FEDERAL COURT OF AUSTRALIA Civil Air Operations Officers' Association of Australia v Airservices Australia [2004] FCA 55 INDUSTRIAL LAW – award – construction – air traffic controllers – loss of licence insurance – whether employer required to pay premium Air Navigation Act 1920 (Cth) Air Navigation Regulations 1960 reg 21 Air Services Act 1995 (Cth) Civil Aviation Act 1988 (Cth) Civil Aviation Legislation Amendment Act 1995 (Cth) Civil Aviation Safety Regulations 1998 regs 65.025, 65.030, 65.035(1), 65.035(1)(c)(i), 65.035(1)(c)(ii), 65.070, 65.075, 65.085(1), 65.115, 65.205(3)(c) Public Service Arbitration Act 1920 (Cth) Workplace Relations Act 1996 (Cth) ss 33, 413 Workplace Relations and Other Legislation Amendment Act 1996 (Cth) Item 51 of Part 2 of Schedule 5 Airservices Australia Award 2000 Airservices Australia (Consolidated) Award 1996 Convention on International Civil Aviation (Opened for Signature 7 December 1944. UNTS 15. Entered into force 4 April 1947). Canberra Television Ltd v Australian Theatrical and Amusement Employees Association (1979) 24 ALR 529 followed Fencott v Muller (1983) 152 CLR 570 cited Seymour v Stawell Timber Industries Pty Ltd (1985) 9 FCR 241 followed Short v F W Hercus Pty Limited (1993) 40 FCR 511 applied Stack v Coast Securities (No. 9) Proprietary Limited (1983) 154 CLR 261 cited CIVIL AIR OPERATIONS OFFICERS' ASSOCIATION OF AUSTRALIA and TED LANG v AIRSERVICES AUSTRALIA V 589 of 2003 FINKELSTEIN J 5 FEBRUARY 2004 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V 589 of 2003 BETWEEN: CIVIL AIR OPERATIONS OFFICERS' ASSOCIATION OF AUSTRALIA and TED LANG Applicants AND: AIRSERVICES AUSTRALIA Respondent JUDGE: FINKELSTEIN J DATE OF ORDER: 5 FEBRUARY 2004 WHERE MADE: MELBOURNE THE COURT DECLARES THAT: Notwithstanding that Airservices Australia has procured the issue of and paid the premium on a policy of insurance that provides cover to air traffic controllers in the event that during the period 1 May 2003 to 30 April 2004 an air traffic controller ceases to hold a licence as a result of his or her inability to satisfy the medical requirements of the licence, Airservices Australia is required by cl 24.17.2 of the Airservices Australia Award 2000 to reimburse to an air traffic controller the premium (if any) paid by that air traffic controller for loss of income insurance taken out for the same period. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V 589 of 2003 BETWEEN: CIVIL AIR OPERATIONS OFFICERS' ASSOCIATION OF AUSTRALIA and TED LANG Applicants AND: AIRSERVICES AUSTRALIA Respondent JUDGE: FINKELSTEIN J DATE: 5 FEBRUARY 2004 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 The second applicant, Mr Lang, is an air traffic controller. At first he was employed by the Commonwealth of Australia. In 1988 the Commonwealth's function of providing air traffic services was transferred to the Civil Aviation Authority (CAA), a body established under the Civil Aviation Act 1988 (Cth). At this time, all air traffic controllers became CAA staff members. A second structural change was effected by the Air Services Act 1995 (Cth). This statute established the respondent, Airservices Australia (AA), as a body corporate, to take over most of CAA's functions, including the provision of air traffic services. Under a different statute, the Civil Aviation Legislation Amendment Act 1995 (Cth), subject to immaterial exceptions all CAA staff members became AA employees. This is how Mr Lang came to be an employee of AA. 2 There is in force an award of the Australian Industrial Relations Commission, the Airservices Australia Award 2000, that is binding on both the first applicant, Civil Air Officers' Association of Australia (whose members include air traffic controllers employed by AA) and AA. The union and AA are in dispute about the proper meaning and effect of cl 24.17.2 of the Award. The applicants seek an interpretation of this provision under s 413 of the Workplace Relations Act 1996 (Cth). 3 The parties also disagree on the meaning of cl 1.19.2 of AA's Staff Policy Manual. The respondent concedes, at least for the purposes of this case, that this provision forms part of Mr Lang's contract of employment. Clause 24.17.2 of the Award and cl 1.19.2 of the Manual deal with the same subject matter. The facts that give rise to the two disputes are also the same. Accordingly the applicants also seek to have the dispute about the construction of cl 1.19.2 resolved. That application is brought in the court's "accrued" jurisdiction: Fencott v Muller (1983) 152 CLR 570, 608; Stack v Coast Securities (No. 9) Proprietary Limited (1983) 154 CLR 261, 290. 4 The background to the dispute has its origin in the Convention on International Civil Aviation (Opened for Signature 7 December 1944. UNTS 15. Entered into force 4 April 1947) (the Chicago Convention). The Chicago Convention was adopted in Australia by the Air Navigation Act 1920 (Cth) in 1947. Annex 1 to the Chicago Convention contains minimum standards (including requirements as to experience, medical fitness and rating) for the licensing of, among other air services personnel, air traffic controllers: see Chapters 4.3 and 4.4. The Civil Aviation Safety Regulations 1998 presently give effect to Annex 1. In many respects these regulations mirror those that have been in force since the 1960s: see Air Navigation Regulations 1960. 5 It is necessary to explain the principal features of the licensing regime. An air traffic controller must hold an ATC licence: reg 65.035 (1). In order to be eligible to hold an ATC licence an air traffic controller must meet the criteria set out in reg 65.070. The criteria includes: (1) the holding of "a Class 3 medical certificate"; (2) the successful completion of the training specified in the Manual of Standards (issued by the Civil Aviation Safety Authority); and (3) a rating (being either an aerodrome control rating, an approach control rating, an approach radar control rating, an area control rating or an area radar control rating: reg 65.075) and an endorsement (which "certifies that [the licence] holder is competent to perform a particular air traffic control function at a particular aerodrome, or in relation to particular air space": reg 65.085(1)). A rating is valid for twelve months and an endorsement for six months: reg 65.115. To maintain the endorsement the licence holder must satisfy both the "currency requirement" and the "recency requirement": reg 65.035(1)(c)(i). In relation to the maintenance of the rating the licence holder need only satisfy the currency requirement: reg 65.035(1)(c)(ii). The currency requirement requires the licence holder to both sit and pass an examination and have his performance assessed: reg 65.030. The recency requirement requires the licence holder to have performed his relevant function for at least 5 hours within the previous 21 days: reg 65.025. The medical certificate remains in force for two years; at the end of that period the licence holder must obtain a new certificate in order to carry out his air traffic control functions: reg 67.205(3)(c). 6 The loss of an ATC licence will result in an air traffic controller incurring a significant reduction in income, even if he is redeployed. By the 1970s most air traffic controllers were taking out insurance to protect themselves against this potential loss. In this respect air traffic controllers followed the lead of flying staff. The evidence does not indicate the type of policy that was purchased. All that is known is that "the premium on a 'suitable policy' [was] about $200": see Determination No. 25 of 1979 made under the Public Service Arbitration Act 1920 (Cth). 7 Determination No 25 varied Determination No. 62 of 1949 which contained air traffic controllers' terms and conditions of employment. The union had sought to vary those terms in order to provide air traffic controllers with an "allowance for the purchase of loss-of-licence-insurance". The application was successful. Determination No 25 inserted a provision into the earlier Determination that "[a]n Air Traffic Controller, … holding a current Australian Air Traffic Controller's licence, shall be paid an allowance at the rate of $205 per annum for the purchase of loss of licence insurance." In due course, however, Determination No 25 was "quashed" by a Full Bench of the Conciliation and Arbitration Commission because under the applicable legislation there was no jurisdiction to make that determination. 8 In 1992 CAA inserted into its Staff Policy Manual (a contractual document) a term which provided for the reimbursement of loss of income insurance premiums. The provision (cl 1.19.2) read: " REIMBURSEMENT OF PREMIUM FOR LOSS OF INCOME INSURANCE (a) An Air Traffic Controller, Flight Service Officer, Pilot or Flight Operations Inspector will be entitled to reimbursement of an amount equal to the premiums paid for Loss of Income Insurance: · where the Authority determines that the holding of a licence is a requirement for such an employee to undertake his/her duties within the Authority, and he/she holds such a licence; · where such an insurance policy provides for benefits to be payable to the employee only in the event that they cease to hold such a licence as a result of their inability to satisfy the required medical standards. (b) Where the annual premium exceeds $490.00 for an Air Traffic Controller and Flight Service Officer, and $672.00 for a Flight Operations Inspector or an employee of the Civil Aviation Authority who is required to hold a Pilot's licence, the amount of the excess will be deducted from the reimbursement. (c) The employee may elect, [in] writing, to have the Authority pay the premium on his/her behalf." In 1993 there was an increase in the amount that CAA was required to pay under cl 1.19.2 (b), but the quantum need not be noted. 9 When AA was established in 1995 it adopted cl 1.19.2 of the CAA Manual into its own Staff Policy Manual, giving it the same number. In 1998 sub-clause 2(b) was amended to increase the amount that AA was required to reimburse. 10 Between 1998 and 2000 the Australian Industrial Relations Commission conducted a review of the then current Airservices Australia (Consolidated) Award 1996. The review was conducted pursuant to Item 51 of Pt 2 of Sch 5 of the Workplace Relations and Other Legislation Amendment Act 1996 (Cth) and s 33 of the Workplace Relations Act 1996. During the course of the review the Commission considered the issue of reimbursement of premiums paid by air traffic controllers for loss of income insurance. The union and AA agreed that the new award should make provision for the reimbursement of the premiums but disagreed as to the form the clause should take. The union argued that the clause should provide the same entitlements as cl 1.19.2 of the AA Manual and, in particular, that sub clause (c), which gave an air traffic controller the right to elect "[in] writing, to have Airservices pay the premium on his/her behalf", should be retained. AA was content to adopt cl 1.19.2, with the exception of subclause 2(c). That is, AA wanted to deprive air traffic controllers of the right to compel it to pay the premium directly to the insurer. 11 In the first of a number of decisions given during the course of the review the Commission stated: "17. Reimbursement of Premium for Loss of Income Insurance The parties agree that the existing provision is allowable in the form of a reimbursement allowance for the protection of an employee's wage. The union clause will be reworded to include the following sentence. The provisions of this clause do not apply where the premium is paid for by the employer." 12 In due course, the new award, the Airservices Australia Award 2000, made provision for the premium to be paid by AA. The relevant clause, cl 24.17.2, read: "24.17 Reimbursement Of Insurance Premiums 24.17.2 Loss Of Income Insurance. 24.17.2(a) An eligible employee will be reimbursed premiums paid for 'Loss of Income Insurance' where the employee is required to hold a licence, and holds that licence to perform their duties with Airservices. 24.17.2(b) The insurance policy must only provide for benefits where the employee ceases to hold a licence as a result of an inability to satisfy the medical requirements of the licence. 24.17.2(c) Eligible employees are: Air Traffic Controller Maximum reimbursement $563.00 annually. Flight Service Officer Maximum reimbursement $541.00 annually. 24.17.2(d) The provisions of this clause do not apply where the premium is paid by the employer." In 2002 the clause was varied in that the amounts $728 and $724 were substituted for $563 and $541 respectively. 13 For many years the union had arranged loss of income insurance on behalf of its members. In turn the members sought and obtained reimbursement of the premiums paid on the policy (up to the specified maximum) initially from CAA and then from AA. This practice continued following the commencement of the 2000 Award. 14 There are several aspects of the current form of the policy that are worth noting. First, the event which gives rise to a claim is the loss of the licence "as a direct result of bodily injury or illness". Second, a lump sum benefit is payable. Third, the benefit varies according to the age of the insured. For example, if the insured is aged between 21 and 30 years the lump sum payment is $192,500. If he is aged between 56 and 59 years the amount is only $77,500. 15 The terms of the policy were negotiated with an insurance broker. Mr McGuane, the executive secretary of the union, deposed that the following matters were discussed during the negotiations: the eligibility of persons to be covered; the quantum of the lump sum payment; exclusions (he gave as an example the fact that at one point the policy excluded an AIDS sufferer); and the duration of the qualifying period before the benefit is payable. 16 Although no evidence was led on this point, I assume that different types of policies are available to insure an air traffic controller against the loss of his licence. I have in mind, for example, a policy where the benefit is a regular payment (eg weekly or monthly) during the period (perhaps a limited period) in which the licence is cancelled. Dependent upon the terms of such a policy the premium may differ from the premium payable under a lump sum policy. 17 I have now reached the point where I can describe the immediate cause of the dispute. In 2003 AA spent approximately $1.6 million (including the cost of the premium, fringe benefits tax, GST and, where applicable, stamp duty) on loss of insurance premiums for air traffic controllers. As a statutory authority that is accountable for its expenditure and corporate governance, AA wishes to satisfy itself that the processes and arrangements for insurance are appropriate and properly managed, the premiums paid by AA are based on sound business principles, claims made under any policy are justified and are adequately documented and managed, appropriate records and contracts for insurance purposes are maintained and that there is an on-going assessment to ascertain whether the arrangements in place at any one time are the most viable and cost-effective option for AA. AA believes that these objectives can only be met by implementing a process by which it can "manage, monitor and improve" the negotiation and placement of policies on behalf of air traffic controllers. 18 In order to implement its objectives AA, through its own insurance broker, placed a loss of income insurance policy which covers its air traffic controllers in the event of loss of licence through injury or illness. The cover is for the 12 months commencing 1 May 2003. The policy provides for lump sum benefits as does the policy arranged by the union, but the benefits appear to be greater under the policy negotiated by AA. AA has paid the premium of $823,540 on the policy (inclusive of GST) and (where applicable) stamp duty. According to the evidence, AA's fringe benefits tax liability was $850,439. 19 The union also arranged for air traffic controllers to be issued with loss of income policies to provide cover for the same period. The union contends that under the Award and the Manual AA is still required to reimburse the premiums which air traffic controllers have paid under their own policies, notwithstanding that AA has also provided them with similar cover. For its part, AA denies that the Award or the Manual can have that effect. 20 Before I resolve this dispute I should make a preliminary observation. During the course of their submissions the parties appear to have assumed that at any one point in time there could only be in force one policy of insurance to cover an air traffic controller against loss of income. Of course the assumption is not correct. Not uncommonly a person takes out double insurance. This does not mean that the insured can recover twice over. He will only recover his loss once. Difficult questions may arise as regards contribution between the common insurers. But there is no rule of law which prevents air traffic controllers taking out their own cover and AA also arranging for cover on behalf of its employees. Here the dispute is confined to identifying the person who is ultimately responsible for the payment of the premium on the policy negotiated by the union. This dispute will be resolved on the proper construction of cl 24.17.2(d) of the Award or cl 1.19.2 of the AA Manual. 21 It is convenient to begin the analysis of the issues by mentioning the way in which AA puts its case. It says that: (1) where AA takes out its own loss of income insurance policy and (2) the policy provides insurance for air traffic controllers as required by cl 24.17.2(c) and (3) the policy provides benefits for employees who cease to hold a licence due to an inability to satisfy the medical requirements of a licence in accordance with cl 24.17.2(b) then, by virtue of cl 24.17.2(d), AA is relieved of the obligation to reimburse an eligible employee for any premium paid for loss of income insurance. That is, AA contends that the effect of cl 24.17.2(d) is that if it places and pays the premium for loss of income insurance policy on behalf of air traffic controllers, it need not reimburse them for any other like insurance. 22 The correctness of this argument depends upon the Commission's intended meaning for cl 24.17.2(d). In this regard the Commission's actual intention is irrelevant; the Commission cannot be called to explain its intended interpretation of the legal effect of cl 24.17.2(d). The Commission's intention must be ascertained from the words it has used, considered not in isolation, but in the context of the Award as a whole: Seymour v Stawell Timber Industries Pty Ltd (1985) 9 FCR 241, 263 per Gray J. I should also keep in mind the purpose of the Award: Canberra Television Ltd v Australian Theatrical and Amusement Employees Association (1979) 24 ALR 529, 535 per Smithers J. It is also permissible to have regard to the history of the clause. As Burchett J said in Short v F W Hercus Pty Limited (1993) 40 FCR 511, 518: "Where the circumstances allow the court to conclude that a clause in an award is the product of a history, out of which it grew to be adopted in its present form, only a kind of wilful judicial blindness could lead the court to deny itself the light of that history, and to prefer to peer unaided at some obscurity in the language." 23 When viewed objectively certain factors tell against the construction of cl 24.17.2(d) put forward by AA. The first and most important factor is that the clause does not state that if AA places a policy of insurance on behalf of air traffic controllers it is relieved of its obligation to reimburse the premium. That is to say, cl 24.17.2(d) does not read: "The provisions of this clause do not apply when the employer procures the issue of, and pays the premium for, the insurance policy". Indeed, on one view, the clause assumes that a policy of insurance has been taken out by "an eligible employee" and its only concern is with the payment of the premium on that policy. It will be recalled that cl 24.17.2(a) provides that an eligible employee will be "reimbursed" premiums paid for a particular type of policy. The assumption is that there is a policy on which a premium has been paid by the "eligible employee". This could only refer to a policy taken out by the "eligible employee". On this basis "the premium" referred to in cl 24.17.2(d) is the premium which would otherwise be paid by the "eligible employee" on his own policy. 24 Another important factor which goes against AA is the absence of any detailed description of the type of policy to which the Award relates. All we are told in cl 24.17.2(b) is that the policy must be for "loss of income" caused by the air traffic controller's loss of licence due to his inability to satisfy the medical requirements of the licence. The clause does not say that the policy must provide a particular type of benefit. It is possible, indeed likely, that the benefit payable under any given policy may vary according to a particular air traffic controller's age, health or past medical history. It is also possible that different terms are available from different insurers. On the assumption that an air traffic controller will not take out a policy if he is required to bear the premium, the consequence of AA's construction, if it were accepted, is that an air traffic controller would be required to accept the particular type of policy that AA deems appropriate. 25 The third factor, which is related to the second, is that cl 24.17.2(c) specifies the "maximum" premium which AA is required to pay. In a particular case, and for a variety of reasons, an air traffic controller may not want to obtain cover for the "maximum" period. If AA can, in a practical sense, displace the union (or an individual air traffic controller) as the person who arranges the insurance, it will also be free to decide what the cost of that insurance might be. Thus it could arrange cover at a cost which is below the "maximum" premium that would otherwise be payable, notwithstanding that such cover may not adequately meet the individual needs of all air traffic controllers. The Commission surely did not intend this situation to arise. On the other hand, the construction asserted by the union gives air traffic controllers the freedom to choose the policy that will best suit their personal circumstances. 26 The fourth factor militating against AA's construction is the history of cl 24.17.2. The provision in the Manual upon which cl 24.17.2 is based contemplated that an air traffic controller would procure his own policy and pay the premium in one of two ways. The first was to pay the premium directly to the insurer and obtain "reimbursement" from AA. The alternative was to have the premium paid by AA. I accept that the current provision has removed this right of election. At least this much can be read into the change brought about by the Commission. It is this change which AA calls in aid of its argument. However, I do not think that the new provision goes so far as AA would have it. I accept that in its present form it is difficult to see precisely what cl 24.17.2(d) is designed to achieve. It seems that, while an air traffic controller no longer has the right to compel AA to pay the premium directly to the insurer, the subclause will come into operation when AA pays the premium on a policy that has been taken out by an air traffic controller. That is, cl 24.17.2(d) gives AA the freedom to choose whether or not it will pay the premium directly, but has no other work to do. 27 There will be a declaration to give effect to my opinion. In that circumstance it will not be necessary to deal with the meaning of cl 1.19.2 of the Manual. That said, it is difficult to see how it could produce a different result. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein. Associate: Dated: 5 February 2004 Counsel for the Applicants: Mr M Bromberg Mr C Dowling Solicitor for the Applicants: Slater & Gordon Counsel for the Respondent: Mr M McDonald Solicitor for the Respondent: Corrs Chambers Westgarth Date of Hearing: 28 October 2003 Date of Judgment: 5 February 2004