C2001/577, Transcript of Proceedings [2001] AIRCTrans 147 (7 March 2001)

AUSCRIPT PTY LTD
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TRANSCRIPT OF PROCEEDINGS

AUSTRALIAN INDUSTRIAL

RELATIONS COMMISSION

JUSTICE MUNRO

C2001/577

TRANSFIELD PTY LIMITED

AND

AUTOMOTIVE, FOOD, METALS, ENGINEERING,
PRINTING AND KINDRED INDUSTRIES UNION,
ASSOCIATION OF PROFESSIONAL ENGINEERS,
SCIENTISTS AND MANAGERS AUSTRALIA AND THE COMMUNICATIONS, ELECTRICAL PLUMBING UNION

SYDNEY

2.15 PM, THURSDAY, 15 FEBRUARY 2001

ADJOURNED SINE DIE

PN1

HIS HONOUR: This is the first listing of matter C 2001/577. It is an notification under 127 lodged on 14 February in relation to questions which have arisen concerning a business being sold and demands that employee accruals for leave and redundancy be lodged in the fund to secure potential benefits. This is the first listing of the matter which I have brought on at relatively short notice. I apologise to the parties for the minor delay. Could I have appearances please?

PN2

MR T. PETHERBRIDGE: If the Commission pleases, I appear on behalf of Transfield Pty Limited. Appearing with me to my left is MR G. SOUTH, general manager of the particular business in question, that is, Transfield Process Equipment. To my left is MR R. KAYE-SMITH, the technical services manager.

PN3

MR A. MOORE: If it please the Commission, I appear on behalf of Automotive, Food, Metal, Engineering, Printing and Kindred Industries Union.

PN4

MRS J. McCARTHY: If the Commission pleases, I appear for the Association of Professional Engineers, Scientists and Managers Australia.

PN5

MR P. SINCLAIR: If the Commissioner pleases, your Honour, I appear on behalf of the CEPU.

PN6

HIS HONOUR: Yes, thank you. Mr Petherbridge, what is the matter about?

PN7

MR PETHERBRIDGE: This is a division within Transfield Pty Limited which manufactures conveyor and materials handling equipment, and the division is being sold. There is a contract in place at the moment for the sale and conditions precedent to the sale being completed are at present being met. Employment within the business is regulated by a certified agreement of this Commission known as the Transfield Process Equipment Certified Agreement 2000/2001. The parties to that agreement are the AFMEPKIU and the CEPU electrical division, and the company. The agreement expires on 30 June 2001.

PN8

Some time ago informal communication between Transfield and the AMWU, if I can use the shorter acronym which they are all usually known by, conferred due to the upcoming sale of the business. There was a letter sent from the AMWU signed by John Parkin, the assistant state secretary, metals division. The letter was dated on 17 January 2001. If the Commission pleases I would like to submit a copy of that reference.

PN9

HIS HONOUR: Yes, I will mark that as Transfield 1.

EXHIBIT #TRANSFIELD 1 LETTER FROM AMWU DATED 17/01/01

PN10

MR PETHERBRIDGE: Thank you, your Honour. That letter refers to the upcoming sale and some concerns that the AMWU had about recent events with other companies where employees entitlements have disappeared, in effect, when companies became insolvent. The letter in its last paragraph refers to the enterprise agreement which, at clause 45, has a provision regarding transmission of business and requesting discussions between the parties to resolve that issue. The particular clause in question in the agreement refers to the potential for transmission of business and, in particular, at clause 43.2 refers to:

PN11

If at any time during the life of this agreement ...(reads)... superannuation and other relevant matters.

PN12

So it was within the terms of the certified agreement that the parties met on 1 February of this year. There was a conference at the metal workers office between the company and the AMWU at which their concerns were expressed and their claim that all entitlement, as they put it, including sick leave, annual leave, redundancy accrual and long service leave be preserved in a trust of some type and their preferred method was a trust which the metal workers were endorsing which was being established, generally known as Manusafe.

PN13

That conference broadly discussed the sale and some of the conditions. The union made a request to confer with the purchasers who, at that time, were in the United States in discussions with a number of licensors to secure an agreement for them to transfer the licenses from Transfield Pty Limited to the purchasers. The purchasers are known TPE Process Equipment Pty Limited.

PN14

Following that meeting with the metal workers a letter was forwarded from Gillis Delaney & Brown, Lawyers, acting for Transfield in the sale to the state secretary of the AMWU. I have copies of this for your Honour.

PN15

HIS HONOUR: That will be Transfield 2.

EXHIBIT #TRANSFIELD 2 LETTER FROM GILLIS DELANEY & BROWN TO AMWU

PN16

MR PETHERBRIDGE: Thank you. Your Honour, the letter set out Transfield's position in the matter in a number of respects: At point 1 there was a denial that we were in breach of the provisions of the certified agreement. At 2 it sets out some of the conditions in the sale agreement. At the third paragraph of item 2 it refers to annual leave with an offer to pay out annual leave to those employees who wanted that done, however, pointing out over the page that should that be done they would no longer have any leave accrual.

PN17

Item 3 refers to long service leave, pointing out that the Long Service Leave Act prohibits any payment being made and that that would be transferred to the purchaser. Item 4 refers to the certified agreement continuing due to the transmission of business provisions under the Act in section 170MB. Item 5 simply pointed out that the purchasers representatives were overseas and that we would endeavour to arrange a meeting with them on their return. That letter was dated 5 February. The following morning a meeting took place at the premises of Transfield Process Equipment and strike action commenced at around lunch time, midday, on that day and continued for the remainder of the 6 February and 7 February.

PN18

A return to work took place on the morning of 8 February following discussions about the timing of the meeting with the representatives of the purchasers. That meeting took place on the afternoon of 9 February, being a Friday, on the day the representatives of TPE Process Equipment returned from the US. The attendees at that meeting included representatives of the AMWU, CEPU electrical division, the APESMA, Transfield, and the purchasers being TPE.

PN19

In brief, the main outcome of that meeting was an undertaking by the purchaser to consider a means of preserving the transferred entitlements from Transfield at point of sale in some form of trust fund. In that regard the AMWU agreed to forward to the purchasers details of Manusafe which were not available at the meeting but it was understood Manusafe would be in place by the following Monday.

PN20

That information I understand was forwarded later that day or the Saturday following. However after that meeting the unions met with the work force and an overtime ban was placed, that being the afternoon of 9 February. On Tuesday the 13th, the same parties met at around 5 pm, however during that day the purchaser's issued to all members of the work force a letter which unfortunately is undated, but it was issued to them on the 13th. I would like to submit that letter if you don't mind.

PN21

HIS HONOUR: That can be Transfield 3.

EXHIBIT #TRANSFIELD 3 UNDATED LETTER ISSUED ON 13/02/01 FROM TPE PROCESS EQUIPMENT PTY LIMITED TO ALL EMPLOYEES OF TRANSFIELD PROCESS EQUIPMENT DIVISION

PN22

MR PETHERBRIDE: Your Honour the letter goes to the process by which the purchasers intend to deal with the employees during the sale and I won't go to the detail of that. However, on page 2, the second paragraph I think summarises their position with regard to the preservation of the entitlements which would be transferred at point of sale. If I may read this into transcript, it says:

PN23

We have been working on the legal and tax issues associated with such trust arrangement since our return from overseas last Friday. We still have advisers working to try and resolve the associated legal and tax issues but cannot provide a clear cut resolution at this point in time. We can categorically confirm, however, that we will continue to work jointly with the employees to find an acceptable method to preserve the relevant funds to the satisfaction of all concerned. In this regard we would be happy to have two employee nominated personnel involved with us in agreeing an acceptable solution in accordance with the guidelines above. Once we have available information on the potential viable options.

PN24

That undertaking apparently did not satisfy the union representatives at that meeting on the 13th in that there was no fixed detail available at that time and in particular the metal workers objected to another form of trust fund being potentially used other than Manusafe. Without wishing to speak on behalf of TPE I think I can safely say that their assessment of the trust deed for Manusafe did not give them any confidence in the manner of the preservation of the benefits they were talking about.

PN25

The benefits in particular which TPE would be prepared to put into a trust account are those which are transferred financially and for which provisions are made at the point of sale. Transfield will pay to the purchaser the pro rata accruals for long service leave for all employees and I should point out that the average length of service is 14 years in this division and also their accrued annual leave. There is no transfer at point of sale for accrued sick leave benefits nor indeed for any potential redundancy in that there is no actual redundancy for the vast majority of employees.

PN26

There is a condition in the contract that the purchaser will employ a minimum of 85 per cent of current employees and they, I understand, intend to do that to comply with the contract. There will be some people which will not be taken up in the transfer business and those people will be made redundant by Transfield.

PN27

HIS HONOUR: Is there a redundancy package in the certified agreement?

PN28

MR PETHERBRIDGE: There is, your Honour.

PN29

HIS HONOUR: And that will be binding on TPE as a result of the succession?

PN30

MR PETHERBRIDGE: It would indeed, yes and that redundancy package includes payment of accrued sick leave as well. The purchasers acknowledge that and that is a liability which they will carry.

PN31

HIS HONOUR: And the purchaser - what's known about it? Is that a major organisation?

PN32

MR PETHERBRIDGE: It's not a large organisation, no, your Honour. There are, as I understand it, four shareholders in the business. They have been operating for some time as a small consultancy basis. I believe they see this business which they are purchasing as having some synergy with their interests in the mining industry and they intend to expand the business.

PN33

Your Honour, the stoppage is a clear breach of clause 11 of the avoidance of disputes procedure under the certified agreement. It is not protected action and is a breach of section 170MN of the Act. In short we are seeking that the Commission assists the parties to resolve the current stoppage. At present they don't intend to meet again until Monday morning and if the unions are not prepared to cease the action then we will be requesting an order under section 127.

PN34

HIS HONOUR: I think you might have left off that last detail. When did that start, the industrial stoppage?

PN35

MR PETHERBRIDGE: The industrial action? It started yesterday morning. That is the meeting which we had with the unions on the 13th concluded around 6 pm and therefore the work force had gone home for the day. The following morning on the 14th, there was a meeting between the unions and the employees and strike action commenced approximately mid morning.

PN36

HIS HONOUR: So the Transfield position is that there will be an actual identified payment of a lump sum to be held in relation to pro rata long service leave accruals and accrued annual leave up to the date of finalisation of sale.

PN37

MR PETHERBRIDGE: That's correct, yes.

PN38

HIS HONOUR: It's not merely a set off from the total amounts payable that's a discrete amount.

PN39

MR PETHERBRIDGE: No, it will be a calculated amount set on each individuals time at the point of sale.

PN40

HIS HONOUR: Yes, thank you, Mr Petherbridge. Mr Moore?

PN41

MR MOORE: Thank you, your Honour. Your Honour, I don't want to go and pick holes in Mr Petherbridge's submissions, but all I would like to say, your Honour, is that the company comes in here seeking 127 orders. We don't deny that there's a dispute in place. The problem we've got at this point, your Honour, there is no agreement and we have not yet received anything in regard from TPE that any entitlements are guaranteed. They're still saying that they're going through the legal process.

PN42

The other problem we've got, your Honour, is that the employees see that what's been offered in regard to their entitlements is about one-third of what their entitlements are because they believe that under the terms of the certified agreement there is a liability for Transfield to carry over in regard to redundancy and that's going to be the biggest part. We estimate that the liability has been taken on by TPE is in the region of $2 million. On the other side of the coin, your Honour, we have a company which has been set up predominantly by Transfield Process and Equipment.

PN43

It's been set up by, as Mr Petherbridge outlined, four people, although we believe that the employing company TPE has only one shareholder and has an asset of all paid up of $1. No assets whatsoever. They have a bank mortgage on the fixed and floating assets of the new business. So if this company doesn't make a go of it or goes belly up or it's a stripping exercise, all our members put at risk all their entitlements including redundancy, long service leave, annual leave and sick leave.

PN44

HIS HONOUR: What's your basis for that belief, Mr Moore?

PN45

MR MOORE: That is based on searches we've done of the company, your Honour. It's been done on a basis of searches of the company. So what we have here, your Honour, is a number of employees being treated like slaves, being sold off by one company which is a well known Australian company, many many millions dollars of assets being moved into a $1 shelf company with no assets, a bank mortgage over any assets which may be contained after the sale, so it leaves our members in a very precarious position if this company doesn't make a go of it and quite clearly our members are saying this fight is somewhat bigger than 127 orders and we want some means of securing their - - -

PN46

HIS HONOUR: Well, it might be bigger than 127 orders, Mr Moore, and it might be on the dimensions that you are putting it, but at least Mr Petherbridge in putting his case has brought evidential material comprising the exchanges and commitments that are made. If there are searches that disclose what you are alleging then I would expect them if you're defending yourself against a seriously mounted 127 application to put them on. It should be no surprise to you to know that the Commission has in relation to the STP matter found disputes but it has done so on the basis of relatively well substantiated material.

PN47

The Commission might even be able to assist you to grapple with some of the problems you have. But if the case you are presenting is based almost entirely on the sort of speech that you would make to the troops then the Commission can't really assist you much. It can act on what is before it in a concrete way and a substantive way and I'm not going to advise you but if you're putting their allegation particularly of that kind and whoever has done your searches hasn't brought them forward so as that the company, Transfield, which is the one here, can examine them and say you've searched the wrong company, which you might have, or you've not searched it at all, you're relying on some speculation based upon what happened to the STP group then you're not getting over first base with me.

PN48

You're dealing with a set of corporate practices that are sophisticated and you need to deal with something approaching the same sophistication. Thus far what Transfield is putting is that you are seeking to enforce what you want by recourse to industrial action during the life of the agreement that you have with Transfield. Now, if you have a case where you are seeking to counter the sophistication of what you say there's a trap for your members then I expect you to present the case with some sort of sophistication about it.

PN49

All I can say to you is that you are in peril of the matter simply passing out of the Commission. I will make up my mind, I suppose, whether or not Transfield is really serious about seeking the order that it wants. I can't say that it's not serious but Mr Petherbridge has prefaced what he has said by saying well look we'd like to settle and resolve the matter. There are way in which that can be done obviously without making a section 127 order. Let me put it to you fairly bluntly. You're either going to talk really about resolving the dispute with the action off with some assistance from the Commission.

PN50

I don't know what date the contract is finalised or we'll simply run the issue on actions on and what is the matter before the Commission that it can deal with. I expect you'll do one or the other. If you are coping with a problem of the dimensions that you suggest, that your members are being sold, not like slaves but like a chattel into a company that has no substance. In the STP Group of Companies case, already demonstrates the pitfalls of the company in the position of Transfield which in STP was Southcorp and for the receiving companies which in that instance, ultimately went into receivership.

PN51

These are sophisticated matters and at least this member of the Commission will endeavour to deal with them in a sophisticated way if both parties are up to dealing with the matter in that way. It is not much use in putting submissions to me about slaves being transferred. I'm not one of the members. I'm not on strike but I may be if you keep on going. I'll simply focus upon whether or not there's a 127 action I can cope with or wait until you get off the grass, so you can get into a serious conference about it. I don't really want to say much more than that but are you in a position to reach some sort of outcome today by talking about the matter?

PN52

MR MOORE: Well, your Honour, I just want to run past, that what I've said here has been said in meetings of both Transfield and TPE executives and they accept that as the position. They haven't, you know,rebutted anything we've put to them.

PN53

HIS HONOUR: Let's assume that that's the score. Whatever is the name of the receiving company, that's TPE is it? That's the one you say is a shelf labour hire company to the other institutions?

PN54

MR MOORE: That is correct, your Honour.

PN55

HIS HONOUR: Firstly, there is a proposition that a quantified amount be paid over presumably to that company to hold in some form of trust at arms' length, guaranteeing the transfer of employees, the accrued leave entitlements so that there's money there to pay for their leave and accrued long service leave, so there is money to do that. The first question would be, how that can be secured? But there is money available for that purpose.

PN56

There is already the Tristar Group of Companies as an instance. A precedent for insurance of benefits by companies in probably no better a position than TPE, that's one option. The other is to fund the entire - which is apparently what you are seeking, the entire severance liability. There are various ways in which that can be guaranteed. Tristar, before it became whatever it is, TRW, I can't remember which order had the American owner go guarantor in the form of an executed deed for the entire amount of the liability.

PN57

Now, whether that is sufficiently sophisticated to pass or not, I don't know, in light of current receivership principles. Essentially, if you are trying to work the matter through, those are the areas you are going down as well as your Manusafe option. It does require some sophistication of approach. If it is common ground that you're going into a sheft company, then I think that is the area where the debate needs to be - if debate it is called, needs to be carried out with some genuine understanding of the problems on both sides. The tax problems of the companies can be quite major.

PN58

There is, I think it's Flood's case, a rather unfortunate ruling, I would have thought that said, simply putting the money into a trust account for accrued and ongoing liabilities is not tax expenditure and it can't be set off against current year's income. I would have thought that that ruling does require or does create a necessity for sophisticated advice to the company and TPE's position faced with this sort of obligation before start-up. It's got to find a means whereby if it does pay out money for that purpose, that is, to secure your members' rights it can treat it as expenditure foregone rather than paying tax on it. It's an area frankly where I would have thought the AMWU should soon be trying to assist companies in this and coming up with its own version to say, no, this is not a problem, this is the way you do it and if you don't do it you're left there shouting at each other about slaves.

PN59

MR MOORE: We believe we have, we believe that men, you're safe, it meets all the legal requirements to secure people's entitlements in a trust account vested in the individual's names. We believe that that's legal, it's in place, we offer that as a vehicle for the security of the entitlements. The other thing is is that the companies have categorically said that they're not going to entertain any question about redundancy or sick leave, I mean, the sick leave is contained within the redundancy and they're not prepared to either entertain that.

PN60

The latest we had from the companies and TPE in regard to the long service and annual leave they will still run around, they're running the argument that it might not be able to be done legally and we're seeking some assistance of how they do it. We believe we gave them the vehicle to do it. If this Commission is of the mind that we have to mount a sophisticated argument in regards to whether TPE is or is not a $1 shelf company and in that sense put our members' entitlements at risk, we will do that, your Honour, but I will be seeking an adjournment to enable a person more - - -

PN61

HIS HONOUR: Well, how do you see this matter being resolved? Do you just keep on staying out - when is the sale due to be finalised?

PN62

MR MOORE: We have asked that question on a number of occasions. We have been told a number of dates and we cannot pin it down to one given date. We believe that the last date we got was 23 February, we've now been told it's somewhere towards the end of February. So we don't know, your Honour, we don't know. Mr Petherbridge may wish to answer that question.

PN63

HIS HONOUR: No, I've got you for the moment thanks, Mr Moore. How many employees are there?

PN64

MR MOORE: I think there's somewhere about 40 involved in the dispute, your Honour.

PN65

HIS HONOUR: Is there any question as to whether TPE or the related companies to TPE are at arm's length from transfer?

PN66

MR MOORE: That we can't answer, your Honour, we don't know if there's any connection between TPE and Transfields, we don't know, our search has suggested there's not.

PN67

HIS HONOUR: What is your proposed solution to the problem?

PN68

MR MOORE: That there be a mechanism in place to secure my members' entitlements at the point of sale or prior to the sale and that would include long service leave, annual leave and the redundancy provisions as contained within the certified agreement and part of that redundancy agreement - - -

PN69

HIS HONOUR: Well, let us take that one at a time. Subject to where the asset is held, is the provision for long service leave that Transfield proposes challenged by you, do you know the details of it?

PN70

MR MOORE: I don't know the details, your Honour, we have been given no details. The only documents we have is what's been put in submissions here today.

PN71

HIS HONOUR: The same applies to annual leave I take it?

PN72

MR MOORE: That's right, your Honour.

PN73

HIS HONOUR: I thought Transfield had offered to pay out annual leave so as that TPE started with carte blanche in relation to agreed annual leave.

PN74

MR MOORE: My understanding is they have offered it, my understanding is most employees have rejected that on the basis is that it's only a couple of weeks and it come Christmas time they would then not probably have any leave to take. Apart from may be one bloke, your Honour, I believe has got over 12 months' annual leave accrued.

PN75

HIS HONOUR: Have you quantified each of the entitlements? Do you know what it is you're seeking in money value terms for each of the members?

PN76

MR MOORE: No, we haven't, your Honour. We request that information from the company that maybe they had done through their due diligence come up with a figure what the liabilities may be broken down to the employees but they informed us they were not aware what really the liabilities were.

PN77

HIS HONOUR: What are the severance benefits applicable to employees under the agreement?

PN78

MR MOORE: What are they?

PN79

HIS HONOUR: Yes. Is it a three week, three by three TCR?

PN80

MR MOORE: It's the TCR provisions up to five years and then there's an additional week and a half per year of service on top of that uncapped, paid out all sick leave and that's not capped at the award but it's also uncapped. I believe long service leave from memory, your Honour, day 1; untaken annual leave pro rata and 17 per cent loading on all.

PN81

HIS HONOUR: Yes. The agreement in your case covers your members in the CEPU, that's the total of about 40 people or are they additional?

PN82

MR MOORE: That would be the total of about 20, 20, your Honour.

PN83

HIS HONOUR: 20 of?

PN84

MR MOORE: This is the company's document I'm reading from now, that there are 19 so called wages employees and it says here 11 salaried employees. So in total that would be 30 people on strike not 40.

PN85

HIS HONOUR: What is the employed, are they all on strike?

PN86

MR MOORE: There are still some office staff working, your Honour. Now, what they're covered by or what their classifications are I would not know. Some of those would be clerical staff.

PN87

HIS HONOUR: What's the trading position of the Transfield Process Equipment Division been, do you know, over the last 12 months, 18 months?

PN88

MR MOORE: Well, this is another concern we have, your Honour, that in discussions we've had with the company and that was the first conference we had with Transfields, we were told by Transfields that they had burnt $4 million in the last three years so they, in fact, lost - - -

PN89

HIS HONOUR: You say, "burnt" $4 million?

PN90

MR MOORE: Lost $4 million over the last three years. In a subsequent meeting we were then told and to quote the company, Lost a shit load of money, and that's why the company was up for sale.

PN91

HIS HONOUR: What understanding do you have or do you have none at all of what is being transferred and to whom under the arrangements?

PN92

MR MOORE: My understanding what's being transferred is the workshop, the equipment within the workshop. My understanding is that the office is not being transferred, the building, the land is owned not owned by Transfield, it is only the plant and equipment, well, go back, it's basically only the plant and equipment that's being transferred. Transfield don't own the building or land so it's not being transferred.

PN93

HIS HONOUR: Well, the plant and equipment, just let me start this from a different angle. What is effectively the business that is being transferred. It is Transfield Process Equipment Division who are employers of your members, is it?

PN94

MR MOORE: Yes and - - -

PN95

HIS HONOUR: Are you sure of that?

PN96

MR MOORE: We're not real sure of anything but that's my understanding.

PN97

HIS HONOUR: What are on their pay slips?

PN98

MR MOORE: Transfer of process and equipment.

PN99

HIS HONOUR: So, they are employees of Transfield?

PN100

MR MOORE: Yes, they are employees of Transfield, that's right.

PN101

HIS HONOUR: At least it's Process Equipment Division and the Process Equipment Division does what where? What's the business?

PN102

MR MOORE: They manufacture, as Mr Petherbridge said, they manufacture conveying and material like handling equipment.

PN103

HIS HONOUR: What's that equipment called?

PN104

MR MOORE: They call them Vibrators and vibrating - - -

PN105

HIS HONOUR: What are they called TPE vibrators, Transfield vibrators?

PN106

MR MOORE: They manufacture all this equipment under licence and I understand that there are seven licensees throughout the world and they manufacture all this equipment under licence to those seven.

PN107

HIS HONOUR: Does the product have a name?

PN108

MR MOORE: The product probably has several names.

PN109

HIS HONOUR: So, they manufacture this conveying and material handling equipment at what site, one or many?

PN110

MR MOORE: At Seven Hills.

PN111

HIS HONOUR: Using what, the standard assembly line, is it?

PN112

MR MOORE: It's manufacture, it's built from drawings up.

PN113

HIS HONOUR: The workshop, there's one workshop in which that's done?

PN114

MR MOORE: Yes, that's correct.

PN115

HIS HONOUR: That is being transferred to whom?

PN116

MR MOORE: That workshop is being transferred to TPE.

PN117

HIS HONOUR: To TPE Process Equipment Pty Limited or somebody else?

PN118

MR MOORE: Yes, TPE Process and Equipment Pty Limited.

PN119

HIS HONOUR: Is that the firm the employees are being transferred to?

PN120

MR MOORE: That is my understanding that that is the firm, that will be the employing firm of the employees.

PN121

HIS HONOUR: So, it's to only one company that the workshop is being transferred?

PN122

MR MOORE: Yes.

PN123

HIS HONOUR: The franchises will be owned by or leased by?

PN124

MR MOORE: TPE Processing Equipment will have signed agreement with the licensees to continue to manufacture under licence.

PN125

HIS HONOUR: So, is it proper to say that the entire business of manufacturing, conveying and material handling equipment currently conducted by Transfield Process Equipment Division is being transferred to Process Equipment Pty Limited ACN 095189034?

PN126

MR MOORE: That would be correct, that would be my understanding.

PN127

HIS HONOUR: To no other company?

PN128

MR MOORE: To no other company.

PN129

HIS HONOUR: But you say that that company is a $1 shelf company?

PN130

MR MOORE: That is correct, your Honour.

PN131

HIS HONOUR: I see; so, it is not like the STP situation where the transfer of equipment and stock went to different entities within the STP group?

PN132

MR MOORE: No, my understanding is it will go entirely to TPE Processing Equipment.

PN133

HIS HONOUR: Is your understanding based upon a disclosure of the detailed transaction arrangements or upon some other basis of belief?

PN134

MR MOORE: TPE Processing Equipment was a company which was formed in November of last year to carry out the sale. It was put in place in November last year to facilitate the sale with Transfields.

PN135

HIS HONOUR: I think I understand that. Could I just come back to the question of from whom you are seeking the commitment, it's from TPE is it or from Transfield or from both of them, the arrangements that you are looking for?

PN136

MR MOORE: We would be seeking it from Transfield because they've now carried the liability, they carry the current liability and we'd be seeking that Transfield passes that liability over in dollars to the - - -

PN137

HIS HONOUR: Yes, yes, thank you, Mr Moore. Ms McCarthy?

PN138

MS McCARTHY: The association of Professional Engineers, Scientists and Managers Australia, supports the submissions of the AMWU. What we are seeking today is that the Commission does not issue orders under section 127 and that what we are asking the Commission to do is to, as Mr Petherbridge has asked, assist the parties in resolving the actual issue at dispute here.

PN139

The issuing of orders under section 127 as you're aware, is very serious. It has the potential to place the employees that are merely seeking protection of their entitlements, to possibly later down the track be at risk or be liable in terms of tort and we see this as a very serious case that the applicants are asking for today, to bring orders under section 127. We would ask that the Commission exercise its discretion today in not granted those orders and look to other ways at perhaps resolving the dispute at hand as we've already discussed.

PN140

HIS HONOUR: How many members have you got, effected?

PN141

MS McCARTHY: The number of members at this stage we have are 6 members out at Transfield Processing Equipment, Seven Hills. We have about another 4 or 5 pending applications.

PN142

HIS HONOUR: When you say, 4 or 5 pending - for membership, yes.

PN143

MS McCARTHY: That's right.

PN144

HIS HONOUR: And what instrument are they regulated by?

PN145

MS McCARTHY: Our members are regulated by the Metals Award - Metal Industry Award. The correct title being, the Metal Engineering and Associated Industries Professional - - -

PN146

HIS HONOUR: I know that but what is it, part 6 or what?

PN147

MS McCARTHY: No, it's Professional Engineers and Scientists Award. I have a copy of this award.

PN148

HIS HONOUR: Yes. You're right.

PN149

MS McCARTHY: It's the old part 3 and 4.

PN150

HIS HONOUR: And does that contain TCR provisions?

PN151

MS McCARTHY: Yes.

PN152

HIS HONOUR: What are their severance benefits, only TCR?

PN153

MS McCARTHY: As far as I'm aware, your Honour, yes.

PN154

HIS HONOUR: And there's no agreement binding upon the employment of your members?

PN155

MS McCARTHY: APESMA is not a party to the certified agreement, no.

PN156

HIS HONOUR: And to no other one?

PN157

MS McCARTHY: No, there's no other agreement.

PN158

HIS HONOUR: Very well. Yes, Mr Sinclair, what did you want - did you want to add anything Ms McCarthy?

PN159

MS McCARTHY: Your Honour, I just I guess wanted to ask the Commission as I said, to exercise its discretion and not grant the orders because of the seriousness of the implications of those orders if they are granted and we believe that the granting of these orders will not assist the parties in resolving the issue or the dispute at hand. We believe that it possibly will exacerbate the situation. We don't see it as a bible solution granting orders under section 127. We would ask the Commission for their assistance in resolving the dispute at hand.

PN160

HIS HONOUR: What do you suggest is the solution, Ms McCarthy. Transfield has said that it will cough up whatever it needs for accrued liabilities in relation to - or contingent accrued but contingent liabilities in respect of long service leave - cover leave benefits but makes no provision in relation to accrued sick leave or severance benefits. If, and I suppose it is a rough guess if Mr Moore's figures are correct, there is about $2 million covering all such liabilities and Transfield is coming good for something of the order of, what, 800,000, would it be that high?

PN161

MS McCARTHY: Your Honour, that would be a guesstimate. I'm not sure of the exact figure.

PN162

HIS HONOUR: Well, let me put the guesstimate in these terms, that Transfield is setting off from whatever it received for the good will and equipment, 800,000 to assure its employees those benefits. It is saving itself on that figure, about 1.2 million the shut down costs that it might otherwise have if it had to if it had to pay out redundancy and just close the place. Your claim, as I understand it and Mr Moore's claim is that 1.2 million shold be fronted up almost immediately by TPE, that's what it comes down to, doesn't it?

PN163

MS McCARTHY: Your Honour, what our association would like to see and I'm sure I have the support here of my colleagues, is that Transfield be directed to participate in any negotiated outcome to protect all employee entitlements because the concern that we have, your Honour, is that the issue that we're talking about here is with Transfield not so much as in what TPE might be able to come up with should they go belly up. Our concern is that once the sale goes through, should TPE Processing Equipment, as my colleague put it, go belly up, and there's mass redundancies, the money is just not there to pay that severance pay. So, what we would like to see is before the sale goes through which we don't know whether it's next week or in two weeks time or it could be tomorrow. What we would like to see - - -

PN164

HIS HONOUR: What you're not asking them, that's take that figure, 1.2 million to be put up front. You're asking it to be assured?

PN165

MS McCARTHY: Yes, your Honour.

PN166

HIS HONOUR: Yes, thank you. Mr Sinclair?

PN167

MR SINCLAIR: The CEPUs submissions, your Honour, would be brief because whilst we are parties to the certified agreement, Mr Petherbridge in his submissions, the CEPU first became aware that there was a dispute on 7 February being Wednesday of last week and was invited to a meeting last Friday. Initially, we believe with the management of Transfield ultimately it was with the potential new owners being TPE. At the meeting last Friday, the concerns that the CEPU still have was that a finalisation of any sale from Transfield to the new owners was uncertain; that the actual timeframe for sale is unknown depending on who we spoke to within the delegate ranks or management ranks, we were able to find out that it was somewhere towards the end of February.

PN168

Some of our members have indicated they have heard it could be as early as this Friday. Others have heard that it could be 22 March. So, there is some uncertainty from CEPUs position is to exactly what date and neither Transfield nor the potential new owners have actually been unable to confirm what date any sale will be finalised.

PN169

Also at that meeting, the two directors of the potential owner, TPE, indicated that they had had to borrow substantial sums of money to secure the sale and that were not in a position to indicate that there was any real assets behind the company that would be able to assist should the company have any financial difficulties after sale and redundancy is maybe pending or employee's entitlements may be at risk. So, there was a concern that we had that TPE is unknown as a major manufacturer in New South Wales by the CEPU.

PN170

We haven't gone as far at this stage as Mr Moore's organisation in testing the bona fides by doing a company search. If there's a need to we will in the future but just in the first meeting that we had with the directors, they were not able to satisfy the CEPU that they had substantial amounts sitting in their company that would be able to assist should they hit any problems after sale. So, that was a concern that we also had, your Honour.

PN171

In regards to the company's liabilities, Mr Moore and also Mr Parkins who was from the AMWU present at those meetings tried to pursue whether or not, during due diligence as to whether or not the directors of TPE had any idea as to what the liabilities they were actually going to incur after sale. They were very vague as to what the actual liabilities on employee entitlements were. They were not actually able to give a dollar figure. I'm not in a position to actually know whether it is 2.8, 2 million, whatever because I've yet to hear from the company, either Transfield or the potential owner of the real liability in employee entitlements. So, that's also of a concern that the organisation has.

PN172

In regards to the history of the - - -

PN173

HIS HONOUR: But aren't those concerns, Mr Sinclair, from what you can't exempt yourself from some responsibility? If TPE thinks that it doesn't know, you nearly have to, in relation to your members, ought to come up fairly quickly with what they would be entitled to under each of these headings, otherwise, how are you going to make a guess?

PN174

MR SINCLAIR: I don't intend to make any guesses, your Honour. I believe that through the processes of having the opportunity to sit down and talk to the company with the union, we'd be able to explore and ascertain exactly what the liabilities would be for our members, allowing - - -

PN175

HIS HONOUR: Can I take another tack? What damage has been done by your members being out on strike at present, I assume they're out too, are they?

PN176

MR SINCLAIR: Yes, our records show that we have three members on - financial members that at Transfield and that part of the division. You asked a question, what damage is being done? I haven't put a figure on it as within a per cent of.

PN177

HIS HONOUR: I'm not looking for a figure but is it effecting output from the plant?

PN178

MR SINCLAIR: That's only something that the company could answer, your Honour. I'm not aware as to what actual - - -

PN179

HIS HONOUR: There's no product at present being shifted?

PN180

MR SINCLAIR: That's correct.

PN181

HIS HONOUR: But has that been the case for a while, whether they're at work or not or is it something that is likely to have some impact? I suppose that's something Mr Moore might have better knowledge.

PN182

MR SINCLAIR: Yes, Mr Moore would have far better a view on the long term and short term of that.

PN183

HIS HONOUR: Yes.

PN184

MR SINCLAIR: Whilst the proposed new owners have been able to indicate that they would explore the possibility of setting up a trust, my clear understanding of reading the letter that was tendered by Transfield headed, Exhibit 3. They have given a commitment to exploring the setting up but there is no firm commitment to actually establishing any trust that would protect the interests of our members' entitlements.

PN185

At the meeting I intended with the company on Tuesday of this week, again, the director, Mr Best put to the unions that they were still seeking advice as to whether or not they could legally set up a trust. They had to wait for that advice to come through. He even explored with one of my colleagues from APESMA as to whether or not he could actually approach the bank and ask the bank if they would forego their claim on any moneys - on any trusts that were set up, that basically they would take a step aside and let the employees have their entitlements. He explored a few options but nothing concrete. Obviously, until we know as to what the views of TPE are in regards to an actual fund, it's still only at the discussion point.

PN186

At this stage we have some concern that if the sale was to go ahead and the indications from the management that were at the meeting from Transfield and also from Mr Best representing TPE, was that the sale may go through before we are able to resolve any of the problems associated with setting up a fund and that is also a concern to the CEPU.

PN187

So, what we believe is that whilst the company is seeking orders under the relevant section here today, but we don't believe it would be appropriate for the Commission to grant those orders, that I would support the position of my colleague from APESMA and that is that this Commission give some directions for Transfield that they also actively participate in the negotiations with a potential new buyer and the union with a view of seeking to resolve the concerns that have been raised. One, being the entitlements of employees, and the other being some assurance around the sick leave provisions and the redundancy provisions after the sale.

PN188

HIS HONOUR: What additional advantage for your members or pressure is created by them being out on the grass? Transfield, already to date it would appear, has certainly taken some interest, judging by the correspondence they've put on, and it's gone to some lengths to ensure that there is cash up front to go into some form of trust account for long service leave. Why should you be out on the grass while this continues?

PN189

MR SINCLAIR: Well, at this stage, your Honour, Transfield has - - -

PN190

HIS HONOUR: When are they coming back, is there any indication of that?

PN191

MR SINCLAIR: There is a further meeting on Monday of next week at 8.30 am, at which time the members have indicated they will consider their resumption of work.

PN192

HIS HONOUR: You see, one of the options to the Commission, and I'll float it sooner or later but it might as well be with you, would be to give Transfield the order it seeks to tell you to go back but to impose conditions on it. Now, one of the conditions could be that the sale not be completed subject to jurisdiction. It might be difficult for me to formulate it on the run but Transfield's before the Commission, it might be subjected to some sort of restraint associated to the 127 order. In any event, section 149 gives some powers in that direction nor or later.

PN193

It would be open to the Commission to say that 149 doesn't operate and this agreement isn't transmitted and that Transfield still has employees in that sense who had an entitlement under the existing agreement because there was no true transmission or because the Commission thinks that the transmission that did occur isn't one that should have the provision to 149 applied to it. I've suggested that on a couple of occasions and SDP Polites in the matter involving Telstra has applied that power to somewhat different effect by saying that Telstra employees transferred to, I think, their call centres, didn't go with their existing terms and conditions.

PN194

I can't see any reason why 149 might not be construed to apply to Transfield the duty, that I've suggested in a decision that's not yet published, could be applied to Southcorp but for different reasons. But that then faces you up with the prospect, if that were to happen, that Transfield might well say, Well, look, if we're going to be faced with 1.2 million for these employees next week, we're shutting the whole place down. We can't go through with the sale because we're going to stuck with the liability now for redundancies, therefore it's all open. I've spelled that out to those at your end of the table, Mr Sinclair, because those are the realities for your members.

PN195

They have to make a reasoned assessment themselves about whether they're better chancing their fortunes with TPE in relation to that 1.2 million, and we know it's a fanciful figure, I don't know what it is and I don't think anybody does. If they don't want to run that risk of Transfield reading it that way, then they've got to look at alternative means of assuring that 1.2 million because it could be that it's never anything. That is, that the 1.2 million is never called upon, not a penny of it has to be spent. If TPE manages to trade its way out of the $4 million loss over whatever period it is and does reasonably well, then it has no redundancies, so the 1.2 million is never called in.

PN196

But what I'm seeking to put to you, the more you're out on the grass over this, the greater the risk that the Commission responds to the position that Transfield is putting by saying, Well, there's no way in which you are going to solve anything by continuing industrial action. I don't particularly want to put any of you into that hard a position but I do expect that you, I suppose, start to get into the real area of what it is that will resolve it, and the concrete questions I've been trying to formulate about the 1.2 million, and where it leads and how much it is needed now to be up front or to be paid into a Manusafe, I can't imagine any responsible purchaser would pay over 1.2 million for redundancy contingencies that on one part it hopes it's never going to realise.

PN197

It's a lot of money up front. You've got to look at the alternatives of assurance or insurance, there are options available and you've also got to look at the reality that if you do force the hand that there is no sale, what are the consequences of that, immediate redundancy or do you struggle on with Transfield. Those are the real areas that you are in. To the extent that the Commission's there then I think you are going to need to formulate fairly closely what it is that you seek from it. I'm a bit reluctant to be barging off doing the sorts of exercises of power that I've spoken of, that's why I put to Mr Moore that this is a relatively sophisticated area and perhaps Transfield - and I don't know one way or another, those at the bar table is learning how sophisticated it is. Until the last year or so, these sorts of arrangements didn't come under scrutiny.

PN198

They're now under a lot of scrutiny and there are an array of powers in the Commission that can be deployed and they're easier to deploy before the sale happens than they are after it. All of you are in very new areas because you're dealing, essentially, with what is the viability of a commercial operation and, in the past, there haven't been that many intrusions by arbitral authorities into those sorts of decisions directly. However, unless you have something to add, I'll hear from Mr Petherbridge?

PN199

MR SINCLAIR: Thank you, your Honour.

PN200

MR PETHERBRIDGE: Your Honour, perhaps I can assist in clarifying some of the matters that have been canvassed in this time. During the meeting we had with representatives of TP Process Equipment on the Friday, they did give verbal assurances, and I know they're not worth the paper they're printed on, but they gave an assurance that the employees and the assets which they were also purchasing in the sale would all be under one company, that they would not put the employees, as has been done in some other cases, into an asset free company, if you like. In terms of the work that Transfield does at Process Equipment, we manufacture under licence about 7 per cent of the production and 30 per cent of which is manufacture of our own products.

PN201

In terms of our own products and the losses, there has been some debate between the unions and Transfield about the profitability or otherwise, of the business. What Mr Moore has said is quite correct. There was a statement made at the first meeting with the metal workers that in the last three years around $4 million has been lost in this business. That was clarified or should I say the purchasers made an indication that during their due diligence they ascertained that the business is profitable. The difference being that at Transfield Process Equipment in the last few years there's been a major research and development exercise undertaken which is not part of the sale to TPE Process Equipment. It has also undertaken a move from its previous location at Rydalmere to Seven Hills and there are also some Y2K implementation system requirements.

PN202

So there were some extraordinary expenditure which under the accounts of Transfield Process Equipment makes it a loss, but in terms of the business being bought by TPE Process Equipment will not transfer. They are losses specific to Transfield. In terms of the accruals one of the fundamental differences between the parties is what the unions refer to as entitlements and they include under that the redundancy provisions. It's Transfield's view that the redundancy provisions are a potential liability but not an actual entitlement until such occasion as redundancy takes place. For the vast majority of the employees in the current circumstances, there is no redundancy per se under the current sale provisions.

PN203

The taxation difficulties and other matters which you referred to earlier on are exactly some of the problems that TPE have been dealing with. Their advisers have advised them that by removing the funds effectively from the employer employing company, that there are potential problems of double taxation and indeed potentially some FBT requirements which could impinge on the company accounts and so this position that the purchasers find themselves in and indeed so do the unions, is one where there is no established provision for dealing with these things.

PN204

The purchasers have indicated and I think fairly clearly in their letter that they do intend to set up a trust fund of some sort and are actively pursuing some means of doing so and have invited the active participation of representatives of the employees. Unfortunately, both for the metal workers in terms of Manusafe, and I should say that the deed which was passed to TPE is obviously not a final deed. Manusafe at present does not exist. The deed included clause references to non existent clauses and indeed some of the provisions are somewhat worrying in that there is a fee up front for the establishment of Manusafe which is up to $100,000 and that means, effectively that the first employer who joins is $100,000 creamed off the top that goes as a management fee to Jacques Martin.

PN205

There are no guarantees under the Manusafe document. It protects the employer for further claims. If, for instance, under Manusafe there are some poor investments and there are insufficient funds to meet the requirements, Manusafe comes back to the employer and the employer has to underwrite any potential shortfall. So there's a lot of problems with Manusafe as TPE see it and they would prefer, as they have said, to set up an independent trust and I believe they've given a fairly honest undertaking to do just that and protect those entitlements. This is a new area and therein lies the problem.

PN206

Under the current contract, Transfield is obligated to transfer to the purchaser the accrued annual leave and long service leave.

PN207

HIS HONOUR: Just going to that point, what scope might there be for that amount to be held by Transfield in trust for some time until the issue is resolved?

PN208

MR PETHERBRIDGE: Quite honestly, your Honour, I don't know. I'm not a lawyer and I haven't been involved in the commercial aspects of the sale, but as I understand it, or my instructions are, that as part of the sale those funds would have to pass to TPE Process Equipment. I would imagine that if the trust fund is established or some means of protection it would then pass from TPE Process Equipment as the employer, it would then have to gain or seek to gain obviously a taxation and other benefit out of paying out or potentially paying out those obligations would then have to go from them into the fund. To go from Transfield into a fund, and not being a lawyer, but I would see that would be a problem from a commercial point of view.

PN209

HIS HONOUR: There are certainly problems from a commercial view, Mr Petherbridge, but I don't think you should be under any illusion there may be problems from Transfield's commercial point of view.

PN210

MR PETHERBRIDGE: Certainly.

PN211

HIS HONOUR: And they could come from here.

PN212

MR PETHERBRIDGE: Yes, I understand that, your Honour.

PN213

HIS HONOUR: Because you're at an awkward point. I think it's quite awkward for Southcorp too, in a sense, and that's 18 months on because they're nearly stuck and I think the High Court authority goes not that far from it with having transmitted to business to someone other than the party to whom they transmitted their employees. I think it's the majority in the High Court but then you look at the business and Southcorp wasn't in the labour hire business, it was in whatever STP is in I think in which case there was no transmission, in which case it's got liability for severance benefits, that's the argument at least.

PN214

You're not up to that stage yet, but you could have liability, so it certainly affects the commercial aspects and that's really why I'm suggesting both sides need to approach the matter with a bit of sophistication and the sophistication goes also to questions of assurance, insurance, I think it is. I don't know who provided the insurance in Tristar and the predecessor of that, but the total liabilities, as I understand it, of the receiving company were able to be assured and I think under an agreement before then, that preceded it when it was TRW, the parent company in Detroit, from recollection guaranteed in what seemed to be a reasonably sound form the total accrued liability in order to continue production for the life of the agreement.

PN215

I'm certainly no source of authority of how enforceable any of those arrangements might have been, but they embarked into new areas of at least legal forms from the simple transfer of the assets of a company and sorted out down the line what happens. But I did interrupt you. What I was trying to raise with you is the possibility that there is a predicament for Transfield as well and that simply passing a substantial amount of money over, if TPE doesn't know what to do with it and how to keep it out of its general liability to the banks, if the banks decide to foreclose in the event of there being a recession later in the year, then that's a problem that you're going to have to address I would have thought. But I interrupted you. You were going on about other matters.

PN216

MR PETHERBRIDGE: They're relatively minor matters, your Honour, in terms of the date of sale, that is not a fixed date at this time. As has been raised, there are several licences which are to be transferred but in fact they are a condition of the sale. As I understand it, the licence holders have all agreed to transfer those licences, but the documentation confirming that and formalising it is in process and so contingent upon those all being put in place, the sale will then take place following that. At the moment it's anticipated around the end of this month. It is not possible to predict an exact date, but that's the expectation.

PN217

HIS HONOUR: Well Mr Petherbridge, what I have to say is partly based upon an assumption that I have from a number of matters that Transfield is a pretty major player and at least to my knowledge a highly reputable one in its dealings with its own employees. But I think the unions might have different views sometimes and they've been shut out, but those who are in have secured, at least my impression, was always fairly generous agreements that have been abided by. The application, such as it is, and I use that only to note that Transfield hasn't really spelled out the precise terms of the order that it seeks under 127, has some difficulty with me in terms of being totally persuaded that the industrial action is illegitimate.

PN218

But certainly, as against Transfield, it is relatively illegitimate and in any event is probably illegal under 170MN. I think you've got the section right. I must say I'm never too sure which one it is, but it's the one that says you can't take industrial action during the life of an agreement. So in that sense, Transfield doesn't even have to be here. It could go along to the court and add to the woes of those at the other end of the bar table by simply seeking an injunction. I have indicated in argument that I'm fairly unpersuaded that there is any worthwhile purpose served by continuing industrial action. What I had in mind was to I suppose float the predicament that all of you are in. I can do that as a form of draft order. I'm not averse to giving you an order but I would attach conditions and codicils to it to the extent that it was open to me to do so and I would need to take some time to do that.

PN219

If I virtually have your assurance that you're not going to wrap up the sale in a sudden and unexpected way at least until the end of the month and I don't know that I need to go to the extent of an order simply to try to prevent you from doing that. What I had in mind was to give you the 127 order, but to attach conditions to it that, pending further hearing of the matter, then Transfield should not complete the sale and direct either under 127 or under some other power that's available, 149 would do for a start, that TPE be brought into conference and that consideration be given to whether or not an order should be made under section 149 and in what respects.

PN220

It would simply put to the surface the sort of negotiations that I think should occur. Unless I am mistaken the Commission can exercise the powers under 149 if it thought that effectively the industrial instrument that is binding on Transfield in this case should not be made binding on TPE because effectively there was a change in the character of the business. I'm fairly freely extrapolating from a fairly hasty reading of SDP Polites reasons in the Telstra case, but there would appear to be a discretion pretty much at large and perhaps all that would be necessary would be to find an industrial dispute involving these unions, Transfield and TPE and then either in relation to that dispute or under 149 generally to make an order and then on top of that to make an award binding on TPE as to what conditions went across.

PN221

That sort of process is a lot easier prior to the transmission having been finalised. But at least, provisionally, I formed the view that some of those powers are available even afterwards when the mess I think is even greater. It appears to me that the best course would be to make no order today, but I would certainly be directing the employers to return to work to allow the conference that I would direct to proceed against the background of the powers that I have outlined. I would direct that notice of today's proceedings, a copy of the transcript, be made available to TPE and that all parties represented in this matter use their best offices to have a conference if necessary before the Commission with a view to trying to resolve the differences.

PN222

I would reserve leave to restore the matter to the list at short notice but preferably in association with an appropriate notification either of dispute or of an application for any particular orders that are sought to be made. If the industrial situation worsens, then I will respond quite quickly to Transfield's application because I stress it doesn't have to come here. It can go direct to the court and if they select Kiefel J we'll probably have an order by midnight and you may have people up for contempt the day after. So they're going through the Commission's processes in order to try to reach a resolution and I suggest that the report back to members be to indicate that there is a process established, hopefully through the Commission, and they should get off the grass to allow that to go forward because otherwise we will all be distracted by countering your industrial action instead of trying to come to grips with what is quite a difficult commercial transaction in which your members have an interest in getting an outcome that I would have thought guarantees them future employment.

PN223

Also, 15 per cent of them, by the sound of it, have ongoing work. I would, for want of another opportunity, say that if Manusafe isn't up and running, then you should look for a better opportunity to run it as a test case. The sorts of models that were used in TRW where redundancies are contingent, not actual, seem a better way to give assurance into the future and perhaps Transfield could be enticed to join in that sort of assurance. But if there are redundancies within a certain period then it may go guarantor or you get an insurance group to do it. You've got money up front at present for the critical short term contingent liabilities, find a way in which that can be safe-guarded. You've got one hell of a start if you've got money. Some of the companies haven't had that. That's the commodity that everybody wants.

PN224

The second fear in terms of losing your accrued redundancy benefits is one where you need an indemnity or an insurance, you don't need money up front for it. For what it's worth I would have thought that Manusafe's strength lies in progressive contributions rather like the construction industry's bit by bit on a prospective basis. You're pushing it hard where you're asking people to pay enlarged lump sums for accrued contingent liabilities, if that's not a contradiction in terms, a lot of money up front. They're going to have to be very wealthy and under a lot of industrial pain, I would have thought, before they can persuade anybody to part with that sort of money.

PN225

Now do you need anything more than that? I can try to reduce that to a direction and then written terms, but I think I'd prefer to leave it rather woolly and ensure that you get a copy of the transcript. Do you want to make any rejoinder to that, Mr Petherbridge?

PN226

MR PETHERBRIDGE: Not really, your Honour. Our purpose here today is to try and achieve a return to work, not to - the order itself is really only a means to an end.

PN227

HIS HONOUR: When is the next meeting of employees? You were saying not until Monday, Mr Moore?

PN228

MR MOORE: That's correct, your Honour. That would be Monday morning.

PN229

HIS HONOUR: It seems a long way away.

PN230

MR MOORE: I guess your Honour, this is how serious that the employees view the situation they find themselves in and that was the decision by the mass meeting - - -

PN231

HIS HONOUR: Mr Moore, I won't press my luck on it but if they're not back by Monday, you can be pretty sure that there will be an order. I don't know that an order is going to resolve the matter but I would expect that you use your best endeavours to get the matter back onto the rails. If there's got to be discussions with Transfield or TPE tomorrow get the process quite clearly spelled out. The Commission will be available to the parties if need be but I would prefer that you do it yourselves. This is not an area where I can do much more than bully and bluster at this stage. Otherwise, when it comes down to doing anything, as I've said, you have to present cases with some real sophistication because it is new territory for everybody and I for one wouldn't be wanting to go off half cocked.

PN232

I think in the conference that you should have and the matters that I have discussed on transcript and precedents that I'm aware of, are probably about as much as I can usefully contribute. At the end of the day you've got to work out where your members interests lie and how far they are prepared to take trust and the sorts of guarantees or insurances that you can get into operation and nobody operates these days in a way in which they can look with too much certainty too far ahead.

PN233

If you can get your severance entitlements across the workforce ensured for whatever, let's say, might be the counterpart period of the next agreement, that's a long term - long time in a period of the global economy and Australia's economy. I won't add to the direction that I'm giving but there should be a resumption of work as soon as practicable. There shall be conferences. The matter may be restored to the list on short notice and I order a copy of the transcript and if the parties supply me the details of TPEs - where it can be forwarded to them, I direct that a copy of it be supplied to them with an indication that they should enter into conference with Transfield and the unions with a view to resolving the matters that remain in dispute. Anything more needed for the time being?

PN234

MR MOORE: I would just like to put on record, your Honour, that it would appear that my colleague here at a shot at Manusafe and we must take some responsibility that maybe some of the documentation we did send to them was the wrong documentation and that the question of $100,000 was not to be creamed off the first employer who jointed the fund. It was a draft document where Jacques Martin was in fact, to put $100,000 into the fund to commence the fund to operate. It wasn't to be creamed off any employee's entitlements which or may not went into the fund. I want to make that quite clear. This is on record. I don't want the employers running around waving that under our noses around the traps.

PN235

HIS HONOUR: Well, I didn't read what Mr Petherbridge said in that sense. It surprised me a little bit because I thought I hadn't seen somewhere that Manusafe was formally established but even that, I have to say, I take with a grain of doubt until I see instances of the first payments made and Mr Petherbridge is probably in the unfortunate position that the documents they had, had to be given to their lawyers and they tend to fix on those little points.

PN236

MR MOORE: What we have done, your Honour, we have in fact contacted the architect or who has been doing the finalisation of the Manusafe with a view to them and arranging a meeting between that person and TPE and maybe Transfield to satisfy the parties that - - -

PN237

HIS HONOUR: Could I say, that collectively you need to provide as much assistance in that area as you can. I've presided over several of these matters and in some instances, I have shared quite genuine concerns that corporate management, the advisers or accountants have had - about how to work the matter through. They are problems of considerable legal sophistication. Manusafe, if it's to be marketed, needs to be marketed with legal sophistication.

PN238

The fears of the employers in entering into it and not only employers, corporate managers, their financiers, are quite genuine ones. It is not enough simply to have a fund there that can guarantee the employees. It's got to be ones that are sensitive to prevailing law. In fact, I would have thought that part of your total package should be in relation to these sorts of problems, having a look at the tax situation for the interests of those who are going to have to find the money to provide the security that employees want.

PN239

In Flood's case and I think it's Flood's case, is part of the start of that problem because the court said it wasn't current expenditure to do what used to be prudent to fund as you went against your contingent liabilities. There was a trust account. People put money into it so as their future liabilities weren't entirely a shock for them and effectively, the court disallowed and the Tax Office disallowed, it wasn't the court's fault. I thought it was ..... so he thought it was prudent for companies to do that but he couldn't say that it was current expenditure.

PN240

I think the problem didn't start there but part of the problem is there because it means that if an employer wants to be generous and prudent, he can't do it in a tax sensible way. If they do, there is no guarantee the money goes to the employers in any event, it goes into general revenue. It is simply income that has been witheld from application to any other purpose.

PN241

I do think the tax position is part of the total problem in this field, that when you're talking to the whoever it is, the adviser on Manusafe, for what it is worth, the Commission sympathises with the predicament that TPE and Transfield have with this sort of problem. They've got to sell Manusafe to those who don't have to part with money at all including I gather, what's new to me, is the fringe benefit's tax problem.

PN242

Very well, I'll stand the matter over. I reserve decision about making an order under section 127. If necessary, I will make an interim order but reserve liberty to apply along the lines that I have indicated and I would hope that the parties might report progress in some way, if and when there is progress. If a copy of transcript could be ordered with such urgency as it can be, it might be of use. All done.

ADJOURNED INDEFINITELY [4.06pm]

INDEX

LIST OF WITNESSES, EXHIBITS AND MFIs

EXHIBIT #TRANSFIELD 1 LETTER FROM AMWU DATED 17/01/01 PN10
EXHIBIT #TRANSFIELD 2 LETTER FROM GILLIS DELANEY & BROWN TO AMWU PN16
EXHIBIT #TRANSFIELD 3 UNDATED LETTER ISSUED ON 13/02/01 FROM TPE PROCESS EQUIPMENT PTY LIMITED TO ALL EMPLOYEES OF TRANSFIELD PROCESS EQUIPMENT DIVISION PN22