation and Arbitration Act 1904 (Cth). That enactment made provision for unlawful dismissal in s 9, which was in similar terms to s 35 of the Industrial Arbitration Act 1901 (NSW). Subsection 9(1) provided: "No employer shall dismiss any employee from his employment by reason merely of the fact that the employee is an officer or member of an organization or is entitled to the benefit of an industrial agreement or award. Penalty: Twenty pounds." 201 Section 9 was amended by the Commonwealth Conciliation and Arbitration Act 1909 (Cth) and by the Commonwealth Conciliation and Arbitration Act 1911 (Cth) in various respects, which need not be mentioned. However, important changes were made by the Commonwealth Conciliation and Arbitration Act (No. 2) 1914 (Cth) so that s 9(1) now read: "An employer shall not dismiss an employee, or injure him in his employment, or alter his position to his prejudice, by reason of the circumstance that the employee – (a) is an officer or member of an organization, or of an association that has applied to be registered as an organization; or (b) is entitled to the benefit of an industrial agreement or an award; or (c) has appeared as a witness, or has given any evidence, in a proceeding under this Act. Penalty: Fifty pounds." 202 For present purposes, it is necessary only to note the omission of the word "merely", adopting what had occurred in New South Wales in 1912. The early cases which considered the meaning of s 9 followed the approach taken in relation to its New South Wales counterpart. The first case is Eaton v McKenzie; Cowley v Dunn (1916) 16 Tas L R 94, a decision of the Full Court of the Supreme Court of Tasmania. The defendant had dismissed his employees, who were members of the Australian Builders' Laborers Federation, after their award was varied to give them an increase in wages. It was alleged that the dismissal was by reason of the fact that the employees were entitled to the benefit of the award. Nicholls CJ said (at 95) that it was "quite plain that the appellant dismissed the respondent for the reason that the respondent was one of those entitled to the benefit of an award which would, next day, cause his wages to be increased." Nicholls CJ noted (at 95–96) that the appellant gave no evidence of inability to pay or any other cause for dismissal besides the award. Crisp J said (at 97): "Many motives may influence employers in dismissing their employees; they may not be able to pay the wages, they may decline to pay them in any event, they may dismiss for purely political reasons, but if … the real basic reason for dismissal was the award," then the statute has been breached. Crisp J recognised that if an employer finds that he cannot pay the wages fixed by the award there is nothing to compel him to do so or to punish him if he decides to go out of business. In that circumstance the employer has not dismissed his employee because of the award but because he could not pay. Ewing J, the remaining member of the court, said (at 98) that he was satisfied "that the real and only reason for the dismissal of the complainants was that they were entitled to the benefit of the award." 203 To the same effect is the decision of the Commonwealth Industrial Court in Klanjscek v Silver (1961) 4 FLR 182. The defendant manufactured shirts. Because of a decline in the retail price of shirts, the defendant took steps to reduce his costs of production. He requested his piece-workers to accept a reduction in their rates. At the time, they were being paid in excess of the award rates. The piece-workers refused to accept any reduction, so they were dismissed. The defendant was charged with unlawfully dismissing his employees by reason that they were entitled to the benefit of an award, contrary to s 5 of the Conciliation and Arbitration Act (s 9 had by then been renumbered as s 5 by the Conciliation and Arbitration Act 1947 (Cth)). The Commonwealth Industrial Court, constituted by Spicer CJ and Joske and Eggleston JJ, observed that, under the corresponding section in New South Wales, it had been held that the section was not intended to take away an employer's right to reorganise his business or reduce his staff when an award increases his expenses, referring to Grayndler v Broun and Connington v Kogarah. In relation to s 5, the court said (at 187) that the provision "should not be considered as intending to penalize an employer who closes down his operations because his operations have become unprofitable, even though the minimum rate prescribed by the award is one of the facts in this result. A fortiori, where the employer is willing to continue to operate in accordance with the award, provided only that his employees will consent to reduce the existing piece-work rates to a lower rate which is still above the minimum, the employer commits no offence. In such a case, he is not actuated by the reason that the employees are entitled to the benefit of the award, but by the reason that his operations have become unprofitable." 204 Thus, there has been an unbroken line of State and Federal authority in favour of the proposition that, for the purpose of deciding whether there has been an unlawful dismissal for the reason that an employee is entitled to the benefit of an award or certified agreement, it is necessary to draw a distinction between the "reason" or motive behind the dismissal and what produced that motive. In this connection, reference should be made to an obiter observation by Evatt J in Grayndler v Cunich (1939) 62 CLR 573. Cunich had been charged with offences against s 9. A magistrate dismissed the informations and the informant sought to bring the matter before the High Court by notice of appeal. The appeal was struck out for being incompetent. However, Evatt J held the appeal was properly instituted and dealt with its merits. In the course of his reasons, he said (at 596) that Grayndler v Broun was wrongly decided, in so far as it laid down that an employer is entitled to dismiss an employee entitled to an award merely because his reason for doing so is that he does not wish to be saddled with the heavier burden of the award rates. Evatt J said that "[i]f this general principle were accepted, a vital provision would be completely excised from the statutory scheme". 205 I do not take Evatt J to be criticising the result in Grayndler v Broun. In that case the employees were not dismissed merely because they were entitled to an increase in wages. They were dismissed because the defendant could not afford to pay the award wages. In that circumstance it was found that the employer was not obliged to keep his employees. That is, because the burden of award rates means that it is no longer profitable to operate the business, it is not unlawful to dismiss the employees. The criticism was directed to the comment by Street J that an employee could be dismissed where award rates would have "saddled [the employer] with a heavy additional liability." It is not necessary to decide presently what Street J meant by this observation and whether it goes too far. 206 The trial judge acknowledged that if the appellant's decision to accept the Silver Circle tender were based on price alone, there would be no contravention of s 298K. He said: "Price of itself is not sufficient to constitute a prohibited reason". But the trial judge went on to explain that "in the circumstances of the case, the only significant factor going to establish that price differential was the HACC workers' entitlements under the award and agreement [and] it was likely that it was well known to all councillors that the discrepancy between the Council's and Silver Circle's industrial instruments accounted for the great part of the price disparity." For this and other reasons, which I will mention in a moment, the trial judge found that an "actual, operative and significant reason" for the appellant's action to accept the Silver Circle tender and dismiss its employees was that the employees were entitled to the benefits of the award and the agreement, although later he did say that this was "an operative, if subsidiary, reason". 207 Those findings led the trial judge to conclude that there had been a contravention of s 298K(1)(a) (dismissal for a prohibited reason) and s 298K(1)(c) (injury for a prohibited reason). In relation to the contravention of s 298K(1)(a), the trial judge said that the appellant could not be protected "against engaging in prohibited conduct merely because it declared 'redundancy' to be the reason for dismissal". He said that "the real reason for dismissal was the council's decision (made in part for a proscribed reason) to outsource the HACC services, not because of an absence of work." 208 On appeal, the appellant did not challenge this approach. First, in relation to the construction of s 298K(1)(a), the appellant did not argue that a distinction should be drawn between, on the one hand, the "real reason" for the dismissals (lack of work) and, on the other hand, the "real reason" for acceptance of the Silver Circle tender, one consequence of which was that dismissals became likely, if not inevitable. On one view, and it is a view that I prefer, s 298K(1)(a) cannot be concerned with conduct that falls into the latter category, because it does not involve a dismissal. To my mind, the true question to be determined was whether acceptance of the Silver Circle tender fell within s 298K(1)(c). This said, I do agree with the trial judge that acceptance of the Silver Circle tender altered the position of employees to their prejudice within the meaning of s 298K(1)(c). The trial judge referred to the key case Patrick Stevedores Operations No.2 Proprietary Limited v Maritime Union of Australia (1998) 195 CLR 1 where, in their joint judgment (at 18), Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ said of s 298K(1): "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." That reasoning has direct application. 209 Second, the appellant did not argue that the trial judge was in error in the manner in which he approached the task of making findings of fact. This is a matter to which I must return. At this point, it is sufficient to note that the trial judge may not have drawn a sufficient distinction between the immediate reason (motive or purpose) for the dismissals or the acceptance of the tender, and the proximate reason (cause) which explained why that action was undertaken, as is required by cases such as Connington v Kogarah, Grayndler v Broun and Klanjscek v Silver. The mere fact that the appellant was aware that the Silver Circle tender was lower, because Silver Circle had the benefit of lower award rates, may say nothing about the reason for acceptance of the tender or for the ultimate dismissal of the staff. 210 Let me put the matter more directly in the context of municipal councils. Municipal councils provide many services to their ratepayers, from garbage collection to baby health care centres to meals-on-wheels for elderly citizens. Often they do not have sufficient funds to provide the services that the community requires. Every day decisions are taken on the allocation of scarce resources. The principal object of the new and mandatory competitive process provisions is to create efficiencies that will enable councils to provide more and better services. If a council, in the course of competitive tendering, accepts a tender which is lower than others because the tenderer has less onerous obligations under an industrial instrument, the mere acceptance of the tender cannot result in a contravention of s 298K. A construction of the section that produces that result would be unacceptable. That is not to deny, however, that there could be a case where the "real" reason for the acceptance of a tender is a prohibited reason. But, speaking generally, where a council is performing its statutory obligation to enter into contracts for the provision of goods and services in respect of 50 per cent of its total expenditure, and the council carries out that obligation strictly in accordance with the relevant statutory provisions (express and implied), it will not contravene s 298K. 211 On the appeal, and it seems also at trial, the appellant chose as its principal battle, a contest about the construction of the relevant statutory provisions. It argued that s 298L(1)(h) had a narrow scope. The argument was that the section is concerned only with dismissal based on the fact that an employee has some entitlement under an industrial instrument, regardless of the nature or level of that entitlement. The appellant assumes that if that is the proper construction of the provision, it will succeed on the appeal, because the trial judge said as much. 212 I have a clear view about this aspect of the operation of s 298L(1)(h). My view does not depend upon any purposive or other modern principle of statutory construction. It does not depend upon the legislative history of the provision. It depends simply upon the meaning of the words used in the provision, taking into account the context in which those words are used. Once this would have been known as the "literal rule" (J Willis, "Statute Interpretation in a Nutshell" (1938) 16 Canadian Bar Review 1), or the "plain meaning" rule (Rodriguez v United States, 480 US 522 at 525-6 (1987)). In my opinion, the language of the provision covers both a situation where the relevant conduct is motivated by the mere fact that an employee is entitled to an industrial instrument as well as a situation where that conduct is motivated by the level, degree or extent of that entitlement. Take the following two cases by way of example. The first is where an employee becomes entitled to the benefits of an award for the first time. He is then dismissed for that reason. The second example is where an employer is bound by an award which is varied to increase the benefits payable to his employee. The employer dismisses the employee because his award rates have increased. In each case the question to be asked is: "Was the employee dismissed because the employee was entitled to the benefit of an award?". In each case, the answer must be in the affirmative. In the first example, the answer is in the affirmative because it is the existence of the award that has brought about the dismissal and a person to whom the award applies "is entitled to the benefit" of it. In the second case, the answer is in the affirmative because the additional benefits have come about because the employee "is entitled to the benefit" of an award. I see no reason why it is necessary to draw a distinction between the two situations and hold that one is within, and the other outside, the section. I do not believe that this view is inconsistent with what was said by Kenny J in Australian Workers' Union v BHP Iron-Ore Pty Ltd [2001] FCA 3 at [66], where she dealt with a different subsection. It is consistent with the decisions in Connington v Council of Municipality of Kogarah, Grayndler v Broun, and Klanjscek v Silver. In any case, to hold otherwise would not be a sensible result and, as we know, statutory construction (the golden rule) is aimed at attributing to parliament a rational intention, whenever possible. 213 The trial judge found that an operative reason for the appellant's acceptance of the Silver Circle bid was that HACC staff were entitled to the benefits of an award and a certified agreement by a process of inference from other facts. The facts upon which the inference was based were stated by the trial judge to be the following: (1) the appellant was concerned about the comparative expense of its employees performing the HACC work (the comparison is between the rates of pay under the in-house tender and the rates under the Silver Circle tender); (2) the appellant knew that the entitlement of those employees was the main reason for that comparative expense; (3) the appellant believed that the main reason that the expense might be reduced was that Silver Circle's employees would be unable to access entitlements of a similar value; (4) the appellant knew that it was probable that at least some of Silver Circle's employees would come from its own ranks and perform the same work; (5) the appellant had attempted to have its employees voluntarily reduce their entitlements; (6) the decision to accept the tender was taken only after reference to the employees' decision to accept that they were, "in effect, labourers unworthy of their present hire". 214 The finding was the subject of criticism on the appeal. That criticism was largely based upon the alleged failure by the trial judge to take into account, or have proper regard to, a number of factors, including (a) the statutory obligation imposed upon the appellant to engage in compulsory competitive tendering; (b) the establishment of a panel to assess the tenders; and (c) the appellant's decision to adopt the recommendation of the panel to accept the Silver Circle tender. I am not at all convinced that all these criticisms are warranted. The operative decision was made by the councillors of the appellant. Before the decision was taken, the issue was the subject of vigorous debate. There was discussion about the panel's recommendation, the interests of the recipients of the appellant's health care services and the interests of the appellant's ratepayers generally. The trial judge had regard to those matters, as is evident from his reasons. 215 The real criticism, if any can be levied at the process of finding the inferred fact, is that the inference was not open. Whether an inference can be drawn from facts found is a question of law: Hope v Bathurst City Council (1980) 144 CLR 1, 8-9. If the inference was not open then there is an appellable error of law: Australian Broadcasting Tribunal v Bond (1990) 170 CLR 356. If the inference is one about which minds may differ, there will be no error: Tracy Village Sports & Social Club v Walker (1992) 111 FLR 32 at 37-38. 216 On the facts as found, the inference was not open. In the first place, facts (1) to (5) do not support the inference. They do support the finding, which was made, that the appellant's decision to accept the Silver Circle tender was based on price and that the appellant knew the reasons for the difference in price between the in-house tender and the Silver Circle tender, a proposition which is hardly surprising. But neither that fact, nor facts (1) to (5) taken together, justify the conclusion that what motivated the appellant's action was the very fact that its employees had superior entitlements under their award and agreement. It seems to me that the trial judge failed to distinguish between the immediate reason for the relevant act, be it the dismissals or the acceptance of the Silver Circle award, and the proximate reason for that act. I can make the point by reference to two sentences in the reasons. The trial judge said: "The major and decisive factor in the Silver Circle bid's acceptance was its price. The major and decisive factor in the difference in price was that, as everyone conceives it, Silver Circle would remunerate the workers doing HACC work under the Silver Circle award and not the Council's industrial instruments." The finding that price was a "major and decisive factor" is plainly correct. To describe the other "major and decisive factor" (that the price difference was the result of different award rates) as a motive for the decision is where the error is to be found. This "major and decisive factor" is not what motivated the decision but merely explains the difference in price. The trial judge did not give proper regard to the appellant's statutory obligation when weighing these facts. Then there is fact (6), namely that the decision to accept the Silver Circle tender was taken after the employees had refused to reduce their award rates to enable the in-house tender to be more competitive. That the appellant's decision was taken after this had occurred does not, either alone in combination with facts (1) to (5), support the inference. Indeed, on one view of the matter, asking the employees to reduce their entitlements, to make their in-house bid more competitive, tends to favour the appellant's case, rather than the contrary. 217 This is not, however, sufficient to dispose of the appeal. The trial judge based his decision on an additional ground. He said that "at the very least … it can safely without injustice be said that the [appellant] ha[d] failed to discharge its s 298V onus of proof". Section 298V relevantly provides that "if … it is alleged that [conduct] was … carried out for a particular reason or with a particular intent … it is presumed … that the conduct was, … carried out for that reason or with that intent unless [it is] prove[d] otherwise." This provision creates a presumption which requires a particular conclusion to be drawn until the contrary is proved. That is, s 298V assigns to the defendant the legal burden of proof in respect of the issue to which the provision relates. Thus, at trial, the appellant had the obligation to prove that the dismissal of its employees or the alteration of their position to their prejudice was not for a "prohibited reason". If it failed to convince the trial judge to the appropriate standard of proof, it would lose that issue. 218 But there is a limit to the operation of s 298V. It will cease to have application in a case where there is sufficient evidence to enable the trial judge to make a positive finding whether conduct has been carried out for the alleged reason or with the alleged intent. Put another way, the presumption imposed by s 298V must be drawn when there is not sufficient evidence before the court to permit the judge to determine what are the true facts, that is, true in the sense of being more probable than not. When the judge has that evidence, he cannot resort to s 298V as an alternative to finding facts. 219 Here the trial judge was satisfied that there was sufficient evidence for him to decide whether or not the relevant conduct had been engaged in for a prohibited reason. Not only was the trial judge satisfied that he had the evidence, he made a finding in that regard. It was not therefore appropriate for the trial judge to place any reliance on s 298V, even as a "fall-back". 220 However, because, in my opinion, the trial judge was not entitled to find by inference from the proven facts that the appellant had dismissed its staff or accepted the Silver Circle bid for a prohibited reason, it still leaves open the question whether there is other evidence which permits that finding to be made, or whether such a finding must be made because of s 298V. 221 No argument was addressed to this court on any of these matters. To answer the questions would require a close examination of the whole of the evidence, including a detailed assessment of the evidence given by Councillor Melham, which the trial judge described, without explanation, as "not helpful" to the appellant's case. Although I incline to the view that the evidence was sufficient to discharge the onus imposed by s 298V, it is neither appropriate not possible for this court to decide the matter for itself. Not only would it be necessary to sift through the whole of the evidence and form views without the aid of any submissions, it might also be necessary to make judgments about the evidence of Councillor Melham without the advantage of having seen him give it. Regrettably the matter should be remitted to the trial judge for his reconsideration. This course is necessary because of the manner in which the appeal has been argued. 222 In view of this conclusion, it is not necessary to consider the other ground of appeal. But because it was the subject of considerable argument, I should express my views. The appellant says that s 298K and s 298L are invalid to the extent that they operate to limit the ability of the State of Victoria (of which, it is said, the appellant is an agent) to determine the number and identity of those whom it wishes to dismiss on the grounds of redundancy. 223 In this connection two questions arise. The first is whether the appellant is an "emanation" or "agency" of the State and, second, whether s 298K and s 298L "unduly interfere" with the performance by the appellant of its functions. 224 The answer to the first question was given as long ago as 1904 by the High Court in the first volume of its authorised reports. In Municipal Council of Sydney v Commonwealth (1904) 1 CLR 208 the question was whether a municipal rate could be levied on Commonwealth property. Section 114 of the Constitution provides that "a State shall not without the consent of the Parliament of the Commonwealth … impose any tax on property of any kind belonging to the Commonwealth …". The court held that s 114 prevented the municipality from levying rates on Commonwealth land. In the course of his judgment, O'Connor J referred with approval to the decision of the United States Supreme Court in Meriwether v Garrett 102 US 472, 511 (1880): "Municipal corporations are mere instrumentalities of the State for the more convenient administration of local government. Their powers are such as the legislature may confer, and these may be enlarged, abridged, or entirely withdrawn at its pleasure. This is common learning found in all adjudications on the subject of municipal bodies, and repeated by text-writers." 225 That a municipal corporation in Victoria is a "mere instrumentality of the State" is evident from the statute pursuant to which it is established. First, it carries out functions of government. According to s 6 of the Local Government Act a principal object of a council is "to provide for the peace, order and good government of its municipal district." It carries out that function by making "local laws" under s 111. A contravention of a local law may be made an offence punishable by a fine: s 115. To fund its operations a council may raise taxes in the form of general rates and various other charges. It is given power to sell land to recover unpaid rates and charges. Second, notwithstanding these wide powers of government, a council is under the direct control of the executive. The Governor in council can revoke in whole or in part any local law: s 123. The council must report to the executive, by preparing an annual report which must be submitted to the responsible Minister: s 126. If the Minister considers it necessary, he or she may direct the municipality to prepare further financial statements and provide other information: s 127A. By s 185B the Minister may limit the income a council can raise from rates and charges. Certain investment powers can be exercised only with the approval of the Minister and the Treasurer: s 193. And so on. 226 Whether the relevant test is the so-called "functions" test (eg Mersey Docks v Cameron (1865) 11 HLC 443, 465; 11 ER 1405, 1413) or the modern "control" test (eg Superannuation Fund Investment Trust v Commissioner of Stamps (SA) (1979) 145 CLR 330; Townsville Hospital Board v Townsville City Council (1982) 149 CLR 282; Registrar of the Accident Compensation Tribunal v Federal Commissioner of Taxation (1992) 178 CLR 145) the appellant meets the requirements of an agent of State. 227 The question whether ss 298K and 298L "unduly interfere" with the functions of the appellant is a matter upon which views may differ. In Konrad v Victoria (1999) 91 FCR 95 I expressed the opinion that the provisions of the Workplace Relations Act which impose an obligation upon the State of Victoria to reinstate a police officer who had been unfairly dismissed were beyond power. However, this was a minority view. Ryan J said that it was not a necessary incident of the existence or functioning of a State to reserve to it the unfettered power to terminate the employment of a Crown servant on a whim or out of spite or otherwise without a valid reason: Konrad at 103. North J said (at 107): "To require a State to reinstate an employee who has been unjustifiably dismissed, in circumstances where it is not impracticable to reinstate the person and where it is otherwise appropriate to reinstate the person, is not an undue interference with the capacity of the State to function as a government". It is clear the views of the majority, although not directly applicable, do nevertheless require me to conclude that provisions now under consideration are not invalid as being beyond the power of the Commonwealth parliament. 228 Finally, as to the appellant's argument about the relief granted by the trial judge, I agree with Wilcox J. 229 For the foregoing reasons, I would allow the appeal, set aside the orders made by the trial judge, and remit the matter to the trial judge for further hearing. I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein. Associate: Dated: 4 April 2001 Counsel for the Appellant: RM Doyle Solicitor for the Appellant: Maddock Lonie & Chisholm Counsel for the First and Second Respondent: F Parry QC and B Lacey Solicitor for the First and Second Respondent: Maurice Blackburn Cashman Counsel for the Intervener: H Dixon Solicitor for the Intervener: Freehills Date of Hearing: 11 December 2000 Date of Judgment: 4 April 2001