Industrial Relations Commission of New South Wales CITATION: Transport Workers' Union of New South Wales and Post Logistics Australasia Pty Ltd [2010] NSWIRComm 177 PARTIES: Transport Workers' Union of New South Wales (Appellant/Cross Respondent) Post Logistics Australasia Pty Ltd (Respondent/Cross Apellant) FILE NUMBER(S): IRC 561 and 693 of 2010 CORAM: Walton J Vice-President; Grayson DP; Ritchie C APPEAL - Transport Industry Redundancy Contract Determination - contract carriers - severance pay - reduction of severance pay - Commission's discretion to reduce severance pay where acceptable alternative work is found - severance pay may be reduced or elimininated only when finding of acceptable alternative work - for three drivers no examination of what reduction should occur where acceptable alternative work found - Commissioner reduced severance pay for six drivers without making finding as to whether alternative work was acceptable for purposes of award - fundamental errors of law and principle found - appeal upheld - leave granted - decision of Connor C quashed - matter remitted. CATCHWORDS: CROSS APPEAL - matter remitted - cross appeal issues need not be determined - leave to cross appeal refused. LEGISLATION CITED: Industrial Relations Act 1996 Busways v Johnson (1994) 55 IR 255 Entertainment Distributors Company Pty Limited v Burnard (1993) 49 IR 446 CASES CITED: House v The King (1936) 55 CLR 499 Notification under s 332 by Transport Workers' Union of New South Wales of a dispute with Toll North Pty Ltd re Contract of Carriage and other matters [2008] NSWIRComm1107 Transport Industry - Redundancy (State) Contract Determination Transport Workers' Union of New South Wales and Post Logistics Australia Pty Limited [2010] NSWIRComm 1030 HEARING DATES: 8 November 2010 DATE OF JUDGMENT: 9 December 2010 Mr A Hatcher of senior counsel (Appellant/Cross Respondent) Transport Workers' Union of New South Wales LEGAL REPRESENTATIVES: Mr S Prince of counsel (Respondent/Cross Appellant) Blake Dawson JUDGMENT: INDUSTRIAL COMMISSION OF NEW SOUTH WALES FULL BENCH CORAM: WALTON J, Vice-President GRAYSON DP RITCHIE C Thursday 9 December 2010 Matter No IRC 561 of 2010 TRANSPORT WORKERS' UNION OF NEW SOUTH WALES AND POST LOGISTICS AUSTRALASIA PTY LTD Application by the Transport Workers' Union of New South Wales for leave to appeal and appeal against a decision of Commissioner Connor given on 24 June 2010 in Transport Workers' Union of New South Wales and Post Logistics Australia Pty Limited [2010] NSWIRComm 1030 Matter No IRC 693 of 2010 POST LOGISTICS AUSTRALASIA PTY LTD AND TRANSPORT WORKERS' UNION OF NEW SOUTH WALES Application by Post Logistics Australasia Pty Ltd for leave to cross appeal and cross appeal against a decision of Commissioner Connor given on 24 June 2010 in Transport Workers' Union of New South Wales and Post Logistics Australia Pty Limited [2010] NSWIRComm 1030 DECISION OF THE COMMISSION [2010] NSWIRComm 177 The Appeal 1 In the first of these matters the Transport Workers' Union of New South Wales seeks leave to appeal and if leave is granted, to appeal against the decision of Connor C given on 24 June 2010: Transport Workers' Union of New South Wales and Post Logistics Australia Pty Limited [2010] NSWIRComm 1030. 2 Although the citation identifies the union as the moving party in the proceedings below, it was in fact, as we will discuss shortly, Post Logistics who brought proceedings by application filed on 4 March 2010 seeking an order that no amount, or a lesser amount of severance pay be paid to the following nine contract carriers who claimed entitlement to such payment: Contractor Company Details AS & EA Kulibab Pty Ltd Andrew Kulibab 137 Bellingara Rd Miranda NSW 2228 Gazmac Transport Pty Ltd Garry Walsh 2 Wellesley Place Green Valley NSW 2168 JM Kostrubiec John Kostrubiec 135 Explorers Way St Clair NSW 2759 Jacklin Consulting Pty Ltd Tony Murphy 138 Terence Ave Lake Munmorah NSW 2259 Pony Transport Pty Ltd Sam Paulis 8 Theresa St Smithfield NSW 2164 Quang Thanh Transport Pty Ltd Duc Kim 14 Avonlea St Canley Heights NSW 2166 SG Santos Pty Ltd Gus Santo 83 Elsiemer St Long Jetty NSW 2261 Tan Transport and Removal Pty Ltd Tan Nguyen 44 Gidgee St Cabramatta NSW 2166 VAS Transport Pty Ltd Vasko Bosevski 1 Watting St Abbotsbury NSW 2176 3 Be that as it may, the union now seeks orders quashing the decision below and it seeks a re-determination of the substantive application dealt with at first instance by Connor C. 4 The grounds and reasons relied upon by the appellant union are as follows: G. Reasons why leave to appeal should be granted: 1. The appeal raises important questions about the circumstances in which the Commission has power to reduce the amount of severance pay payable under an industrial instrument. 2. The purported effect of the decision under appeal is to deny carriers their entitlements under the Transport Industry (State) Contract Determination ('the Determination"). 3. The decision under appeal was attended by fundamental jurisdictional error and ought not to be permitted to stand. 4. The decision has wide ramifications for the severance entitlements of workers within the Commission's jurisdiction generally. And: H. Grounds of the appeal are: 1. The Commissioner erred in that he purported to reduce the severance pay entitlements of six of the nine carriers the subject of the proceedings in circumstances where he had not found that they had been obtained acceptable alternative work, contrary to the terms of clause 6(iii) of the Determination and the redundancy test case standard. 2. In the alternative to ground 1, the Commissioner, in reducing the severance pay entitlements of the six carriers, did not disclose any reasons, or sufficient reasons, for the amounts determined by him. 3. The Commissioner erred in finding, contrary to the terms of cl 6(iii) of the Determination and the redundancy test case standard, that an employer or principal contractor who arranges for suitable acceptable employment is released from the obligation to pay any severance pay. 4. The Commissioner, having found that acceptable alternative employment had been obtained for three of the nine carriers the subject of the proceedings, failed to exercise his discretion as to whether and by how much their severance pay entitlements ought to be reduced, and erroneously assumed that they must receive no severance payment at all. 5. Such other reasons as to the Commission seem appropriate. The Cross Appeal 5 For its part, Post Logistics Australasia seeks leave to cross appeal and, if leave is granted, to cross appeal against the same decision of Connor C. 6 The questions raised by the cross appeal and the grounds and reasons upon which it relies are as follows: F. The questions raised by the cross appeal are: 1. Whether the contract carriers who were awarded severance payments were found by the Commissioner to have been offered acceptable alternative work within the meaning of the Transport Industry - Redundancy Contract Determination (the Contract Determination); 2. Whether the Commissioner erred in awarding severance payments to the contract carriers despite his finding that the contract carriers were offered acceptable alternative work; 3. What constitutes acceptable alternative work within the meaning of cl 6(iii); 4. Whether the principles from decisions of the Commission dealing with severance payments in awards covering employees have application in a case dealing with owner drivers covered by the Contract Determination. G. Reasons why leave to cross appeal should be granted: 1. The cross appeal raises important questions as to whether contract carriers covered by the Contract Determination are entitled to severance pay notwithstanding offers of acceptable alternative work being made, including recognition of service and maintenance of existing rates of pay. 2. The decision under cross appeal involved fundamental error and ought not be permitted to stand. 3. The decision affects principals and contract carriers operating in the industry generally and the Full Bench's determination of the issues in the cross appeal will provide guidance as to the operation of clause 6(iii) of the Contract Determination. H. Grounds of the cross appeal are: 1. the Commissioner had made a correct finding that PLA had obtained for the contract carriers offers of acceptable alternate work pursuant to clause 6(iii) of the Contract Determination. 2. Having made the finding in ground H1, the Commissioner erred in finding that there were sufficient differences between the terms of the offers and the contract carriers' current terms of engagement with PLA or losses so as to justify the awarding of severance payments to the contract carriers. 3. In the alternative to grounds H1 and H2 (if the Full Bench determines that the finding in ground H1 was not made), the Commissioner erred in failing to find that PLA had obtained for the contract carriers acceptable alternative work pursuant to clause 6(iii) of the Contract Determination, and as a result, erroneously awarded severance pay the contract carriers. 4. Such other reasons as the Commission considers appropriate. 7 In addition to the grant of leave, the cross appeal seeks to set aside the decision below insofar as it was held that six of the nine claimant contract carriers were entitled to severance payments. As will be apparent from the above grounds, crucial to the cross appeal was the question whether there was a finding below that the cross appellant had obtained for all of the nine claimant contract carriers, offers of acceptable alternative work pursuant to the Transport Industry - Redundancy (State) Contract Determination ('the Determination'). 8 Clause 6 of the Determination makes provision for payment of severance pay to contract carriers as follows: 6. Severance Pay (i) Where a carrier is to be terminated for reasons arising from changes in production, program, organisation, structure or technology, subject to further order of the Commission, the principal contractor shall pay the carrier the following severance pay in respect of a continuous period of engagement: (a) If the natural person who performs the driving or riding duties pursuant to the contract of carriage between the principal contractor and the carrier (being a person permitted to do so under paragraphs (a), (b) or (c) of section 309(1) of the NSW Industrial Relations Act 1996 is under 45 years of age, the principal contractor shall pay in accordance with the following scale: Years of Engagement Under 45 Years of Age Entitlement Less than 1 year Nil 1 year and less than 2 years 4 weeks pay 2 years and less than 3 years 7 weeks pay 3 years and less than 4 years 10 weeks pay 4 years and less than 5 years 12 weeks pay 5 years and less than 6 years 14 weeks pay 6 years and over 16 weeks pay (b) Where the natural person who performs the driving or riding duties pursuant to the contract of carriage between the principal contractor and the carrier (being a person permitted to do so under paragraphs (a), (b) or (c) of section 309(1) of the NSW Industrial Relations Act 1996 is 45 years old or over, the entitlement shall be in accordance with the following scale: Years of Engagement 45 Years of Age and Over Entitlement Less than 1 year Nil 1 year and less than 2 years 5 weeks pay 2 years and less than 3 years 8.75 weeks pay 3 years and less than 4 years 12.5 weeks pay 4 years and less than 5 years 15 weeks pay 5 years and less than 6 years 17.5 weeks pay 6 years and over 20 weeks pay (c) "Weeks pay" means the weekly average gross remuneration the carrier received from the principal contractor for the previous twelve month for work performed by the carrier on behalf of the principal contractor, less the percentage amounts set out in Schedule A to this contract determination on account of running costs. (ii) Incapacity to pay - Subject to an application by the principal contractor and further order of the Commission, a principal contractor may pay a lesser amount (or no amount) of severance pay than that contained in subclause (i) of this clause. The Commission shall have regard to such financial and other resources of the principal contractor concerned as the Commission thinks relevant, and the probable effect paying the amount of severance pay in subclause (i) of this clause will have on the principal contractor. (iii) Alternative work - Subject to an application by the principal contractor and further order of the Commission, a principal contractor may pay a lesser amount (or no amount) of severance pay than that contained in subclause (i) of this clause if the principal contractor obtains acceptable alternative work for the carrier. (iv) Severance pay not to be construed as pay in lieu of reasonable notice - The severance pay in subclause (i) of this clause shall not be construed as satisfying, either in whole or in part, the principal contractor's obligation to provide reasonable notice of termination or pay in lieu thereof. 9 As may be seen, cl 6(iii) above permits a principal contractor such as Post Logistics to apply to the Commission for relief, in whole or in part, from liability to pay severance benefits to carriers and it vests in the Commission a discretion to grant or decline to grant such relief if the principal contractor obtains "acceptable alternative work" for the carrier. It is that condition precedent which governs the operation of the sub-clause. Without it being met, a principal contractor who terminates a carrier for reasons set out in cl 6(i) above cannot (absent established incapacity to pay - see cl 6(ii) above) be granted relief from payment of the full severance entitlement. Only if the condition is met can the Commission make discretionary orders for the payment of an amount less than the full severance pay or for no amount at all. 10 Conversely, even if the condition precedent is met and the principal contractor is found to have obtained acceptable alternative work for the carrier/s the Commission may, in the exercise of discretion, decline to order payment of a lesser amount (or no amount) of severance pay. The impugned decision 11 In his reasons for decision the Commissioner set out the factual matrix as follows: 5 On Monday, 22 January, 2007 Post Logistics took over the business of J R Haulage Pty Limited, trading as State Warehousing and Distribution Services [SWADS] in the transporting of white goods customarily in the Sydney metropolitan area. There were 17 contract carriers at that time and they were covered by a contract agreement with SWADS which they retained whilst they worked for Post Logistics. However, in the middle of 2009 Post Logistics sought to convert its contract drivers from the SWADS agreement to a new contract agreement. I accept from the evidence before me in this hearing that, among other things, the SWADS agreement contained a provision recognising goodwill in the event of the sale of the vehicle [Clause 23, Sale of Vehicle with a Work Component]: the Post Logistic agreement which was purportedly to replace it did not recognise goodwill. 6 As far as is relevant for current purposes, three of the contract drivers who were subsequently retrenched - Mr Sam Paulus, Mr Duc Kim and Mr Vasko Bosevski - were prepared to enter into the new contract agreement with Post Logistics. Mr Murphy, Mr Kostrubiec and four other of the retrenched contract carriers - Mr Andrew Kulibab, Mr Garry Walsh, Mr Gus Santos and Mr Tam Nguyen - declined to do so. There was some suggestion by Mr Bull that those contract carriers who refused to work under the new contract agreement with Post Logistics would have the allocation of work to them reduced and that those contract carriers who moved over to the Post Logistics contract did so under duress. The evidence to support such a claim is not convincing and it appears that there was no reduction in the work of the contract carriers who refused to move from the SWADS agreement. 7 However, subsequently Post Logistics decided to bring its contract carrier operations to a close and it negotiated with Messenger Post for the nine contract carriers it engaged to be taken over by it. Those negotiations resulted in Messenger Post agreeing to offer contracts to each of the nine contract drivers engaged by Post Logistics whose contracts of carriage were being terminated. Messenger Post indicated that it would pay the contract carriers for the existing Post Logistics work at current rates, ie those contract drivers on the SWADS contract agreement would retain their existing level of remuneration and those on the Post Logistics contract agreement would be paid accordingly. Also Messenger Post would recognise the prior service of the contract carriers with respect to any future redundancy situations. 8 On the strength of that agreement, Post Logistics gave notice of the termination of the contracts of carriage effective from Saturday, 28 February, 2010 and Messenger Post offered each of the contract carriers a contract commencing on Monday, 1 March, 2010. Five contract carriers - Mr Murphy, Mr Paulus, Mr Kim, Mr Santos and Mr Bosevski - accepted that offer and are presently working for Messenger Post performing the type of work that they originally performed for Post Logistics, albeit without prejudice to the TWU claim made on their behalf in this hearing. Four contract carriers - Mr Kostrubiec, Mr Kulibab, Mr Walsh and Mr Nguyen - declined the offer. Mr Hurst indicated in his evidence that he had informed the nine contract drivers that they should all take up the positions offered by Messenger Post, whilst reserving their position with respect to these proceedings, but four contract carriers declined to do so. 9 Apart from the concessions made by it with respect to the Post Logistics contract carriers, the contracts offered by Messenger Post were its standard form of contract. It is Messenger Post policy that all of its contract drivers trade as corporations and it insisted that the contract drivers it adopted from Post Logistics also trade as corporations. The benefits of Chapter 6 apply whether the contract carrier is a sole trader [S.309(1)(a)], in a partnerships [S.309(1)(b)] or trades as a corporate entity [S.309(1)(c)]. Mr Kostrubiec was the only one of the nine retrenched contract drivers who did not trade as a corporate entity and, although Mr Hurst encouraged him to form himself as a corporation he has refused to do so. 10 Mr Ryan has estimated the potential severance pay of the nine contract carriers who are the subject of the TWU claim in this hearing if the TWU claim is successful. Mr Bull has not had the opportunity to check those figures but I have no reason to doubt Mr Ryan's calculations and I believe I am entitled to rely on them in this hearing. I summarise the position with each of the contract carriers as follows: (i) Mr Kulibab trades as A S and E A Kulibab Pty Limited. He was engaged on the SWADS contract and refused to convert to the Post Logistics contract in the middle of 2009. He declined to accept the offer to work with Messenger Post. If he is entitled to severance pay, it has been estimated at $29,741.99. (ii) Mr Walsh trades as Gazmac Transport Pty Limited. He was also engaged on the SWADS contract. He refused to convert to the Post Logistics contract in the middle of 2009 and declined to accept work with Messenger Post. If he is entitled to severance pay, it has been estimated at $23,183.77. (iii) Mr Kostrubiec is a sole trader who refuses to form his business as a corporate entity. He was originally engaged under the SWADS contract and in 2009 refused to convert it to the Post Logistics contract. He declined to accept work with Messenger Post. His severance pay has been estimated as $33,630.27. (iv) Mr Murphy trades as Jacklin Consulting Pty Limited. He was engaged under the SWADS contract and refused to convert to the Post Logistics contract in the middle of 2009. He accepted work with Messenger Post and is working for it performing the work he originally carried out for Post Logistics. His severance pay has been estimated at $26,741.63. (v) Mr Paulis trades as Pony Transport Pty Limited. He accepted work under the Post Logistics contract from the middle of 2009 and accepted work with Messenger Post. His severance pay has been estimated at $13,951.26. (vi) Mr Kim trades as Quang Thanh Transport Pty Limited. He also agreed to work under the Post Logistics contract when it was given to him in the middle of 2009. He accepted work with Messenger Post. His severance pay entitlements have been estimated as $22,581.61. (vii) Mr Santos trades as S G Santos Pty Limited. He was engaged under the SWADS contract and refused to work under the Post Logistics contract when it was offered to him in the middle of 2009. He subsequently accepted work with Messenger Post. His severance pay has been estimated as $30,808.06. (viii) Mr Nguyen trades as Tan Transport and Removal Pty Limited. He was also engaged under the SWADS contract and refused to work under the Post Logistics contract. He declined work with Messenger Post. His severance pay has been estimated as $28,537.58. (ix) Mr Bosevski trades as VAS Transport Pty Limited. He worked under the Post Logistics contract and accepted work with Messenger Post. His severance pay was estimated as $19,080.80. 12 After setting out the above factual matrix, about which there is no controversy, the Commissioner went on to consider the questions posed for determination and in so doing, made the following observation about the operation of cl 6(iii) of the Transport Industry - Redundancy (State) Contract Determination: 12 An employer or principal contractor who arranges for suitable alternative employment is released from the obligation to pay any severance pay. 13 We accept, as Mr A Hatcher SC for the TWU submitted, without demur, that the provisions of cl 6(iii) required the Commissioner to determine whether Post Logistics had obtained acceptable alternative work for each of the nine retrenched carriers. Only in the event of a positive finding in that regard, could the Commissioner then determine whether the amount of severance pay for each carrier should be reduced and if so, to what extent. 14 It was further submitted by senior counsel for the TWU that the Commissioner, in stating the proposition set out above (assuming that the word "suitable" is used as a synonym for "acceptable") fundamentally misdirected himself and, in so doing, acted "upon a wrong principle" (see House v The King (1936) 55 CLR 499 at 505) such as to require leave to appeal being granted and the appeal being upheld. We agree with that submission and in so doing, reject the conclusion for which counsel for Post Logistics contended (among others) to the effect that the deficiency in the proposition stated by the Commissioner could be somehow cured if the word "not" is read between the word "is" and the word "released". We do not accept and, with respect, there are no grounds upon which it could be accepted as counsel for Post Logistics submitted, that the error of principle is founded in a typographical error. On the basis of this error alone there are sufficient grounds upon which to grant leave to appeal and to uphold the appeal and we intend to do so. 15 Before doing so, however, it is appropriate to recite another basis upon which the impugned decision is criticised by the appellant and that basis is to be found in the following passage from the decision: 13 There is no doubt that Post Logistics have made efforts to arrange for alternative engagements for its retrenched contract carriers - and five of them actually took up the offer made to them in that respect. I would not wish to in any way suggest in this decision that it should be in the same position as a principal contractor who made no efforts at all in that respect. To do so would discourage a principal contractor from making any efforts to find its retrenched contract drivers alternative work, which is clearly a desirable thing for him to do and something that it would be appropriate for me to have regard. Consequently, I reject Mr Bull's primary submission that the retrenched contract carriers should receive the redundancy pay prescribed in Clause 6(i) without any discounting at all. 16 We consider there is substance in the TWU contention that the proposition stated by the Commissioner appears to be intended to apply irrespective of whether the alternative work obtained by Post Logistics was "acceptable" work within the meaning of cl 6(iii). This would mean that contract carriers can have their severance entitlements reduced, even though the alternative work obtained for them is not "acceptable alternative work". We consider this is something which is simply not authorised by cl 6(iii). 17 In the case of the three carriers whose claims were rejected by the Commissioner, we accept and it is not contended otherwise, that the Commissioner found that the alternative work obtained for them with an entity known as Messenger Post was "acceptable alternative work" within the meaning of the clause. We also consider, on a review of the material before us, that there is substance in the TWU complaint that the Commissioner having so found, did not then proceed to consider whether he should exercise his discretion under cl 6(iii) to reduce or not reduce the amount of severance payment because he applied the proposition stated at [12] of his decision in a way which automatically disqualified them from severance payments. 18 Finally, as to other matters complained of by the TWU, and without determining the matter, we consider it is tolerably clear that the Commissioner failed to reach a conclusion as to whether Post Logistics had obtained or failed to obtain acceptable alternative work for the remaining six claimant contract carriers and yet proceeded nonetheless to reduce severance payments that would otherwise be due and payable to them. If established this would constitute further appellable error on the long established principle that it is essential that decisions of the Commission contain express findings upon which to ground the exercise of discretion: Busways v Johnson (1994) 55 IR 255 at 257. It will not be sufficient for such findings to be left, as a matter of inference, from the fact that the Commission decided to grant or decline to grant relief: Entertainment Distributors Company Pty Limited v Burnard (1993) 49 IR 446 at 453. 19 Further, on the question of leave, and notwithstanding the submission of counsel for Post Logistics to the contrary, we consider that there are questions raised by the appellant which are of general importance or more particularly, which have wider implications for the jurisdiction of the Commission in this area. In that regard, we were taken by senior counsel for the TWU to an earlier decision of McKenna C where on the face of the record, there were similar errors of principle. In Notification under s 332 by Transport Workers' Union of New South Wales of a dispute with Toll North Pty Ltd re Contract of Carriage and other matters [2008] NSWIRComm1107 at [26] the Commissioner said this: In these circumstances, I do not consider the respondent could be regarded as having obtained "acceptable alternate work for the carrier" as contemplated in cl 6(iii) of the Determination, such as would wholly displace Mr Bailey's entitlement to scale severance payments . While the work of itself may have been acceptable there was simply not enough of it to be regarded as acceptable alternative work (emphasis added). 20 The Commissioner went on at [28] to then say this: I have given consideration to whether Toll should be allowed some reduction in the amount of 20 weeks severance pay on the basis it arranged at least some alternative work for Mr Bailey. 21 It was submitted with some persuasive force that those observations of McKenna C demonstrate errors of the same nature as in the instant case in as much as they demonstrate a belief on the part of McKenna C that there was some residual discretion to reduce severance pay, even though the alternative work found by the principal contractor in that case was not "acceptable alternative work". CONCLUSION 22 As we have determined the appeal upon these fundamental errors of law and principle, and we have determined to remit the matter, we do not consider that it is appropriate, or necessary, to resolve the issues raised by the cross appeal. We shall, therefore, uphold the appeal, remit Matter No IRC 561 of 2010 and refuse leave to bring the cross appeal in Matter No IRC 693 of 2010. ORDERS 23 The orders we make in Matter No IRC 561 of 2010 are as follows: 1. Leave to appeal granted; 2. The appeal is upheld; 3. The orders of Connor C of 26 May 2010 are quashed and set aside; 4. The matter is remitted to a Member of the Commission to be determined in accordance with this decision. 24 The orders we make in Matter No IRC 693 of 2010 are as follows: 1. Leave to cross appeal refused. ____________________________ DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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