Australian Submarine Corporation Pty Ltd v Kenefick & Ors A16/1996 [1996] HCATrans 318 (15 August 1996)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Adelaide No A16 of 1996

B e t w e e n -

AUSTRALIAN SUBMARINE CORPORATION PTY LTD

Applicant

and

TREVOR KENEFICK, PETER DIGGLE, IAN CHEONG, PETER HILL, BRONTE NAGEL and AUTOMOTIVE, FOOD, METALS, ENGINEERING, PRINTING & KINDRED INDUSTRIES UNION

Respondents

Application for leave to appeal

DAWSON J

GAUDRON J

KIRBY J

TRANSCRIPT OF PROCEEDINGS

AT ADELAIDE ON THURSDAY, 15 AUGUST 1996, AT 10.10 AM

Copyright in the High Court of Australia

MR S. WALSH, QC: If the Court pleases, I appear with my learned friend, MR C.J. KOURAKIS, for the applicant. (instructed by Ward & Partners)

MR P.A. HEYWOOD-SMITH: If the Court pleases, I appear with MR S.J. BLEWETT, for the respondent. (instructed by Simon Blewett)

DAWSON J: Yes, Mr Walsh.

MR WALSH: If the Court pleases, this application for leave to appeal is made pursuant to section 432(2) of the Industrial Relations Act 1993 .

KIRBY J: This is leave, not special leave?

MR WALSH: Leave, your Honour, yes. The Act was substantially amended and Part VIA was inserted on 30 March 1994 and that contains the sections with which we are concerned with respect to this application. Subsequent to that there was an amendment No 97 of 1994 which inserted a further section which deals with the issue of burden of proof which is also the subject of this application.

Prior to 30 March 1994 the applicant had entered into an enterprise bargaining agreement with the three Unions that were involved. The enterprise bargaining agreement gave the employees entitlements to very generous packages if they were made redundant. Part of that agreement was that the management had the right to choose those to be made redundant. Superimposed, of course, upon that agreement was the Act which was passed, or the amending Act in 1994, and that applied to that situation.

Not one of the persons who was retrenched would have had their services terminated had it not been for the need for redundancies. Each of them would have maintained their employment. That much is clear from the reasoning of his Honour Chief Justice Wilcox. The judicial registrar had found that there was no doubt that each of the respondents' witnesses did all that was required of them as honestly as they could. In other words, the process was not tainted by capriciousness or otherwise. His Honour Justice Wilcox observed at page 18 point 20 of the application book, if I may turn briefly to it, that:

Counsel for the applicants put a different view -

and this is dealing with the argument -

They do not dispute that ASC was faced with a genuine redundancy situation; the company needed to reduce its workforce. Nor do they dispute Mr Bews' decisions about the number or categories of people to be retrenched. They disavow any attack on the motives of those involved in selecting the retrenchees. Counsel do not claim the selection of particular people was caused by a desire to get rid of them.

Then he goes on to deal with the argument put. In addition to that, to complete the picture as far as the factual matrix, at page 33 point 1 of the application book his Honour observed in the first paragraph that:

No attempt was made to show that the selections were substantively unfair; that is, that some or all of the applicants had claims for retention superior, on Mr Bews' criteria, to retained welders.

That was the factual background.

Section 170DE and the proper interpretation of that section was dealt with by his Honour Chief Justice Wilcox at page 21. If I may turn very briefly to that page, it cites the sections from the amending Act and your Honours will observe that section 170DE(1) provides that:

An employer must not terminate an employee's employment unless there is a valid reason, or valid reasons, connected with the employee's capacity or conduct or based on -

and I notionally underline the words "based on" -

the operational requirements of the undertaking, establishment or service.

His Honour found that as a matter of fact and consistent and in compliance with that section that in fact there was a termination of each of the employee's employment for reasons based on the operational requirements of the undertaking. The section does not go on to say, for example, as it might have if it was intended to encompass the argument that is put by my learned friend, that "and if there is a valid reason based on operational requirements, the employer must also prove a valid reason for the selection of the particular employee". What it does is to confine it to a particular reason for the termination. That was satisfied, his Honour found.

As I say, we put emphasis on the use of the words "based on the operational requirements of the undertaking". That was clearly so in the case at Bar. It mattered not, for example, that there might have been a selection process thereafter which took into account the merits of particular employees for the purposes of a selection process. The safeguard to employees in this interpretation is that if in fact the employer is to satisfy section 170DE(1), the employer must prove that there was a valid reason based upon operational requirements. Thus, if in truth as a matter of fact it was based not upon operational requirements but for some perverse reason associated with a particular person and it was just a matter of using the redundancy for the purposes of getting rid of someone, then of course it would not qualify as a matter of fact.

KIRBY J: But was not the fact here that there were the two reasons. It is not just a single reason. It was based on operational requirements - that was the first - then they had to choose amongst the employees, so they looked at the different employees' capacity or conduct.

MR WALSH: In our respectful submission, as his Honour Justice Wilcox found, that was not the reason for the termination. The only reason for the termination was the fact of the requirement for redundancies.

KIRBY J: A point of classification but, if you are looking at this as protective legislation and looking at its application to the particular facts of this case, the employer's operational requirements were part of the reason, but another part was they then had to choose which employees. The section seems to be addressed to individual employees' rights and entitlements and therefore you have to focus as well as on the operational requirements on what it was that led to particular employees being laid off.

MR WALSH: In our respectful submission, the preferable construction is that what Parliament intended, and consistent we say with the general theme of the convention which it adopted, is that there should be a shifting of onus on to an employer - previously possibly being solely on the employee - to prove at least that there was at face value a valid reason, a valid reason that could be tested, for the termination based on operational requirements. It did not intend to include - - -

KIRBY J: But were not the operational requirements the reason why some employees were put off, but they were not the reason for putting off these particular employees who then made their claim? That is what the Full Court said. It seems an arguably correct construction of legislation which I think may be the subject of planned - is that in the Bill? Has this legislation survived in the Bill?

MR WALSH: This legislation is the subject of a Bill entitled "The Workplace Relations and Other Legislation Amendment Bill" 1996 but it changes the scheme, your Honour.

KIRBY J: Why should we get into looking at legislation that may or may not survive the Parliament?

MR WALSH: Because there is no certainty that anything will ever come of it, your Honour.

DAWSON J: There is no certainty of anything in this area of endeavour but, Mr Walsh, whatever you might say about 170DE, one surely can look at 170DC independently. Surely there was a breach of that section here. You have to succeed on both, do you not, both DE and DC, in order to succeed?

MR WALSH: Yes. I will come back to DE because I wish to refer to what we would refer to as the emasculation of section 170DE(1) and the burden of proof sections, in particular the amendment, if in fact the Full Court is correct - - -

KIRBY J: I do not think you should spend a lot of time on this except that it is something that may take away the urgency or importance of the Court looking at this. Normally federal legislation is construed finally by the Full Federal Court unless there is some matter of particular importance or general significance.

MR WALSH: I am sorry, I was looking at the substantive argument and the amendment that was made in 1994 which in effect superimposed on the existing subsections a shift in the burden of proof with respect to the requirement that the employee prove that the termination was harsh, unjust and unreasonable. That was superimposed on the existing section, and that of course must be looked at in that light. But turning to your Honour Justice Dawson's - - -

DAWSON J: What I am saying is that we do not get really to DE if you do not satisfy DC.

MR WALSH: Yes, quite so, your Honour. The convention which is contained within Schedule 11 annexed to the Act, and in particular article 8, deals with the issue of section 170DC in effect. It gets confusing because it is called Schedule 1 but it is - - -

DAWSON J: What page is it of this print that we have?

MR WALSH: Page 171, your Honour, of the Industrial Relations Reform Act. If one looks at article 8:

The employment of a worker should not be terminated for unsatisfactory performance, unless the employer has given the worker appropriate instructions and written warning and the worker continues to perform his duties unsatisfactorily after a reasonable period of time for improvement has elapsed.

9. A worker should be entitled to be assisted by another person when defending himself, in accordance with Article 7 of the Termination of Employment Convention -

and so forth. Inherent in that is the need to defend oneself. When one looks at section 170DC of the Act, article 89, if one is incorporate it into it - and I should point out that section 170CB of the Act says:

An expression has the same meaning in this Division as in the Termination of Employment Convention.

I am not saying specifically there was an expression, but the use of the word "defend", for example, in the context that it appears in that article. Section 170DC then:

An employer must not terminate an employee's employment for reasons related to the employee's conduct or performance -

Firstly, we would say that in the present case the reason for the termination was in fact the redundancy.

DAWSON J: There were two reasons: a major reason and a subsidiary reason.

MR WALSH: Your Honour, there was one reason - - -

DAWSON J: When you look at employee A whose employment was terminated, it was not just because of the redundancy; it was also because of his work performance.

MR WALSH: Can I put this to your Honour, that the corresponding argument is that there were not two reasons in truth. Proper characterisation of what occurred was that there was one reason only but that there was a selection process consequent upon that.

DAWSON J: If the employee was asked why was he sacked, it was because they had lost contracts for the submarines and - - -

KIRBY J: - - -"he was not the best person we had". In the old words we would have said one is the causa causans and one is the casus sine qua non. The "sine qua non" is the loss of the contracts but the initiating step to send that man out onto the street is that he had been a troublemaker or had caused difficulty or was difficult to instruct or had taken a lot of time, was not up to it.

MR WALSH: As a matter of fact, there were people who were involved in this process. It was only a starting point in terms of the exhibit R7, but I will not get involved with the factual matrix of it except to say that it was a reasonably thorough process that was gone through to make sure that in effect, as Mr Bews had said, what was achieved was substantially that people who were best suited to the requirements of the employment and the enterprise were chosen only, not because of personal qualities as such. But the scheme of section 170DE should be kept in mind when one looks at section 170DC because in effect section 170DC is looking at a different circumstance to that where there is a reason placed on the operational requirements. Section 170DC is speaking to a circumstance where an opportunity to defend should be granted. In this case there could be no question of an opportunity to defend. All that might have been done, for example, is that one employee might say, "Well, I think I'm better than him".

DAWSON J: No, he could say, "Look, this was done on reports". He could say that is wrong.

MR WALSH: But all those employees would have been dealt with with respect to that report, in so far as that was part of their background, at an earlier time. They had their opportunity to be notified of it and deal with it but, in the circumstances of this case, it was just a methodology of choosing redundancy. Let us test it, for example, by looking at the example given by my learned friend. He says: last on, first off. That cannot be a reason for termination. The reason is the redundancy.

DAWSON J: Well, it can. We have had a big case about it in this Court debating it as an appropriate approach to the situation.

MR WALSH: Yes, your Honour, I accept that, but what I am saying is that it cannot be the reason; it is only the selection process.

DAWSON J: It can in relation to the individual.

MR WALSH: Yes, it is a justified part of the process but, as a matter of characterisation, the redundancy - - -

DAWSON J: Section 170DC is talking about the individual.

MR WALSH: Your Honour, if one looks at section 170DC and the articles, it is apt to be referring to a person who is going to lose or potentially lose his or her job because individually, and for no reason associated with redundancy, they have in some way been grossly inefficient or, alternatively, because of improper conduct or the like. That is what section 170DC is looking to. Section 170DE and the scheme of the Act is such that there is a distinction to be drawn between that which must be proven by the employer - and if we are right about that, it assists with the proper interpretation that we say should apply with respect to section 170DC, because what the employer must prove is, consistent with section 170DE(1), that the termination was based on genuine defensible - that is valid - operational requirements.

DAWSON J: I think we go over the same ground, but that establishes that some employees had to be got rid of. But when you look at the individual employee, the reason why that employee was got rid of was because of his work performance in one way or another and he was not given a chance to defend himself in relation to that.

MR WALSH: Your Honour, obviously there was an argument with respect to section 170DC, but can I go back to the reason why we say that leave ought to be granted in this case irrespective of that. Section 170DE, as it has been interpreted by the Full Court, we say is plainly wrong. Indeed, when the Full Court really summed up its position, as it seems to have done at page 64 of the application book, it is likely, we say with respect, to be mischievous in the context of the amendment which provides for the burden of proof. What the Full Court said was:

Thus, in the present case, the respondent made the decisions concerning the selection of each particular appellant, and determined the basis on which the selection was to be made. The respondent should justify those decisions. To cast on the employee the onus of showing that the basis of selection has been harsh, unjust or unreasonable would be inconsistent with the apparent intention that this legislation should accord an accessible and inexpensive means by which a dismissed employee can seek a remedy.

With respect, what had happened was that, as we know, the amendment in 1994 which came after the original introduction of these sections, required that the burden of proof be on the employee with respect to that which is harsh, unjust and unreasonable. If one looks at the section as it appears at the foot of page 21 of the application book, section 170EDA(1) provided:

If an application under section 170EA alleges that a termination of employment of an employee contravened subsection 170DE(1):

(a) the termination is taken to have contravened subsection 170DE(1) unless the employer proves that.....

(b) if the employer so proves, the termination is nevertheless taken to have contravened subsection 170DE(1) if the applicant proves that, because of subsection 170DE(2), the reason or reasons proved by the employer were not valid."

That means that under (2) the burden of proof with respect to harsh, unjust or unreasonable is squarely upon the employee.

Now, in our respectful submission, the scheme of this legislation and consistent with the convention is as I have put it earlier and it flows, and then section 170DC must be looked at in that light and, particularly, given that it is apt to be referring to people who are about to have their services terminated because of conduct or inefficiency, not because of the fact that they are redundant. If the Court pleases.

DAWSON J: Thank you, Mr Walsh. The Court need not trouble you, Mr Heywood-Smith.

For the proposed appeal to succeed, the success must be both on the grounds of section 170DC and section 170DE. There may be grounds for doubting the correctness of the Full Court's approach with respect to section 170DE but there is no reason to doubt the correctness of the decision of the court below with respect to section 170DC.

The proposed appeal thus does not enjoy any prospect of ultimate success and leave to appeal should be refused. Leave to appeal is accordingly refused.

MR HEYWOOD-SMITH: I ask for an order for costs, if the Court pleases.

KIRBY J: Is there not a special provision in the Act which denies costs in industrial relation matters?

MR HEYWOOD-SMITH: Your Honour, there is in the Industrial Act. My learned friend in his outline does not suggest that this would not be an appropriate case for costs.

KIRBY J: I thought the Act denies the power to make such orders except when proceedings are brought in - we had this in another case.

MR HEYWOOD-SMITH: It does, your Honour, but in my submission the cost provisions of this Court would override that section.

GAUDRON J: What does that section say?

MR HEYWOOD-SMITH: It is section 347 of the Industrial Relations Act which provides that:

A party to a proceeding in a matter arising under this Act shall not be ordered to pay costs incurred by any other party to the proceeding unless the first-mentioned party instituted the proceeding vexatiously or without reasonable cause.

KIRBY J: Would you say that this is, where the Court has already said that there may be some doubt on one matter, the issue is of some general importance in industrial relations? The obvious purpose of Parliament is to say that normally you do not get costs and the ordinary rule, does it apply?

MR HEYWOOD-SMITH: I cannot answer that, your Honour. I really had not, because of the concession in my friend's summary, come to Court - - -

KIRBY J: I perhaps should not have raised the matter if it is conceded and it may be that - - -

MR WALSH: It was an error on my part to make the concession, your Honours. I had not adverted to it.

DAWSON J: And you withdraw it, do you?

MR WALSH: I withdraw the concession.

DAWSON J: There will be no order as to costs.

AT 10.34 AM THE MATTER WAS CONCLUDED