FEDERAL COURT OF AUSTRALIA Finance Sector Union of Australia v Commonwealth Bank of Australia [2003] FCA 518 FINANCE SECTOR UNION OF AUSTRALIA & JOSEPH ADAMS v COMMONWEALTH BANK OF AUSTRALIA N 1068 OF 2000 MOORE J SYDNEY 27 MAY 2003 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 1068 OF 2000 BETWEEN: FINANCE SECTOR UNION OF AUSTRALIA FIRST APPLICANT JOSEPH ADAMS SECOND APPLICANT AND: COMMONWEALTH BANK OF AUSTRALIA RESPONDENT JUDGE: MOORE J DATE OF ORDER: 27 MAY 2003 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Pursuant to Order 29 Rule 2, the following question be tried separately from any other question arising in the proceeding: Whether on a true construction of Clause 42 of the Commonwealth Bank of Australia Officers Award 1990, an award of the Australian Industrial Relations Commission, employees listed in annexure K to the Affidavit of Peter Kevin Presdee sworn 27 September 2000 are entitled to severance payments in accordance with sub-paragraph (g) thereof. 2. The matter to be listed for further directions at 9.30 am on Tuesday 10 June 2003. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 1068 OF 2000 BETWEEN: FINANCE SECTOR UNION OF AUSTRALIA FIRST APPLICANT JOSEPH ADAMS SECOND APPLICANT AND: COMMONWEALTH BANK OF AUSTRALIA RESPONDENT JUDGE: MOORE J DATE: 27 MAY 2003 PLACE: SYDNEY REASONS FOR JUDGMENT 1 In issue in this matter is how the trial of a separate question should proceed. Both the applicants, the Finance Sector Union of Australia ("the Union") and Joseph Adams, and the respondent, the Commonwealth Bank of Australia ("the Bank"), seek the trial of a separate question as provided by O 29 r 2 of the Federal Court Rules. However there is a difference between them about how the question should be formulated. Before discussing the competing formulations and the arguments supporting them, I should briefly set out the nature of the proceeding. I do so by repeating a summary in an earlier judgment in this proceeding: [2003] FCA 51 ("the February judgment"). 2 These are a representative proceeding brought by the applicants on behalf of former employees of the Bank who resigned from their employment when the information technology services of the Bank were outsourced and provided to the Bank by a third party. The group members are said to number approximately 572. Amongst other things, it is alleged that the Bank breached the Commonwealth Bank Officers Award 1990 ("the Award") by failing to pay the group members severance payments on the basis that they had been made redundant. 3 The proceeding was commenced on 5 October 2000. It was in the docket of another Judge and the matter was fixed for hearing in July 2001. However the hearing did not proceed. The matter was transferred to my docket. This was because another matter ("the Macey matter"), raising broadly similar issues, was already in my docket and due to be heard by me. It was agreed that the further prosecution of this matter would await judgment in the Macey matter. Judgment was given in the Macey matter 16 November 2001: see [2001] FCA 1613 and judgment given in an appeal on 18 June 2002: see [2002] FCAFC 193 ("the Macey Full Court judgment"). The judgment of the Full Court determined the meaning of relevant provisions of the Award as they applied in the Macey matter. One material factual difference (on the facts as I presently understand them) between the circumstances raised in the Macey matter and those raised in this matter is that the employees said to have been entitled to severance pay under the Award in the Macey matter did not resign their employment with the Bank when the information technology services were outsourced, but the employees in this matter did tender their resignation. 4 The separate question formulated by the Bank (in a notice of motion filed on 26 September 2002) was: 1. Pursuant to Order 29 Rule 2, the following question be tried separately from any other question arising in the proceedings: whether the Bank was obliged to treat the employees identified in annexure K to the affidavit of Peter Kevin Presdee sworn 27 September 2000 as being in a redundancy situation for the purposes of clause 42(d)(i) of the Commonwealth Bank of Australia Officers Award 1990. 5 The separate question formulated by the applicants (in a notice of motion filed on 13 March 2003) was: 1. Pursuant to Order 29 Rule 2, the following question be tried separately from any other question arising in the proceedings: Whether on a true construction of Clause 42 of the Commonwealth Bank of Australia Officers Award 1990, an award of the Australian Industrial Relations Commission, employees listed in annexure K to the Affidavit of Peter Kevin Presdee sworn 27 September 2000 are entitled to severance payments in accordance with sub-paragraph (g) thereof. 6 There is, of course, a threshold issue of whether any question should be tried separately. Neither the Bank nor the applicants submitted there was any impediment in adopting the course each proposed. The point in issue was the terms of the question which, in effect, reflects a difference between the parties concerning how many of the issues which might arise in the proceedings should be addressed (or might possibly be addressed) as part of answering the question. A Court should be particularly cautious in trying a separate question unless it will or might finalise the proceeding or will finally resolve an issue between the parties: see Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334. However in a representative proceeding under Pt IVA of the Federal Court of Australia Act 1976 (Cth) it will often be appropriate to undertake the trial of a separate question or questions as part of resolving common issues on which the representative proceeding is based. I am satisfied it is appropriate to do so in this matter on the basis I now discuss. 7 The way the Award operates is as follows (this description is a broad summary intended only to illuminate what the competing formulations of the question might comprehend both as to legal issues and procedural implications). The Bank must pay an employee severance payments in particular circumstances. There must be a termination through retrenchment. Retrenchment occurs where the termination is as a result of redundancy. Redundancy arises where there is a position redundancy where work (or a major portion of that work) firstly, is no longer required to be performed or secondly, is to be performed at a new location which requires a change in residence of the employee concerned. There can be redundancy resulting from reorganisation; changed business practice; technological change; downturn in business; a decision to reduce the number of employees; or a general reduction in classification levels or positions. When an employee is in a redundancy position, the Bank should take steps to redeploy the employee, which can involve offering the employee a directly comparable position or another position. If the employee cannot be redeployed, retrenchment follows. If an employee declines to take up a directly comparable position and the employment is terminated, the Bank is not obliged to pay the employee severance pay. It might be obliged to do so, in other circumstances, if the redeployment is unsuccessful. 8 It can be seen that in relation to a particular employee (and arguably groups of employees) various paths can be followed if there is a position redundancy concerning the employee. Some might lead to continuing employment and some might lead to termination of employment. If the latter, some might lead to payment of severance pay and some might not. The question formulated by the Bank invites determination of the question of whether there is a redundancy situation but not the determination of residual issues if that question is not answered in the Bank's favour. It is, in a sense, a threshold question, the answer to which determines whether other questions arise and need to be answered. The question formulated by the applicants requires consideration of not only that threshold question but, if the threshold question is answered in a particular way, other questions. Those other questions, when answered, would determine whether the members of the representative group follow a path leading to an entitlement to severance pay. The controversy between the parties is ultimately whether there was such an entitlement. 9 It might be expected that to answer the question proposed by the applicants, many issues of fact would have to be resolved and findings of facts made which were peculiar to each employee as well as detailed findings of fact made concerning the circumstances more generally leading up to the employees tendering their resignation. Indeed this prospect was one of the matters relied on by the Bank supporting adoption of its question and rejection of the question proposed by the applicants. It is a prospect which I accept might have warranted the adoption of the Bank's formulation of the question. However the applicants have now indicated that the evidence they will rely on is limited in its compass. In a letter from their solicitors dated 9 May 2003, they indicated the following evidence would be relied on (whether the question is formulated as they proposed or as the Bank proposed): 1. The Applicants propose to rely on the following evidence: (a) Commonwealth Bank of Australia Officers Award (1990) (b) Agreed Statement of Facts. A document arising from the Notice to Admit Facts and the Notice to Dispute Facts, modified having regard to the further agreement reached during the proceedings before his Honour on 23 April 2003 (transcript page 11) will be provided to the Court shortly. In this respect is it be [sic] noted that there remains the prospect of further refinement in relation to the Agreed Facts and to this end we expect to receive confirmation from the Respondent in the immediate future. (c) Agreements signed by employees of the Respondent, or application forms completed by applicants for employment with the Respondent see for example Macey [2001] FCA 1613, paragraph [54]. These documents are to be subpoenaed from the Respondent. It must be accepted that the agreed facts have not yet been settled. However having regard to facts presently agreed and the intimations of both parties at the hearing on 23 April 2003, it appears likely that the facts surrounding the termination of the group members' employment will not be controversial. The applicants are proposing to litigate the issues raised in this application without any detailed consideration of the circumstances of any particular group member save, perhaps, for what might be revealed by the employment agreements (referred to in (c) above) if they are admitted into evidence. The meaning of many of the potentially relevant provisions of the Award has been considered by this Court and the Industrial Relations Court or Australia on several occasions. They are provisions of little mystery. 10 In these circumstances there is considerable sense in conducting a separate trial of the question posed by the applicants. It is a question which will almost certainly resolve all common issues in the proceeding in circumstances where it is unlikely there will be a need to hear evidence, in any detail, about controversial issues of fact. There is the possibility that the Bank would wish to lead detailed evidence responding to what will be limited evidence led by the applicants. But the Bank has not said it wishes to do so. If it transpired that I am proceeding on a false assumption about the limited scope of the evidence (or that the facts are not controversial), the terms of the question can be reviewed (as can whether a question should be tried separately). Answering the question posed by the applicants will resolve the controversy between the parties save for determination of any amount of severance pay (assuming success on the applicants part on the question of liability) due to any particular employee. In a case such as the present, it could be expected there would be agreement about amounts payable. If there was not there would be a variety of mechanisms which could be deployed to resolve that issue. By adopting the question proposed by the applicants, the hearing is unlikely to be materially lengthened, nor are the costs likely to be materially increased. 11 However the Bank pointed to two further matters which it submitted warranted adoption of the question it proposed. The first arises from the Macey Full Court judgment. The Bank submitted that the Union, as a party to the Macey proceedings, was bound by the construction of the Award determined by the Full Court. The Full Court's construction, it was submitted, provided a complete answer to the applicants' case which will result in it being dismissed. Plainly I cannot express a considered view about that matter at this stage. No comprehensive submissions have been made by any party concerning the proper construction of the Award (informed by the Macey Full Court judgment) as it might apply in the circumstances raised by this application. However quite apart from any legal effect of the Macey Full Court judgment on the Union (though the second applicant in this proceeding was not a party in the Macey proceeding nor were the members of the representative group directly involved), I am bound to give effect to the Full Court's reasons insofar as they are a binding precedent, and would treat them as highly persuasive even if they were not. It presently seems to me that if the Bank's contention is correct, it will mean that the question proposed by the applicants can be answered by answering the question proposed by the Bank. It probably will be appropriate to move on to other issues raised by the applicants' question only if the Bank's contention is not correct. However given the prospect that any residual issues will involve legal issues (and perhaps inferences to be drawn from primary facts not in issue) there appears to be little utility in forclosing debate about and determination of the other issues by restricting the question to that posed by the Bank. The course proposed by the Bank might bring about a situation where the entire controversy between the parties is not resolved at one trial and the litigation becomes piecemeal. 12 The only qualification to this last observation about utility arises from the second matter relied on by the Bank. In the February judgment I dealt with an application by the Bank to stay this proceeding. The Bank sought a stay because it seeks the opportunity to persuade the Australian Industrial Relations Commission ("the Commission") to vary the Award to put beyond doubt (from its perspective) that it has no obligation under the Award to pay severance payments to any of the members of the representative group in this proceeding or, alternatively, to remove that obligation if it existed at the relevant time. The Bank continued to maintain a similar argument on the issue of how the preliminary question should be framed by submitting that it will be prejudiced by a determination of the question as framed by the applicants. I entertain some doubt whether this is a relevant consideration generally and, in any event, I also doubt it is matter the Bank can now pursue in the face of the February judgment (subject to any contrary view of a Full Court, given that the Bank has sought leave to appeal against that judgment) which effectively dealt with the question of potential prejudice. 13 Nonetheless I make the following observations. I accept that there is a considerably greater risk from the Bank's perspective that if the question to be determined is the one framed by the applicants (and assuming an answer in the applicants' favour), the Bank's ability to alter its legal position by variation to the Award will, at the very least, be diminished and probably entirely stultified. However this flows from the decision of the Commission not to proceed to hear the application to vary the Award to the extent that it might apply to the representative group in this matter (to their benefit). One might observe, parenthetically, that the Commission generally has a prima facie duty to determine an application made to it: Re Queensland Electricity Commission; Ex parte Electrical Trades Union of Australia (1987) 72 ALR 1 at 12-13 per Deane J, but need not where it exercises the unusual power to refrain from exercising jurisdiction (presently conferred by s 111(1)(g) of the Workplace Relations Act 1996 (Cth)): see Re Australian Bank Employees Union; Ex parte Citicorp Australia Ltd (1989) 167 CLR 513 at 515 and Re Media, Entertainment and Arts Alliance; Ex parte Hoyts Corporation Pty Ltd (1993) 112 ALR 193 at 194, though it has not purported to exercise that power in relation to the Bank's application to vary the Award as it might apply in the present matter. 14 I will not repeat the reasons I gave in the February judgment for refusing a stay. They are apt in relation to the argument advanced by the Bank presently being considered. However, I should mention one further matter. I noted in the February judgment that the position of the applicants about how this matter should proceed had not been constant. The original decision of the Commission to effectively adjourn indefinitely the application of the Bank (as it might be relevant to the present proceeding) was based, in part, on the position adopted by the Union. What was said by the Union to the Senior Deputy President is encapsulated in the following passage: (SENIOR COUNSEL FOR THE UNION): I think that fairly accurately describes the latest point raised before Justice Wilcox. The first time it was raised was last week. We are not convinced that the application would necessarily have that effect but we haven't completed our own consideration of the question. I have instructions that if the making of all the orders sought, and there are a number of declarations and orders that are sought, is likely to have that effect, we would ask the court to make only the declaration at the first instance as to whether or not the award obligation applied in the outsourcing situation and not then proceed to make the money orders. In that way, if there's anything left in this case it could proceed. If we totally fail, of course, these proceedings as we say would be unnecessary. [Emphasis added] 15 I apprehend that the position adopted by the Union in the Commission, reflected in the above passage, is consistent with what is now being advanced by the applicants, namely the trial of the question they have formulated. If those representing the Bank in the Commission or the Commission itself misunderstood the effect of what was being said (or the position adopted by the Union resulted in the Bank being misled having regard to correspondence passing between the parties in June and July 2001), then any relief for the Bank from the position which presently obtains is not, in my opinion, to be found in either staying this proceeding or casting a question in what are inappropriately narrow terms. 16 I propose to order that there be a separate trial of the question formulated by the applicants. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore. Associate: Dated: 27 May 2003 Counsel for the Applicant: Mr S Rothman SC Solicitor for the Applicant: Geoffrey Edwards & Co Counsel for the Respondent: Mr R Ellicot QC with Mr J Fernon Solicitor for the Respondent: Freehills Date of Hearing: 23 April 2003 Date of Judgment: 27 May 2003