Seaman v First Mildura Irrigation Trust [1994] IRCA 52

C A T C H W O R D S Industrial - application for imposition of penalties for alleged breaches of award - obligations under award to "discuss" and to provide in writing all relevant information - whether obligation required employer to provide to the employees and the union a copy of a report by a consultant - prescription that termination of employment shall not be harsh, unjust or unreasonable. Industrial Relations Act 1988 (Cth), s.178 ROBERT JOHN SEAMAN, BERNARD JOHN NEILSON and MICHAEL JOHN INNES -v- FIRST MILDURA IRRIGATION TRUST No. VI 52 of 1993 KEELY J. MELBOURNE 29 July 1994

IN THE FEDERAL COURT OF AUSTRALIA ) ) VICTORIA DISTRICT REGISTRY ) No. VI 52 of 1993 ) INDUSTRIAL DIVISION ) B E T W E E N: ROBERT JOHN SEAMAN, BERNARD JOHN NEILSON and MICHAEL JOHN INNES Applicants A N D: FIRST MILDURA IRRIGATION TRUST Respondent MINUTES OF ORDER 29 July 1994 KEELY J. THE COURT ORDERS THAT: The application 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 ) ) VICTORIA DISTRICT REGISTRY ) No. VI 52 of 1993 ) INDUSTRIAL DIVISION ) B E T W E E N: ROBERT JOHN SEAMAN, BERNARD JOHN NEILSON and MICHAEL JOHN INNES Applicants A N D: FIRST MILDURA IRRIGATION TRUST Respondent REASONS FOR JUDGMENT 29 July 1994 Keely J. Messrs Seaman, Neilson and Innes (the applicants) by application filed on 14 September 1993, as amended, seek the imposition of penalties, under s.178 of the Industrial Relations Act 1988 (the Act), upon First Mildura Irrigation Trust (the respondent - sometimes referred to in documents as the Trust) for alleged breaches of clauses 21, 22 and 23 of the Victorian Local Authorities Interim Award 1991 (the award) arising from the termination of their employment by notice given on 15 July 1993. They have also sought damages for breach of contract and for breach of statutory duty and orders that any penalties imposed be paid to them. The hearing of the case occupied thirteen days. Evidence was given by each of the applicants and by Mr Chris Hawken, an organiser employed by the Australian Municipal, Administrative, Clerical and Services Union (the union), who had responsibility for members of the union employed by the respondent. Witnesses called by the respondent included Mr R. P. Byrnes, its Chief Executive Officer, and Mr Gary Rayson, a former employee of the respondent. The latter's evidence related primarily to the claim by Mr Innes for damages for breach of contract and for breach of statutory duty - which claim will be dealt with later in these reasons for judgment. The full text of the three clauses of the award will be set out later but it is convenient to state at this stage the general nature of the obligations imposed by each clause, insofar as they are relevant to the application. Clause 21 required the respondent to discuss with the employees affected and the union the introduction of certain changes which the respondent had decided to introduce, the likely effects of those changes upon employees, and measures to avert or mitigate the adverse effects of those changes on employees. It also required the respondent to provide in writing to the employees and the union all relevant information about the changes. Clause 22 provided that termination of an employee shall not be harsh, unjust or unreasonable. Clause 23 required the respondent, if it had "made a definite decision that [it] no longer wishes the job the employee has been doing done by anyone", to hold discussions with the employees directly affected and with the union. It also required the respondent to provide in writing to the employees and the union all relevant information about the proposed terminations. It was conceded by counsel for the respondent that: (1) the respondent is and was at all relevant times an incorporated body capable of being sued; (2) the respondent is and was at all relevant times a respondent to and bound by the award; (3) each of the applicants was at all relevant times a member of the Union; (4) the applicants were at all material times employed by the respondent; and (5) at all relevant times the applicants' employment was subject to the award. The financial problems faced by the respondent and some of the events relevant to the respondent's decision to terminate the applicants' employment are detailed in documents which are exhibits and were the subject of oral evidence. In late 1992 the respondent first heard that it might have to pay a diversion levy and on 4 May 1993 it was informed by the Rural Water Corporation that it would be required to do so. On 26 May 1993 the respondent distributed a newsletter to its staff and to the relevant owners or occupiers of holdings (the growers - sometimes referred to as the ratepayers) which included the following: "The harvest has been completed and published information suggests that the total returns to growers will be dramatically low. The Trust wishes growers every success in coping with the trying financial and climatic conditions experienced to date. Items of interest are as follows: . . . 4. Diversion Charge: The Rural Water Corporation has verbally advised the Trust that it will be required to pay a charge of approximately $4.80 per megalitre for each megalitre (Ml) diverted from the River Murray from 1993/94 Irrigation Season for its share of the cost of operational and maintenance of River Murray regulation structures and headworks. This impost will result in an additional annual cost of between $300,000.00 and $400,000.00 per annum which translates to a 10% to 13% rate increase. The Trust Board is investigating options to reduce the impact of passing these costs onto growers for the 1993/94 Irrigation Season. 5. Trust Tariff Rebate: This financial year has been unusually wet with over 500mm of rain to date - the only financial years with more rain than this were 1974 with 875mm and 1918 with 544mm. With around half the usual volume of water being ordered and pumped, the Trust's revenue will be significantly reduced by: - Extra Water sales to growers using in excess of their entitlement normally provides around 10% of revenue, but this year will be negligible. - The Trust's Policy of refunding half the irrigation rate where growers use less than half their entitlement reduces revenue even further. There has been much debate on reform, and the Trust board prior to setting the 1993 tariff carefully evaluated all arguments and decided that the existing tariff structure with reducing marginal extra water rates and refunding half the irrigation rate where growers use less than half their entitlement continued to be the most equitable to all growers. It was considered that the existing tariff best served growers by equalising differing crop requirements and soil types, supported by crop protection from frost and sun burn, and facilitated grower financial management and minimised their interest cost while still adequately addressing user-pays issues." (Exhibit D) On 22 June 1993 the respondent wrote the following letter: "Dear Ratepayer, 22 June 1993 We would like to keep all growers fully informed as to how we are trying to manage increasing costs, to ensure that you are not hit with a significant rate increase. Commencing this week, we plan to re-organise aspects of the Trust to improve efficiency. The wet season of 1992-3 has had a negative impact on the Trust's revenue in that $140,000 was returned to growers as rebates and $300,000 of budgeted water sales was not realised. As a consequence, revenue this year has fallen dramatically. In addition, the Trust has been advised of the introduction of a government diversion charge of $4.80 per megalitre for water diverted from the Murray River which would commence in the 1993-94 year. This charge would result in additional costs of approximately $400,000 per annum. This alone translates to a rating base increase of 14% per annum. It is not feasible to use reserves as the diversion levy is an ongoing commitment. We are aware that many growers face financial pressures and that containing the rate is essential. We strongly believe that an increase like this cannot and will not be passed on to growers. Over the past three years our long term planning has helped prepare us for such change. We have become debt free, fully appreciated our assets to ensure they can be maintained in the future, along with reduced operating costs. The Trust is considered to be one of the best managed and financially prudent of all irrigation authorities within Australia. The Board has just completed a special in depth operational review of options to determine where efficiency gains can be obtained while ensuring services are maintained and continue to meet grower's needs. The option we are adopting is the introduction of further cost effective technology and a reduction in our workforce. An action we do not take lightly. We regret loss of staff but we have endeavoured to introduce cost-conscious measures before considering the loss of jobs. We plan to offer voluntary redundancies to workers in an effort to contain the impending rate increase. This decision has been difficult but is necessary to ensure that the FMIT remains a viable business while protecting growers from unreasonable rate increases. We will, within the next month, inform you of the details of the restructuring and advise you of the 1993-94 irrigation tariff. Your support during these difficult times is appreciated. Yours sincerely SIGNED Mr Barry Kilpatrick Chairman FIRST MILDURA IRRIGATION TRUST" (Exhibit C) On 25 June 1993 the respondent distributed the following memorandum: "MEMO TO: All Staff FROM: Ray Byrnes, Chief Executive Officer SUBJECT: Re-Organisation of the FMIT for Greater Efficiency The Trust is currently facing significant increases in operating costs due to the introduction of a government diversion charge. The charge for diverting water from the Murray River will result in an additional $300,000 to $500,000 costs per annum. As you are aware, revenue this year was well below expected, due to the unseasonally wet year; $140,000 was returned to growers as rebates for unused water and $300,000 of budgeted water sales was not realised. Growers this year have had to contend with a poor year, with higher operating costs and fifty percent less yields. Ten years ago water costs constituted approximately five percent of total costs to growers, now it is ten percent. Grower [sic] are facing financial pressure and cannot withstand a significant rate increase. Wednesday night the Board made a definite decision to introduce, where feasible, cost-effective technology which will lead to a reduction in the size of the Trust. We would like to give some staff the opportunity to take voluntary redundancy. I would be happy to meet with anyone who is interested, next week to discuss the offer and give specific details. SIGNED RAY BYRNES CHIEF EXECUTIVE OFFICER" (Exhibit B) The respondent convened a meeting of employees at its depot on 25 June 1993 (the 25 June meeting) and on the same day wrote to Mr Michael Innes, the third applicant in these proceedings, who was at that time, and had been for about six years, the union's shop steward at the respondent's establishment. That letter was as follows: "Dear Mick, Friday 25th June This morning we held a staff meeting to discuss changes announced by the Board. At this meeting I gave details regarding the financial pressures facing the Trust, and Growers, I also explained that new technology was being considered which would have a flow on impact to staff. I announced that voluntary redundancies were being sought from interested employees. Next week further details will be available. I feel it is necessary that all staff be kept fully informed. As you were on leave when this meeting was held I felt it was important to give you this information and invite you to see me when you return for an update. Yours sincerely SIGNED Chief Executive Officer" (Exhibit N) The respondent on that day also advised the General Secretary of the union of its decision on 23 June "to introduce changes likely to have significant effects on employees". That letter was in the following terms: "Dear Mr Cochrane, The First Mildura Irrigation Trust Board, at its meeting on Wednesday 23 June, made a definite decision to introduce changes effecting [sic] the use of technology and organisational structure. We would like to inform you, under Clause 21 of the Award, that the change is likely to have significant effects on employees. Staff will be addressed this Friday on the financial pressures facing growers and the decision to introduce cost-effective technology to help meet escalating costs due to new government diversion charges. Staff will be presented with the option of voluntary redundancies and the opportunity to contribute to further cost-conscious measures. The organisation and delivery of water services in rural Victoria have experienced considerable changes to meet demands for increased efficiency, cost-effectiveness and financial self-sufficiency. The FMIT is not a state or local government body, so maintaining a long term viability is a critical problem. The current market environment in the fruit industry is not good. Growers also had to contend with a seasonally poor year, receiving only half of their previous year's production. Growers are facing financial pressures and can't withstand significant rate increases. The attached growers letter [Exhibit C] outlines the problems the Trust is facing in relation to this year's poor return and impending increase to operating costs. As the increased costs are primarily ongoing, due to new government charges, levies and electricity costs, we are forced to restructure and make significant changes in how we provide water to growers. We will endeavour to work with our staff and growers in implementing workable change which will increase our overall efficiency and cost effectiveness. In line with Clause 21, we would like to discuss the proposed changes with you as soon as possible. Please contact the undersigned for a mutually convenient meeting date. Yours sincerely, SIGNED SIGNED CHAIRMAN CHIEF EXECUTIVE OFFICER" (Exhibit DD)