CATCHWORDS INDUSTRIAL LAW - AWARD - Interpretation of award - whether employer is a successor, assignee or transmittee of the business of the respondent - Breach or non observance of award Industrial Relations Act 1988 ss 149, 178 Conciliation and Arbitration Act 1904 ss 61, 88ZB Industrial Relations (Consequential Provisions) Act 1988 s7 Re Australian Industrial Relations Commission and others; Ex parte Australian Transport Officers Federation and others (1990) 171 CLR 216, 230-231 Re Anti-Cancer Council, Ex parte State Public Service Federation (1992) 175 CLR 442, 448. Meat & Allied Trades Federation of Australia v Australasian Meat Industry Employees Union (1995) 58 IR 90, 94 Short v F W Hercus Pty Limited (1993) 40 FCR 511, 518-519, 523 Western Newspapers Pty Limited and Another v Warren (1994) 1 IRCR 393, 405. Re Australian Transport Officers Federation [1991] 11 CAR 488 No. VI 3549 of 1995 AUSTRALIAN FEDERATION OF AIR PILOTS -v- SKYWEST AIRLINES PTY LTD Marshall J Melbourne 31 October 1995 IN THE INDUSTRIAL RELATIONS) ) COURT OF AUSTRALIA ) ) VICTORIA DISTRICT REGISTRY ) No. VI 3549 of 1995 AUSTRALIAN FEDERATION OF AIR PILOTS Applicant SKYWEST AIRLINES PTY LTD Respondent JUDGE: Marshall J PLACE: Melbourne DATE: 31 October 1995 ORDER THE COURT ORDERS THAT: 1. It is declared that the respondent has committed a breach or non observance of clause 30 of the Skywest Airlines Pty Ltd Pilots' Agreement 1986 on and from 8 September 1994 and continuing, by failing to maintain the Pilots' System Seniority List provided for in the award. 2. It is declared that the respondent has committed a breach or non observance of subclause 30F of clause 30 of the award by failing in or about September or October 1994 to assign Captain C Batty to any of the three available assignments of first officer on J31 aircraft at Perth and did instead assign to one of those positions a person who did not have seniority over Captain Batty in the Pilots System Seniority List. 3. The matter is adjourned until 9.30 a.m. on 27 November 1995 for the Court to hear submissions as to the question of the penalty, if any, which should be imposed upon the respondent. NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules. IN THE INDUSTRIAL RELATIONS) ) COURT OF AUSTRALIA ) ) VICTORIA DISTRICT REGISTRY ) No. VI 3549 of 1995 AUSTRALIAN FEDERATION OF AIR PILOTS Applicant SKYWEST AIRLINES PTY LTD Respondent JUDGE: Marshall J PLACE: Melbourne DATE: 31 October 1995 REASONS FOR JUDGMENT BACKGROUND On 28 June 1995 the applicant filed in the registry an application pursuant to s178 Industrial Relations Act 1988 ("the Act") seeking that penalties be imposed upon the respondent for breaches or non-observances of the Skywest Airlines Pty Ltd Pilots' Agreement 1986 ("the award"). The application claims that the respondent did:- "(a) in and between 1994 and 1995, in breach of Clause 30 of the Award, fail to maintain the 'Pilots' System Seniority List'. (b) in or about November, 1993, in breach of Clause 30F of the Award, did fail to assign Captain C. Batty to an available assignment of first officer on J31 aircraft at Perth, and did instead assign to that position a person who did not have seniority over Captain Batty in the 'Pilots' System Seniority List'. (c) in or about September or October, 1994, in breach of Clause 30F of the Award, did fail to assign Captain C. Batty to any of three available assignments of first officer on J31 aircraft at Perth and did instead assign to two of those positions persons who did not have seniority over Captain Batty in the 'Pilots' System Seniority List'." The application was heard by the Court on 12 and 13 October 1995. Mr Herman Borenstein, of counsel, appeared for the applicant. Mr Frank Parry, of counsel, appeared for the respondent. The following facts were not in issue:- · The respondent was at all material times incorporated pursuant to the laws of the State of Western Australia. · The respondent commenced operations in 1982. Its principal activity was at all material times the conduct of airlines operations. Its activities included the following as at 1987: - a regular passenger transport feeder operation ("the RPT operation"); - corporate jet operations; - coast watch operations under contract; - non regularly scheduled transport operations. · In 1986 the applicant, an organisation of employees then registered under the Conciliation and Arbitration Act 1904 (the "former Act") and now registered pursuant to the provisions of the Act, served a log of claims upon the respondent. · On 17 November 1986 the applicant notified the Flight Crew Officers Industrial Tribunal ("the Tribunal") of the existence of an industrial dispute arising out of the respondent's non accession to the demands of the applicant. · On 21 November 1986 Coldham J, constituting the Tribunal, made a finding of dispute between the applicant and the respondent in relation to the matters set out in the log. · On 21 August 1987 the Tribunal certified a consent agreement between the applicant and the respondent in partial settlement of the matters in dispute between them with effect from 30 November 1986. The agreement as amended is the award the subject of these proceedings. · Subsequent to the certification of the agreement, and as it appears shortly thereafter, the respondent restructured its operations. A new company called Skywest Aviation Pty Ltd ("Aviation") was formed. Aviation took over from the respondent the conduct of all its operations other than its RTP operation. · Until 8 September 1994 the respondent maintained an integrated seniority list of pilots employed by it and Aviation for the purposes of allocating a seniority ranking to pilots to govern promotions, demotions, retention in employment, equipment assignments, transfers and the like. THE CRITICAL ISSUE The critical issue for determination in this proceeding is whether or not the respondent was required by the award to maintain a seniority list of pilots employed not only by it but also by Aviation. Central to the resolution of that issue is whether or not Aviation is bound by the award. The applicant contended, as its primary submission, that Aviation was bound by the award as a result of the effect of subclause 4A of the award and s88ZB of the former Act. Subclause 4A of the award provides as follows: "(1) This Agreement shall be binding upon Skywest Airlines Pty Ltd (hereinafter referred to as the 'Company') and the Australian Federation of Air Pilots (hereinafter referred to as the 'Federation') as to all employees in the Company engaged in the occupations specified herein. (2) This Agreement and Statutory obligations shall be binding upon any successor to, or any assignee or transmittee of the Company including a Corporation that has acquired or taken over the business of the Company where continuity of ownership or interest can be shown in any form through any level of ownership change." Section 88ZB(1) of the former Act provided that:- "[Award binding] An award of the Tribunal is binding on - (a) the organizations, persons, and persons included in classes of persons, specified by the Tribunal in the award, or to which or to whom the Tribunal declares the award to extend by a declaration made after the making of the award; (b) all members of organizations bound by the award; and (c) where an employer is bound by the award - any successor to, or any assignee or transmittee of, the business of the employer. including acorporation that has acquired or taken over the business of the employer." Mr Parry submitted that in order for Aviation to have become a successor, assignee or transmittee of the business of the respondent it would have had to have acquired all of the business of the respondent. For ease of expression I shall refer to such succession, assignment or transmission as "transmission". As Aviation only acquired part of the business of the respondent it was submitted that no transmission occurred in the context of subclause 4A of the award or s88ZB of the former Act which applied. The former Act was operative until 1 March 1989. Mr Parry referred the Court to the provisions of s149(1)(d) of the Act. That paragraph became operative on 1 March 1989 when the Act was proclaimed. Section 149(1)(d) provides as follows:- "(d) any successor, assignee or transmittee (whether immediate or not) to or of the business or part of the business of an employer who was a party to the industrial dispute, including a corporation that has acquired or taken over the business or part of the business of the employer;" Mr Parry submitted that if the phraseology of s149(1)(d) had have applied at the material time in 1987, instead of s88ZB of the former Act, Aviation would have been bound by the award. I have no doubt that that submission is correct. Nonetheless, the Court must firstly determine whether s88ZB of the former Act and subclause 4A of the award applied to make Aviation a party to the award in 1987. It is not to the point that such obligations would have been even clearer if the restructure referred to above had occurred post 1 March 1989 if the effect of it in 1987, properly understood, was to make Aviation a party to the award in 1987. In Re Australian Industrial Relations Commission and others; Ex parte Australian Transport Officers Federation and others ("ATOF") (1990) 171 CLR 216, a Full Court of the High Court of Australia considered the meaning of an eligibility rule of a registered organisation. The High Court considered the meaning of the words "a successor or assignee or transmittee of the business of" in determining whether or not the organisation had eligibility rights in relation to employees of a recently created statutory body. At pp 230-231 the High Court said: "... According to the natural reading of the language of the successor clause, the inquiry should be directed to ascertaining whether the business or the activities formerly carried on by the C.M.T. are still carried on by the R.T.A., notwithstanding that the R.T.A. also carries on one or more other substantial activities. The question then is whether the purpose of the clause viewed in this context requires a different reading for which the respondents contend. The natural reading, it is urged, could give the A.T.O.F. very wide, indeed 'windfall', coverage, even a coverage unrelated to employment in the business of the kind carried on by the former employer. There is force in this argument and it may be perhaps that some limitation would need to be implied in order to preclude such an extreme operation. However, there are two answers to the respondents' argument. The first lies in the proviso to the successor clause and requires the successor to be an employer within sub-r. (1)(a)(i) to (v). The second is that the Commission has a discretion under the Act to refuse to make an award at the instance of a registered organization which has a peripheral interest in the industry. Accordingly, on the reading of the clause which we favour, the ultimate issue is whether there is a substantial identity between the old activities and those now carried on by the R.T.A. which correspond with the old activities. It is then said that no such substantial identity exists when regard is had to all the facets of the reorganization of functions effected by the Administration Act. Not all the functions previously performed by the D.M.T. under the C.M.T. are now performed by the R.T.A. Thus, the regulation and licensing of taxis, hire cars, private buses and water taxis, and the licensing of privately operated passenger taxi ferries were vested in the Secretary of the Ministry of Transport (now the Director-General, Department of Transport). Nonetheless, according to the evidence and the findings made at first instance in the Commission, the major part of the functions of the D.M.T. are now undertaken by the R.T.A. and the bulk of the D.M.T. staff have been transferred to the R.T.A. In Holmes, Gibbs J described the functions of the D.M.T. as falling into three categories which he set out [(1977) 140 CLR, at p. 70]. The bulk of those functions were retained by the D.M.T. until the reorganization and are now discharged by the R.T.A. The major functional divisions of the D.M.T., driver licensing, vehicle registration, information systems, regional services, and finance and administration, went over to the R.T.A. In the light of all this we conclude that the R.T.A. is the successor of the C.M.T., notwithstanding that the major activities of the R.T.A. are the former functions of the D.M.R. and predominantly the staff of the R.T.A. are former employees of the D.M.R." The relevant eligibility clause in ATOF is not materially distinguishable from the relevant wording in subclause 4A of the award and s88ZB of the former Act. Applying the test laid down by the High Court the ultimate issue here is whether there was a substantial identity between the old activities of the respondent and those carried on by Aviation upon the commencement of its operations. It does not matter that Aviation did not take over all of the functions of the respondent. Quite clearly the vast majority of the various activities of the respondent outlined above were taken over by Aviation. Applying the reasoning of the High Court to the facts in this matter, I conclude that in or about August 1987 by operation of subclause 4A of the award and s88ZB of the former Act, Aviation became bound by the award as a successor to or assignee or transmittee of the business of the respondent. Mr Parry submitted that the Court should pay little regard to the decision in ATOF because it concerned the interpretation of an eligibility rule. I reject that submission. It is well established that eligibility rules should ordinarily be construed generously. See for example, Re Anti-Cancer Council, Ex parte State Public Service Federation (1992) 175 CLR 442, 448. However, there is no indication in ATOF that the Court approached the meaning of the relevant rule in any special way because it was considering an eligibility rule. I agree, with respect, with the views of the Full Bench of the Australian Industrial Relations Commission ("the Commission") in Meat & Allied Trades Federation of Australia v Australasian Meat Industry Employees Union (1995) 58 IR 90 where at 94 the Full Bench said of ATOF:- "... The Court in that instance was free to place a liberal construction on the relevant union rules. However the Court's reasoning would appear to be no less applicable to construction of the corresponding terms of that Act, which were alluded to in the same passage of the decision ..." The relevant part of the legislation to which the Full Bench was referring was s61(d) of the former Act which was in materially identical terms to s88ZB(1)(c) of the former Act. THE EFFECT OF THE COURT'S FINDING THAT AVIATION WAS BOUND BY THE AWARD AT ALL MATERIAL TIMES On 1 March 1989 the former Act was repealed. Section 7(3) Industrial Relations (Consequential Provisions) Act 1988 continued the award in force. That subsection provides that:- "(3) An award of the Flight Crew Officers Industrial Tribunal continued in force by subsection (1) remains binding, subject to the Industrial Relations Act, on the persons who would have been bound by the award if the previous Act had not been repealed." Mr Parry submitted that if Aviation was bound by the award, such fact did not have the consequence that the respondent was required to maintain an integrated seniority list. It was submitted that each of the respondent and Aviation was required to maintain its own list. As the respondent had maintained its own seniority list according to the submission of Mr Parry it had not breached the award. I reject that submission. I find that the award properly construed imposes a requirement upon the respondent to keep an integrated seniority list in accordance with subclause 30A of the award. Subclause 30A provides that: "A. Subject to subclause 30D the Company shall maintain the 'PILOTS' SYSTEM SENIORITY LIST' which shall specify the seniority number and name of all pilots and the date of employment on the flight staff of the Company." The words "Subject to subclause 30D" were inserted in subclause 30A on 3 February 1992. On 3 February 1992 by order of a Full Bench of the Commission contained in Print K1652 a new subclause 30D was inserted in the award. It provides as follows:- "D. For the purposes of maintaining the Company's 'Pilots' System Seniority List' and for determining the seniority number of a pilot employed by the Company on 1 October 1990, who was formerly employed by Lloyd Aviation Jet Charter Pty Limited, the pilot's date of employment as a pilot on the flight staff of the Company shall be 1 October 1990. Provided that any such pilots shall appear in the Seniority List in accordance with the provisions of Appendix V to this Award." This new subclause was inserted into the award as a result of a decision of the same Full Bench on 29 November 1991: See Re Australian Transport Officers Federation [1991] 11 CAR 488. The decision dealt with the appropriate way of placing on the integrated seniority list of pilots of the respondent and Aviation a group of pilots formerly employed by Lloyd Aviation Jet Charter Pty Ltd ("Lloyds"). A new appendix to the award, Appendix V, was added which stated the principles which would apply to the determination of the pilots' seniority list "following absorption by Lloyd Aviation Jet Charter Pty Ltd by Skywest Aviation Pty Ltd". The Appendix further refers to "Skywest pilots" as a way of referring collectively to pilots employed by the respondent and Aviation (including ex-Lloyd's pilots). It is clear from the decision of the Full Bench and its order, both referred to above, that the Commission intended that the respondent maintain an integrated seniority list consisting of pilots employed by the respondent and Aviation. Although it is not necessary to determine for the purposes of this proceeding it is strongly arguable that such a requirement falls upon Aviation as well. I therefore find that the respondent breached and/or failed to observe the requirements of clause 30 of the award and in particular subclauses 30A and 30D thereof by failing to maintain the "Pilots' System Seniority List" referred to in that clause from 8 September 1994 onwards. The first alleged breach of award referred to in the application is made out. ALLEGED BREACHES OF SUBCLAUSE 30F Subclause 30F of the award provides that "F. Seniority shall govern all pilots in the case of promotions and demotions, their retention in case of reduction in force, their assignment or re-assignment due to expansion or reduction in schedules, their choice of assignments, their transfers, or changes of status. Any appointment as a Supervisory Pilot may only be made to a pilot who has the seniority to rate the type or with an assignment on that type." Mr Borenstein conceded that the applicant had not established the facts which would support a finding that the respondent had breached or failed to observe the award as alleged in paragraph 1(b) of the application. Mr Borenstein made no such concession in respect of paragraph 1(c) of the application. The evidence before the Court shows that as at 9 June 1994, Captain Batty was number 71 according to Exhibit B which is a document described as a "Seniority List for pilots employed by Skywest Airlines & Skywest Aviation as at 09.06.94". On 8 September 1994, the respondent issued a list entitled "Seniority List for pilots employed by Skywest Airlines AS AT 31 AUGUST 1994". Naturally, Captain Batty being an employee of Aviation did not appear on the later list. There is no evidence that any integrated list was kept by the respondent beyond 9 June 1994. In September or October 1994 three positions became available based in Perth. Captain Batty applied for these positions. Captain J Russell was successful in applying for one of those positions. Captain Batty was unsuccessful in his applications notwithstanding that Captain Russell's seniority number was 80 on 9 June 1994, some nine places below Captain Batty. It is abundantly clear from subclause 30F that the purpose of that subclause is to give effect to the intention behind an integrated seniority list, i.e., to allocate promotions, assignments and transfers etc by use of the criterion of seniority within Aviation and the respondent across Aviation and the respondent. It is no answer for the respondent to submit that in dealing with assignment the subclause intended to refer to equipment assignment and not the creation of a new employment relationship between someone not hitherto engaged by the respondent. Such an approach is an extraordinarily narrow one which would make the maintenance of an integrated seniority list practically worthless. The Court having found that the respondent had a duty to maintain such a list should be reluctant to give the subclause a meaning that provides no practical substance to that duty. The restrictive meaning contended for by Mr Parry would give subclause 30F no work to do and render the maintenance of an integrated seniority list futile. It is abundantly clear from the February 1992 variation to the award and the accompanying Full Bench decision in November 1991 that the Commission intended to provide a workable integrated seniority list. Its intention should not be rendered nugatory unless the Court is compelled by clear words to do so. I find no such clear words of compulsion on the face of the award. In the circumstances the intention of the Commission should be given full effect. See Short v F W Hercus Pty Limited (1993) 40 FCR 511, 518-519, 523 and Western Newspapers Pty Limited and Another v Warren (1994) 1 IRCR 393, 405. In the circumstances the Court is of the view that the respondent's failure to assign Captain Batty to any of the three available assignments of first officer on J31 aircraft in Perth in September or October 1994 constituted a breach of its duty to ensure that seniority in accordance with an integrated seniority list, in the sense described above, was allowed to govern the assignment of pilots to positions available within the respondent. To find otherwise would be to find that the obligation to maintain an integrated seniority list is devoid of practical utility. ORDERS The Court will make the following orders:- 1. It is declared that the respondent has committed a breach or non observance of clause 30 of the Skywest Airlines Pty Ltd Pilots' Agreement 1986 on and from 8 September 1994 and continuing, by failing to maintain the Pilots' System Seniority List provided for in the award. 2. It is declared that the respondent has committed a breach or non observance of subclause 30F of clause 30 of the award by failing in or about September or October 1994 to assign Captain C Batty to any of the three available assignments of first officer on J31 aircraft at Perth and did instead assign to one of those positions a person who did not have seniority over Captain Batty in the Pilots System Seniority List. 3. The matter is adjourned until 9.30 a.m. on 27 November 1995 for the Court to hear submissions as to the question of the penalty, if any, which should be imposed upon the respondent. I certify that this and the preceding 13 pages are a true copy of the Reasons for Judgment herein of his Honour Justice Marshall. Associate: Date: 31 October 1995 Counsel for the Applicant: Mr H. Borenstein Solicitor for the Applicant: Mahoney Glavin Rylah Counsel for the Respondent: Mr F Parry Solicitor for the Respondent: Freehill Hollingdale and Page Date of hearings: 12 and 13 October 1995 Date of judgment: 31 October 1995