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High Court of Australia Transcripts |
Office of the Registry
Sydney No S132 1994
B e t w e e n -
GEORGE ALBERT BYRNE
Appellant
and
AUSTRALIAN AIRLINES LIMITED
Respondent
Office of the Registry
Sydney No S133 of 1994
B e t w e e n -
GEORGE MORTIMER FREW
Appellant
and
AUSTRALIAN AIRLINES LIMITED
Respondent
BRENNAN CJ
DAWSON J
TOOHEY J
McHUGH J
GUMMOW J
TRANSCRIPT OF PROCEEDINGS
AT CANBERRA ON TUESDAY, 2 MAY 1995, AT 10.18 AM
Copyright in the High Court of Australia
MR D.F. JACKSON, QC: If the Court pleases, I appear with my learned friend, MR F. PARRY, for the respondent in each matter. (instructed by Freehill Hollingdale & Page)
BRENNAN CJ: Yes, Mr Gross.
MR GROSS: Your Honours, might I hand up nine copies of the outline. I am not sure whether the chronology of events at a factual level is important to the Court but, nevertheless, if the Court requires it, we do have multiple copies of the chronology which was prepared for the purpose of the Full Bench of the Federal Court. The dates and events are right but the references are, unfortunately, for the Full Bench books.
BRENNAN CJ: They do not appear to be of much assistance to us then.
MR GROSS: Only to set a time frame if it becomes relevant at any stage, your Honours. This is not really a matter where the facts themselves need to be revisited.
BRENNAN CJ: Yes, Mr Gross.
MR GROSS: Your Honours, the first proposition we put is that the clause 11(a) was imported into the employment contracts as a term implied in law. Justice Gray alone took this view. Each of the majority judges rejected it, and Chief Justice Black, who also dissented, rejected it. Your Honours, we would note that the basis upon which this proposition was rejected largely turned upon the fact that the various judges were unable to find in the cases of True, Mallinson and Gough authoritative support for such a proposition. Those three cases were the cases that had been relied upon by the majority in Gregory v Phillip Morris Ltd, in a passage which is regularly quoted in the various judgments in the Full Bench. But having, as it were, found that reliance upon those cases was unsafe, the court did not really proceed, except for the exception of Justice Gray, to properly analyse what is involved in importing into an employment contract a term implied in law.
Your Honours, this fault is particularly evident in the judgment of Chief Justice Black where, at 790, his Honour, having reviewed these cases, at line 21 goes on to say:
In my opinion, therefore, the authorities cited by the majority in Gregory for the proposition that the award terms were imported into the contract of employment do not support that conclusion and in the absence of any other basis in authority for the conclusion - and none was suggested - I consider that Gregory should not be followed on this point.
And then, your Honours, Justice Keely, at 808, line 2 and following agrees with the conclusion of Justices Beaumont and Heerey and, without further explanation, rejects this particular part of the case. So that one really must go to the joint judgment of Justices Beaumont and Heerey in order to understand on what basis such a proposition was ultimately rejected. Now, we would submit that, although a series of reasons were given for rejecting it, nevertheless, there was not an appropriate analysis of the relevant considerations bearing upon whether such a term should be found.
Your Honours, can I just go to the joint judgment if I may to pick out those features. In the list that I have set out in the outline at paragraph 1.2, I have perhaps omitted a further basis which may be inferred, that is at page 848. If your Honours would go to page 848 at line 13, where their Honours say that Chief Justice Latham - that is in the case of True:
discussed the relationship between award and contract in a way which stressed the separate legal basis and function of each.
And, although the fact that there are different sources is not developed further as an argument against the proposition, one could assume that that is a fact that would operate on your Honours' minds. But, can I just go, your Honours, to the three identified reasons given by their Honours for rejecting this part of the case. On the proposition that neither the award nor the Act had that implied or purported effect, would your Honours go to page 854, lines 11 to 15:
In the present case, if cl.11(a) of the Award is to be imported into the employment contract independently of the intention of the parties, then that can only be a result which flows from the terms of the Award itself and the Act under which it was made.
And then a similar comment at 863, lines 15 to 19:
With the possible exception of cl.10(a), which has no relevance to the present case, nothing in the Award purports to affect the terms of any contract of employment of a person to whom the Award applies or to include terms in such contracts.
This is not under the heading of breach of statutory duty, this is under the general heading of terms imported independently of intent and we derived that because that is the heading at page 845, line 9, and this is part of that section. The second reason given was that such a term was unnecessary. One appreciates that necessity bears different meanings in respect of different types of terms, whether they be implied in law or were implied in fact. But would Your Honours please go, on this proposition, to the joint judgment at page 858, line 25:
From the award-maker's point of view there is no need to import the award into employment contracts and no practical benefit to be obtained from such importation; the terms of the award will create rights and obligations because of the statute-based power of the award-maker, whether the parties agree or not.
Then, the same proposition is advanced at page 859, line 13, at the commencement of the paragraph:
Not only does it appear unlikely that award makers would want, or need, to insert terms into individual employment contracts; there might be ground for thinking that such an exercise would be beyond power.
Your Honours, that then takes me to the third ground given which, as we have listed, such an exercise might be beyond power, which is in the section I have just read. Justice Gray, on the other hand - - -
TOOHEY J: Just before you leave that, Mr Gross, and I do not want to disrupt the flow of your argument, but there is a reference in the passage you just read to inserting terms into individual employment contracts. Is it your argument that the whole of the award is imported into the employment contract as a term implied in law or that certain clauses of the award should be?
MR GROSS: The latter proposition, your Honours, and we would accept that the great weight of authority and writing in the subject says that one just cannot superimpose upon or import into the contract the entire award which, of course, covers so many topics of differing degrees of significance and detail.
TOOHEY J: Without developing your answer, could you just give us an indication of the basis upon which you suggest this selection may be made?
MR GROSS: The relevant term would have to be one described as fundamental to the employment contract and, your Honours, although - - -
GUMMOW J: But if not fundamental to the award?
MR GROSS: Your Honours, that would be an alternative formulation. I had not analysed the degree to which one draws the distinction but in the end, your Honours, it would plainly include matters such as pay but in the context of this case the provisions for the duration of the contract, its termination and what qualifications are imposed upon the exercise of the power of the employer to purport to terminate the contract. Your Honours, we would submit that duration of contract and what is available to the worker in terms of protecting that valued employment falls under a fundamental heading whether as an award or contract consideration.
TOOHEY J: Is this something you are going to develop later?
MR GROSS: Yes, I will. In fact, that is a fundamental matter we want to deal with.
GUMMOW J: But you pick up the whole of 11(a), do you, which is set out on page 862?
MR GROSS: Yes, I do.
GUMMOW J: Including the second sentence?
MR GROSS: Yes, because that is merely explaining in the complete coverage of that particular provision, that is, it covers the two situations where terms implied in law normally operate, namely, where you have termination on notice which yields an obligation to give appropriate period of notice to pay wages in lieu otherwise, and also the alternative situation of summary dismissal for misconduct, and in both situations this single standard applies, in our submission, as either an articulation or a modification or, more likely, a replacement of what ordinarily would be there as the term implied in law governing the termination of the employment relationship.
GUMMOW J: But does it not contemplate there may be some terminations without notice that are not harsh, unjust or unreasonable?
MR GROSS: Yes, misconduct situations, but, nevertheless, although obvious and undoubted misconduct of a major kind may create no difficulties under the clause at the substantive level, there is still an expectation, both by the award makers and, we would submit, within the employment contract itself, that there will be procedural fairness accorded in the determination to terminate for obvious reasons related to the employee's dignity and the need for the employee to have an opportunity to understand the charge and explain himself if he feels able or willing to do so.
Now, your Honours, can I then go to Justice Gray's judgment where Justice Gray deals with the arguments in favour of such a term imported into the contract as a term implied in law. At 910, his Honour has quoted two passages, one of which starts on the preceding page, as to the various obligations which are traditionally regarded as implied obligations owed by one party to an employment contract to the other. Now, without going to those in detail - and I will mention some of those later - at line 30 on page 910 his Honour says:
These implied terms of the employment relationship have not resulted from the application of the tests in the BP Refinery Case, or the earlier law relating to implied terms in contracts. Rather, they have been imposed on the parties by the law, as a matter of policy. They are regarded by the law as proper incidents of the employment relationship and are applicable in the absence of express agreement to the contrary.
Also, your Honours, at page 913, line 27, there is a further summary. His Honour repeats the point about the inapplicability of the BP Refinery test at line 25. At line 23 he refers to the English case of Bliss, which is also concerned with the term implied in law:
I note in passing that the term was not implied by the application of the principles in BP Refinery but was imposed on the parties (and presumably on the parties to all other contracts of employment) as a result of a policy decision, in an attempt to equalise the relationship between employer and employee.
DAWSON J: But do these cases really imply it as a term of the contract or simply impose obligations?
MR GROSS: Your Honours, I keep slipping into using the expression "implied" meaning implied in law, implied in fact. Perhaps it is easier to talk about "imported terms" and "implied terms".
DAWSON J: But are they imported terms: the obligation on a servant to serve his master faithfully?
MR GROSS: Yes, imported terms.
DAWSON J: Is there something that says that that is so, not just an obligation imposed by law as part of the law of master and servant?
MR GROSS: Your Honour, there are obviously some duties which are described and which are imposed by law which flow in effect from the way in which the courts have developed the concept of either tortious duties or just general law based - - -
DAWSON J: But what I am asking is: are these obligations contractual in nature or are they imposed simply by law?
MR GROSS: In referring to "these", one would not say that all of them are contractual but, if one is talking about clause 11(a), we would submit that is a classic contractual-type provision.
DAWSON J: I do not see that at the moment. It is a statutory obligation. Why then does it have to be imported into the contract?
MR GROSS: Your Honour, we would submit that many obligations arising out of the contract are determined by rules of law as legal incidents of the relationship and ultimately, because those implied terms are stipulated as a vehicle of judicial policy - however, the question your Honour is asking is - - -
DAWSON J: I find some difficulty with this. I do not see why you need an implied obligation when you have got an express one.
MR GROSS: Can I come to our answer on that: because the clause 11(a) type term, as distinct from some other legally-based duties applicable to an employer, operates in an area which, in the absence of such a clause, would be governed by a term implied in law; that is, the terms which are implied in relation to the circumstances in which the employment can be terminated. Your Honours, once one has the award provision as part of the law, it renders void any contractual provision, whether implied or not, which is contrary to it.
DAWSON J: So what? That just means that the statute modifies the obligation by statute which would otherwise be an obligation arising from the contract.
MR GROSS: But, your Honour, the method of modification is to require a reformulation of the circumstances in which contractually the employment can be terminated. If in fact before clause 11(a) was created one had an implied term that the contract was terminable at will on notice or summarily in the case of misconduct, such a term would be illegal perforce of the award. It would have to be rewritten so as to fit in with the award. Therefore, that rewriting would involve feeding into its terms a qualification based upon the clause 11(a) standards or qualities required in a valid legal termination.
DAWSON J: Why do you have to rewrite anything?
MR GROSS: Because if, in fact, the effect of the award is to render illegal the original term - - -
DAWSON J: That would impose different obligations.
MR GROSS: No, it does not impose different obligations; what it does is that it adds a rider based upon the criteria in 11(a), as to what shall be a valid termination of the contract. If it is not doing that and it is totally displacing the contractual term, there is then no contractual term as to how the employment can be terminated.
TOOHEY J: Well, there might be, on reasonable notice, for instance. But I take it the reason why you seek to import the award provision is to ground an action for breach of contract?
MR GROSS: Yes.
TOOHEY J: I am not suggesting that is your justification, but that is the reason and the practical importance of importing the award provision; otherwise, I suppose the question would not arise.
MR GROSS: Yes. Your Honours, ultimately one has an imposition of a legal term, which in this case is determined by the award, and we submit that many terms that are regarded as being contractual terms, where imposed by law, have taken some source or other to make that a term implied in law, and the fact that its source happens to be an award, rather than a statute, or a decision by a court, is not to the point. The end result is you have a reformulated contractual term concerning the circumstances in which the employment can be terminated.
TOOHEY J: Why would that not be met by an implied provision that the contract of employment be not determined except on reasonable notice; reasonableness being governed by all the circumstances, including misconduct, if that be in issue, length of service and a whole range of circumstances?
MR GROSS: Provision for reasonable notice, of course, would not displace the concerns in the award that are based on harsh, unjust, et cetera, it would merely address the period of notice. But I think what your Honour is putting is: why is the problem not solved by, as it were, a negative provision of that kind.
TOOHEY J: Well, I am not suggesting the problem is solved, but when you are seeking to import something and, in this case, you seek to import the award, and you offer reasons why the award should be imported, there may be other implied provisions which could equally well be imported or implied, such as reasonable notice.
MR GROSS: Yes, that of course is a term which would be implied in any event and as a contractual term. It is our submission that once the award enters into matters, it not merely qualifies, as it were, the basic term as to termination on reasonable notice, et cetera, but it also operates upon that spectrum of other implied terms, which various courts have identified attend the way in which the employer must deal with the employee.
BRENNAN CJ: Mr Gross, I have a conceptual difficulty also. You speak in terms of "operating upon": that does not sound to me like the language of contract. I would have thought, for a contractual obligation, one needed to found the obligation in the consensus of the parties. Here, we are speaking about a power of dismissal and a contractual restriction on the power. Now, what is it that can be attributed to the consensus of the parties:
MR GROSS: Your Honour, the first thing is that looking for the consensus of the parties in the context of a term which is imported as a matter of law, is contrary to the way in which such terms are traditionally dealt with. In other words, one does not look at the presumed intention of the parties, so a consensus based criterion - - -
BRENNAN CJ: If one looks at that list that appears at page 910, are not all of those terms terms which are attributed, in the absence of anything else, to the parties' mutual consent?
MR GROSS: Your Honour, well they were treated as contractual but - - -
BRENNAN CJ: Is that not what it means?
MR GROSS: Well, in terms of the objective period of contract, of course that is so, yes.
BRENNAN CJ: Well then, if one looks to see what is the basis of consensus in relation to 11(a), where does one find it?
MR GROSS: Your Honours, the foundation of the consensus, historically, is, of course, the fact that both parties are parties to the award itself. But, your Honours - - -
McHUGH J: Well, not necessarily, particularly in the federal sphere. What happens in the case of an employer and employee who are not members of an association bound by the award?
MR GROSS: Well, your Honours, in that situation, the award nevertheless sets a standard which is regarded as being applicable between them.
McHUGH J: But, in what way? It sets a standard. How does it set a legally binding standard? By contract?
MR GROSS: Well, your Honours, employees who are not trade unionist members are not parties to such awards, even though the award itself governs their employment. Your Honours, we would submit that the award's unfair dismissal clause becomes an implied part of the employment contract. In other words - - -
McHUGH J: So, they can vary it, they can reject it?
MR GROSS: Your Honours, not being parties to the award, the award does not apply as such in terms as between them and, therefore, one has to rely upon, in fact, the adoption by conduct of the standard posed by the award and, of course, having such a standard accepted as being applicable to non parties is, in our submission, desirable because otherwise, one would have two classes of standards applicable to termination of employees, dependent - - -
McHUGH J: You might. Supposing there is an express contract which entitles the employer to terminate on a week's notice and neither party are members of any relevant association bound by the award, what happens then?
MR GROSS: Your Honour, we accept that in that situation the award itself does not apply. However, any implied term which is not protected by an award provision is capable of being overriden by an express agreement to the contrary.
GUMMOW J: That is not what Mr Justice Grey found, is it? Did you adhere to what his Honour says at page 917 line 10? This is all bound up with the notion of consensual arrangements.
GROSS J: It seems to be imposed by law.
TOOHEY J: The fact his Honour says so, if you look at page 910 line 33, although you look to that judgment for support, the particular implication that you are seeking, his Honour expresses it in terms of imposition on the parties by the law as a matter of policy.
MR GROSS: Yes. His Honour perhaps appears to be talking not so much of the indirect affect of the award on non-parties - - -
TOOHEY J: No, I was not suggesting that he was in that context. But more generally, although you rely upon that judgment to support the implication of the term as a matter of law, in the context of contract it seems that his Honour is really saying that, as a matter of policy, the law imposes the obligations to be found in the award or, at any rate, an obligation to be found in clause 11(a) as a matter of policy, not as a matter of contract.
MR GROSS: Yes, although his Honour is using, in effect, conclusory language concerning a term important as a matter of law rather than describing the operation of the award itself, nevertheless, we would submit that the principles which govern whether such a term will arise fit in with his Honour's analysis. Your Honours, might I perhaps go briefly to those principles and then further develop that argument. Your Honours, there are three sources I wish to go to if I may: firstly a decision of your Honour Mr Justice Gummow in Service Station Association Limited v Berg Bennett and can I hand up nine copies of that please.
Secondly, - - -
BRENNAN CJ: Just so we can follow it, what are you three bases on which you are putting it Mr Gross?
MR GROSS: I am sorry, the bases are the references that I am giving which I am going to take your Honours to. I am not describing concepts but rather references. Secondly, what is said on the subject in some short passage I wish to take your Honours to in the article by Mr Tolhurst which is in the list of authorities, "Contractual Confusion and Industrial Illusion" - it has a longer title than that - which is at 66 ALJ 719. Could I hand up nine copies, your Honour. And then finally, I wish to take your Honours to what is said by Greig and Davis, "The Law of Contract", applicable to this very point in the context of employer and employee.
Your Honours, can I go first to the judgment of your Honour Justice Gummow in Service Station Association Limited v Berg Bennett [1993] FCA 445; (1993) 45 FCR 84 at 92. Your Honours, I will not recite the factual or other legal background, but would your Honours go to page 92 in Justice Gummow's judgment and at page 92 point 2, there is a reference to section 205 of the Restatement of the Law, Second, Contracts:
"Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement."
I am only introducing that because his Honour deals with it further in the passage I now wish to read. Would your Honours go to page 92 point 5, the commencement of the paragraph:
It is an unresolved question whether, as the applicant would have it, a term such as that in S205 is to be implied in Australia as a matter of law. A term is implied by law in at least two ways. The first is on the footing that the term has become so much a part of common understanding or practice that the courts import it as a matter of course.
And then there is a series of examples given which I will not read and five lines down:
Secondly, the term is implied not by reference to the actual or presumed intention of the parties, but as part of "the felt necessities of the time" as to what ought to be the case.....It then may be a question as to how these necessities may be ascertained and by whom.
I will just read part of the next paragraph:
Further, in the United States itself it has been said that the good faith performance doctrine may appear as a licence for the exercise of judicial or juror intuition, resulting in unpredictable and inconsistent applications, requiring repeated adjudication before an "operational standard" may be "articulated and evaluated".
Now, your Honours, the three points we derive from that passage are this, that what one is looking at for a term implied as a matter of law is, on Justice Gummow's first test, a matter of whether it has become a matter of common understanding or practice; secondly, that - - -
TOOHEY J: Just before you leave the first, Mr Gross, is that the same as custom?
MR GROSS: No, your Honour, we would submit. One appreciates that with all these implied terms, as I think Lord Wilberforce said in Irwin, the dividing lines between types of terms are shades in a continuing spectrum but that does not seem to be a reference to custom either as crystallised custom of industry or custom in the way in which the court generally views matters.
McHUGH J: What is the difference between crystallised custom of industry and custom of industry?
MR GROSS: One suspects it is a more florid description, but what perhaps is being looked at is not so much a summary of what industry does, but rather an extraction of the relevant principles as to how reasonable and responsible employers behave in that environment and therefore there is a certain evaluative or judgment element in the formulation of that crystallised custom.
BRENNAN CJ: We are not talking about how people behave, we are talking about how they agree. And if you are talking about custom, surely you are talking about that which it is reasonable to impute to the parties as their having made an agreement by a reference to the custom of a market in which they are engaged.
MR GROSS: Yes, but we would submit that the criterion would appear to be not merely a matter of summarising what employers do but rather invoking what a court finds, as a matter of public policy, ought be occurring within that section of the marketplace.
BRENNAN CJ: I would be interested to discover your authority for that proposition.
MR GROSS: The passages I will read will pull up all those propositions.
McHUGH J: But take another field of contract. The articles of association can create a contract between the members of a corporation. Many articles of association give a power of compulsory acquisition of shares of minority shareholders. The Corporations Law gives a statutory power to certain shareholders meeting certain conditions to acquire the shares of others. Surely it could not be suggested that that either becomes an implied term of a contract, or that somehow or other because such powers are exercised from time to time that there is a custom in the securities industry that makes it a term of the articles of association by implication.
MR GROSS: That is why in this particular submission I am not seeking to invoke custom, ie what people do, but rather relying upon the fact that the court itself sets the standard by reference to what is regarded as being civilised and appropriate conduct within the industrial community in this case.
McHUGH J: When you say "the court", do you mean the commission or do you mean the common law courts?
MR GROSS: It is a combination of both, in a sense, but ultimately it is the common law court which fixes the standard and we would submit that when it fixes the standard it takes as the proper operation or standard - which is the expression used in the third part I emphasised from Justice Gummow - that which has been formulated by virtue of the award.
McHUGH J: So the common law courts in New South Wales, if they have got a contract between an employer and an employer who is not regulated by a Federal industrial award, do they have the same standard in their contract as another employer or employee who have a provision in an industrial award such as 11(e)?
MR GROSS: It would not necessarily be the same, but, your Honours, can we put that one of the reasons why one ought take the award provision and bring it in as an implied term in the contract is that otherwise in the situation your Honour has proposed one has a whole series of competing definitions as to what is the employer's obligation in those circumstances. Is it the general much touted duty of good faith and fair dealing or is it one of the more subtle formulations which has emerged in England to treat employers with due dignity and respect and the like, and rather than have, as it were, employers in a state of uncertainty as to what is the precise scope of the duty or what would later be found by the court, certainly in the federal sphere, it is legitimate that the award should be seen not only as coming in and filling the gap, as I tried to explain earlier, but also as displacing those alternative formulations which may otherwise be proposed. But, your Honours, as for the State situation, that is a different zone and we are only concerned with the situation where the award is having an expected and intended operation.
TOOHEY J: Does your argument allow the parties to agree to a provision which is more detrimental to the employee than the award?
MR GROSS: No, your Honour, because such a contractual term would be illegal and void and, therefore, another way of viewing it is that if you are going to have the implied term still formulated in a modified way as to how the employment is to be terminated, the qualification is that the minimum standard will be that which is stipulated by the award.
TOOHEY J: So the parties are at liberty on your argument to enter into terms of contract which are different to those in the award so long as they do not operate adversely to the employee?
MR GROSS: As long as they do not operate more adversely to the employee than the award or so that they do not displace the articulated protections in the award.
McHUGH J: But it really seems difficult to describe these matters as contractual. I mean, take one of your fundamental matters, pay. Suppose the employer and the employee both say, "Well, we want to pay less than the minimum rates imposed by the award." They cannot do it. It seems a strange sort of contract, that although neither party agrees that the employer should have to pay at X, yet you have a contract between them.
MR GROSS: Well, your Honour, may I say that for every contract, there are certain terms that are expected to be there, and that includes, in effect, the price or remuneration and, we would submit, the duration of the contract or circumstances or manner in which it be terminated.
McHUGH J: I appreciate that, but normally the parties can vary the contract. They can exclude these terms which the law implies as a matter of implication, or as a matter of imposition.
MR GROSS: Your Honour, that, of course, is in the territory of express contracts, either incorporating or rejecting a particular concept, but they are not, of course, free to reject what is an award minimum. Your Honours, it is important, we would submit, to distinguish between that pay situation which your Honour Justice McHugh is dealing with, and the situation we are now dealing with, which is the provision as to termination of employment. Where you have got a pay situation, one can see that both the award and the contractual term, in effect, are separate sources of legal obligation ,but if in fact the term as to pay is less than the award amount, it is illegal and it disappears; if it is the same as the award, well, it is a corresponding result. If, in fact, it is an agreement to pay more, well, of course, both obligations stand, but the award standard does not have any extra role to play.
But that is where, in fact, you have different quantitative protections provided by the contract and the award. But where you are dealing with termination of employment, involving not considerations of pure quantity, but those of quality, as to the judgment to be applied to that termination decision, you have, in our submission, a situation where you must necessarily be varying the original formulation of what would otherwise be the contractual term as determination. And so it is then necessary to absorb into that formulation those qualitative requirements, or those qualifications, which are to be found in clause 11(a), and - - -
BRENNAN CJ: Mr Gross, I must confess it seems to me that unless you can articulate the logical steps by which you would translate the provisions of the award into the contract, otherwise than by reference to the result that would be achieved if they were translated into the contract, we are not going to get very far forward.
MR GROSS: Your Honour, therefore might I, to more quickly resolve that concern, take your Honours to what is referred to in those other two sources I am taking your Honours to. Do your Honours have the Greig and Davis texts? They are in the list of authorities.
GUMMOW J: Is this the latest edition?
MR GROSS: Yes, your Honour. It is the latest edition - I think it is the only edition - plus the fifth cumulative supplement it is up to now. Would your Honours go to the text itself rather than the supplement, and first of all go to page 526. Your Honours will note that the heading at 526 at the top indicates the way in which such terms arise in the minds of the authors, "IMPLIED TERMS AS A VEHICLE OF JUDICIAL POLICY". It is our submission that with terms of this type one is dealing with judicial policy as to what is a proper term rather than looking for consensus. Would your Honours then go, please, to pages 538 and 539. This is in a general section. At 538 the heading is, "CIRCUMSTANCES IN WHICH A TERM MIGHT BE IMPLIED". The first example is, "Where the contract is incomplete". That is at the top of page 538. Then on 539, "Automatic implication of terms in certain well recognised contracts". On that page the authors say:
In particular types of contract, certain terms are readily implied in order to fulfil what the law regards as the normal expectations of the parties to a relationship of the type in question.
Whereas the implication is necessary in a category 1 situation because the contract would otherwise be ineffective, contracts in the category presently under consideration would be valid. The courts' objective is usually to balance the obligations of the parties, to allocate loss if things go wrong.
Your Honours, I will not read the rest of that paragraph. Would your Honours go to the heading on that same page:
(a) The types of contract
The contracts in this category include those involving -
there is a series of categories, and of course employer and employee is one of those categories.
Such contracts were said to be of "common occurrence" by Lord Denning MR in Shell UK Ltd v Lostock Garage.
Lord Denning is quoted as saying:
"In all those relationships the courts have imposed obligations on one party or the other, saying they are `implied terms'. These obligations are not founded on the intention of the parties, actual or presumed, but on more general considerations. In such relationships the problem is not to be solved by asking what did the parties intend? Or would they have unhesitatingly agreed to it, if asked? It is to be solved by asking: has the law already defined the obligation or the extent of it?"
DAWSON J: Well, that is what I was putting to you earlier that, in fact, they are not implied terms, these obligations. They are obligations which the law imposes.
MR GROSS: Well, your Honours, if, in fact, in asking has that question - Lord Denning is saying that is the solution as to whether there should be an implied term. And, so what he is looking for is some existing definition by the law of the obligation or its extent. In other words, Lord Denning is not saying "If, in fact, it is defined elsewhere, you do not have to worry about implied terms" but rather, what has been looked at is, "Is there some source one can go to, eg a court decision concerning the obligations - - -"?
DAWSON J: But, whichever way you approach it, it has to be something that is necessary to complete the picture. But you do not have anything to complete the picture here. You have a statutory obligation in the form of the award. It is completed.
MR GROSS: Well, your Honour, if I can just put aside necessity for just one moment. The answer is, in our submission, that the law which defines the obligation can as well be the award or some other source of law, eg judicial decision and - - -
DAWSON J: I do not follow that. I just do not understand that.
MR GROSS: Well, your Honours, in the area of employer/employee, there will be multiple sources which are competing for attention as representing the basis upon which the relationship is conducted. And, in our submission, one does not treat - - -
BRENNAN CJ: What does that mean?
MR GROSS: Well, there will be judicial decision as to what term ought be implied, having regard to the relationship and the surrounding facts. But, your Honours, we would submit that an industrial award or a collective agreement can equally be a source of law which can be absorbed into the contractual statement of the relevant obligation.
BRENNAN CJ: That sounds to me, if I might say so, utterly confused. You speak in the first instance of there may be judicial decision. Judicial decision, I take it, is the judicial decision of the type to which you are referring in this passage from Greig and Davis, in other words, "Having regard to all the circumstances of this nature of contract, we predicate the parties, as a matter of law, an intention that they should be bound by the following term, to wit -". Now, once the Court has arrived at that conclusion, it may be that there is some statutory or award provision which overrides it. But it has nothing to say about what intention will be imputed to the parties.
MR GROSS: Well, your Honours, we would submit that it is not inconsistent with the necessity principle or the consideration your Honour has raised that the formulation as per an award or collective agreement is absorbed into the statement of the implied contractual duty.
That is because, your Honours, the courts in proposing implied terms in law construct from a range of factors, in particular, class of contract, what shall be that formulation and it matters not, in our submission, that part of that formulation is compulsorily there perforce of an award which makes anything inconsistent, illegal and inoperative. I think that is the best formulation.
BRENNAN CJ: I think we understand now what you are saying is that if the courts are going to imply terms as a matter of law they can look to the statutory provisions which are most analogous to the situation even though not completely binding and import those terms as contractual terms. Is that what you are saying?
MR GROSS: Yes.
BRENNAN CJ: Are you saying anything else?
MR GROSS: Yes, I am, but one should not stop at the point where it is just a bare analogy as distinct from defining something which is an inescapable consequence or legal consequence of that relationship by force of an award and, in our submission - - -
BRENNAN CJ: I thought analogy was probably helpful to you having regard to the matters that Justice McHugh drew to your attention, namely, that sometimes the award does not bind and you would want it to apply by analogy.
MR GROSS: Yes.
BRENNAN CJ: Is that right?
MR GROSS: Your Honour, that is helpful for those employees who do not have the protection of the award but, in our submission, it is easier to have a general term which is seen as being applicable to the whole class of employees in the same terms rather than treating, as it were, awards as being a separate jurisprudential zone with no capacity to influence the statement of the contractual term. So, your Honours, the only point I wish to make further in relation to Greig and Davis, pages 542 and following, the heading "The allocation of responsibilities between employer and employee" and, your Honours, the discussion between pages 542 and 547 deals with the particular considerations in relation to an employer's obligations and if your Honours would go to page 544 and following, the bottom of page 544, under the heading "Obligations of the employer" there is a discussion and under that heading it is said:
Two aspects of the employer/employee relationship have given rise to a consideration of the need to imply terms into their contract for the benefit of the employee: the employer's duty to provide a safe system of work, and a developing issue of the extent to which an employer should be required to provide work for his employees and act conscientiously towards them.
Now, the second topic, which is what we are concerned with here, starts at page 545 point 7, and, your Honours, there is then a discussion of the trend that has developed, for example, overseas to impose reciprocal obligations both on an employer and an employee and, in particular, there has been discussion which has emerged, for example, in England, as to the obligation to provide a right of work or, alternatively, to have regard to considerations of industrial harmony in formulating the nature of any implied contractual term.
Now, we would submit that there is a factor of necessity identified here, which I have not mentioned and, in our submission, it is the necessity to formulate the award term as being the relevant term on this matter, so as to demonstrate that the other competing implied terms, of the sort that have surfaced in England, do not apply, and so that it is not merely a matter of stating it as an award obligation, but rather stating it as the sole formulation of the circumstances in which the employment is to be terminated; in other words, to exclude other potentially confusing or arguably overlapping formulations. And so, you put it in the contractual term in order to demonstrate that that is the standard rather than some other standard based on a duty to treat a worker fairly, or to co-operate with him in his performance of the contract, or to show him good faith and fair dealing and, in our submission, that necessity is either based upon the need to exclude other formulations which come from the common law itself or, alternatively, to fill the gap within the contract in the manner I have already made submissions on.
TOOHEY J: Mr Gross, is there a finding of fact by the trial judge as to what the terms and conditions of employment were?
MR GROSS: No, your Honour. Your Honours, his Honour, perceiving himself to be bound by Gregory v Phillip Morris Ltd, took the relevant terms and conditions as involving importation or implication of an obligation in terms of the award. But, of course, because his Honour found that the termination was substantively and procedurally fair, he did not need to further explore the implications of the formulation of the term.
TOOHEY J: I was not thinking of implications, but when these men were engaged by the respondent, something must have been said about the basis upon which they were to be employed. But, if there is no finding on that matter, then I suppose it is the basis on which we should proceed.
MR GROSS: Yes, Your Honours. I think Mr Frew started in 1963; Mr Byrne in 1969, and there is no evidence of the type your Honour is suggesting, that is, expressly adopting award conditions as part of the initial conversations when the employment contract was entered into.
TOOHEY J: I was thinking of the situation, for instance, in True's Case, where True was engaged under a verbal arrangement by which he was to be engaged under the terms of the award, save, I think, as to this additional condition regarding pay. But he was able to succeed before the Privy Council because he was suing under the contract and not on the award itself. But that sort of consideration does not seem to arise here.
MR GROSS: No, it does not arise as being an evidential factor in the determination of the case, however we would submit it does arise as part of potentially our third leg of necessity. Would your Honours go to the formulation in paragraph 1.5 of our written outline. There we acknowledge the fact that the expressed term of the contract by virtue of conversation or, I suppose, correspondence, could enable an award obligation to go in as an express term of the contract. But we would submit that an approach whereby such a worker gets not only a contractual term but an action for damages for breach whereas the more trusting, or silent, employee does not have the same benefits, creates a potential injustice and therefore the scope of the protection under the award should not depend upon whether the worker asserts or, if denied, proves that in fact that conversation took place.
We would submit that such an arrangement would be prone to create industrial disharmony and also much extra work for courts because one would have litigated because of the incentives to do so, whether or not the magic words were stated, either when the contract was entered into or at some subsequent stage where it is alleged that the contract in some way was modified by virtue of what the worker at some time or another said to his boss.
TOOHEY J: Except for this, that even if the parties had agreed in express terms that the employment of each of these appellants was to be governed by the award, you would still have a question as to what the effect of clause 11(a) was. In other words, whether it gave rise to any sort of right of action in a dismissed employee, or whether even though the award terms had been agreed to by the parties it did no more than impose some sort of an obligation on the employer sounding in a penalty.
MR GROSS: Yes. The conversations on the question of the applicability of the award could vary in degree of detail. That is whether they dealt specifically with termination as distinct from all the other conditions in the award and whether the conversations were meant to create a contractual term as distinct from create an acknowledgment by the employer that it was an employment governed by an award. We would submit that just as the plaintiff in True succeeded by using the right words, one can see that conversations could be alleged which would be intended to have the effect of making such a term based on the award an express clause of the contract. Some would succeed, some would fail.
We would submit that it would be extraordinary if in fact the award was left there in a separate jurisprudential zone attracting only a penalty ordinarily, but given the right sort of conversations it could obtain a contractual status giving rise to an action for damages. We would submit that in formulating a relevant term it is important as a matter of law that one looks at the potential injustice of having some workers so protected, others not, and where ultimately you require considerable judicial investigation at high cost and delay in order to determine whether the award has that contractual status or damages consequence. And that is another reason - - -
BRENNAN CJ: Mr Gross, most cases of contract start with the proposition: was a contract made? That involves the very sort of inquiry you are speaking of. It is not peculiar; it is just the nature of the issue. What you are endeavouring to put, as I understand it, is that there is an implication which will be made by the court as a matter of law in every contract of employment, is that right?
MR GROSS: Clause 11 would only be intended to apply to those who were covered by the award by being a party or where conduct had led to its adoption.
BRENNAN CJ: Very well.
MR GROSS: Your Honours, could I then move on if I may. Given the extent of the discussion, might I just give your Honours the reference to the passage in the Australian Law Journal article. Rather than take your Honours through it, could I just give your Honours that reference, please, otherwise we might cover the same ground: Tolhurst 66 ALJ at pages 720 to 723. There is only one further point on the necessity principle which I wish to make on that. Ultimately at 723, just before the heading "Conclusion", Mr Tolhurst concludes that:
Perhaps the strongest argument for such an implied term has been the absence of adequate enforcement mechanisms in the legislation.
Therefore, we would submit that an extra limb of necessity is the unlikelihood that the paltry sums which fines can be made and the difficulties of getting it will render the award protection itself unlikely to give the requisite level of protection unless it is made a term of the award.
Could I move to the second submission, which I think we start advancing on page 3 of the outline. Your Honours, that submission is that an implied term arose from the presumed intention of the parties in the circumstances. As we recognise at paragraph 2.1 of our submissions, we have failed in relation to that heading on two of the requirements stated in the BP Refinery Case, that being the "no necessity" problem and the "not obvious" problem.
Can I then address, if I may, the question of "no necessity". I appreciate I have already dealt with that to a degree in addressing a term implied in law. At page 797, line 10, of the judgment, Chief Justice Black deals with that aspect. The Chief Justice refers to the fact that:
the employee's position was to be protected only by the liability of the employer to a penalty of not more than $1,000.
Justice Gray, at page 894, line 10, also deals with the same consideration and defines the problem that the purpose behind the award will not be achieved if the only result of breach is:
the chance of a successful proceeding against the employer and a maximum penalty of $1,000.
So that of course, when one looks at that $1,000, that is the maximum amount. But then an employer running the risk of breach recognises that there is only a chance, I suppose, of a proceeding against him and then, if there such a proceeding, only a chance of it being successful. So he would doubly discount down the maximum $1,000, and the end result is a very small risk. When one finds that outweighed by the cost of doing so and the delay and recognises that the worker cannot get his costs of such a proceeding, on any analysis the costs of doing so - that is financial costs - must exceed any expectable benefit.
DAWSON J: This is an extraordinary argument, is it not, that, because treating the award as a statutory provision contains inadequate remedies for its enforcement, there therefore is a necessity to import it into a contract in order to give a remedy for damages - that is the argument, is not it - so as to supplement the remedies which the statutory provision provides?
MR GROSS: Your Honour, the remedies provided are a remedy provided to the union which can initiate the proceedings and we would submit that - - -
DAWSON J: An individual employee can enforce the award in this respect, can he not?
MR GROSS: Yes, indeed he can, and obviously if there were fruits of any proceedings he would ordinarily be expected to get it, but your Honour's formulation of the question in that way, that is, this is the remedy provided, has the same risk of circularity as some of my earlier propositions may perhaps have, namely, that your Honour's proposition is that you should not take into account the inadequacy of the remedy chosen perforce of the Act - - -
GUMMOW J: You say inadequacy, you see. Why?
MR GROSS: Your Honour, it is not just a question of the inadequacy in terms of finance, it is inadequacy in terms of its foreseeable effectiveness to make that award protection one which operates in the workforce. If in fact you do have a provision of a very modest penalty which is considerably below expectable losses from breach of the award and where, of course, the remedy is not a remedy based on a compensatory principle or a damages principle but nevertheless can reflect other factors - - -
GUMMOW J: That is your real point, is it not? You want to get into compensation where the legislation does not do that. You seek to do that by getting into contract.
MR GROSS: Yes, your Honours - - -
GUMMOW J: And you get into contract by saying it is necessary. It is necessary because of this perceived inadequacy, and we are round in a circle.
MR GROSS: Your Honours, the circularity arises if, in fact, one perceives the only purpose of attacking the inadequacy is because you want the damages which the statute does not give you and we would submit that that motivation-based analysis is not a complete answer; rather, where there is a right, one ordinarily assumes there is not only a remedy but an effective one and we would submit that without going to the question of whether you attribute to an award maker or to the legislature an intent to expressly articulate all the consequences of a particular provision, you do have the problem that a protection like this is intended not only to exist but also be respected and unless there is some sanction which is foreseeably likely to influence behaviour there is very little point in putting the award there in the first place.
BRENNAN CJ: That might be a very good argument which an employer might address to the commission in contemplating whether such a provision should be inserted into the award. I mean, if that is the limit of the penalty that is provided by the statute, the next question is, what provision should be put into the award, the breach of which that penalty is appropriate?
MR GROSS: Your Honour, that then assumes a delegation to the award maker of a decision as to what consequences ought follow. Now, we would submit that - - -
BRENNAN CJ: No, not what ought follow; what can follow.
MR GROSS: Your Honour's argument is that the existence of the award provision is attributable to an assumption by the award maker that breach would only have a limited effect. Now, in our submission, one just does not know whether such is the case. What one is left with is an award provision which is intended to apply to employees who ordinarily, if not terminated, have a significant earning capacity in industry and we would submit in providing the various protections in the award one can assume that the award maker takes into account the fact that contractual law will operate upon the award as is but that is a matter for others to deal with.
McHUGH J: But why do you say that? I would have thought your argument turns the whole history of industrial regulation in this country on its head. The whole purpose of setting up the Conciliation and Arbitration Act 1993 was to take industrial disputes outside the area of the ordinary courts; henceforth, industrial disputes were to be settled by arbitration; awards were to be imposed on the employers and employees; if there was a breach of the award, orders would be made with fresh arbitration to remedy the grievances of the parties; in certain cases prosecutions could be launched for breach of the award and, in particular cases, I think in just about all the statutes, the employee was given a statutory right to sue for his wages or her wages in certain common law courts, and that was the beginning and end of it. It was a regime separate and altogether independent of the ordinary law of contract. Now you want to take the whole regime and put it right back into the law of contract, put it into the common law courts, create rights of action for damages.
MR GROSS: Your Honours, in our submission, by having an award provision of that type, it plainly influences the contractual rights that exist and, if that is the consequence of what is an illegal act, the contract operates of its own force. And, your Honours, I appreciate that the original intent have been a more limited one than that but, nevertheless, the subsequent legislative history reflects the fact that it is recognised by the legislature that actions will be brought for damages based upon contractual principles.
TOOHEY J: But that is not right, is it? Your case is founded on clause 11(a) but the Industrial Relations Act itself creates a whole set of procedures for obtaining compensation where there has been a termination of employment that is harsh or unreasonable.
DAWSON J: And was not the penalty intended to the compensation in that it could be awarded to the employee for a breach? And the mere fact that the penalty has not been increased - I think I read somewhere since 1904, when it was a substantial amount - does not alter the scheme of the Act.
MR GROSS: Your Honours, historically it has been treated as being a civil penalty, not a criminal penalty and to a degree, compensatory nature - - -
TOOHEY J: Well, I was not putting it to you in terms of civil penalty: I was looking at the wider provisions of the Industrial Relations Act that provide for compensation to employees who have been dismissed. There must be an obvious answer to this, but why is it necessary to rely upon a clause in the award and not rely upon the relevant provisions of the Industrial Relations Act? I am looking, in particular, Mr Gross, at section 170EE which is part of a regime.
MR GROSS: Your Honours, that provision was not there at the time. Can I take your Honours to a short chronology of legislative history.
TOOHEY J: Well, I think the answer must be obvious and it is, apparently.
MR GROSS: Well, your Honours, the submission I wish to take your Honours to is this, that, Gregory v Phillip Morris Limited was a decision, I think, in 1988. On 10 February 1993, judgment was reserved in this case, that is judgment by the Full Bench of the Federal Court. On 28 October 1993, there was the second reading speech in relation to the Industrial Relations Reform Bill 1993 and that is the Bill which introduced the provisions your Honour is are referring to.
TOOHEY J: Can we take it then that, prior to the introduction of those provisions, there was nothing in the Industrial Relations Act that provided for any form of compensation to a dismissed employee as opposed to any penal provision there might have been?
MR GROSS: That is so.
DAWSON J: The penalty was compensation, was it not? It was intended to be so.
MR GROSS: Well, it may have had some deterrent flavour in it as well.
DAWSON J: It might have, but it went to the employee if he sued for the penalty.
MR GROSS: Ordinarily that would be expected, although there was a discretion, I think, as we point out in our submissions, that the court itself determines who actually gets the benefit of it, and that, your Honours, is summarised - section 356 - power to order:
the penalty, or a part of the penalty, be paid:
(a) into the Consolidated Revenue Fund; or
(b) to a particular organisation or person.
Your Honours, therefore there are a number of potential recipients with their hands out, including consolidated revenue. One could see that, ordinarily, the worker would get it, but it is not intended to be a remedy for the worker and no one else. It is a penalty - - -
McHUGH J: But there were devices to get around it. I used to appear for the TWU and under the New South Wales Act we used to use the device of a continuing breach. We would keep bringing actions; so long as we were within the time limitations, for breaches of the award, until the employer paid up what was proper compensation, and you can always do that.
MR GROSS: Yes.
McHUGH J: Each day that the employer fails to comply with the terms of the award, the theory is that there is a continuing breach of the award. You can prosecute day after day after day.
MR GROSS: One appreciates there are more ingenious ways to work with the $1,000 limit. I suppose the first response I would have is that, if such a practice exists, that would undermine the argument which we have already entertained, that it was only intended to punish the employer in a little way, as distinct from the larger way which flows from an award of damages. And, Your Honours, secondly the fact that there is a discretion as to who gets it, even if you bring a fresh prosecution every day, indicates that the penalty provision is not intended to be remedial for the worker; it is intended to be a fine and there is a discretion as to who gets it.
So, Your Honours, can I just address one final aspect, if I may, on this point. The legislative history was being urged to me as to a reason why you do not have civil actions for damages and, your Honour Justice McHugh recited a whole series of factors which, no doubt, are very important considerations but, Your Honours, the legislature has not shown any signs, subsequently, of regarding civil actions for damages based on breach of the award as being beyond the industrial pale, and, if I just give your Honours the relevant chronology on this: at the time of the second reading speech on the Industrial Reform Bill, ie on 28 October 1993, the law still was Gregory v Phillip Morris Ltd, and the legislation, I think, was then enacted at the end of 1993. Judgment was given on 7 February 1994, so that when the legislation was introduced and enacted, Gregory v Phillip Morris Ltd was seen as being the position and, of course, the position only then changed because the Full Bench, on 7 February 1994, overturned Gregory v Phillip Morris Ltd. On 30 March 1994, the Industrial Relations Reform Act was proclaimed.
If one goes, if I can just give your Honours this reference, to the parliamentary debates, that is the second reading speech - could I hand up nine copies? It is a very short passage.
BRENNAN CJ: What is this to show?
MR GROSS: This is for the purpose of showing that at page 4, first column at the bottom of the page the Minister Mr Brereton said:
The termination provisions will apply where employees have no protection that adequately meets our international obligations, such as the protection already widely available through the 1984 termination, change and redundancy case.
And this clause 11(a) comes from that case, as did the clause in the Gregory v Phillip Morris Case. So that if one is looking at legislative intent or legislative history, one finds that at least the more current state of that perception is contrary to those principles which your Honour Mr Justice McHugh enunciated. As to the legislation itself, section 170EB of the Industrial Relations Act 1988 has a provision which reflects what the Minister was saying in the passage I have just read, section 170EB:
THE COURT MUST DECLINE JURISDICTION IF ADEQUATE ALTERNATIVE REMEDY EXISTS
That is the heading, and the section reads:
The Court must decline to consider or determine an application under section 170EA if satisfied that there is available to the employee by or on whose behalf the application is made an adequate alternative remedy, in respect of the termination, under existing machinery that satisfies the requirements of the Termination of Employment Convention.
The argument being that it was contemplated, even under the amending legislation that the Gregory v Phillip Morris situation, and indeed the situation as per Justice Hill's decision in this case would still continue to obtain and that the new provisions only operated to the extent that the prior situation did not provide an adequate remedy. Can I then move, if I may - - -
GUMMOW J: But your clients' contracts were entered into at a time when the 1904 Act was in force, were they not?
MR GROSS: Yes.
GUMMOW J: And that created new rights and specific remedies, and is not the ordinary principle that if you have a statute that does that, creates a new universe, as it were, and gives new remedies for the new rights, that is exhaustive? What Justice McHugh was putting to you is an example of that, that reasoning, to the 1904 Act and that is what we are dealing with here.
MR GROSS: Your Honours, we would submit that the fact that their employment contract started before the relevant provision, or the 1984 award provision came in, would not change the equation since it is recognised that the employment contract can constantly evolve with relevant alterations being made.
GUMMOW J: Yes, but when did the evolution relevantly stop for the purposes of this litigation?
MR GROSS: I am sorry, when would we stop?
GUMMOW J: When did the evolution relevantly stop? What date?
MR GROSS: In relation to these particular gentlemen?
GUMMOW J: Yes, it is their rights we are worried about.
MR GROSS: If, in fact, the Automatic Fire Sprinklers argument is right and because it is in breach of the award the determination is void, it is a relationship that still continues and, therefore, is capable of evolution. If, on the other hand, one takes the alternative view of Automatic Fire Sprinklers and you have got repudiation which is accepted,and there is no factual determination on this, well, of course, the relationship has ended long ago.
GUMMOW J: 1987 or some time like that? 1988?
MR GROSS: At the time of the termination. The termination was, of course, in 1989; 28 March 1989, and I think your Honours will have the chronology which we handed up at the outset of the argument. They were being terminated under the Industrial Relations Act 1988 and of course an award made in 1984. Your Honours, could I then move on. I think I had said enough concerning the necessity ground and, your Honours, in the case of Gooley which is the very recent decision by Chief Justice Wilcox, the necessity aspect is dealt with. That is the case of Gooley v Westpac Banking Corporation, a decision of Chief Justice Wilcox in the Industrial Relations Court of Australia, 3 April 1995.
BRENNAN CJ: We seem to have a photocopy of the judgment. Is that what we are working from?
MR GROSS: Yes, that is it. It was only given two months ago, 3 April 1995. That is the copy. Your Honours, at pages 66 to 68 the Chief Justice deals with the question of what he describes as being "employment efficacy" which is obviously a necessity concept and his Honour took the view that unless the award termination provision is not incorporated, it leaves the employment contract with a gap in it as to a fundamental matter.
Your Honours, I think there is no need to read through that judgment unless your Honours wish me to go to some part of it. We would emphasise the warning at the bottom of page 67, that:
If the High Court confirms the overturning of Gregory, this will leave a major gap in industrial law.
And at the top of page 68:
Employer obligations inserted in awards for the benefit of employees will only be enforceable by employees who are aware that they must press for the inclusion of the obligations in the contract of employment as well, and sufficiently articulate and powerful to obtain this result. This will rarely occur.
So, your Honours, the necessity really seems to be one of avoiding predictable evasion and to make sure that the award provision is just not an illusory promise to workers in relation to their protections.
TOOHEY J: But is that statement correct having regard to the insertion in the Act of those provisions regarding compensation? I appreciate that the statement is cast in wider terms, but so far as compensation for unjust termination of employment is concerned, does the Act not provide an apparently adequate system of compensation?
MR GROSS: Yes, your Honours, after March 1994 the gap identified by the Chief Justice has really filled in a way chosen by the legislature, so that that argument may be seen to have less force, if one is describing it as being a gap where only those who can talk their employer into an express term have a protection. Of course, that still leaves the situation that an employee who wants something more than the new statutory benefit can presumably still try and talk his employer into an express term and you have still got the same problem that there may be a lack of clarity as to the criterion by which any damages are to be assessed, bearing in mind, of course, there are restrictions in relation to the new statutory remedy.
DAWSON J: But your argument must be that even now, when this particular provision for limited compensation is in the Act, the employee could still sue for damages and get a greater amount than the amount that the legislature apparently thought was appropriate.
MR GROSS: If there was an express term.
DAWSON J: No, would you not say the same thing is applied. The compensation provisions do not alter the situation.
MR GROSS: Well, they change the overall context in which an employer can be assumed to be acting or not and obviously whether the courts impose a term depends upon what are the - - -
DAWSON J: Let us get it straight. Do you say an employee, notwithstanding these terms, can sue for damages, notwithstanding section 170EE(2) and (3), as an alternative remedy by way of a breach of an implied term of the contract?
MR GROSS: Your Honours, I should have said yes to the original question. Your Honour is quite right because that is the effect of the second reading speech and of the formulation in relation to alternative remedies in the amended Act to which I have just taken your Honours. So that, yes - - -
DAWSON J: Why does not the implied term comprehend the remedy as well as the substantive terms?
MR GROSS: Your Honours, we would submit that the assumption in the legislation itself appears to be that one can have an implied term giving a remedy of unlimited damages in accordance with Gregory v Phillip Morris and the fact that the legislature did not move in more explicit terms to correct that apparent result at that time shows a legislative approval of that unlimited damages remedy as being appropriate. We appreciate that does create the danger that you do in fact have two alternative streams of compensation, one, based upon the award and, two, based on the statute, but, your Honours, what the legislature appears to have done, as is evidenced by the second reading speech and the form of that section which I just read, is to contemplate that you cannot have the statutory remedy itself if in fact there is an adequate alternative remedy existing and the adequate alternative remedy existing was assumed to be Gregory v Phillip Morris or that was one of the alternative remedies possible and we would submit that one does not even get to a statutory remedy under section 170EA unless one gets past the section 170EB alternative remedy provision, which basically gave implicit endorsement to the Gregory v Phillip Morris type of remedy.
So that it seems to be the situation where the legislation itself contemplates that the worker has his choice as to which route he will go down. Plainly the first route was assumed to be the Gregory v Phillip Morris route and the second one is this statutory route. Your Honours, we would submit that if in fact the legislature, having sat down to consider the matters, proposes a legislative scheme for compensation for unfair dismissal which recognises the entitlement to sue a contractual remedy, that ought be given some retrospective effect.
McHUGH J: Is there anything to stop the Industrial Commission making an award which varies the contract of employment by inserting the terms of an award as terms of employment?
MR GROSS: We would submit if it is necessary to resolve an industrial dispute, that is, if it has generic operation for that purpose, that would be a course that would be within power. Whether it does it or not is another matter, but it certainly is within power, we would submit.
McHUGH J: If my recollection is right, sometimes you would see an award with a heading, "Terms of employment".
MR GROSS: Your Honour, I think that is starting to surface more in the safety sphere. My knowledge in this zone is limited, but there is a growing practice of incorporating explicit terms into awards and having them described as terms of employment rather than just as general dictates as to what the situation shall be. I have one further point to make, and that relates to the obviousness objection. At paragraph 2.3 on page 4, we have addressed submissions to the question of whether the obviousness criterion is satisfied. Your Honours, I think only Justice Keely took the view that this criterion was not satisfied. Would your Honours go to page 808, lines 7 through to 34, just to see what Justice Keely said on this. His Honour says at line 7:
Further, in my opinion this Court should not follow the decision of the majority in Gregory that the "second basis for holding that the provisions of the award were part of the contract of employment, in the present case, is that an agreement to that effect ought to be implied". On that question I adopt, with respect, the following passage from the reasons for judgment of Jenkinson J in Gregory:
"It could not in my opinion be predicated in respect of the implication proposed that, if the parties had been asked at the time the contract was made whether the provisions of the award as they should from time to time exist were to be terms of their contract, each would have unhesitatingly responded in the affirmative. The evidence, no less than what one may be permitted judicially to know, is consistent with each party's believing that some of the matters with respect to which the award made provision, or might in the future make provision, could be regulated by agreement between employer and union representatives of the employer's workers to the greater advantage of that party than that party might expect to gain from the contractual adoption of whatever provision an award applying indifferently to many kinds of industrial enterprises might from time to time contain. Since the provisions of the award as from time to time varied would bind the parties without their agreement, and since the parties would remain free to agree that the appellant should have more than the award prescribed, why should it be thought likely that the appellant would have responded affirmatively, when he entered into the contract of employment, to a question whether his freedom should be fettered by a term of the kind suggested? Further, it cannot, in my opinion, be said that the implication suggested was necessary to give business efficacy to the contract of employment. The relationship between appellant and respondent would be regulated by the provisions of the award without their agreement that it should be so."
Now, obviously, the end part of that is a necessity principle and the question, it seems, of obviousness, Justice Keely has reservations in that the mythical conversation - - -
BRENNAN CJ: What do you say? What is your submission?
MR GROSS: Well, our submission is that Justice Gray and Chief Justice Black correctly rejected that proposition and, in effect, one does not - well, first of all, an employer presumptively accepts and undertakes performance of the award obligation under clause 11(a) and in so far as it is suggested that, in this mythical conversation, the employer should unquestionably say "yes" not only to the nature of the contractual entitlement but also its consequences, Justice Gray is correct in saying that what is necessary only applies to the formulation of the obligation not to the formulation, in effect, of either the damages remedy or the jurisprudential basis upon which it is formulated.
Could I then move your Honours to the customs submission, please, at page 4. Now, your Honours, we submit that alternatively there was an implied term based on custom. The question of custom is a difficult one in the sense that it is not alleged that there was explicit evidence concerning the custom and practice of the industry to observe award provisions generally or, in particular, clause 11(a). So that, your Honours, we would submit that to use custom as a basis for finding a term is difficult unless one takes the approach that award provisions or collective agreements between employers and employees are, in fact, adhered to and expected to be adhered to within the industrial community and it can be assumed that this is so without specific proof.
And the fact of an award having such a wide operation exists and continues without challenge reflects what, in fact, employers consider to be the relevant obligations and entitlements for employees covered by the award.
So that one would treat, in effect, the existence of the award and its assumed and expected adherence by employers and employees, as being indicative of the existence of the custom, rather than, as it were, doing it the other way around, to achieve such a result.
McHUGH J: But, do you ever import a custom when an obligation is imposed by some legal source. One does not talk about a custom to obey the Crimes Act 1973 - - -
MR GROSS: Or a custom not to rob banks - Your Honours, I appreciate that it is customary for people to obey the law, and therefore one does not have to find a specific custom to do so generally. However, we are concerned with a particular aspect of behaviour, namely the criteria of a qualified security in a job, or the circumstances of termination of an employment. And so, we are dealing with a specific zone which influences not only industrial expectations within the workforce, but also outcomes upon termination of employment in breach. And, Your Honours, we would submit that there is scope for the crystallised custom analysis for a series of reasons.
TOOHEY J: Just before you take us to those reasons, Mr Gross, does crystallised custom have some standing in decisions of the English courts, or is it dependent upon academic writing, or - it seems to have its origin in academic writing and my question is whether it has been adopted or taken up by any of the English courts?
MR GROSS: Your Honours, can I just go to the reference which we have recited in our written outline, and I will be able to answer your Honour's question. Your Honours, we have given a reference, and I am sorry we have not photocopied the article, Mitchell & Naughton, "Collective Agreements, Industrial Awards and the Contract of Employment", 2 AJLL 252, at pages 260 to 262. Can we get those pages photostated for your Honours. But, Your Honours, to answer the question of Justice Toohey, and I must say I have relied really on the secondary sources, rather than going to the precise writing - your Honours do have it - at 262 it does seem to be a product of the discussions of Professor Kahn-Freund and Davies and Freedland, Hepple and Fredman and, Your Honours, the "crystallised custom" analysis obviously has, as its source, the thinking of these writers - - -
TOOHEY J: No doubt, but has it been taken up by any court, to your knowledge?
MR GROSS: My knowledge is insufficiently wide to be able to answer that question accurately, however, one can assume that with writings on the subject from such sources, it must have been addressed but I cannot give your Honours the precise references and we do have difficulties getting the English cases.
TOOHEY J: But to the extent that you are relying upon it as an alternative basis for upholding the appeal, we really need to know, do we not, if it has the endorsement of any judicial authority?
MR GROSS: Yes. May I make some further enquiries about that, but I am unable to give your Honours precise case references where the crystallised custom concept has been dealt with by the courts and, of course, many of the courts would be at varying levels of the industrial judicial machinery in England and, as I say, we do seem to have some difficulty in getting hold of a lot of those cases. But can we make further inquiries about that rather than take up time?
We would submit that the way in which custom gives rise to an implied term involves, obviously, incorporation based on practice but we would submit that practice ultimately can be presumed, as distinct from demonstrated, and no doubt any such presumption is capable of being fortified, if necessary, by evidence of widespread acceptance.
GUMMOW J: Is it not just a question of inferring consent? The custom cases, are they not just cases of you infer that this is what the parties were doing?
MR GROSS: Yes, one actually goes to the Acts rather than the documents or other sources.
GUMMOW J: Yes, but what you infer is contractual consent though.
MR GROSS: Yes. That seems to be the mode but, your Honours, we would submit that if one can go to bare Acts, or a multiplicity of same in order to show a pattern, presumably one can also go to such conduct which is influenced or informed by some express document, be it a code of industrial practice or a collective agreement or an award. Therefore, we would submit, that it is odd that crystallised custom if established by sufficiently cogent evidence or repetition, can meet that demand but it cannot meet that demand if, in fact, that conduct is occurring in a zone where an authoritative body such as an award-making body has stipulated in terms what that custom shall be. Obviously evidence of custom based on practice will not be articulated in very much detail. If one is describing inferences from conduct it will be in fairly raw terms but, in our submission, crystallised custom applied to awards does enable a general bland formulation of a practice to be articulated in greater detail and, in our submission, in terms such as used in clause 11(a).
Bearing in mind, of course, that clause 11(a) reflects what is really a widespread recognition throughout the international industrial community that you have to have specific provisions in place and employers as a matter of practice will adopt that best practice in dealing with their workers so as to create industrial harmony.
TOOHEY J: I am not sure that I am following you. Are you saying that crystallised custom is a concept that exists in relation to collective bargaining but not in relation to any situation in which there are award-making authorities or legislative regimes?
MR GROSS: No, your Honour.
TOOHEY J: You seem to be drawing a distinction between the two.
MR GROSS: No, rather, I was putting that ultimately crystallised custom or even I suppose custom is a distillation of what is done as a matter of regular conduct and presumably by regular conduct by right-thinking people or by people acting reasonably. Now, if in fact one can do that, it seems wrong that one should deny yourself the benefit of that means of finding a contractual term simply because that behaviour follows or is influenced or informed by a more express standard articulated somewhere else, be it by virtue of some collective agreement or - - -
BRENNAN CJ: It is not a matter of denying a means of discovering a contractual term. The term in clause 11(a) is quite explicit. The question is whether one would infer that parties who are bound by clause 11(a) have consented to it as part of their contractual arrangement when they are already bound by it under the award, is it not?
MR GROSS: Yes. Well, it may be that one comes back full circle because one then asks the question, are they behaving that way because it is obligatory because of some other legal source or because it has become part of some implied contractual framework?
BRENNAN CJ: Well, put it to the test. Clause 11(a) is eliminated from the award; what happens tomorrow?
MR GROSS: Putting aside subsequent legislative amendments, what one is then left with, with various competing implied terms as to how an employer will treat an employee qua termination, what are the grounds and in what manner will he exercise his power and as part of demonstrating good faith in relation to the performance of the contract on his side, to what extent will he allow the fair procedures and general concepts of justice to influence his decision?
DAWSON J: But, must not your argument be - excuse me for interrupting - but, in answer to that question, if clause 11(a) is eliminated tomorrow, taken out of the award, nevertheless, the existing contracts will still have clause 11(a) implied in them. That must be your argument, is it not?
MR GROSS: Well, your Honour, they would have that or some - - -
DAWSON J: That as a minimum, you would say?
MR GROSS: Well if, in fact, clause 11(a) went, there might be ramifications in terms of what assumptions the parties thereby make because of its removal and the circumstances of its removal. But, in the absence of 11(a), one would have a provision approximating its terms, perhaps using different terms or diluting the protections, but ultimately taking up some of the traditional formulations that are used in wrongful dismissal law or other textbook writings which deal with this concern.
McHUGH J: With respect, I do not think you are answering Justice Dawson's question. You are not being asked whether there is some other provision that might apply if 11(a) was brought to an end or terminated. What is your answer about 11(a), the precise terms of 11(a)? If the award is terminated, does 11(a) continue to bind the parties contractually? Does it bind the employer and the employee somewhere in the wilds of Western Australia who are not even aware of the fact that the award has gone?
McHUGH J: Or north Queensland?
BRENNAN CJ: It is compounding - - -
TOOHEY J: Why not New south Wales?
McHUGH J: There are not any wilds in New South Wales.
MR GROSS: Having considered the full range of those all attractive geographical alternatives, I would have to say that clause 11(a) would remain because it articulates what are general standards in any event. However, the danger would be that it may be contended in court proceedings that the contractual term of an implied kind should be formulated more generously to the worker or more favourably to the employee. You would have scope for debate and, of course, wasteful cost, et cetera, in determining what the term was.
That is why, in our submission, the Court exercising its powers in relation to importing terms implied in law can take the standard articulated in the award as avoiding all that uncertainty and that is why one puts it in the contract. I suppose another reason would be so that when the award goes, you have still got something in place governing the relationship.
Your Honours, can I then go to the fourth ground, if I may, at page 5 of the outline. Chief Justice Black and Justice Gray took the view that clause 11(a) made the purported termination of the contract of service illegal and void and, with that giving two alternative outcomes, either the employment continued so that the entitlement to pay continued or, alternatively, where such act represented a repudiation which, depending on what the evidence was, the workers either accepted, entitled them to sue for damages or rejected, enabling the contract to continue.
Can I then go to what is said on this point by Chief Justice Black and Justice Gray and then deal with the rejoinder arguments. Your Honours, Chief Justice Black at pages 794 to 801 deals with this point under the heading, "The Ineffectiveness of Termination in Breach of the Award". That is at the top of page 794. The reasoning we would adopt and, without paraphrasing that reasoning, we would submit that the effect of the prohibition is to render such termination illegal and void so that those consequences I have just identified follow.
Justice Gray at pages 917 to 919 takes up the same point with the same result. His Honour Justice Gray stipulates the relevant consequences in those pages, and I need not repeat those consequences. It is desirable therefore to go to the reasons for rejecting this view which we have listed in page reference form at paragraph 4.2.
BRENNAN CJ: What is meant by "void" in what you are putting to us?
MR GROSS: Ineffective to achieve the intended purpose because it is a legally ineffective act. It is a purported termination which does not have that effect.
BRENNAN CJ: So there is no termination?
MR GROSS: There is no termination, rather than the alternative argument which is: there is a termination but, because it is illegal, there can be legal consequences flowing from that act.
BRENNAN CJ: If there is no termination, how can there be a breach of 11(a)?
MR GROSS: Well, the - - -
McHUGH J: There cannot be. You have got to construct a completely different theory, do you not? You sue not for breach of clause 11(a) but for breach of the contract on the basis of repudiation?
MR GROSS: Yes, that is so.
DAWSON J: There is a distinction surely, is there not, between terminating employment and terminating a contract of employment?
MR GROSS: Yes.
DAWSON J: You can terminate employment. You just stop the man coming; do not employ him.
MR GROSS: That of course is employment as in utilising him as part of the workforce.
DAWSON J: That is what employment is.
MR GROSS: Your Honours, we would submit that if "terminate" means that - that is, in effect shuts the man out from the work - but the contract of employment continues, one has those financial consequences which are accepted as flowing by Chief Justice Black and Justice Gray, namely, not only does the contract continue but also so does the entitlement to pay.
BRENNAN CJ: Not necessarily. If you restrict 11(a) to termination of de facto employment, then you are not concerned with whatever implied term there is in relation to the termination of the contract of employment. You have got to find some other term then that deals with the termination of the contract of employment.
MR GROSS: Yes.
BRENNAN CJ: What is it?
MR GROSS: Your Honour, if in fact clause 11(a) does not impact at all upon the matter, you are then driven back to those alternative formulations based on an implied duty not to treat the employee unfairly and the like, and of course that creates great uncertainty but, nevertheless - - -
BRENNAN CJ: Well, you can be driven back to the term that you drew our attention to on page 910:
at the expiration of a fixed term or on the giving of proper notice.
The term which the common law imports, or has hitherto been regarded as imported.
MR GROSS: Yes. Your Honours, we would submit that that argument seems to assume that the prohibition in the award is intended only to penalise the termination once it has occurred. Alternatively, that if a termination does occur there is the penalty plus what would ordinarily be the other provisions which would attend a termination; that is - - -
BRENNAN CJ: First of all, we have it on your submission, does clause 11(a) relate, so far as it refers to termination, to de facto employment or to the contract of employment?
MR GROSS: Your Honours, I am just trying to find the text of 11(a) - - -
BRENNAN CJ: You will find it on page 862.
MR GROSS: Your Honours, we would submit that termination of employment is there directed to the termination of the contract. Although one can in lay terms talk about an employment being terminated because, in effect, no work is provided for the employee, that really is either a lock out or a suspension of the employee and really when one talks about "termination of employment" one means dismissed, ie, the employer putting the contract at an end by virtue of his power to do so.
BRENNAN CJ: Then that being your submission in relation to construction of 11(a), how is that 11(a) is susceptible of breach if your argument under part (4) of your submissions is accepted?
MR GROSS: Your Honours, there are two potential ways -and I hope I have not exhausted all possible means of answering your Honour's question - is that - - -
BRENNAN CJ: I hope you have. I hope you do.
MR GROSS: Your Honours, it is a provision which is intended purposively; secondly - - -
GUMMOW J: Intended purposively. What does that mean?
MR GROSS: I am sorry, it is intended to address purported or attempted terminations, ie, acts which are desired or perceived to have that effect, and so, therefore, one might well read "termination" as being "purported termination" and, therefore, the purposive construction of such a clause - and one assumes, therefore, you can apply purposive construction to award provisions just like any other form of legislation; an award is quasi-legislation - the prohibition is directed to purported terminations and - - -
McHUGH J: It is hard to get it out of the language, is it not? How can there be a harsh termination if there is no termination? The whole language of the clause assumes that there is a termination, does it not? You cannot read 11(a) as though it read "no employer shall terminate". It assumes that there is a termination and says the termination:
shall not be harsh, unjust or unreasonable.
I do not think paragraph (4) of your submissions is your strongest point, Mr Gross.
MR GROSS: Yes. Your Honours, we then come back to, if there is the prohibition on termination -and let it be assumed that the termination is not only of the opportunity to work but actually of the contract itself - the problem I therefore have is that one cannot treat that provision as requiring the conclusion that the employment nonetheless continues. Your Honours, we redress that by saying that regardless of how one views the word "termination" what one has is conduct which is intended to be described as being illegal, ie, contrary to the award.
How one defines the consequences of that illegality must be rationally related to the goals you are seeking to achieve or the protections you are seeking to enhance by having such a provision so that merely to say the clause assumes the contract is terminated, does not remove the force of the Automatic Fire Sprinklers submission because if, in fact, it is said to be illegal, there is a range of consequences. It can be illegality merely attracting some penalty but nevertheless standing or, alternatively, it can be the sort of illegality where the law requires that the proper remedial solution is to treat the purported termination as void ab initio.
BRENNAN CJ: What do you mean "the law requires a proper remedial solution"? What law requires that?
MR GROSS: Perhaps I am describing the argument in policy terms. But can I just address the policy matter then come back to who determines that question.
BRENNAN CJ: Not who determines it; what is the law that determines it. Are you talking about contract law or are you talking about construction of the statute? What are you speaking of?
MR GROSS: To answer that question would involve me repeating the submissions I have already put in relation to the relationship between the award and the contract and I do not want to go back into that territory.
BRENNAN CJ: You are saying it is contractual?
MR GROSS: Yes, your Honour.
BRENNAN CJ: I see.
MR GROSS: But where the award itself is, in effect, prohibiting such terminations, the function of the award is basically to stop that occurring and to protect the employment against this form of illicit destruction. If that is the purpose, that purpose is going to be achieved better by an outcome that gives the worker the option as to whether he treats the employment as being on foot or not, because it is in fact the integrity of expectations by the worker that you are trying to respect and the catastrophic consequences of loss of employment you are trying to prevent. So how do you address that problem? If you have a choice between saying yes, it has happened but the employee can be fined up to a thousand dollars, or are you going to say it shall not be treated as a valid act, the policy factors behind this kind of protection induces you towards a solution which keeps the employment there as something available to the worker until he is dealt with in relation to his employment in the manner required by clause 11(a).
So that, we would submit that it is excessively simplistic and not taking into account the competing policies to say, "Well, clause 11(a) is just looking at a job that no longer exists, and therefore attracts somewhere else some remedy". We would submit that one is more likely to achieve the goals aimed for by clause 11(a) by, at least, giving the employee the option to treat the purported, but legally ineffective, termination as being a repudiation, and then he can either decide, is he going to treat the contract as being on foot and endeavour to restore it, or have its continuance recognised, or is he going to accept the repudiation and, in effect, retire from the field but with an entitlement to seek some form of damages or other remedy? We would submit that one must read clause 11 as providing scope for preservation of the employment contract at the employee's option, after the employer has purported to dismiss in a manner inconsistent with clause 11(a).
Now, your Honours, the points raised by Justice Keely and Justices Beaumont and Heerey: can I briefly go to those points and endeavour to address those points? Justice Keely at 811 to 813 deals with the point and Justice Keely appears to resolve the question by treating Watson as a special case where, in fact, there were prohibitions on both the employer and the employee in the special protected undertaking during World War II purporting to terminate the employment. So that, in comparing the National Security Act with the spectrum of obligations under the award with its protection under the Industrial Relations Act, Justice Keely did not see a close enough parallel between the two and so that, having then done that, at the bottom of page 813, Justice Keely construes the award as not intending to make the employment relationship "legally infrangible".
Your Honours, we would submit that no satisfactory further explanation arises for rejection of this argument. And then, Justices Beaumont and Heerey at 874 to 879 - I will just go to those. Once again, at the bottom of page 876, their Honours take the same line that there is no true parallel between the legislation dealt with in Watson and the award provisions which are intended to have a different operation, ie, resolving industrial disputes, and the like and, at 877, line 5, seemed to take up the point that there is no indicated intention that the termination "is to be a nullity", and there are legislative sanctions in the form of penalties which, I think, is in a different form to what has already been put to me.
Your Honours, we would submit that it is erroneous just to examine the award in its bald terms to see whether such an intention is indicated. Rather one has to look at the award in the context of that which is being sought to be achieved by the award protection and the need, ultimately, not just to provide a sanction by reference to some far off and doubtful penalty, but by preserving the employment and, we would submit, for the reasons we have given, that is why one should read the provision in this way. Now, your Honours, can I move then, if I may, to the final submission.
BRENNAN CJ: We will perhaps hear you at quarter past two on that and, in the meantime, perhaps, Mr Gross, you might be able to answer the question Justice Toohey raised with you about the judicial approval of the notion of crystallised custom.
MR GROSS: Yes, we will endeavour to do so, Your Honour.
BRENNAN CJ: How long do you expect the remainder of your submissions to take?
MR GROSS: I would think that my submissions based on statute would be approximately a quarter of an hour and no longer. I recognise that that is perhaps the least attractive of the submissions, and I am reviewing that and I think I will only be about 15 minutes.
BRENNAN CJ: And how long do you expect your submissions to take, Mr Jackson?
MR JACKSON: Your Honour, I would hope to finish this afternoon, by about four. Your Honours, could I just invite my learned friend to indicate to your Honours that the grounds under which an attack is made on the findings of the primary judge that his two clients were, in fact, implicated in the pilfering, those grounds are not pursued.
MR GROSS: Your Honours, that certainly is not the case. Your Honours, we would be submitting that the Full Federal Court failed entirely to deal with the question of the appellants challenges to the findings by Justice Hill that the dismissals were substantively fair because they were involved in theft. I will make this much clearer this afternoon. Those findings by Justice Hill were erroneous and the Full Federal Court, despite four days of argument on that point, failed to properly address, or at all, that particular consideration.
BRENNAN CJ: The Court will adjourn until quarter past two this afternoon.
AT 12.48 PM LUNCHEON ADJOURNMENT
UPON RESUMING AT 2.18 PM:
BRENNAN CJ: Yes, Mr Gross.
MR GROSS: Could I answer Justice Toohey's inquiry first. The 1989 article by Mitchell and Naughton on the question of crystallised custom has a footnote 56 which refers to a case of Robertson v British Gas Corporation (1983) ICR 351 but on reading that case there is no reference to crystallised custom. Since the Mitchell and Naughton article in 1989 which reviews the textbook writers, we have been to all of the Industrial Court Reports in England since that time and we have not been able to locate any reference to or discussion of the concept of crystallised custom in the cases.
TOOHEY J: It would not necessarily come through an industrial tribunal though, would it? It might just come through the ordinary courts.
MR GROSS: Yes. In other words, your Honours, we have not been able to absolutely satisfy ourselves on that, but all the searching that has been done has failed to reveal any case which actually deals with that particular concept and, I am sorry, we have not had an opportunity to further explore the matter, but that is where it stands.
Your Honours, could I just deal with a couple of other matters that arose during the morning. I would like to briefly just touch upon them if I can. Your Honour Justice Dawson, I think, took me to page 910 of the judgment of Justice Gray where a series of obligations on the part of employees or employers are set out and my recollection is that it was in the context of these being duties imposed by the law as distinct from being specific implied contractual terms.
Certainly Justice Gray treated them as being implied contractual terms. We would submit that the description of these obligations of an employer or of an employee are traditionally regarded as being described in contractual terms and just to illustrate that, if we may, may we take your Honours to the decision of this Court briefly in Shepherd v Felt and Textiles of Australia Limited [1931] HCA 21; (1931) 45 CLR 359 at page 370 in the judgment of Justice Rich where what was concerned was circumstances in which employment could be terminated.
Could I just take the passage just as an illustration without going into the case in detail. At page 370, the first five lines of Justice Rich's judgment:
In contracts of the kind in question, there is an implied condition that faithful service shall be rendered and that if such service is not rendered the principal may elect to determine the contract, and the determination takes place on that implied condition.
Your Honours, we would submit that all discussions of employer/employee duties have traditionally been in the context of these being implied terms of the contract. Your Honours, we would submit that the fact that a term is imposed by law as a result of a decision of the courts is fully consistent with it becoming an implied contractual term.
Can I deal with the concern raised by Justice McHugh now. Your Honour asked the question: do most awards have contracts of employment clauses? And the answer is yes, most do and there is a discussion of this briefly in Justice Hill's judgment - - -
McHUGH J: I think I may have said terms of employment. Most of them do have a contract of employment.
MR GROSS: Yes. I think your Honour is right, with respect, your Honour did say terms of employment.
McHUGH J: This award has got clause 10 in it, has it not?
MR GROSS: Yes it has, and that is discussed at 862, 863. Your Honour will find the heading "Contract of Employment" at the bottom of 862 and the award itself is not in the appeal books separately available, however, and it was exhibit A before Justice Hill. I am instructed that the terminology used is "contracts of employment" rather than "terms of employment".
There is also raised the question of the purpose of the award making body. In other words, did the industrial body which issued the award have in mind a contractual consequence or a consequence of that type which would attract a damages entitlement? The decision of Justice Hill touches upon that particular point. At page 741 to 743, his Honour starting at line 12 on page 741 describes the proceedings in the Termination, Change and Redundancy Case and page 742 a series of submissions are identified and then what the Tribunal had to say.
Then, after a passage from the tribunal which is quoted at the bottom of 742 and the top half of 743 - and I will not read That again or at all -at 743, line 22, Justice Hill said:
These extracts indicate what would in any event be clear from the wording of the award itself, that the Commission's intention in inserting provisions into the Award dealing with termination of employment was to modify the contract of employment so as to ensure that there was embodied therein a requirement upon the employer to afford fairness to the employee.
So that we would adopt at least this part of Justice Hill's judgment for that purpose. Now, your Honours, a question that was asked of me is what would happen if clause 11(a) disappeared tomorrow. The response that we give to that is that there would still be implied in the terms of the contract, either the same provision or, if there was subsequent negotiated variation, a modified provision.
Your Honours, if, in fact, the same alteration of the award extended to wages and so that the wages provisions went out the window, those wages would still be payable as a matter of contract. We would submit that wages are prescribed by an award, fill in the gap which describes, in effect, the price of the provision of the labour and the specification of the rate perforce of the award is no different in kind from the specification of the qualification on the entitlement to terminate. And although that comes from an award - - -
TOOHEY J: Well, there is, is there not? There is a very marked difference. Because, in the case of payment of wages, you would simply look at what has been done over the period of employment and you could see what the employer had paid. But, when you are talking about termination of service, you are talking about a one-off situation for which there is no guidance in the previous relationship of the parties.
MR GROSS: Well, with respect, not necessarily so. I appreciate that termination when it does occur is a sudden and final event, but the historic payment pattern is really indistinguishable in kind from an ongoing pattern of assumption that the rules as determination shall be of a particular type, although obviously it is easier to detect the pattern from actual payments rather than from either withholding of the employer's privilege to terminate or from the acknowledged assumption that the award governs that situation. But in the end, your Honours, the role of the award is to give content to what would otherwise be a general obligation, but insufficient to complete either the contractual obligation or to make efficacious the protection of that position.
Could I just deal with another aspect, your Honours. Justice McHugh raised the question of the capacity in an industrial situation for repetitive proceedings to be commenced almost on a daily basis seeking to obtain ultimately, on a day by day basis, fresh remedies by way of fine and thereby making such an award protection an efficacious one. Of course, that can apply adequately in relation to wages where there is an ongoing continuing obligation to meet that requirement and there is scope for repetitive prosecutions, but of course termination - - -
McHUGH J: Well, I am not sure that there is, or there certainly was not towards the end under the old Conciliation and Arbitration Act, because they inserted a section 1(a) which deemed a series of offences arising out of the same course of conduct to be deemed to be a single offence. I do not know when that came in, but what I had in mind was in the 1960s it was certainly open in New South Wales at that time under the New South Wales Industrial Arbitration Act and I think the Commonwealth Act as well, but certainly the New South Wales Act.
MR GROSS: Yes, although such a practice would multiply the number of prosecutions depending on what unit of time one chose; it could be an hour rather than a day, presumably, but the point we make concerning terminations, of course it happens only once and you have no such scope for piling up the points on an ongoing basis and therefore that confirms our submission, we would say, that the fine provides no real protection at all.
Your Honours, that then takes me on to the submissions which we have made concerning the clause 11(a) be an obligation superimposed on the contract by force of the award, and this is point (5) in our submission. Your Honours, we acknowledge in our outline of submissions that this is a little-favoured approach and has been greatly criticised because such a concept does not fit in with what is commonly understood to be the requirements for an action for breach of statutory duty of a tortious kind. Now, your Honours, we obtained revived enthusiasm for this point in the light of the fact that Justice Wilcox in Gooley, at pages 62 to 63, felt in retrospect that this point really is deserving of greater weight and, Your Honours, rather than endeavour to paraphrase Justice Wilcox, may we say that we would adopt the reasoning. But, can we just put this, Your Honours, that there is, of course, a distinction between an award-based obligation, which has an effect on the contract, and an inquiry as to whether, on construing a statute or other legislative or quasi-legislative document, there would seem to be an implied intent to create a private cause of action.
Now, very often when one is looking at breach of statutory duty, one is looking at a tort which is intended to operate independently in its own right with perceived damages consequences. We would submit that there is, nevertheless, scope for the argument that, as Justice Wilcox points out, the award does nonetheless operate so as to impose that obligation on top of the contractual obligation.
Your Honours, the difficulty we see is that where that is discussed in those High Court references and by Justice Wilcox, what is described as occurring is the superimposition of the award term by force of the award on to the contract itself, which of course does not give one ordinarily an implied term thus modified. That is to be compared with, it is argued, an imported term or one which is treated as being implied in the manner we have indicated.
Your Honours, we would question as to whether or not, despite the apparent points of distinction between "superimposed" on the one hand and "imported" or "incorporated" on the other, there is truly any distinction which the law ought recognise for this purpose. Obviously an imported term looks at the process of arrival of that term. Incorporation looks at the process of integration. But in the end, by either importation or incorporation, it is found that the parties have agreed that such is now a term of the contract, either by modifying an old term or by adding an extra one.
We would submit that where the cases say that an award obligation is superimposed by force of the award, in the end one has a total composite obligation. To suggest almost by way of physical analogy that one is lying on top of the other, as distinct from being intermingled with the other, is paying excessive regard to the verbal distinction when in fact the end result is that you have an obligation which is modified perforce of that award.
TOOHEY J: But if you are offering that as an independent argument for finding in the contract of service clause 11(a) of the award, then how do you get there? It is all very well to say the award imposes on the contract its terms. One can say that, but how does it happen?
MR GROSS: As part of the dispute resolution process, which of course has generic ramifications throughout industry, the award-making body is ordering that the term itself, in this case concerning termination, shall be thus varied. Now, there are various ways to solve an industrial dispute and one then asks whether that is a valid exercise of power and, in our submission, it is one way of resolving potential industrial disputes. Therefore, one should not really be going to tortious-type decided authority like Groves v Lord Wimborne to ask questions about legislative intent and whether it is intended to create a private cause of action. Rather, one looks at whether or not validly the award-making body can solve the problem by in effect changing a term which ordinarily is an implied term.
BRENNAN CJ: I am afraid you have lost me, Mr Gross. Are you saying under your fifth proposition that the provisions of clause 11(a) are statutory in nature and that a contravention of them exposes an offender to a liability in damages in tort?
MR GROSS: No, I am not.
BRENNAN CJ: You are not saying that?
MR GROSS: No. What I am saying is it resolves an industrial dispute situation or potential industrial dispute by prescribing in effect a particular protection where that is intended to be superimposed on the contract but so as to change the operation of the contract, but in any event giving rise to an altered contractual obligation.
BRENNAN CJ: Is this what you are saying, that clause 11(a) is inserted statutorily into the contract thereby excluding any provision of the contract that is inconsistent with it?
MR GROSS: Yes, or qualifying a generally expressed provision which requires that degree of supplementing in order to accord with the award.
BRENNAN CJ: And so it is a question of whether or not the effect of clause 11(a) is to produce a variation in the contract itself?
MR GROSS: Yes, one still has to ask that question and we would submit that that is consistent with the way in which the operation of the award has been described as affecting the contractual obligation. In our submission, superimposition - - -
BRENNAN CJ: Can I just ask you this final question: once it is inserted the power to terminate remains there but any harsh, unjust or unreasonable exercise of the power is in breach of the inserted contractual term. Is that right?
MR GROSS: Yes.
BRENNAN CJ: And what are the damages for that?
MR GROSS: Damages based on a breach of contract model rather than some other model.
BRENNAN CJ: Well then, if one looks at the procedural notion of harshness, one says, if the procedure had been properly carried out and the dismissal took place nonetheless, what would the damages be?
MR GROSS: Can I just clarify this? Is your Honour proposing a situation where, in effect, you have a procedurally fair termination but where substantively it was warranted?
BRENNAN CJ: Substantively warranted but the procedure was unfair.
MR GROSS: Yes. Your Honours, there would be a breach of the award and correspondingly a breach of the implied term which thus altered. The extent of the damages would have to acknowledge the possibility that the employment could have been terminated in any event and with those possibilities of termination including the possibility of termination for this particular impugned conduct. However, in the context of this case, can we just make a couple of quick points.
Firstly, there is a problem of addressing that issue in this case as there were no findings of fact by the Full Bench of the Federal Court on rehearing the matter and although, I think, four of the five days - perhaps four and a half of the five days were taken up in attacking Justice Hill's findings, nevertheless the Full Bench, having found that there was a breach on procedural grounds then referred the matter back to Mr Justice Hill for dealing with the penalty but where, of course, when his Honour would come to consider - - -
BRENNAN CJ: All of this is beside the point in terms of the question of principle. If this is a contractual term then the remedy, one would have thought, in damages for breach of that is to be assessed according to what the position would have been if the contract had been observed. If the contract would have been observed there would have been procedural fairness but termination.
MR GROSS: We agree with that proposition until your Honour says "but termination". If in fact there is a procedural fault that really effectively denies an opportunity not only for the worker to address the substantive charge but also to persuade the employer out of the termination. So that one of the consequences of procedural failure is that one does not know to what extent the - - -
BRENNAN CJ: The opportunity was lost and therefore it is a question of damages, is it, for lost opportunity to convince an employer in circumstances such as the present that an employee ought not to be dismissed though he is involved in pilfering?
MR GROSS: Once again, that is an easy problem to propose when you have someone who is undoubtedly caught in a dishonest act.
BRENNAN CJ: That is the proposition I am putting to you.
MR GROSS: Yes. However, if in fact one has a challenged set of facts and where such a finding is still a matter of debate the remedy must be a real one to reflect the lost opportunity. We submit that what would have happened if the contract had been fulfilled is a difficult question because where you have got an employer who is fairly flagrantly, almost, disregarding procedural protections one cannot assume that having acted unreasonably in that direction they are going to be acting reasonably when it comes to the substantive question. Therefore it is unwise to look at what evidence emerged as a consequence of that flawed process. But if your Honours were talking about this case we would submit that that scenario we challenge and the Full Bench failed wholly to deal with that substantive aspect, perhaps because it was inferred that once there is a breach of the award therefore it goes back for consideration of the penalty. The problem is, when you are fixing a penalty are you doing it by reference to a found procedural breach but, at the same time, assuming that the substantive breach found by Justice Hill should be given effect to when in fact one spends time challenging that but gets no decision from the Full Bench.
Now, your Honours, one of the questions raised by my learned friend before the break was, well, do we still maintain that point? Your Honours, yes we do, but we would submit that, in order to get a bigger share of a fine of no more than $1,000 and with no costs, there is no function to be served in exposing this Court to a repetition of the argument in the Full Bench of the Federal Court where the Court would have to look at three extra volumes of appeal books, video evidence which took many days to go through and have the court subjected to fine argument concerning what inferences are properly to be drawn and where his Honour went wrong.
And, your Honours, that is one of the great difficulties in the case, that the costs of fully exploring that particular issue by far exceed any imaginable gains in respect of the fine. So, your Honours, we continue to maintain that Justice Hill was wrong, not only procedurally but also substantively and the Full Bench ought to have addressed that question.
TOOHEY J: Could I ask you this, Mr Gross: in relation to section 178 of the Act which provides that:
where an organisation.....bound by an award.....breaches a term.....a penalty may be imposed by the Court -
is it your argument that, somehow, you read subsection (1) and its reference to "penalty" as including damages or, if not, then how does the question of damages get before the court in this application?
MR GROSS: Your Honours, on the first part of the question, it has been held by the Full Bench of the Federal Court that the penalty referred to is, in effect, a civil penalty and obviously for a civil penalty, some compensation issues arise. But, how does the matter come before the court - - -
TOOHEY J: Well, no, my first question was really related to the meaning of "penalty". Are you saying that the Full Court in the present case gave a meaning to "penalty" which includes, to some degree at any rate, compensation?
MR GROSS: No. Your Honours, I think it all starts back with the decision of the Full Bench in Gapes and there the Bench, including Justice Deane I think, held that it was a civil penalty and I do not know whether the meaning of civil penalty was further explored. In the present case, in our recollection in the present case, the court has not dealt with the criteria by which the sever penalty is fixed and therefore one does not find there evidence that it must have a damages component or a compensatory component.
TOOHEY J: My question was not so much directed at jurisdiction as what I took to be an argument by you that somehow the court in imposing a penalty had the power to compensate, not merely by reference to a prescribed penalty, but by reference to some wider basis of compensation. But, as well, is there a question of jurisdiction involved?
MR GROSS: The jurisdiction question arises because it is an accrued jurisdiction therefore the Federal Court can deal with the matter - - -
TOOHEY J: You mean, we are in the area of Fencott v Muller and those cases, are we?
MR GROSS: Yes, arising from the same substratum of facts, and the plaintiff himself has title to sue for a penalty, and if he is also suing for damages based in breach of contract arising out of the same substratum of facts, the accrued jurisdiction operates. So there is jurisdiction of the type referred to in section 178, but there is the accrued jurisdiction by virtue of that circumstance.
McHUGH J: Well, one problem I have had with this case ever since I read the judgments some months ago, is the Federal Court seemed to have acted on the basis that the employer had an obligation to give the appellants a hearing about dismissal and if they were in breach in some way concerning that obligation, then the dismissal was unreasonable, harsh or unjust and so on. I find that very difficult to understand. Suppose in this case, in the witness-box, these appellants had admitted that they were engaged in theft; that strikes me as very odd to say, in those circumstances, that their dismissal was harsh, unreasonable or unjust. This case does not seem to me to be a suitable vehicle for determining some of the questions, apart from the abstract question of incorporation. I just wonder whether or not it is not a case where special leave should not be revoked.
MR GROSS: Your Honour, we would oppose that but, your Honour, just to address the particular concern your Honour is raising, of course, the award does not break itself up into two separate duties: one procedural, one substantive.
McHUGH J: I know it does not.
MR GROSS: And it is only one test which has regard to the termination and asks whether that act of termination bears those characteristics.
McHUGH J: That is what troubles me about this case. I just do not follow how their Honours could deal with the case without determining the substantive issue.
MR GROSS: Well, one argument is that really you have got look at the totality of the balance between substantive and procedural flaws, or substantive evidence and procedural flaws, or vice versa, in order to reach that single conclusion. However, the answer to that, we would submit, is more sensible, that even those who are - and this is not this case - undoubtedly guilty of behaviour warranting dismissal on substantive grounds, no matter what type of hearing they get and how long it goes and what they are entitled to say, nevertheless have legitimate expectations to be treated with proper procedures and due dignity, and a provision like this is in there, not just to make sure that the innocent keep their jobs and the guilty leave, but to ensure that there is a proper standard of dealing with this kind of problem so that you do not have unnecessary resentment, or anger.
McHUGH J: But clause 11 itself assumes that people can be dismissed without notice and I would need some convincing that the employer is always bound to provide a hearing, having regard to the second limb in clause 11(a).
MR GROSS: Well, your Honour, dismissal without notice is still consistent with having an appropriate procedure, depending on the nature of the impugned conduct, which involves due inquiry.
McHUGH J: It may be, but it is also consistent with summary dismissal. If the employer catches the employees taking the contents of suitcases and emptying them out and putting the proceeds in their pocket; why does the employer have to have a hearing? He just may say, "You're dismissed."
MR GROSS: Yes, well, as with natural justice cases, the extent of the hearing, or said of the justice required, depends on the circumstances and, of course, we have obvious misconduct of that extremely serious kind and where, in effect, someone was caught specifically doing it, the obligation to specify your concern is rapidly satisfied and, of course, the opportunity to give a satisfactory explanation does not take much time to be respected. So that is quite consistent with termination summarily.
McHUGH J: Where does this doctrine of natural justice come in in employment contracts? I mean, the standard view when I was at the Bar, or I thought it was, was that ever since Ridge v Baldwin an employee was not entitled to a hearing before dismissal unless the employee held an office such as a union organiser or somebody of that nature.
MR GROSS: Yes. Your Honour, using natural justice as an expression is perhaps a dangerous way to deal with what is unfair dismissal or dismissal which offends the procedural protections which are designed to deal with the problem and so we would seek to distance ourselves from that terminology, but, your Honour, just as holders of office originally were given this type of respect and protection and it was seen to be desirable, there is now a recognition that there is no reason why statutory office holders should get that protection whereas other people who have the same economic needs do not get that protection and that is why one has broad-based expressions like this applying right across the work force.
McHUGH J: Then that would mean outside the award context that all dismissals without a hearing were at least voidable or void. What about ordinary employment contracts? You have got a managing director on $500,000 a year and he is dismissed without being given a hearing. They just called him and dismissed him.
MR GROSS: Whether it is void or not depends on whether you accept the Automatic Fire Sprinkler's argument. It does not trouble us when it comes to the other heads of argument which we have.
McHUGH J: Is it your argument he is entitled to a hearing as a general rule?
MR GROSS: A hearing does not have to be something in a formal setting, but nevertheless there is a requirement that he be made aware in sufficient terms, and sufficiency can be governed by many other factors, as to what is the ground of concern and he have an opportunity, if he wishes, to respond before the termination occurs.
McHUGH J: Where does this right of a hearing come in? Is this an implied term or is it imposed by law?
MR GROSS: Your Honour, we would submit that it starts off from the implied duty of co-operation in relation to the performance of the contract and that is a bilateral obligation. One appreciates that its content can vary from time to time. An implied duty of good faith and fair dealing, which may also have a varying content as we recognise, and the obligations that have been recognised, for example, in New Zealand in Goulden's Case, that it is an implied obligation to treat employees with respect and with due consideration when it comes to matters such as not only changing of duties but also termination of employment.
TOOHEY J: But are you not running two notions together; one of dismissal without a hearing, and the other, one of reasonable notice. Is there any reason why an employer should not quite arbitrarily say to an employee, I am perfectly satisfied with the way you are doing your work but I really just cannot stand to have you around. I am giving you notice but it is six month's notice, or what you will, some period that could be generally regarded as reasonable. Can that constitute unjust, unfair or unreasonable dismissal?
MR GROSS: Your Honour, the case still has not been sufficiently worked out on that but, your Honours, obviously those three criteria are intended to respect and consider the position of both parties and their economic and organisational needs in the case of the employer or their legitimate demands for consideration as an employee.
TOOHEY J: All I think I am putting to you, Mr Gross, is that their summary dismissal may raise certain questions, particularly if it is on the basis of some unlawful conduct which the employee is not given an opportunity to answer and dismissal after a period of what might be regarded as reasonable notice in any circumstances. I wonder in the latter case can that sort of dismissal be regarded as unfair, unjust or unreasonable.
MR GROSS: For a long serving employee not given any prior indication his services are less than satisfactory and were to cause great or catastrophic hardship to the person, that may satisfy some criteria, eg harsh, whereas it might not be unjust.
TOOHEY J: I see that. It just really points up that there is a whole range of situations involved in this.
MR GROSS: Yes, your Honour.
McHUGH J: I thought I read somewhere recently that, I think it was under this new legislation, that some employee that is held to have been dismissed unreasonably or harshly or unjustly when he was dismissed for stealing because he had a long period of service and therefore it was regarded as unreasonable to sack him even though he had been found guilty of stealing.
MR GROSS: Yes. There would obviously be anomalous factual decisions which point up the problems of resolving this kind of issue. On the other hand, having such tests and providing tribunals to resolve matters after the event is part of the price that is paid for trying to secure greater employer/employee co-operation and a more enlightened work force, or society, as applied to the working situation.
GUMMOW J: Do you wish to rely on that New Zealand case?
MR GROSS: Yes, I do, your Honour.
GUMMOW J: It is an exercise of statutory power. It is just the sort of case that Justice McHugh was putting to you in connection with Ridge v Baldwin. This man is the statutory office holder.
MR GROSS: Yes, your Honour, that is so, but rather - - -
GUMMOW J: He was appointed, to put it precisely, in exercise of statutory power by this body.
MR GROSS: Yes. I recognise - - -
GUMMOW J: It is not an ordinary employer/employee case.
MR GROSS: Yes, but if we could go to page 383 to find a more general proposition going beyond government office holders, Marlborough Harbour Board v Goulden (1985) 2NZLR 378 at 383.
GUMMOW J: You have to start at page 381, do you not, in order to - - -
MR GROSS: I will now.
GUMMOW J: You either take us to it or you do not. I do not see how you can escape line 2 on page 381, because that is where it all flows from?
MR GROSS: Your Honour, I was not seeking to gain extra comfort from the particular factual analysis, but rather I was more interested in - - -
GUMMOW J: The issue was whether that very broad statutory power was fettered in any way, and that is what Sir Robin Cooke is talking about when one gets over to 382, line 6.
MR GROSS: Yes, your Honour, that is right. However, at page 383, lines 10 through to 28, the judgment of Justice Cooke expresses more general considerations. At line 9 on page 383:
Turning to the application to this case of principles to be found in the modern authorities, we think that the position has probably been reached in New Zealand where there are few, if any, relationships of employment, public or private, to which the requirements of fairness have no application whatever. Very clear statutory or contractual language would be necessary to exclude this elementary duty. Consider Lord Wilberforce's "I do not wish to assume that this is inevitably so" in Malloch at p 1294, and note the recognition by Sir John Donaldson MR in the East Berkshire Case at p 431 that natural justice may apply in the essentially contractual sphere.
McHUGH J: What does he mean by "the essentially contractual sphere"? Does he mean no other fact and no public employment, no statutory employment?
MR GROSS: It seems to be private contract rather than one with a statutory flavour or a code of protection. At line 18:
In Auckland Shop Employees Union v Woolworths (NZ) Ltd -
and it is fairly obvious there are no government employers or employees there -
this Court accepted that in the sphere governed by the Industrial Relations Act the relationship of confidence and trust that ought to exist between employer and employee imports duties on both sides, including a duty on the part of the employer, if carrying out an inquiry preceding a resignation or dismissal (in that case on the ground of possible dishonesty), to do so in a fair and reasonable manner. Perhaps a similar implication might quite readily be found in private contracts of employment not subject to the 1973 Act.
GUMMOW J: That is what you have to fix on, is it not?
MR GROSS:
Fair and reasonable treatment is so generally expected today of any employer that the law may come to recognise it as an ordinary obligation in a contract of service.
Then his Honour goes on to deal with the public sector and the statutory provisions. We would submit that there are values that have to be respected when it comes to termination of employment even when you are dealing with someone who is arguably or undoubtedly dishonest.
TOOHEY J: Well, in this present case, does your argument need go any further than saying that there should have been procedural fairness before the applicants, or the present appellants, were summarily dismissed.
MR GROSS: That is so, yes.
TOOHEY J: And we do not really have to look beyond that situation, do we?
MR GROSS: No, and we adopt fully the reasoning of the Full Bench on that issue.
McHUGH J: Even if a person is as guilty as a person can be and it is established at the hearing?
MR GROSS: Well, that is not this case. See, very often that can be retrospectively discovered evidence or, alternatively, conclusions drawn on a more measured consideration of the matter.
TOOHEY J: Well, take a case where other offences are found. For example, supposing there was no substance in the particular ground the person was dismissed on and yet, the person is an accountant and it is found out that that person has been engaged in whole-scale embezzlement. Is the termination harsh, unreasonable or unjust there?
MR GROSS: Well, your Honours, we would submit that one can arguably see situations where the substantive breach is so heinous that any procedure extended would only be a ritual with an expectable outcome.
McHUGH J: But natural justice seems to be encroaching in all jurisdictions, extending its domain and here it is, even in private contractual employment, it is being said that it applies. Fairness - I am not sure that we need any other guidelines in the law except fairness these days.
BRENNAN CJ: The word conscionable
McHUGH J: And conscionable.
MR GROSS: Procedural fairness as applied to unfair dismissal is well recognised throughout the western world as being desirable for industrial harmony and it also serves to reflect generally respected beliefs as to the dignity of labour and the nature of the power relationship between employer and employee. Now, in our submission if, in fact, one reasons why you do not have to be procedurally fair to someone who deserves sacking anyway, you are undermining that part of the protection which is designed to ensure that all are treated with dignity or appropriate to the fact there is an employment relationship.
McHUGH J: But, the bottom line is, was this dismissal unfair, harsh or unreasonable? And that is a question of fact and it is a term in a contract, on your argument. These lawyers' distinctions about fair hearings and so on seem to be no more than factors to be taken into account.
MR GROSS: Well, your Honour, that arguably is so for the reasons we have just discussed but, your Honours, we would submit that the answer may lie in the fact that you can have a dismissal which offends those particular standards but where the expectable penalty would be virtually zero as would any damages, even recognising a contractual entitlement. And, so maybe that is the way the problem is solved rather than saying, "Well, you can throw procedure out the window" if, in fact, you've got a suitably undeserving worker who is being terminated.
And, of course, the trouble with that method of reasoning is that there will be a temptation to treat them all like that, or a greater number than you should, hoping that they will do nothing about it or, alternatively, hoping that if they sue, you will be able to sufficiently develop your substantive case to show that the failures of a procedural kind were technical but not worth worrying about.
That is why you have the protections in at the point of termination, just to avoid that temptation to engage in a more aggressive termination expecting that there will be no comeback. Of course, that is also in the context of the difficulties that anyone faces in pursuing an employer in respect of a wrongful dismissal.
TOOHEY J: Of course, you are faced here with notices of cross-appeal which challenge an obligation on the part of the respondent to accord procedural fairness before dismissal in the present case, but I think the notice of cross-appeal is couched more widely, that no obligation cast by clause 11(a) on an employer to accord procedural fairness. I am not suggesting that this is necessarily the appropriate time to deal with that. It comes up by way of cross-appeal. I am just simply pointing out that the argument against you is that there is no obligation to accord procedural fairness in relation to clause 11(a).
MR GROSS: In maintaining the opposing position we reassert that it is difficult to work out what substituted outcome or test one is to propose if in fact the Full Bench has totally failed to decide the appeal in relation to the substantive aspects. And that was a very strenuously fought issue both at trial and on appeal. I think that completes my submissions.
I am reminded, and I am very grateful for this, that the subsequent legislative picture confirms what we are putting. Section 170DB under the heading "EMPLOYEE TO BE GIVEN NOTICE OF TERMINATION"
has a prohibition on an employer terminating employment unless various forms of notice have been given and, of course, they are of the natural justice type - adequate opportunity to respond, and that type of thing.
Secondly, we would point out that the international recommendation, or covenant, from the International Labour Organisation, which this Act is seen as giving adherence to, or respect to, is schedule 10 to the Industrial Relations Act 1988 and it has an Article 7:
The employment of a worker shall not be terminated for reasons related to the worker's conduct or performance before he is provided an opportunity to defend himself against the allegations made, unless the employer cannot reasonably be expected to provide this opportunity.
And there is a heading "PROCEDURE OF APPEAL AGAINST TERMINATION". But, your Honours, it shows that - - -
BRENNAN CJ: When was that introduced?
MR GROSS: Your Honours, the convention was ratified in 1993 and, as the second reading speech, which I have already given your Honours a copy of for the Industrial Relations Reform Bill, makes clear the amendments to the legislation are seen as giving effect to this particular ILO Convention, and your Honours, the references to those are at page 2, first column at point 4 and page 4, second column at point 3. I do not think your Honours want me to read them.
GUMMOW J: Did you say schedule 9?
MR GROSS: Schedule 10, I am sorry.
GUMMOW J: Thank you.
MR GROSS: I may have said schedule 9 and I now correct it to schedule 10.
TOOHEY J: Could I just ask you this, Mr Gross, and I do not want to take up too much time, but just so that I can understand clause 11(a), is it your argument that the clause precludes the termination of employment without reason or that it permits the termination of employment with or without reason, although in a case where there is no good reason, there may be an obligation to give a lengthy period of notice or to pay some form of compensation?
MR GROSS: Your Honours, could I answer this in two parts: the ordinary implied term enables the employer to terminate for good reason, bad reason or no reason at all. That implied term is modified by the award prohibition so that however way he does it in those three situations, or which way he wants to do it or would otherwise have done it in the absence of the award, he has to pass the test of that termination not being harsh, unjust or unreasonable, and ordinarily termination without notice, where there is no misconduct, would plainly be prohibited by the award. As for what degree of notice is required in other circumstances obviously depends upon the facts.
TOOHEY J: So the illustration I gave you a while ago of the employer who had no real complaint about the employee's performance of duties, but had developed some personal antagonism, is it your understanding of clause 11(a) that it would nevertheless permit dismissal of the employee, but the precise terms on which the employee was dismissed, in particular the length of notice or payment of compensation, would have to be looked at in order to determine whether the dismissal was unjust or unreasonable?
MR GROSS: Your Honour, that would appear to be so, except that it may well be that the protection, if in fact our submission is right that the employment stays on foot, would include, as it were, a holding that the employment continues on foot and that his protection is he still has his job with a chance to satisfy his employer by no doubt the persuasion process, and that he still has the pay that he would have received between the purported termination and the date when the matter is decided.
TOOHEY J: Yes, thank you.
MR GROSS: Thank you, your Honour.
BRENNAN CJ: Thank you, Mr Gross. Yes, Mr Jackson.
MR JACKSON: Your Honours, may I hand to the Court copies of an outline of submissions. May I say two things about it. The first is that I apologise for the somewhat faint nature of it but it was changed somewhat and that involved sending it by fax and then photocopying it. The second thing is that it refers to a document called summary of facts and that is referred to in, I think, paragraph 27 on page 9. Can I give your Honours that document when I come to it perhaps later today or I suspect tomorrow.
BRENNAN CJ: Perhaps you should give us a little time to peruse it.
MR JACKSON: Yes, your Honour.
BRENNAN CJ: Yes, Mr Jackson.
MR JACKSON: Your Honours, one must bear in mind that this is a case where there is really nothing other than the award provision itself which might be relied upon to establish a basis for the claim in damages sought to be advanced and by that I mean in particular that it is not a case where there is any evidence such as that of the nature discussed between your Honour Justice Toohey and my learned friend this morning to indicate that there was some kind of incorporation, whatever that might mean, of the terms of the award into a contract of employment. It is simply a case which depends upon the existence of the award. So that, your Honours, the argument is based on the award and I intend, if I may, to go first to the terms of the award a little out of the order set out in our outline of submissions and then to the enactments which are material.
I would seek to do that, your Honours, first to demonstrate that if one looks at the internal material, that is the award itself, the provisions which are said to give rise to the rights in question, then their terms are such that they really lead to a conclusion the other way. The second thing then, your Honour, is to go to the terms of the statutes. I say "the statutes" because two are relevant because of the change from the Conciliation and Arbitration Act 1904 to the Industrial Relations Act to demonstrate what, in our submission, is the position that those Acts made provision for the creation of rights by the making of awards and made specific provision for the way in which those awards were to be enforced.
Could I take your Honours immediately to the terms of the award. Your Honours should have been given a copy of the award. The whole award was in evidence. It was not reproduced in the appeal books. Could I take your Honours to clause 11 of it which appears at page 11 and what your Honours will see, in our submission, and the conclusion we will be submitting follows from it, is that the terms of the award do not support the contention that a civil right of action was intended to be conferred in circumstances where there was some contravention of clause 11(a).
Could I take your Honours now to clause 11(a). What your Honours will see is that it speaks of termination by an employer not being:
harsh, unjust or unreasonable.
It indicates specifically in the second paragraph of subclause 11(a) that the termination earlier referred to includes:
termination with or without notice.
Could I pause to say, your Honours, that your Honours will see that clause 11 is not entitled as clause 10 is, "Contract of Employment", whatever that might mean, if I can put it parenthetically, in relation to clause 10, because what clause 10 appears to be doing is to make specific prescription in relation to specific matters and one looks, for example, at clause 10(g), whilst it would be possible to describe that as being something that was a term of a contract of employment, it seems a little less likely that that is the most apt description of it.
Could I take your Honours then from clause 11(a) through to clause 11(d) and what your Honours will see is that clause 11(d) provides for there to be particular periods of notice to be given in order to terminate employment. Your Honours will see particularly that when one comes to subparagraph (v) of that subclause that it expressly excludes the requirement for notice:
in the case of dismissal for conduct that justifies instant dismissal -
which includes, as one might expect, things such as neglect of duty. One sees that the terms of clause 11 then prescribe a period of termination but also contemplate that there may be termination in accordance with the clause which occurs in the circumstances amounting to, in effect, instant dismissal.
Your Honours, one then goes on to see in clause 11(e) that:
The notice of termination required to be given by an employee shall be the same as that required of an employer -
And then one sees, your Honours, the important provision of clause 11(f) which is a disputes settlement procedure. I will take your Honours in just a moment if I may - and perhaps I could postpone it for just a moment - to the several provisions of the Conciliation and Arbitration Act I referred to there, but may I say that what they are, your Honours, is that they amount to the provisions which deal with the remedies given by the Act where there has been a breach of an award.
So that what is being said by clause 11(f) is that, in effect, in addition to the award enforcement provisions provided for by the Act, any dispute or claim arising under this clause shall be dealt with in accordance with clause 41. Clause 41, to which I will take your Honours now, which is at page 39, deals with a particular procedure which is to be gone through where a dispute or claim arises under clause 11, and the dispute or claim might well be whether a termination of employment in accordance with the clause has been one that has occurred in circumstances attracting the opprobrium, as it were, of the opening words of clause 11(a).
What your Honours will see from clause 41 is that it provides that any dispute or claim, and your Honours will see it is prefaced again by the words "subject to the Act", in effect, "any dispute or claim shall be dealt with" in the manner there set out. What your Honours will see then in subparagraph (i), the employee has to discuss the matter with the employee's supervisor, then a higher level of intervention is involved; the accredited union representative and the personnel officer. Then, paragraph (iii), it goes to the branch secretary and the appropriate representative of the employer. Then, paragraph (iv), again to a higher level, and then your Honours will see in paragraph (v) that if it still is not settled, it goes to the Conciliation and Arbitration Commission, and the decision of that body is final and is to be accepted by the parties.
Now, what your Honours will then see is that paragraph (vi) involves that if that procedure is brought into being, then work is to continue as instructed by the employer; no party is to be prejudiced by the continuance of work. Now, if I could just pause at that point, what your Honours will see is that the terms of clause 41, we would submit, are against the view that there is to be some additional remedy of the nature presently contemplated; that is, a remedy in addition to that special remedy provided for by clause 41 itself, and the remedy provided for by the various provisions of the Act.
TOOHEY J: When you speak of the remedy provided by clause 41, Mr Jackson - - -
MR JACKSON: Your Honour, I used the term "remedy" loosely, but the procedure contemplated - - -
TOOHEY J: That was not my matter of concern, but do you understand it to mean that the member of the commission must give a decision in accordance with clause 11? In other words, is the function of the commissioner to apply clause 11 to the facts, or is there some more wide-ranging option available to the commissioner.
MR JACKSON: Your Honour, really if I could just go back to the terms of clause 41, what the commissioner seems to be doing under that clause is to be endeavouring, in a sense, to do what the three levels below the commissioner, or before the commissioner might have done, that is to arrive at a settlement of the matter and your Honour will see the phrase "the dispute or claim" first of all then becomes the matter being discussed in paragraph (i), that matter is not settled in paragraph (ii) and that phraseology continues through. And, what it seems to be, your Honours, is that there is, in effect, a requirement that there be an attempt to settle the matter by a decision of the Conciliation and Arbitration Commission.
And, your Honours - perhaps I am putting this badly - but the procedure under clause 41 is one that is to be brought into being, in effect, at the instance of the employee. Your Honour will see that from the words of clause 41(i) which says:
The matter shall first be discussed by the aggrieved employee with their supervisor.
If, as in a case like this, that course is chosen, or it is decided not to follow that course on behalf of the employee, well then, the employee does not have the benefit of the procedure which is available to the employee by virtue of the clause.
TOOHEY J: It would be curious if the commissioner had some open-ended power to determine the matter and in terms of awarding compensation, for instance, that went beyond the compensation powers in the Act itself. But, it is a little obscure in that respect.
MR JACKSON: Oh, yes, your Honour. And, no doubt at the time when this award was made, the margin between judicial and non-judicial powers of the commission was, perhaps, more in favour of the commission only being able to exercise, in effect, non-judicial powers in relation to reinstatement than might presently be the case.
But, your Honour, the point I am seeking to make about it is that, whatever might be the precise nature of the power given to the commission to settle the dispute, what one does see is that a particular method was provided for by clause 41 and, your Honours, one cannot really separate out the terms of clause 41 from the terms of clause 11(a) because the very thing that is contemplated by clause 11, namely by clause 11(g) I think it is, is that all disputes and claims arising under clause 11 are to be dealt with in the manner provided for by clause 41.
And, your Honours, what that means in short is that if one is looking at it purely as a matter of the award, what one sees is a situation where, at the time of giving, in effect, the new right - I use the term "in a sense" in inverted commas - whatever its exact content might be, at the time of giving the right contemplated by clause 11(a), a particular and new remedy was given, it was given in the sense of saying every dispute under this goes via the clause 41 method but then, each of the two provisions was prefaced by terms which recognise that the Act itself provided for there to be particular means by which breaches of the awards might be the subject of potential sanctions.
And, your Honours, it is difficult in those circumstances, in our submission, to arrive at the view that, in addition to those two means, the commission, in making the award, assuming it had power to do so, was intending to give some other further remedy of a very new kind and of a very, very far-reaching kind - because millions of dollars would be involved in these things - without saying so expressly.
So, your Honours, that is the first thing. We would submit that if one looks at the award by itself, it gives no support to the notion which lies at the heart of the case on behalf of the appellants. I should also give your Honours in that regard a reference, if I could go to volume 4 for just a moment, to what was said in that connection by Mr Justice Keely at page 813. It is a passage that commences at line 16 and goes through to page 814, line 3. Your Honours, I should say that the context in which his Honour makes these observations is the context of dealing with Automatic Fire Sprinklers v Watson, but the observations made by his Honour there, although dealing with that topic, are more generally apt as well.
Could I give your Honours then a reference to the judgment of Mr Justice Beaumont and Mr Justice Heerey on the same topic at page 861, commencing at the top of the page. It is a long passage which really goes through to page 864, about point 4, where there is a discussion of the terms of the award and other matters germane to that.
Your Honours, could I move then from that aspect of the award to the two enactments in question. The purpose of going to the enactments is to seek to make out the proposition that the enactments allow the creation of new rights by awards but also they provide the means by which the rights so enabled to be created are to be enforced. The award in the present case was made pursuant to the Conciliation and Arbitration Act, the relevant provision of that being section 41. Section 41 is the provision the equivalent of which is now section 111. But if I could just say in relation to section 41 that your Honours will see that in section 41(1)(b) there is power to make an award, and your Honours will see from the opening words of section 41(1) that is in relation to an industrial dispute, a term defined of course in the Act.
Your Honours, so far as the objects of the Act were concerned, they bear upon the topic in question. If I could take your Honours to section 2 of that Act, what your Honours will see is that one of the objects, described as being one of the chief objects of the Act, was - that is set out in section 2(d), namely that the chief objects are:
(d) to provide for the observance and enforcement of agreements and awards made for the prevention or settlement or industrial disputes -
It is possible of course that if one were to consider that provision in isolation, one could say that it does not say that it is to provide the only means of observance and enforcement of those agreements. But when one looks at the remaining provisions, which I will take your Honours to in just a moment, what your Honours will see, in our submission, is that that was the intention.
Now, your Honours, you will then see that section 61 listed the persons upon whom an award was to be binding and what one sees, of course, is that - I will not go through the lists of persons - one sees for example section 61(f):
all members of organizations bound by the award.
Your Honours, the Act was divided, if I could come directly to the matters involved, into various Parts - I use the expression with a capital "P" - including Part VI, and Part VI itself had the title "The Enforcement of Orders and Awards". The provisions of Part VI dealt specifically with the methods of enforcement of provisions of awards, and could I take your Honours to section 119. Your Honours will see that section 119 is preceded by the heading on that Part and then the provisions of section 119(l) deal with the ability to obtain the imposition of a penalty for breach or non-observance of an award. Then there is the single penalty provision to which I think your Honour Justice McHugh may have been adverting earlier in section 119(1A). One then sees, your Honours, in section 119(2) the identity of the persons who may sue for and recover the penalty, and your Honours will see those persons listed, for example, in (c):
any member of any organization who is affected by the breach;
Then one goes to section 119(3) and section 119(3) gives an additional power and that is, that if it appears in such proceedings that an employee:
has not been paid an amount to which he is entitled under an order or award, that Court may order that the employer shall pay to the employee the amount -
et cetera, and your Honours will see that there is a particular time limit provided for and that is also so, your Honours, in section 119(4).
Your Honours, one goes then to section 120 and section 120 is the provision that gives a discretion to:
order that the penalty, or any part thereof, be paid -
other than into the Consolidated Revenue Fund and in effect may be paid to the person who sued for it, for example.
Your Honours, section 122 is an additional provision creating an offence that a:
person shall wilfully make default in compliance with an order or award.
And section 123 is a provision which allows:
An employee entitled to the benefit of an award -
to sue for any amount, or any payment, which would be due to the employee under the Award, and again, a specific time is fixed for that, together with a right to go to any court.
Your Honours, the structure of that Act which allows the creation of, in a sense, new rights and obligations also, in our submission, did provide for the means of enforcement of it and prima facie, we would submit, those means are the exclusive means available. There are a couple of other provisions of that Act I will refer your Honours to in just a moment when dealing with the Industrial Relations Act 1988 but the provisions are to the same effect and if I can give your Honours the references in the other Act and the references of that time because they are more or less put together in the other Act.
Your Honours, the Conciliation and Arbitration Act was repealed by the Industrial Relations (Consequential Provisions) Act section 3 and by section 7(1) of that Act the award continued in force as if it were made under the Industrial Relations Act. Your Honours, the Industrial Relations Act contained provisions which relevantly are similar to those to which I have referred in the Conciliation and Arbitration Act. May I take your Honours to them very briefly. First, your Honours, the objects of the Act in section 3, once again one sees in this case section 3(e), which says:
to provide for the observance and enforcement of agreements and awards made for the prevention and settlement of industrial disputes -
I should say that your Honours have been given I think a copy of the Industrial Relations Act and the one your Honour the Chief Justice is looking at is the current one. The one I am about to speak of is the one which was in force at the time of the events, namely, the sacking in the present case. I think the provisions I am about to refer to have been extracted in the copy your Honour has been given. Section 3(e) was the provision which provided for the relevant object of the Act. Section 111 is the award-making power. Once again one sees Part VIII, the provision dealing with observance of the awards. This time it is headed "Compliance" and your Honours will see it commences immediately before section 178. It is divided up into divisions.
Your Honours will see section 178(1), which is the provision allowing the imposition of the penalty; section 178(4), the actual provision for the penalty; section 178(5), the provision which identifies the persons who may sue for it; section 178(6), which is the provision which allows there to be in addition an order for payment of unpaid moneys. Once again, your Honours, one sees the time limits in subsections (7) and (8). One sees also, your Honours, in section 179 again the provision which entitles an employee to sue for moneys due under an award and one then sees in sections 181 to 186 Division 2, the provisions of the Act which deal with breaches or potential breaches of particular types of clauses in an award, namely, bans clause as defined earlier in the Act.
Your Honours, those provisions had their equivalents in sections 32 and 33 of the Conciliation and Arbitration Act but they are drawn together in this part of the Act. Then, your Honours, one sees also, in Division 3, in section 187, a provision for cancellation and a suspension of awards and orders and it is possible for orders to be made suspending or cancelling the operation of awards, and your Honours will see 187(4), if it appears that there have been in various circumstances breaches or potential breaches of an award.
Your Honours, could I refer your Honours then to section 311 and 312 of that Act. Section 311 is, once again, the provision that makes it an offence wilfully to contravene an award and then section 312, a provision which prevents, to put it shortly, incitement to boycott awards and similar things. Those provisions had their equivalents in section 122 and 138 of the Conciliation and Arbitration Act and your Honours have already been referred to section 356 which is the provision which allows the amount of a penalty to be paid to consolidated revenue or someone else.
If I could take your Honours then, for just a moment, to paragraph 7(b) of our outline of submissions, as we submit there, there have also been subsequent changes to the relevant provisions of the Act. Your Honours, not all the ones have been included there. Some of them have been referred to by our learned friends this morning but, your Honours, without going to the subsequent provisions in any detail, what appears in our submission is that, in the several forms of the Act, Parliament has provided for specific remedies in respect of, if I could use the phrase of now long ago, the new province for law and order. That fact militates, in our submission, against the proposition that additional rights or remedies exist dehors the Act.
At an early point in the operation of the arbitration system in Australia a similar view was taken by the Court and that is in Josephson v Walker [1914] HCA 68; (1914) 18 CLR 691 and, your Honours, if I could go first to page 695, in the reasons for judgment of Chief Justice Griffith, what your Honours will see - dealing with the Industrial Arbitration Act (1912) of New South Wales - is that a demurrer in the Supreme Court to a claim made under an award, in effect. What your Honours will see is that:
The ground of the demurrer is substantially that an action will not lie in the Supreme Court, that the obligation sought to be enforced is an obligation created by the Statute, and that the general rule is that where a Statute creates a new obligation and provides a special mode of enforcing it, no other Court has jurisdiction to enforce that obligation.
Your Honours, I shall not read it out but we would invite your Honours to read what was said by the Chief Justice when he was quoting from Pasmore v Oswald-twistle Urban Council and you will see the principle stated by the Earl of Halsbury and the passage, your Honours, goes over to the top of the next page, about line 6. That is where his Honour is quoting from the Pasmore Case.
And then his Honour goes on in the first new paragraph on page 696 to say:
I have already read the first paragraph of sec.49. If that paragraph stood alone, a new obligation would be created, and if nothing more were said that obligation could be enforced in any Court of competent jurisdiction.
Your Honours will see that his Honour then goes on to deal with another matter, which is germane for present purposes, namely the effect of the obligation created and the effect of the award. That goes down to about the middle of the page and his Honour is saying that:
that which is called an award is of an entirely different character.
That is, from private arbitrator's award.
The obligation created by it does not depend upon any agreement of the parties express or implied, and may arise without their knowledge.
Then, having discussed the nature of the award, he goes on to say at page 697 - the passage to which I am about to refer is about point 3 on the page. His Honour says:
The effect of these provisions is that every case may come in one way or another before the Court of Industrial Arbitration -
He then says:
Under those circumstances I think that the general rule applies. A new obligation is created and a special mode of enforcing it is given. That mode, according to the general rule, is exclusive of any other mode of enforcing it. That is sufficient to dispose of this case.
He goes on to accept, of course, as your Honours might expect, the proposition that the rule might not be of universal application and was a presumption that could be rebutted, but your Honours will see that he goes on to say then at about point 7 or 8 on the page:
In this case, however, having regard to the peculiar nature of the obligation there seem to be very special reasons, not only for appointing a special tribunal, but also for limiting the time -
And so on. Your Honours will see that that discussion goes on through the whole of that paragraph to about the middle of page 698 and the reference to the fact that the rights were created, in effect, and a special tribunal was created. Justice Isaacs dealt with the issue also. If I could go perhaps first to the end of his Honour's reasons, which appears at the end of page 703, where he too deals with the question of the nature of the award, and it is the last paragraph of his reasons where he speaks of the fact that:
the Act left the contract of employment as at common law, but merely affixed a statutory rate of wages, and also provided an optional method of enforcement. That being erroneous, as the right to the statutory rate of wages is not part of the contract, but a new right with an inseparable new remedy -
And he went on to work on that basis.
McHUGH J: Mr Jackson, I am just having some trouble understanding where we are going. Your opponent has not said that he relies on the Act as creating a contractual obligation of a kind or inserting it...... If it was held that it was the intention of Parliament not to do it, that would not stop the common law courts if they wanted to, importing a - - -
MR JACKSON: With respect, your Honour, it would in a sense but what I mean by that is this, our learned friend's argument, if I can say so with respect, really puts to one side the terms of the Act. Now, we would seek to start at a point anterior to that and say that any right that is given, or any remedy that is sought to exist, must be one that ultimately derives, one way or another, from something done under the Act.
McHUGH J: But he does not rely on the Act; he relies on the contract. He says, "This is my contract. This is incorporated by some means or other", and it gets there.
MR JACKSON: Well, your Honour, could I say these things about that: the first is that there is really - try as one may and walk around all through the record as much as one likes, there is not anything there to establish any connection apart from the existence of the award, and it is the existence of the award provision and nothing else. Now, your Honour, if one is looking to see what effect the existence of the award provision can have, one has to really look at, then, two things; one is to see what, according to its terms, the award does, and I have dealt with that already, your Honours. The second thing is to see what could the award do if that is all one is looking at, and to see what could happen there, one really has to look to see what the terms of the Act permit it to do.
McHUGH J: That argument seems to concentrate, or to meet an argument that the appellant is seeking to enforce the award. He is not seeking to enforce the award at all; he is seeking to enforce a contract.
MR JACKSON: Your Honour, I am conscious of that, of course, but what I am seeking to say is that - I will just perhaps go back one stage, your Honour - it is possible, no doubt, as the Privy Council's observations in True suggest, to have a contract that says, "The contract contains the following terms of an award", picking it up in effect by incorporation. This is a case where you do not have anything to establish that that is so. So that the argument has to be then that there is some incorporation either by law, or as a matter of fact, but the only facts that there are upon which that incorporation can rely, are the ones that are the base facts, essentially, of the employment and the existence of the award.
McHUGH J: But, for his purposes - he happens to have an award, but it might be an industrial agreement between a union and somebody; it might be some document that is used by somebody else - he just says that it fits there.
MR JACKSON: I suppose your Honour could say that does not. Could I just say, however, that no doubt is the result that is sought to be achieved and the approach that is being taken. Your Honour, I intend to deal with those aspects of it in just a moment, but what we are seeking to do is to say that in a case like this where all you have got in fact is the award, if you are looking to see what effect the award could have, or could this result be achieved from having the award and no more, what you have to do is to see what the Act under which that award is made would permit. That is what we are seeking to do. If I could just say in relation to that, your Honours, without dwelling on it - - -
GUMMOW J: You are saying in a way, are you, you cannot just pick up 11(a)? You have got to look at the rest before you work out what is said to be going into the contract?
MR JACKSON: Yes, your Honour. In fact, we would put it really in two ways in relation to that. The first is, to pick up exactly what your Honour put to me, that 11(a) is part of 11 and 11 expressly incorporates 41. The two provisions speak of "the provisions of the Act". They have no particular meaning that can be elicited unless one takes into account an aspect of them, namely, the particular reference to the Act. The second thing is, your Honour, that if one is saying - and this is the point I was discussing in a sense with Justice McHugh - that there is to be found some implication as a matter of law and the implication exists by virtue of the existence of the award, then it really, I suppose, would not matter very much what the award was. What we would submit in relation to it is that the only results in terms of there being legal remedies or legal rights that can flow from the award are those that are contemplated by the Act pursuant to which it is made.
McHUGH J: But I still have difficulty with that, because it seems to me that the appellant says it doesn't matter what federal law intended or what the commission intended, New South Wales law imports this into the contract or, alternatively, the parties must be presumed to have brought it in, irrespective of what Parliament did.
MR JACKSON: Your Honour, the difficulty that that argument faces is really one, I suppose, that is fundamentally constitutional because, if the situation be - and I think this is dealt with in passing perhaps by Justice Wilson in Wardley's Case - I can give your Honours a reference to that in a little while. But if the position be that there is a law of the Commonwealth, namely the Conciliation and Arbitration Act or the Industrial Relations Act, which has the effect that the remedies which are to exist in respect of contraventions of awards are to be limited to those provided for by the Act, then there would be considerable difficulty, in our submission, either by virtue of section 109, if one was speaking of statutes of the State, or by virtue of section 5 of the covering clauses if there were to be contracts made or common law provisions of the States in effect which had the effect that the parliamentary intention disclosed in the Conciliation and Arbitration Act, Industrial Relations Act was itself contravened.
So that, your Honour, one could imagine, of course, cases where there was a provision which one sees in an award which is adopted, for example, for the purposes of a contract of employment by persons not subject to the award. It is a simple incorporation of some standard. But, your Honours, there are particular difficulties, in our submission, if one comes to adopt the view that what is being done is to adopt, as a term of the contract, something which is a provision of an award and which is subject to the Act under which the award is made.
McHUGH J: So, you would say that if a New South Wales statute passed at law in the terms of clause 11(a), it could not constitutionally operate, if the intention of this award is that the remedies in the C&A Act are to be exclusive?
MR JACKSON: Well, if it applied to the same employees, of course, yes.
McHUGH J: Yes, the same employees.
MR JACKSON: Yes, your Honour, yes. Your Honour, I mentioned Wardley - - -
McHUGH J: Well, Metal Trades is probably a better illustration of it, because - - -
MR JACKSON: Yes, I think so your Honour. Your Honour, perhaps I can give a reference. I suspect, despite my declaration earlier today, that I will not be finishing this afternoon. So, your Honours, that is the situation. Could I say also one other thing, your Honours, about the incorporation of awards in the sense of True. Your Honours, in that case there was held to be an incorporation of the award as it a term of the contract, but one does have to bear in mind that, although there may well be circumstances in which an employer says to an employee, "You'll be working under the so-and-so award" it does not follow from that that the terms of the award are themselves terms of the contract, nor does it follow, even if they were terms of the contract in that sense, that they were to be given any greater effect than they would have if they were not terms of the contract.
Your Honours, I do not mean to be unduly obscure in saying that but it is very easy for there to be a situation where an employee says to an employer, "What am I working under?" and he says "You're working under the such-and-such award". Now, your Honours, if one accepts that, it does not follow necessarily that the award becomes a term of the contract nor even if it were said, "Oh, well, the terms of the contract are the transport workers' award applies", your Honours, it does not follow that every breach of the transport workers' award is intended to give rise to an action for damages for breach of that, as distinct from simply being an indication, in effect, that the procedures provided for by that Act are available in the case of breaches of it. It must depend on the circumstances.
BRENNAN CJ: Mr Jackson, is this the propositions that you are putting, that in relation to the incorporation in fact of clause 11(a) in the contract the facts are against it?
MR JACKSON: Yes.
BRENNAN CJ: And there is no finding which supports it. In relation to incorporation by operation of law, that the cases to which you have referred indicate that the law does not operate by way of placing clause 11(a) in the contract, but only by way of providing the remedies of the kind which Josephson v Walker speak?
MR JACKSON: Yes, your Honour. Your Honours, the approach taken in Josephson v Walker, which of course is a theory of general application, is needless to say subject to the particular terms of the Act under consideration, but there is really nothing in the Act to suggest that a different conclusion would be arrived at and, indeed, the provisions of the Act support the conclusion for which we were contending, in our submission. Could I say also, your Honours, that the history of the Act, as referred to in the reasons for judgment of Mr Justice Beaumont and Mr Justice Heerey, in relation to the history of provisions for enforcement of awards, supports that conclusion also, in our submission. Could I refer your Honours to page 871 point 10 going through to page 873 about line 7. Your Honours will recall the really notorious differences of views that have been held over the years concerning the appropriate forms of relief in respect of breaches of awards.
Your Honours, the submissions we have made so far, if accepted, really deal, in our submission, with the causes of action that are relied on by the appellants in relation to there being a cause of action which incorporates by the operation of law in some way the terms of the award into the contract or gives a cause of action based on the existence of the award. Your Honours, can I just give one other reference in that regard and it is this: even in cases where what is relied upon is a cause of action arising from breach of statutory duty, what is now clear, in our submission, is that it is not sufficient, for example, for there to be a provision which obviously is, in one respect or another, for the benefit of particular people who seek to sue on it, but the provision must also be one which, as a matter of construction of the Act, indicates that there is to be a cause of action arising by reason of a contravention of it.
Your Honours, could I just give a reference in that regard. It is the decision of the House of Lords in Reg v Deputy Governor of Pankhurst Prison, Ex parte Hague (1992) 1 AC 58 at 169 to 171 - that is the principal judgment - and also page 159. I will not take your Honours to that now. I am sorry, that case was not on our list but it is I think in a volume which your Honours will have with Scally's Case.
Your Honours, could I come then to the submissions that we would seek to make in paragraphs 13 and following of our outline of submissions and as we submit there, broadly speaking, terms of course may be implied as implications of fact or implications as a matter of law and what we submit, your Honours, in relation to the implication of clause 11(a) as an implication of fact is that the test is not - the tests are not satisfied in the two respects to which we refer in paragraphs 15 and 16. In particular, your Honours, dealing with paragraph 15(a), there is no doubt that contracts of employment have been workable and effective for years before the introduction of provisions such as clause 11(a). Could I take your Honours very briefly to page 864, line 25 to page 865, line 15, where your Honours will see some reference to the history in that regard.
No doubt, your Honours, it was thought by the commission to be a desirable thing that there should be provisions of the kind set out in clause 11 but, your Honours, that does not mean that it was necessary that those provisions be inserted in the contract of employment. The second feature, we would submit, is that which we refer to in paragraph 15(b) and that is a matter dealt with by their Honours at page 864 lines 19 to 24 and that is, your Honours, that if it be that the provisions of clause 11 operate independently of the will of the parties and are backed by the force of the Statute of the Commonwealth, then it can hardly be said to be necessary that they become part of the contract between the parties.
They operate whatever the contract says as, in effect, Justice Isaac said in the passage to which I was referring a moment ago and, of course, as your Honours will see from the well-known reference to Codelfa at page 346, it is not sufficient to import the term that it would be reasonable that that should occur. Your Honours, I have noted the time - - -
BRENNAN CJ: How long do you expect the remainder of your argument to take, Mr Jackson?
MR JACKSON: Your Honour, I expect to be about three-quarters of an hour. So far as the questions of fact are concerned, we have put the submissions that we wish to make in writing and I just wish to speak to those when I come to them.
BRENNAN CJ: Is that in some further document that you are going to pass up.
MR JACKSON: Yes, your Honour, I am happy to do that. Can I give your Honours that now perhaps?
BRENNAN CJ: Yes.
MR JACKSON: Your Honours, it is partly in that on one point, partly already in the outline of submissions.
BRENNAN CJ: Yes. Thank you, Mr Jackson. The Court will adjourn now until 10.15 tomorrow morning.
AT 4.15 PM THE MATTER WAS ADJOURNED
UNTIL WEDNESDAY, 3 MAY 1995
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