FEDERAL COURT OF AUSTRALIA MTCT Services Pty Ltd v Australian Workers' Union [2018] FCA 1648 File number(s): VID 786 of 2017 Judge(s): O'CALLAGHAN J Date of judgment: 31 October 2018 Catchwords: PRACTICE AND PROCEDURE – application to amend cross-claim – allowed in part – discovery dispute Legislation: Fair Work Act 2009 (Cth), ss 12, 50, 186, 188, 343, 550 Cases cited: Ezy Accounting 123 Pty Ltd v Fair Work Ombudsman [2018] FCAFC 134 Fair Work Ombudsman v Devine Marine Group Pty Ltd [2014] FCA 1365 Potter v Fair Work Ombudsman [2014] FCA 187 Seven Network (Operations) Ltd v Communications, Electrical Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (2001) 109 FCR 378 Yorke v Lucas (1984) 158 CLR 661 Fowler, HW, A Dictionary of Modern English Usage (Oxford University Press, 2nd ed, 1983) Date of hearing: 25 October 2018 Registry: Victoria Division: Fair Work Division National Practice Area: Employment & Industrial Relations Category: Catchwords Number of paragraphs: 43 Counsel for the Applicant: Mr M Follett and Mr A Pollock Solicitor for the Applicant: Kelly Hazell Quill Lawyers Counsel for the Respondents: Mr H Borenstein QC and Mr M Harding Solicitor for the Respondents: Slater & Gordon ORDERS VID 786 of 2017 BETWEEN: MTCT SERVICES PTY LTD (ACN 070 140 251) Applicant AND: AUSTRALIAN WORKERS' UNION First Respondent AUSTRALIAN MANUFACTURING WORKERS' UNION Second Respondent COMMUNICATIONS, ELECTRICAL, ELECTRONIC, ENERGY, INFORMATION, POSTAL, PLUMBING AND ALLIED SERVICES UNION OF AUSTRALIA (and others named in the Schedule) Third Respondent AND BETWEEN: AUSTRALIAN WORKERS' UNION (and others named in the Schedule) First Cross-Claimant AND: MTCT SERVICES PTY LTD (ACN 070 140 251) Cross-Defendant JUDGE: O'CALLAGHAN J DATE OF ORDER: 31 OCTOBER 2018 THE COURT ORDERS THAT: 1. The respondents/cross-claimants have leave to file an amended statement of cross-claim substantially in the form of exhibit GB-2 to the affidavit of Mr Geoffrey Borenstein affirmed on 21 September 2018 filed herein, not including paragraphs [61](e), (g) and [62], which proposed amendments are refused. 2. The respondents/cross-claimants have leave to re-plead paragraphs [61](e), (g) and [62]. 3. The applicant/respondent provide discovery of categories 38 and 44 described in Annexure A to the respondents'/cross-claimants' interlocutory application dated 5 October 2018, but that the application otherwise be refused. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT O'CALLAGHAN J: Introduction 1 This is an application by the first, second and third respondents (the unions) for leave to amend their statement of cross-claim dated 30 November 2017 in the form of a proposed amended statement of cross-claim (the proposed amended claim), which is exhibit GB-2 to the affidavit of Mr Geoffrey Borenstein affirmed on 21 September 2018. 2 The applicant/cross-respondent (MTCT) opposes the granting of the leave sought to the extent that the proposed amended claim makes allegations of accessorial liability against the putative second respondent, Mr Elliott. 3 Those proposed allegations are that Mr Elliott is liable as an accessory for contraventions alleged against MTCT of ss 50 and 343 of the Fair Work Act 2009 (Cth) (the Fair Work Act). The granting of leave is opposed on the grounds that the relevant paragraphs of the proposed amended claim, namely paragraphs 61, 62 and 62A, do not disclose or properly plead a cause of action because they does not allege that Mr Elliott had actual knowledge of all of the essential elements making up the principal contraventions. 4 Each of the accessorial liability allegations with respect to the alleged contraventions by MTCT of ss 50 and 343 is advanced under s 550(2)(a) (aiding and abetting) and s 550 (2)(c) (knowing involvement) of the Fair Work Act. The principal claims against MTCT 5 In order to understand how the case against Mr Elliott is sought to be made it is necessary briefly to essay the allegations made against MTCT (which MTCT consents to in their amended form). 6 The first cross-claimant (the AWU) and the second-cross claimant (the AMWU) plead that they are covered by separate enterprise agreements, being the UGL Kaefer, AWU Onshore Mechanical Maintenance Services Enterprise Agreement 2015 and the UGL Kaefer, AMWU Onshore Mechanical Maintenance Services Enterprise Agreement 2015 (the UGLK agreements). The third cross-claimant (the CEPU) is an employee organisation within the meaning of s 12 of the Fair Work Act. 7 MTCT is a wholly owned subsidiary of UGL Operations and Maintenance Pty Ltd. It provides to Esso Australia Pty Ltd (Esso) certain maintenance services at the onshore and offshore sites at its Bass Strait facilities. 8 The coercion claim against MTCT is founded upon the proposition that an agreement called the NM Enterprise Agreement 2016 (the MTCT agreement) was "purportedly" approved by the Fair Work Commission in November 2016, and that the Commission should not have approved it (as it did on 23 November 2016) because, among other things: (1) it had not been genuinely agreed to by the employees covered by it within the meaning of s 188 of the Fair Work Act; (2) the relevant employees were not engaged to perform "Maintenance Work" within the meaning of the relevant term of the MTCT agreement; and (3) the Commissioner's satisfaction that the requirements of ss 186 and 188 of the Fair Work Act had been met was unreasonable or plainly unjust. 9 It is next alleged that, in September 2016, MTCT had proposed the possibility of making a greenfields agreement with the unions to cover the employees it would engage to perform work in relation to services at onshore and offshore sites operated by Esso at its Bass Strait facilities. 10 The unions allege that, at all times on and after 22 September 2016, and during what it refers to as the "Greenfields Negotiations", the terms and conditions of employment that MTCT wished to have included, and that it proposed to the unions should be included, in the greenfields agreement were terms, among other things, that would have resulted in a 7.4% reduction in employees' total wages compared with the remuneration available under the existing agreements which included, among others, the UGLK agreements. 11 The unions next allege that, after 22 September 2016 and during the greenfields negotiations, terms and conditions that they wished to have included, and that they proposed to MTCT should be included, in the greenfields agreement were terms that carried forward the terms and conditions contained in, among other agreements, the UGLK agreements, but with increases in wages. 12 The unions allege that in March 2017 MTCT threatened to apply the MTCT agreement to those employees who it employed who would otherwise have been covered by the greenfields agreement if the unions did not make the greenfields agreement with MTCT within a timeframe acceptable to MTCT. This is defined in the pleading as "the March Threat". 13 In May 2017, it is alleged that MTCT threatened to apply the MTCT agreement to those employees that it employed and who would otherwise have been covered by the greenfields agreement because the unions had not made the greenfields agreement with MTCT within a timeframe acceptable to MTCT. Thus, it is alleged MTCT threatened to apply terms and conditions to those employees that resulted in wage reductions and changes to roster because the unions had not made the greenfields agreement with MTCT within a timeframe acceptable to MTCT. This is defined in the pleadings as the "May Threat". 14 It is alleged that the March Threat and the May Threat were each a threat to take action against the unions with the intent to negate their choice to exercise a workplace right in a particular way by making a greenfields agreement on terms favourable to it, and/or not engaging in free bargaining for the terms and conditions they wish to be included in the greenfields agreement they made with MTCT. 15 It is then alleged that each of the threatened actions was illegitimate or unconscionable and that the MTCT agreement contravenes s 343(1) of the Fair Work Act, which provides as follows: (1) A person must not organise or take, or threaten to organise or take, any action against another person with intent to coerce the other person, or a third person, to: (a) exercise or not exercise, or propose to exercise or not exercise, a workplace right; or (b) exercise, or propose to exercise, a workplace right in a particular way. The second alleged contravention is a contravention of s 50 of the Fair Work Act, in relation to an alleged transfer of business within the meaning of s 311 of the Fair Work Act. 16 Sections 311 and 50 are also relevant for the purposes of this application. It is convenient to set out those provisions here. Section 311 relevantly provides: (1) There is a transfer of business from an employer (the old employer) to another employer (the new employer) if the following requirements are satisfied: (a) the employment of an employee of the old employer has terminated; (b) within 3 months after the termination, the employee becomes employed by the new employer; (c) the work (the transferring work) the employee performs for the new employer is the same, or substantially the same, as the work the employee performed for the old employer; (d) there is a connection between the old employer and the new employer as described in any of subsections (3) to (6). 17 Section 50 provides: A person must not contravene a term of an enterprise agreement. 18 As Mr Borenstein QC, who appeared with Mr Harding, explained in his oral submissions, a number of employees who are identified in the existing cross-claim were employed by a joint venture company to carry out certain maintenance work on offshore platforms in Bass Strait as well as certain onshore facilities. Esso decided that it wanted to call for tenders for new operators to carry out that work and to bring to an end the previous agreement. MTCT tendered for the work and was successful. 19 The pleading alleges that MTCT is a wholly owned subsidiary of UGL Operations and Maintenance Pty Ltd. It is not necessary to record in detail the nature of the allegations made with respect to s 50 at this point because Mr Follett, who appeared with Mr Pollock for MTCT, conceded that if the UGLK agreements were legally transferred to MTCT under s 311 such that they then applied to MTCT and to the employees relevantly identified in the cross-claim, then those agreements would have applied to the exclusion of the MTCT agreement. As Mr Follett submitted, it would follow that MTCT's act of paying the relevant employees the lower rates of pay under the MTCT agreement (instead of the higher rates of pay provided by the UGLK agreements) would have amounted to a contravention of the UGLK agreements and a contravention of s 50 of the Fair Work Act. 20 In those circumstances, a critical issue for trial presumably concerns a legal question about the proper characterisation of the relationship between UGL Operations and Maintenance Pty Ltd and MTCT within the meaning of s 311 of the Fair Work Act. The allegations of accessorial liability against Mr Elliott 21 The relevant sections of the proposed amended claim to which objection is taken are set out at Annexure A to these reasons. Applicable principles 22 The parties did not dispute that if a pleading asserts that an individual, here Mr Elliott, aided, abetted, or was knowingly concerned in the principal's (MTCT's) contraventions, the pleading must plead by way of material facts that the individual was sufficiently aware of all of the relevant facts going to the contravention by the principal. As White J said in Fair Work Ombudsman v Devine Marine Group Pty Ltd [2014] FCA 1365 at [176]-[179] (in a passage recently endorsed by a Full Court in Ezy Accounting 123 Pty Ltd v Fair Work Ombudsman [2018] FCAFC 134 at [11]): [176] Although the general principles relating to accessorial liability are settled, their application in a case such as the present is not without difficulty. In order to aid, abet, counsel or procure the relevant contravention, the person must intentionally participate in the contravention with the requisite intention: Yorke v Lucas (1984) 158 CLR 661 at 667. In order to have the requisite intention, the person must have knowledge of "the essential matters" which go to make up the events, whether or not the person knows that those matters amount to a crime: Yorke v Lucas at 667. Although it is necessary for the person to be an intentional participant and to have knowledge of the matters or things constituting the contravention, it is not necessary for the person to know those matters or things do constitute a contravention: Rural Press Ltd v Australian Competition and Consumer Commission [2002] FCAFC 213; (2002) 118 FCR 236 at [159]- [160]. That is to say, it is not necessary that the accessory should appreciate that the conduct in question is unlawful. ... [177] Actual, rather than imputed, knowledge is required. So much was made clear in Giorgianni v The Queen (1985) 156 CLR 473 at 506-7 by Wilson, Deane and Dawson JJ ... [178] The notion of being "knowingly concerned" in a contravention has a different emphasis from that of aiding, abetting, counselling or procuring" a contravention. To be knowingly concerned in a contravention, the person must have engaged in some act or conduct which "implicates or involves him or her" in the contravention so that there be a "practical connection between" the person and the contravention: Construction, Forestry, Mining and Energy Union v Clarke [2007] FCAFC 87; (2007) 164 IR 299 at [26]; Qantas Airways Ltd v Transport Workers' Union of Australia [2011] FCA 470; (2011) 280 ALR 503 at [324]- [325]. [179] As indicated, these principles are not in doubt. The more difficult question arises from their application to the circumstances of this case and, in the identification of the essential facts about which an accessory must have actual knowledge. Consideration 23 In this case, as to the allegation that Mr Elliott aided or abetted or was knowingly concerned in MTCT's alleged breach of s 343 of the Fair Work Act, the unions must establish, and therefore must plead, that: (a) the March Threat and the May Threat were made with intent to negate the unions' choice by the exertion of pressure that was, in the circumstances, unlawful, illegitimate or unconscionable; and (b) Mr Elliott had actual knowledge of those circumstances that made their conduct coercive: cf. Seven Network (Operations) Ltd v Communications, Electrical Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (2001) 109 FCR 378, 388 at [43]. 24 As to the allegation that Mr Elliott aided or abetted or was knowingly concerned in MTCT's alleged breach of s 50, the unions must establish, and therefore must plead, each of the relevant requirements the existence of which it is necessary to demonstrate in order to make good the proposition that a relevant transfer of business has occurred within the meaning of s 311. Relevantly, in this case, that would mean pleading as follows: (a) the employment of an employee of the old employer has terminated; (b) within 3 months after the termination, the employee becomes employed by the new employer; (c) the work the employee performs for the new employer is the same, or substantially the same, as the work the employee performed for the old employer; and (d) there is a connection between the old employer in the new employer because the new employer was an associated entity of the old employer when the transferring employee became employed by the new employer: see s 311(1) read with s 311(6) of the Fair Work Act. 25 If those requirements are satisfied, then s 313(1) of the Fair Work Act has the effect that: "(a) the transferable instrument covers the new employer and the transferring employee in relation to the transferring work after the time the transferring employee becomes employed by the new employer; and (b) while the transferable instrument covers the new employer and the transferring employee in relation to the transferring work, no other enterprise agreement or named employer award that covers the new employer at the transfer time covers the transferring employee in relation to that work". 26 For the reasons which I set out below, in my view, the pleading does not disclose a cause of action against Mr Elliott with respect to the coercion breaches of s 343. However, it does disclose a cause of action with respect to the breaches of s 50. Section 343 (coercion) 27 Paragraph [62] of the proposed amended claim says that "by reason of" the matters referred to in paragraphs [61](a), (b), (c), (d), (e), (f) and (g) Mr Elliott was "a person involved in the contraventions referred to in paragraph 30 in that … [he aided and abetted and was knowingly concerned etc.]". Paragraphs [61](a), (b), (c), (d) and (e) (see Annexure A) do not, in fact, concern relevant allegations of knowledge. It is only paragraphs [61](f) and (g) that do so. 28 In my view, however, it is not permissible for the unions to plead that Mr Elliott knew "that the MTCT agreement had been purportedly approved by the Fair Work Commission and was purportedly in operation" because it does not disclose any material fact relevant to the question of what Mr Elliott is alleged to have known that is said to have given rise to him "knowing" that the MTCT agreement had been approved. 29 The word "purportedly" is problematic in many contexts. In "A Dictionary of Modern English Usage" by HW Fowler (Oxford University Press, 2nd ed, 1983) the learned author says of the word "purport": The word is one that, whether as noun or as verb, requires cautious handling. The noun may be said to mean 'what appears to be the significance' (of a document, an action, etc); its special value is that it is non-committal, and abstains from either endorsing or denying the truth of the appearance, but lightly questions it. And so it is here. The allegation that Mr Elliott knew that the agreement had been "purportedly" approved and was "purportedly" in operation "lightly questions" the issue of Mr Elliott's knowledge of the validity of the agreement. It does not, as a pleading must, plead the necessary material facts relied upon. 30 In those circumstances, it is not possible for Mr Elliott to know the case that he must meet with respect to the coercion claim, and in particular what it was that he is alleged to have known that was unlawful, illegitimate or unconscionable, such that the making of the March Threat and the May Threat was coercive within the meaning of the Fair Work Act. 31 For those reasons I will not allow paragraphs [61](e), (g) and [62] of the proposed amended claim. Section 50 32 Mr Follett's complaint about the pleading against Mr Elliott in this regard is that there is no allegation that Mr Elliott had actual knowledge that there was a transfer of business such that the UGLK agreements applied to, and imposed legal obligations on, MTCT in relation to its employment of the identified employees. He submits that the highest that the unions can put the case against Mr Elliott is that he knew that contraventions of the UGLK agreements would occur, and that underpayments would follow as a result, "if these agreements were transferable instruments" (see paragraph [61](l) of the proposed amended claim).] 33 Mr Follett submitted that the pleading, insofar as it concerns the allegations that Mr Elliott was involved in the s 50 contraventions, is defective because it does not plead that Mr Elliott knew that there was a transfer of business within the meaning of s 311(1). In doing so he referred to a number of cases concerning industrial awards in which it has been held that, in order for a person to be knowingly concerned in a breach of an award, the alleged accessory is required to have actual knowledge that the relevant award applied to the relevant employees: see, principally, Potter v Fair Work Ombudsman [2014] FCA 187 at [81] ("The Court finds that, to be an accessory to the underpayment contraventions, Mrs Potter must have known the [award] applied to the Employees"). 34 Mr Borenstein submitted that the cases cited by Mr Follett are distinguishable because, in this case, it is sufficient that the pleading allege that Mr Elliott had knowledge of the essential relevant matters, which he submitted are the requirements set out in s 311(1). If each of those requirements is alleged (as they are here), then, in Mr Borenstein's submission, the fact that the transferring employees and the new employer are covered by the transferable instrument is a conclusion that is effected without more by the provisions contained in s 313(1). In other words, adopting the language of Yorke v Lucas (1984) 158 CLR 661, Mr Elliott is alleged to "have knowledge of the essential matters which go to make up the events". 35 In my view, there is much to be said for that contention. In any event, it is sufficiently arguable that I should permit the pleading on the point contained in the proposed amended claim to proceed. Disposition 36 Accordingly I will not allow the amendments proposed in paragraphs [61](e), (g) and [62] in the proposed amended claim, and allow the rest. 37 The unions shall have leave to re-plead if they wish to do so. Discovery 38 The parties were unable to agree on a small number of outstanding categories of documents, described in Annexure A to the unions' interlocutory application filed on 5 October 2018. 39 I will allow category 38 because it goes to the question of whether any contractual directions were given. 40 I will not allow category 39, because categories 40-42 cover the field. 41 I will allow category 44 because it arises out of the amendment that I have allowed concerning s 50 of the Fair Work Act. 42 I will not allow categories 47 and 48. It is not antithetical to modern principles of case management to encourage parties to negotiate and agree on numerous categories of discovery, which the parties in this case have done over a considerable period of time and doubtless at considerable expense, only at the end of it all to impose "cover all" orders requiring the discovery of all "adverse" and all "supportive" documents, in particular where no good reason for doing so is propounded. 43 I will make orders accordingly. I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice O'Callaghan. Associate: Dated: 31 October 2018 ANNEXURE A 61. The Second Cross-Respondent (Elliott): (a) Is and was at all relevant times an employee of UGL Pty Ltd. (b) Is and was at all relevant times employed by UGL Pty Ltd in the position of National Industrial Relations Manager. (c) Is and was at all relevant times responsible for the conduct of MTCT's industrial relations in that capacity: (i) in Australia; and (ii) in relation to MTCT's employment of employees in relation to the Services, including the terms and conditions of employment MTCT offered to those it employed or offered to employ. (d) Initiated and participated in the Greenfields Negotiations referred to in paragraph 22 herein for the Greenfields Agreement referred to in paragraph 21 herein for and on behalf of MTCT. (e) Communicated the March Threat and the May Threat referred to in paragraphs 26 and 27 herein for and on behalf of MTCT in the capacities referred to in paragraph 61(a) to (c) herein. (f) Knew, prior to and at the time that he engaged in the conduct referred to in (e) above: (i) that the MTCT Agreement had been purportedly approved by the Fair Work Commission and was purportedly in operation; (ii) that the MTCT Agreement: (aa) was a minimum rates agreement; and (bb) would entitle MTCT's employees to inferior terms and conditions of employment compared with the terms and conditions employees payable under the UGKL Agreements; and (iii) that the MTCT Agreement would purportedly apply to MTCT employees if the AWU, the AMWU and the CEPU did not agree to make the Greenfields Agreement on terms and conditions favourable to MTCT. (g) Engaged in the conduct referred in (e) above with the intention to, alternatively, knowing that MTCT intended to, negate the choice of the AWU, the AWMU and the CEPU as alleged in paragraph 28 herein. (h) Knew that the AMWU Onshore Agreement and the AWU Onshore Agreement were enterprise agreements made under and within the meaning of the Fair Work Act 2009. (i) Knew that the AMWU Onshore Agreement and the AWU Onshore Agreement prescribed rates of pay for employees to whom those agreements applied. (j) Knew: (i) that UGL Operations and Maintenance Pty Ltd, alternatively UGL Operations and Maintenance Pty Ltd and Kaefer Integrated Services Pty Ltd, had terminated the employment of employees covered by the AMWU Onshore Agreement and the AWU Onshore Agreement; and (ii) that the employment of these employees had been terminated in or about May 2017. (k) Knew: (i) that MTCT employed a number of the employees referred to in paragraph 61(j) above within 3 months after the termination of their employment in or about May 2017 referred to in paragraph 61(j) above (the MTCT Transferring Employees); (ii) that the work performed by the MTCT Transferring Employees was the same work or substantially the same work as the work they had performed for UGL Operations and Maintenance Pty Ltd, alternatively for Operations and Maintenance Pty Ltd and Kaefer Integrated Services Pty Ltd; and (iii) that MTCT employed the MTCT Transferring Employees as casual employees. (l) Knew that MTCT: (i) intended to; and (ii) did; pay the MTCT Transferring Employees a casual rate of pay that was inferior to the rate of pay prescribed for a casual employee by the AMWU Onshore Agreement and the AWU Onshore Agreement. (m) Knew that MTCT was wholly-owned subsidiary of UGL Operations and Maintenance Pty Ltd. [Particulars omitted.] 62. By reason of the matters referred to in paragraphs 61(a), (b), (c), (d), (e), (f) and (g), Elliott was a person involved in the contraventions referred to in paragraph 30, above, in that: (a) he aided and abetted MTCT in the contraventions within the meaning of s. 550(2)(a) of the FW Act; and/or (b) he was, by act or omission, directly or indirectly, knowingly concerned in the contraventions within the meaning of s. 550(2)(c) of the FW Act. Particulars The Cross-Claimants refer to and rely upon the matters referred to in paragraphs 61(a), (b), (c), (d), (e), (f) and (g) herein, the particulars sub-joined to paragraph 61, and the inferences to be drawn therefrom. 62A. By reason of the matters referred to in paragraphs 61(a), (b), (c), (d), (f), (h), (i), (j), (k), (l) and (m) Elliott was a person involved in each of the contraventions referred to in paragraphs 57 and 60 above, in that: (a) he aided and abetted MTCT in the contraventions within the meaning of s. 550(2)(a) of the FW Act; and/or (b) he was, by act or omission, directly or indirectly, knowingly concerned in the contraventions within the meaning of s. 550(2)(c) of the FW Act. Particulars The Cross-Claimants refer to and rely upon the matters referred to in paragraphs 61(a), (b), (c), (d), (f), (h), (i), (j), (k), (l) and (m) herein, the particulars sub-joined to paragraph 61, and the inferences to be drawn therefrom. SCHEDULE OF PARTIES VID 786 of 2017 Respondents Fourth Respondent: JEFF SHARP Fifth Respondent: STEVE DODD Sixth Respondent: PETER MOONEY Cross-Claimants Second Cross-Claimant: AUSTRALIAN MANUFACTURING WORKERS' UNION Third Cross-Claimant: COMMUNICATIONS, ELECTRICAL, ELECTRONIC, ENERGY, INFORMATION, POSTAL, PLUMBING AND ALLIED SERVICES UNION OF AUSTRALIA