Industrial Relations Commission of New South Wales in Court Session CITATION : Hansen Yuncken Pty Ltd v Andreas Costopoulos [2004] NSWIRComm 91 APPELLANT Hansen Yuncken Pty Ltd PARTIES : RESPONDENT Andreas Costopoulos FILE NUMBER: 6778 of 2003 CORAM: Staff J Section 106 Claim - Federal award and certified enterprise partnership agreement covering labourers in construction industry - orders made under s 106 for relief - Appeal - Application for stay of orders - Principles - Regard to be had to appellant's prospects of success - Appeal arguable - Whether the Commission had jurisdiction to make orders - Exercise of discretion - Balance of convenience - Balance of convenience favouring grant of a stay - Respondent not impecunious - Stay granted on condition that appellant pay to respondent a specified portion of money awarded at first instance and balance into interest bearing account CATCHWORDS : Stay of proceedings - Section 106 - Unfair contract - Appeal from orders awarding respondent 12 months payment as notice - Application for stay - Principles - Balance of convenience - Stay granted on condition that appellant pay to respondent a specified portion of money ordered at first instance and balance into interest bearing account LEGISLATION CITED : Industrial Relations Act 1996 Workplace Relations Act 1996 Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 Bellambi Bowling Recreation & Sports Club Ltd v Grammel (2001) 107 IR 104 BHP Iron Ore Pty Ltd v Australian Workers Union (2000) 102 FCR 97, (2000) 97 IR 266 Burgess v Mount Thorley Operations Pty Ltd (2002) 115 IR 13 Burgess v Mount Thorley Operations Pty Ltd [2003] NSWIRComm 432 CASES CITED : Campbells Cash & Carry Pty Ltd v National Union of Workers, New South Wales Branch (2001) 104 IR 400 Professional Officers' Association of New South Wales v New South Wales Teachers' Federation (1993) 50 IR 404 Re Transport Industry - Waste Collection and Recycling (State) Award (2000) 102 IR 192 State of New South Wales (Department of Public Works and Services and Department of Education and Training) v WorkCover Authority of New South Wales (Inspector Page) [2000] NSWIRComm 124, (2000) 101 IR 131 Water Industry Salaried Officers' Union v Professional Officers' Association of New South Wales (1987) 22 IR 178 Thornwaite v Australian National Credit Union Ltd (2002) 116 IR 438 HEARING DATES: 03/29/2004 DATE OF JUDGMENT: 04/14/2004 APPELLANT Mr A Britt of counsel Solicitor: Mr D Murray The Master Builders Association of New South Wales LEGAL REPRESENTATIVES: RESPONDENT Mr J H Pearce of counsel Solicitor: Ms R Mallia Construction Forestry Mining & Energy Union JUDGMENT: INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION Coram: Staff J 14 April, 2004 Matter No IRC 6778 of 2003 HANSEN YUNCKEN PTY LTD v ANDREAS COSTOPOULOS Application for Leave to Appeal and Appeal by Hansen Yuncken Pty Ltd against Judgment of Justice Kavanagh given on 6 November 2003 in Matter No IRC 3868 of 2001 JUDGMENT [2004] NSWIRComm 91 1 On 26 November 2003, Hansen Yuncken Pty Ltd (the appellant) lodged an application for leave to appeal and appeal against the decision of Justice Kavanagh of 6 November 2003 whereby her Honour made orders varying the contract of employment between the appellant and the respondent requiring the appellant to pay the respondent 12 months payment as to notice, calculated at his full salary package rate. This decision concerns an application made by the appellant for a stay of that decision. The Decision 2 Her Honour found that the employment contract entered into between the respondent and the appellant had operated unfairly in circumstances where the employment of the respondent was terminated and appropriate notice was not given by the appellant. 3 The facts found by Kavanagh J were that the respondent was employed for 23 years by the appellant as a construction worker/builder's labourer. He was retrenched by his employer. On termination, the respondent received a termination payment for his years of service in the sum of $2,880 for outstanding entitlements from the appellant's company. The respondent received a further $13,916.70 from a Redundancy Trust contributed to by his employer during his employment. The respondent at the time of termination in February 2001 was in receipt of annual remuneration from the appellant of $41,835 plus allowances of $3,258. The applicant also received a superannuation payment of $3,120 per annum ($60 per week) which was paid to a trust nominated in the National Building Industry and Construction Award. 4 During the latter period of the respondent's employment, the appellant was party to a series of federally certified Enterprise Partnership Agreements ("EAs") covering the employment of construction employees. The Certified Enterprise Partnership Agreement ("CEPA") between the appellant and the Construction Forestry Mining and Energy Union (NSW Branch) known as the Hansen Yuncken Pty Ltd NSW/CFMEU Partnership Agreement 1998 ("the 1998 Agreement") was certified under the Workplace Relations Act 1996 on 21 January 1999. This was the Certified Enterprise Partnership Agreement in force at the termination of the respondent's employment. 5 The appellant is a party to a Federal Award (now known as the National Building and Construction Industry Award 2000) - ("the NBCI Award") which regulates the employment of construction industry employees. It was not in dispute that the respondent is a member of the CFMEU. 6 Her Honour found that there was nothing in the evidence to lead to the conclusion that the appellant intended to vary the respondent's contract of employment to incorporate into it the terms of the Award and the Agreement. Her Honour found that the facts of the case differed from those considered by the Federal Court in BHP Iron Ore Pty Ltd v Australian Workers Union (2000) 102 FCR 97 wherein in a letter of offer to the employees there was reference to the terms of the Award. It was held in that case that such an offer had to be specifically agreed to for any term of an award to be incorporated into the employment contract. Her Honour found such was not the circumstance before her. 7 It was therefore necessary for her Honour to examine the specific relevant Agreement and Award provisions, particularly related to the applicant's employment. 8 Her Honour found the duties performed by the respondent were as a labourer on a construction site. Such employees are covered by the Certified Enterprise Partnership Agreement and the NCBI Award. The scheme in place on a reading of the Award and Agreement were found to be as follows: Under the relevant Award there are three employment categories identified: (i) weekly hire - operator; (ii) casual labourer; and (iii) daily hire - tradespersons and labourers. 9 Her Honour found the provisions covering "weekly hire operators" and "casual labourers" not relevant. 10 The Enterprise Agreement, which prevails where there is conflict between the Award and the Agreement, contains clause 10 (which her Honour set out in full at pp 10-11 of her decision). This clause contained a classification for new employees. 11 The Agreement and Award both include notice of termination clauses. 12 An issue for determination by Her Honour was the employment category of the respondent. Her Honour did not accept the applicant could be categorised as a "new employee" after 23 years of service. The Enterprise Agreement referred to new tradespersons and labourers as weekly hire employees, however, the appellant referred to the respondent as a permanent employee covered by a new employee clause. 13 Evidence revealed the respondent, when first hired, had been paid under a federal award. Later the respondent was paid under the terms of a Certified Agreement and then in accordance with the Enterprise Agreement as a labourer. In the latter period of the respondent's employment, and at the time of termination, he was paid a higher rate than that of a construction worker. He was being paid the rate of a tradesperson. The appellant submitted to her Honour that this payment identified him as a weekly hire employee under cl 10 of the Certified Enterprise Partnership Agreement. 14 Her Honour found under the respondent's contract of employment that the appellant paid him at a higher rate than the minimum rate under the Award or the supplementary rate struck under the Enterprise Agreement for a labourer on a construction site. This was an arrangement which was part of the respondent's contract of employment. 15 In reaching her decision Kavanagh J referred to a decision of Schmidt J in Burgess & Ors v Mount Thorley Operations Pty Ltd (2002) 115 IR 13 and observed that the claim in Burgess was for orders similar to that being considered in this matter. Schmidt J found that clauses in a federal award dealing with notice and redundancy payments were not incorporated into the employment contract. Schmidt J held, at 41, that "the federal legislative scheme in the context of these Award and EA provisions, simply leaves no room for the exercise by this Court of the s 106 jurisdiction, in the manner were sought." 16 Kavanagh J observed that Haylen J had expressed a different view in Thornwaite v Australian National Credit Union Ltd (2002) 116 IR 438 in respect of the claim under s 106 for orders for a variation of a contract to reflect just compensation of notice and redundancy payment on termination where there was an alleged federal award and enterprise agreement. 17 Her Honour noted what Haylen J said in Thornwaite at [81]: "Approached on the basis of the judgment in Byrne v Australian Airlines Ltd, it may be said that the Award alone (or certified agreement) is not the contract of employment. Section 106 deals with unconscionability associated with the contract of employment or any related arrangement, using that term broadly. It is for this reason, in my view that orders made under s 106 of the Act would not usually be inconsistent with a law of the Commonwealth, namely the provisions of a certified agreement or Award." 18 After considering the evidence and various decisions of the Commission, Kavanagh J, following the approach adopted by Haylen J in Thornwaite, made the following findings at [60], [61]: [60] I find the applicant had statutory rights as enunciated in the relevant Award and Enterprise Agreement but these instruments did not exhaustively or exclusively cover the terms and conditions of his employment. The facts reveal he was categorised by the employer as a permanent employee and as a term of his employment, that is, as part of his employment contract, he was paid a higher rate of pay than a labourer. [61] The Award and Enterprise Agreement therefore do not "cover the field" in terms of this employee's contract of employment. His contract of employment incorporated supplementary terms and conditions. There is therefore no inconsistency in the application of s 106 of the State Act to the applicant's contract of employment terms and conditions and to apply to those terms of his employment contract the test of unfairness. 19 It was contended by the appellant that the Enterprise Agreement entitled it to provide notice of termination to the respondent whilst he was on annual leave. This resulted in the respondent not receiving a payment as to notice on termination as such notice was taken to have been given whilst the respondent was on leave. 20 Her Honour found that the failure to pay this employee a notice payment and the decision to characterise an accrued right to holiday pay as a notice payment was an unfairness in the conduct of the applicant's employment contract. Her Honour varied the contract to add an additional clause reflecting the payment of notice to the applicant for 12 months. 21 There was also a claim for redundancy, however, her Honour found such rights were dictated in accordance with the Enterprise Agreement and the Award and rejected that claim. In addition, the respondent alleged the decision-making process which led to his termination was not in accordance with the procedures outlined in the Agreement. Her Honour found that the decision in respect of the continuing employment of the respondent had been assessed in accordance with the provisions of the Agreement and the Award. Her Honour rejected this part of the claim. 22 Kavanagh J made the following orders: 1. The contract of employment between the applicant and the respondent be varied and the respondent pay to the applicant 12 month's payment as to Notice calculated at his full salary package rate from 20 February 2001. 2. Interest on that amount calculated in accordance with s 94 of the Supreme Court Act 1970 as amended from 20 February 2001. 3. The respondent to pay the applicant's costs as agreed or assessed. The parties have liberty to approach in relation to the making of any costs order. The Application for Appeal 23 The matters appealed against as specified in the Application for Leave to Appeal and Appeal were as follows: (i) the finding that the contract of employment between the Appellant and Respondent was unfair for the purposes of s 105; (ii) the orders to vary the contract of employment so that the Appellant pay to the Respondent 12 months' payment as to notice calculated at his full salary package rate from 20 February 2001; and (iii) subsequent orders made by Her Honour. 24 The questions raised by the appeal were stated as follows: (i) whether the court may vary the Respondent's contract of employment under s 106 of the Act in respect to a payment in lieu of notice where the Respondent is employed under a Federal Award and/or Certified Agreement which provide for a specific period of notice or payment in lieu of notice of termination; (ii) what is the proper approach which should be taken by the Court in relation to an application under s 106 of the Act where the contract which is sought to be varied to provide for a greater period of notice or payment in lieu of notice and the employee concerned is covered by a Federal Award and/or Certified Agreement which provide for a specific period of notice or payment in lieu of notice of termination; (iii) whether pursuant to the operation of s 109 of the Commonwealth Constitution, the existence, terms and operation of section 152 and section 170LZ of the Workplace Relations Act 1996, the Court is denied jurisdiction to deal with the Respondent's Summons for Relief pursuant to s 106 of the Act and/or the power to grant relief sought in the Respondent's Summons for Relief as it relates to the question of notice or payment in lieu of notice; (iv) what is the proper approach to be taken by the Court to interpreting clause 10 of the Hansen Yuncken Pty Ltd and Construction, Forestry, Mining and Energy Union (CFMEU) Partnership Certified Agreement 1998/2000 and clause 13 of the National Building and Construction Industry Award. (v) what is the proper approach to be taken by the Court in assessing the date from which interest should be awarded in applications under s106 of the Act; and (vi) the obligation for the Court to provide reasons for its' (sic) decisions. Submissions 25 Mr Britt, counsel for the appellant, contended that the principles to be applied in determining the Application for Stay were those stated by Walton J, Vice-President in Bellambi Bowling Recreation & Sports Club Ltd v Grammel (2001) 107 IR 104 and the Judgment of Wright J, President in Re Transport Industry - Waste Collection and Recycling (State) Award (2000) 102 IR 192 where his Honour summarised the principles as follows at 199 and 200: I consider that the following considerations derived from the discussion in the Cambridge Credit case are those relevant to apply in this matter: "(1) The mere filing of an appeal will not of itself provide a reason or demonstrate an appropriate case nor will it discharge the onus which the applicant bears. (2) A court has an appropriate discretion whether or not to grant the stay and as to the terms that would be fair if a stay be granted. (3) The onus is upon the applicant for a stay to demonstrate a proper basis for a stay that will be fair to all the parties. (4) In the exercise of its discretion all considerations including the balance of convenience and the competing rights of the parties need to be considered and weighed. (5) Where there is a risk that the appeal will prove abortive or nugatory if the stay is not granted then the normal exercise of discretion will result in the grant of a stay. (6) Although, generally speaking, it is inappropriate in relation to an application for a stay to speculate as to the appellant's prospects of success, this does not prevent a court, in the context of considering the specific terms of the stay that will appropriately and fairly adjust the interests of the parties, from making a preliminary assessment as to whether the appellant has an arguable case." 26 Mr Britt's primary submission was that the notice period required to be provided to the respondent upon termination was dealt with in the Award or the Enterprise Agreement. It was submitted that the decision of the Full Bench in Burgess and Ors v Mount Thorley Operations Pty Ltd [2003] NSWIRComm 432 was on "all fours" with this matter. In that matter a Full Bench found that money orders relating to the payment in lieu of notice and redundancy pay led to a direct inconsistency with the relevant Award and Enterprise Agreement provisions. 27 Mr Britt contended that there was an arguable case that her Honour's decision was inconsistent with the Certified Agreement and the Federal Award. 28 In respect of the balance of convenience Mr Britt contended that it favoured the granting of a stay. It was common ground that the respondent owned a property at Earlwood which was unencumbered. Evidence also demonstrated that the respondent had an amount of money invested in a term deposit. However, Mr Britt contended that the real issue if a stay was not granted and the appellant was successful on appeal involved the steps required to recover the moneys ordered payable by her Honour. Mr Britt did not oppose such moneys being placed into a trust account. 29 Mr Pearce of counsel appeared for the respondent and contended that her Honour had correctly applied the principles set out in the Full Bench decision in Burgess and opposed a stay being granted. 30 Mr Pearce submitted that the principles to be considered in respect of the granting of a stay were to be found in Re Transport Industry - Waste Collection and Recycling (State) Award. These principles required the Commission to undertake a two part exercise, that being, a consideration of whether there existed an arguable case and the exercise of a discretion in respect of the balance of convenience. Counsel also relied on the Judgment of Walton J, Vice-President in Campbells Cash & Carry Pty Ltd v National Union of Workers, New South Wales Branch (2001) 104 IR 400 in which his Honour found that the Commission was required to undertake a consideration of the two primary questions set out in Re Transport Industry - Waste Collection and Recycling (State) Award. 31 Mr Pearce submitted that the key findings of her Honour were to be found in par [60] and [61] of the Judgment which have been set out earlier. 32 Mr Pearce pointed to State legislation dealing with long service leave and occupational health and safety to emphasise his submission that the federal scheme does not cover the field. 33 It was further submitted that the Award and the Enterprise Agreement only dealt with daily and weekly employees, however, her Honour had found that the respondent was a permanent employee and it was submitted that the Award and the Agreement were silent in respect of this category of employee and it followed that there was therefore jurisdiction under s 106 of the Industrial Relations Act ("the Act") to entertain the application. 34 In respect of the balance of convenience Mr Pearce submitted that the respondent was entitled to the 'fruits of his victory' and that he had been waiting for three years to receive appropriate payment in lieu of notice. Consideration 35 I am prepared to accept, for the purposes of the stay application, the principles set out by Walton J, Vice-President in Campbells Cash & Carry particularly at par [49] - [51] where his Honour said: [49] The principles relevant to determining an application for stay upon an appeal brought pursuant to s190 of the Act have been recently stated by a Full Bench of the Commission in Court Session in State of New South Wales (Department of Public Works and Services and Department of Education and Training) v WorkCover Authority of New South Wales (Inspector Page) [2000] NSWIRComm 124 [at 15] as follows: "The facility of a stay of a challenged decision, in whole or in part, is afforded by s190 of the Industrial Relations Act . The principles on which a stay is allowed have been often stated - in short, a sufficient reason needs to be shown to delay the decision made at first instance from being effective pending the determination of the appeal: see Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 and Water Industry Salaried Officers' Union v Professional Officers' Association of New South Wales (1987) 22 IR 178. As was observed by the Full Commission ( Fisher P, Hungerford J and Buckley CC) of the former Commission in Professional Officers' Association of New South Wales v New South Wales Teachers' Federation [1993] 50 IR 404 at 404: Shortly stated the approach in considering a stay application is that the appellant is required to demonstrate reasons to warrant the exercise of discretion in his favour. Specifically unlike the former position, an appellant is not now required to establish special or exceptional circumstances to warrant the imposition of a stay. The question then is whether the appellant has established or demonstrated reasons supporting an appropriate case for a stay.' In the result in that case, the Full Commission considered the circumstances in terms of the balance of convenience as favouring a stay and said (at p 405) that "if a stay were not granted however then a series of applications drastically affecting the rights of industrial parties to represent the interests of their members or potential members would produce major consequences and may indeed have subsequently to be unravelled". [50] I respectfully adopt this statement of the principles to be applied in the determination of an application for stay on an appeal for the purposes of determining the present application. [51] The question further arises, however, as to whether it is appropriate to consider the prospects for success of the appeal in determining whether to grant an application for a stay. 36 Later at par [59] his Honour said: [59] In my view, the Court of Appeal did not establish, in Cambridge Credit, a rigid or immutable rule or principle against any preliminary consideration of an appellant's prospect for success on appeal, where the appellant seeks a stay of the decision at first instance. Nor did other decisions following Cambridge Credit, such as Green v Brown. For example, the court in Cambridge Credit considered it appropriate that a preliminary assessment be made as to whether an appellant had an arguable case in order for a court to evaluate the specific terms of a stay that would fairly adjust the interests of the parties. 37 His Honour went on at par [61] and [62] to note: [61] …However, it is reasonably clear from the authorities earlier discussed that the Commission may be required to consider the prospects for success of an appeal in certain cases. The Commission may be required to consider such matters where the appeal would in all likelihood be a futility… Furthermore, it may be necessary to consider the prospects of success of the appeal in a preliminary way in order to appropriately consider the balance of convenience or competing rights and interests of the parties in a particular case. [62] Where it is appropriate to assess the prospects for success of an appeal in considering an application for a stay, the assessment so made will be entirely preliminary. 38 In my view, it is appropriate to make an assessment of the appellant's prospects for success in this matter. That consideration is relevant to the question of the balance of convenience and the terms of any stay. Such an assessment is necessarily preliminary as the Commission has not fully heard the parties on the Application for Leave to Appeal or the merits of the appeal. 39 An appeal lodged against the decision of Schmidt J in Burgess was delivered on 12 December 2003 subsequent to her Honour's judgment. The Full Bench (Wright J President, Walton J Vice-President, Boland J) in Burgess & Ors v Mount Thorley Operations Pty Ltd (2003) NSWIRComm 432 found that there was no jurisdiction to entertain claims in respect of higher notice and redundancy payments in circumstances that would have imposed legal obligations that the respondent did not carry under the terms of federal instruments. 40 The essence of the appeal is whether the Commission has jurisdiction to make the orders that it has, in circumstances where the appellant contends the respondent is employed under a Federal award and/or certified agreement which provide for a specific period of notice or payment in lieu of notice of termination. This gives rise to a consideration of the operation of s 109 of the Commonwealth Constitution and/or s 152 and s 170LZ of the Workplace Relations Act 1996. These sections of the Workplace Relations Act 1996 provide that a federal award (s 152) and a Certified Agreement (s 170LZ) prevail over a state law to the extent of any inconsistency. 41 In my view, in light of the Full Bench's decision in Burgess and issues raised in this appeal, it seems to me that the appeal is arguable. 42 I now turn to consider the question of the balance of convenience. The matters raised by the appellant essentially relate to perceived difficulties that may arise if a stay is not granted and the appellant is successful in the appeal. Mr Pearce contended that the respondent was entitled to have the benefit of her Honour's orders. However this does not really take the matter anywhere because it is simply a restatement of the principle that a stay will not automatically be granted upon the filing of an appeal. 43 I consider that a balance of convenience favours the appellant in that it has an arguable appeal. 44 The more difficult question is the terms upon which such a stay should be granted to effectively balance the interests of the parties in a fair and appropriate way. There is no issue as to the impecuniosity of the respondent and the usual issue of incapacity to repay the moneys if the appeal was successful. This needs to be balanced against the reasons demonstrated for a stay. This is not without difficulty, but I consider that the way in which this should be achieved is to grant a stay with conditions. This will involve a combination of the payment of an amount of money to the respondent and the balance into an interest bearing account. 45 In all the circumstances and, taking into account the respective interests of the parties, I have determined to grant the stay sought by the appellant on terms. The terms of the stay will be that the appellant pay to the respondent a sum equivalent to 50% of the amount awarded by Kavanagh J. The balance of the amount awarded by Kavanagh J should be paid into an interest bearing account with a solicitor from the appellant and a solicitor from the respondent being joint trustees in respect of the account. The payment of moneys would be on the basis that the money would only be paid out of the account in accordance with the orders of the court. The account should be structured in a way where the money bears interest. 46 I therefore grant a stay of the order made by her Honour on 19 February 2004. The appellant is to pay moneys to the respondent on the following basis: 1. Within 14 days of today's date the appellant shall pay 50% of the amount awarded by her Honour to the respondent. 2. The balance of the amount awarded to the respondent after complying with order 1, will be paid into an interest bearing account arranged by its solicitor. The moneys in such account are not to be paid out except upon an order of this court and in accordance with that order. 3. A solicitor shall act as trustee for the appellant in respect of the account. Similarly a solicitor will act as a trustee to the account on behalf of the respondent. The respondent shall nominate a solicitor to act as trustee to the account within seven days of the date of this order. In the event that no nomination is made by the respondent within that time the appellant's solicitor shall be the sole trustee to the account. 4. The solicitor for the appellant shall advise the Industrial Registrar in writing within 21 days of the date of this decision of the above moneys being paid to the respondent and the balance being paid into an interest bearing account referred to earlier and a copy of that correspondence shall be forwarded to the CFMEU as the body entering a notice of appearance for the respondent. 5. The court also grants liberty to apply generally in relation to the appeal if there is any matter that needs to be dealt with. 47 The Commission orders that the orders made by Justice Kavanagh in matter IRC 3868 of 2001 be stayed until further order of the Commission upon the terms that the appellant shall pay 50% of the amount awarded by her Honour to the respondent and the balance into an interest-bearing account by no later than 4.00 pm on 28 April 2004. 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