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Fair Work Commission Transcripts |
TRANSCRIPT OF PROCEEDINGS
Fair Work Act 2009 1048498-1
COMMISSIONER CARGILL
B2013/890
s.240 - Application to deal with a bargaining dispute
Chassis Brakes International Castings Pty Ltd
and
The Australian Workers' Union; "Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union" known as
the Australian Manufacturing Workers' Union (AMWU)
(B2013/890)
Sydney
10.06AM, WEDNESDAY, 17 JULY 2013
Reserved for Decision
PN1
THE COMMISSIONER: Could I have appearances, please.
PN2
MR R. DOYLE: Good morning, Commissioner, my name is Doyle, initial R, and with me is Pollock, initial A, seeking permission to appear on behalf of the applicant.
PN3
THE COMMISSIONER: Thank you, Mr Doyle.
PN4
MR S. CRAWFORD: If it please, Commissioner, Crawford, initial S for the AWU.
PN5
THE COMMISSIONER: Thank you.
PN6
MR A. WALKEDEN: Please the commission, my name is Walkeden, initial A, I appear for the AMWU in this matter, Commissioner.
PN7
THE COMMISSIONER: Thank you. Do either of you gentlemen have any view about permission being granted to Mr Doyle or Mr Pollock?
PN8
MR CRAWFORD: We don't oppose leave, Commissioner.
PN9
MR WALKEDEN: Neither do we, Commissioner.
PN10
THE COMMISSIONER: All right. Nevertheless, perhaps, Mr Doyle, you could address me briefly on the provisions of the Act as to why permission should be granted.
PN11
MR DOYLE: Thank you, Commissioner. The application for permission is advanced primarily on two basis. Looking at section 596 of the Act, starting with subsection (2)(a), advanced on the basis that it will enable the matter to be dealt with more efficiently, taking into account the complexity of the matter. Commissioner, the complexity is here for two main reasons: the first is there are relatively few published decisions in the manner in which the tribunal is to approach an application such as this and it will be apparent from the submissions filed on behalf of the unions that there is a dispute in relation to the legal principles that are to be applied and the way the evidence will be relevant to those principles.
PN12
Secondly, Commissioner, there is - the subject matter of the application will be in the interest not only to the applicant but to the manufacturing industry generally and to the component parts industry. In terms of efficiency, Commissioner, at this very late stage, it will be significantly inefficient for permission not to be granted. The applicant has prepared its case on the basis that there's been no objection to its anticipated request to the commission, the respondent unions have been aware of the applicant's intention to be represented at the proceeding since at least 5 and no objection has been taken. In the event that permission was not to be granted, today, Commissioner, it would necessitate, at the very least, a short adjournment so that my instructors could appropriately prepare and be able to advance the case as it would need to be put today.
PN13
In any event, Commissioner, in light of the issues on the law and the way the tribunal is to approach the proceeding in this type of application, it is significant benefit to the tribunal and will enhance the efficiency of the matter to have a legal representative take the tribunal through the relevant principles, through the authorities and case law, and then apply the relevant evidence to those cases.
PN14
On a secondary basis, Commissioner, as a matter of comparative fairness in relation to section 596(2)(c), the applicant submits it would be unfair not to allow representation, taking into account fairness as between the applicant and the respondents. The respondents are present here today represented by experienced practitioners who are experienced in appearances before the tribunal. I'll stand to be corrected by my learned friend but I know in respect of Mr Walkeden, I understand that he has appeared in a very similar proceeding, a section 240 application, very recently, which has been the subject of a decision of this tribunal. On the other hand, in respect of my instructors, they are not legally trained, they have no experience in conducting arbitrations, and whilst it's conceded they do have experience in appearing before conciliations in the tribunal, they do not have that arbitration experience, Commissioner, so as a matter of comparative fairness - - -
PN15
THE COMMISSIONER: What about Mr Crawford? Doesn't he get a - - -
PN16
MR DOYLE: Unfortunately, Commissioner, Mr Crawford as well, but perhaps Mr Crawford can let us know about his experience in the tribunal, but I would anticipate - - -
PN17
MR CRAWFORD: Very minimal.
PN18
THE COMMISSIONER: Sorry?
PN19
MR CRAWFORD: (indistinct) unpleasant.
PN20
THE COMMISSIONER: That's not very nice.
PN21
MR DOYLE: I might leave the submission at that, Commissioner.
PN22
THE COMMISSIONER: Right. Okay. Thank you. I presume, Mr Crawford and Mr Walkeden, you don't want to put anything on that, seeing you've already indicated there's no opposition to permission being granted other than perhaps Mr Crawford you may want to salvage your reputation.
PN23
MR CRAWFORD: Not so much that at all, Commissioner. I let my reputation speak for itself, whatever that means, but I did want to just mention that we wouldn't necessarily accept that the outcome of this case has brought an implication across different industries.
PN24
THE COMMISSIONER: Yes, I thought that might be a condition.
PN25
MR CRAWFORD: Aside from that, I don't take any issue with what my friend said.
PN26
THE COMMISSIONER: Yes. I think I take that as being read, Mr Doyle, but nevertheless on the basis of what you've put I'm satisfied that I should grant permission for you and Mr Pollock to represent the applicant on the basis that considering the complexity of the case it would allow it to be dealt with more efficiently. Perhaps we might leave the 596(2)(c) to one side about comparative fairness. I'm sure that, you know, despite the, perhaps, lack of arbitration experience of company representatives here, they've certainly had quite a bit of experience, perhaps more than they wish to, in the tribunal and I'm sure that they would be able to put up a good show, but nevertheless I'll grant you permission.
PN27
MR DOYLE: Thank you, Commissioner.
PN28
THE COMMISSIONER: Right. Thank you, Mr Doyle, so - - -
PN29
MR DOYLE: Firstly, Commissioner, can I confirm the tribunal has received four witness statements filed by the applicant in this proceeding together with a written outline of submissions?
PN30
THE COMMISSIONER: Yes, so the two witnesses by two statements, if that's - - -
PN31
MR DOYLE: That's correct, Commissioner.
PN32
THE COMMISSIONER: Yes, so the original statements plus the statements in reply.
PN33
MR DOYLE: Yes, that's right.
PN34
THE COMMISSIONER: Yes, and the outline of submissions. Yes, I've received that. I won't mark anything at this stage. Obviously the witness statements need to be put through the witnesses and I don't usually mark outlines of submission unless everybody particularly wants me to, but anyway, we can deal with that later on, but I've certainly received that.
PN35
MR DOYLE: That's fine, Commissioner. What I might do, just for administrative convenience, is hand up a folder that's tabbed, it has the exhibits identified, just to assist us today.
PN36
THE COMMISSIONER: Yes, we seem to always gain quantities of folders and I'm sure sometimes these proceedings are sponsored by whoever makes folders who might possibly employ some of your members, Mr Walkeden, do you think? I don't know. Okay.
PN37
MR DOYLE: Commissioner, this is an application made by Chassis Brakes International Castings under section 240 of the Fair Work Act for the tribunal to deal with dispute about proposed enterprise agreement. As the tribunal would be aware, the parties have agreed the tribunal is to arbitrate on the quantum of the first wage increase to be included in the proposed agreement, and particularly the tribunal is to determine whether the first wage increase will be an increase of three per cent, five per cent or somewhere in between.
PN38
THE COMMISSIONER: Yes, I've got that agreement. I don't know that there was ever a signed copy but certainly both - I received a copy, I think, in fact, from both parties early on, and that's been referred to in both lots of submissions and I don't think there's any - there's disputes about what things have to be taken into account, but I don't think there's a dispute about the actual terms that were agreed upon, so - - -
PN39
MR DOYLE: That's my understanding, Commissioner. The agreement is reflected in the email exchange that - - -
PN40
THE COMMISSIONER: Yes, that's right, that's what I have. Yes.
PN41
MR DOYLE: The parties have agreed again the enterprise agreement will be put to a vote of employees to incorporate whatever the determination of the tribunal will be.
PN42
THE COMMISSIONER: But ultimately, it's up to the employees, unless there was an - that was discussed when we had a conference at which this process was agreed that, at the end of the day, the employees still have the right to decide.
PN43
MR DOYLE: That's correct, Commissioner, and the parties have agreed to abide by the decision of the tribunal and certainly support it, and - - -
PN44
THE COMMISSIONER: But ultimately the employees have their right to approve - - -
PN45
MR DOYLE: That is so, yes.
PN46
THE COMMISSIONER: - - - or - not "not approve"; to agree or not agree to what then will be the agreement between the parties.
PN47
MR DOYLE: That is so.
PN48
THE COMMISSIONER: Yes.
PN49
MR DOYLE: The applicant intends to lead evidence from two witnesses, Commissioner, Madanlal Patel and Craig Charter, both of whom are waiting outside the courtroom today.
PN50
THE COMMISSIONER: Yes.
PN51
MR DOYLE: By way of brief opening, Commissioner, the applicant's position is this: the business is in a dire financial state; it's making and is forecasting significant losses. The component parts industry in Australia and the manufacturing industry generally are also in a dire financial state. Ford has announced closure of its manufacturing operations by 2016 in Australia. Holden has announced redundancies. Holden is trying to negotiate wage reductions for its manufacturing workforce. Now, despite this, the applicant is offered wage increase of three per cent, four per cent and four per cent over three years. It's agreed to backdate the first increase to September of 2012; it's also agreed to a $400 sign on bonus, and all for nothing in the term.
PN52
The economic environment has significantly worsened since that offer was first put by the applicant. There is a risk of the group moving its manufacturing operations to China where the cost of production is significantly reduced. The applicant is doing everything possible, everything within its power to improve its position and is now asking its employees and the unions to assist. Whilst it might be superficially attractive, Commissioner, where one party is seeking three per cent, the other seeking five, to land somewhere around four, the applicant submits it's not that simple and indeed the applicant submits that based on the evidence in the principles that we will go through today, that on the merits three per cent is really the only meritorious outcome available.
PN53
If it pleases the tribunal, I would like to call Craig Charter.
<MR CRAIG CHARTER, affirmed [10.18AM]
<EXAMINATION-IN-CHIEF BY MR DOYLE [10.19AM]
MR DOYLE: Mr Charter, have you made a witness statement in these proceedings?---Yes.
PN55
How many witness statements have you made?---I've made two.
PN56
If I may hand up first a folder to the witness, Commissioner.
PN57
Mr Charter, can I ask you to have a look at tab 2 of that folder?---Yes.
PN58
If you can have a look through that document; once you've had a look, can you confirm whether that is the first witness statement that you filed in this proceeding?---It appears to be. Obviously I haven't read every word, but, yes, it appears to be my first statement.
PN59
Does it have 61 paragraphs?---Yes.
PN60
Does it have exhibits CC1 to CC20?---Yes.
PN61
Okay. Have you read your statement recently?---Yes.
PN62
Are there any corrections that you would like to make to that statement?---No, there's not.
PN63
Is it true and correct?---Yes.
PN64
I tender that statement, Commissioner.
PN65
THE COMMISSIONER: All right. I will mark that as applicant 1.
**** MR CRAIG CHARTER XN MR DOYLE
EXHIBIT #APPLICANT 1 STATEMENT 1 OF CRAIG CHARTER
MR DOYLE: Mr Charter, can I ask you to turn to tab 4?---CC4?
PN67
There should be a tab marked tab 4?---Okay.
PN68
Towards the back of the folder?---No.
PN69
THE COMMISSIONER: It's after CC20, if that - - -?---Oh, yes, it was hiding. Yes, got it.
PN70
MR DOYLE: Again, can I ask you to have a flick through that document and confirm whether or not that is the second statement that you filed in these proceedings?---Yes, that's correct.
PN71
Does it contain 29 paragraphs?---Yes.
PN72
And exhibits CC21 to CC34?---Yes.
PN73
Have you read that statement recently?---Yes.
PN74
Are there any corrections that you would like to make?---No.
PN75
Is it true and correct?---Yes.
PN76
I tender that statement, Commissioner.
PN77
THE COMMISSIONER: We will mark that as applicant 2.
EXHIBIT #APPLICANT 2 STATEMENT 2 OF CRAIG CHARTER
PN78
**** MR CRAIG CHARTER XN MR DOYLE
MR DOYLE: Commissioner, if there are no objections, there's just two exhibits that I would like to take Mr Charter to, just to explain to the tribunal.
PN79
MR CRAWFORD: Well, it depends on what they are, of course, but - - -
PN80
MR DOYLE: CC1 and CC2, just to explain - - -
PN81
THE COMMISSIONER: To the first statement?
PN82
MR DOYLE: That's correct, Commissioner. The exhibits - - -
PN83
THE COMMISSIONER: Yes, I realise that. Sorry.
PN84
MR CRAWFORD: I don't have any objections to that course.
PN85
MR DOYLE: Mr Charter, if we can start with CC1, if I can ask you to turn to tab CC1?---Yes.
PN86
What is that document?---It's an organisational chart showing the worldwide structure with the CBI global presidents and then it goes and shows the functions within our global business.
PN87
Looking at the left-hand side, there are a number of rows and at the start of those rows in the first cell there's a series of text,
the first one saying, "CBI/RP-EU"; the second, "CBI/RP-LA." Can you explain what each of those abbreviations
mean?
---EU?
PN88
EU, LA, CN, IN and AU?---Yes, they're the different regions, so they're the regional presidents, so the business is set up in a matrix form where we have functional management and then we have regional presidents, so the RP is 'regional president', the following acronym shows the region, so you have the European one for 'EU'. 'LA' is Latin America; 'CN' is China; 'IN' is India; and 'AU' is Australia, and I come under the AU, Australian one, and I come under the manufacturing function.
**** MR CRAIG CHARTER XN MR DOYLE
PN89
MR DOYLE: Thank you, Mr Charter. Just moving to exhibit CC2 under tab CC2, is there a document with two pie charts under that tab?---There is.
PN90
Under the second pie chart is text that reads, "2011/12 sales by OEM customer"?
---Yes.
PN91
What does "OEM customer" mean?---Original equipment manufacturer for the automotive industry.
PN92
Could you explain for the tribunal what the difference is between the two charts?
---The second chart shows our split by the original equipment manufacturers. The first chart shows our sales by our particular customers,
so Chassis Brakes in the first chart, International, is who CBIC supplies to, 50 per cent of the parts, and then Chassis Brakes will
supply the OEM customers directly or through tier 2 suppliers.
PN93
MR DOYLE: Thank you, Mr Charter. No further questions, Commissioner.
PN94
THE COMMISSIONER: Are you going first, Mr Crawford?
PN95
MR CRAWFORD: Yes, thank you, Commissioner.
<CROSS-EXAMINATION BY MR CRAWFORD [10.26AM]
MR CRAWFORD: Mr Charter, I might deal with your first statement initially. So the applicant company in these proceedings is Chassis Brakes International Castings Pty Ltd. Is that right?---Yes.
PN97
They're generally referred to as CBIC. Is that right?---Yes.
PN98
**** MR CRAIG CHARTER XXN MR CRAWFORD
Are you actually employed by that company?---No.
PN99
Who are you employed by?---I'm employed by Chassis Brakes International Australia.
PN100
Is that commonly referred to as CBIA?---Yes.
PN101
How is it that you're in a position to give evidence on behalf of a company that you don't actually work for?---CBIC is a subsidiary of Chassis Brakes International Australia and I'm responsible for that subsidiary.
PN102
Is it correct that CBI is basically, on a simple level, making decisions on behalf of CBIC. Is that a fair comment?---It's a subsidiary to CBI, so therefore we have to make decisions.
PN103
Are the directors of CBIC the same as those for CBIA?---I think there's some different ones. I haven't researched that question.
PN104
Are there any former owners or directors for Autocast and Forge Pty Ltd that are involved at all in CBIC or CBIA?---No.
PN105
I think at paragraph 14 of your statement, you refer to A and F, which is Autocast and Forge previously being known as Broens Automotive Casting and Forging Pty Ltd. Is that right?---Yes.
PN106
Are you aware why they changed their name?---Not particularly.
PN107
Commissioner, I would like to hand the witness a copy of some enterprise agreements, the one currently applying at the Seven Hills site. At the same time, I'll hand up some other enterprise agreements that currently apply to CBIA because I'll refer to them later.
**** MR CRAIG CHARTER XXN MR CRAWFORD
PN108
Do you have those, Mr Charter?---I do, four of them.
PN109
There should be three different - - -?---I've been handed four.
PN110
There should be the Seven Hills agreement, which is titled Broens Automotive Casting and Forging?---Yes.
PN111
Then agreements starting with the title including Bosch Chassis Systems, one for East Bentleigh and the other for Lonsdale?---Two for Lonsdale, so now we look like we've got three.
PN112
THE COMMISSIONER: Are you missing one, Mr Doyle, or - - -
PN113
MR DOYLE: No, Commissioner.
PN114
MR CRAWFORD: Can I take you to the Seven Hills agreement titled Broens Automotive Casting and Forging Pty Ltd Union Collective Agreement 2011. Do you have that?---I do.
PN115
Can I refer you to clause 17 in that document?---Yes.
PN116
Can you see, Mr Charter, at the bottom of that clause there's a paragraph with (a) and (b) appearing below it, and it reads:
PN117
When a business or part of a business of the employer is proposed to be transmitted from the employer to another employer (purchaser) during the term of the agreement, the employer shall include as part of their contractual arrangements with the purchaser the obligation for the purchaser to:
PN118
(a) make an offer of employment to each employee on terms no less favourable than those governing that employee's employment on the date the offer was made; and
**** MR CRAIG CHARTER XXN MR CRAWFORD
PN119
(b) agree that the period of employment which the employee has had with the employer or any prior transmitter shall be deemed to be service of the employee with the purchaser.
PN120
Is that right?---Yes, it is.
PN121
Were you aware of that clause being in the Seven Hills agreement when you were doing your due diligence for the Seven Hills site?---Personally, I wasn't, but our HR manager was across this agreement.
PN122
From CBIA, involved in the due diligence, were certainly aware of the full contents of the agreement?---Correct.
PN123
Are you aware whether that clause, that paragraph I just read to you in the agreement was a factor in why CBIC, after it was created, ultimately didn't acquire the Seven Hills site until November 2012?---I don't think that was the governing factor of any date at which it was required.
PN124
Do you agree that the paragraph I read to you on a general level requires that if there's basically a sale, that all the employees move over. Is that correct?---The employees that are with the business at the time, yes.
PN125
I guess when CBIC ultimately acquired the site in November 2012, that's what happened, isn't it?---They're the employees at the time, yes.
PN126
Okay, but earlier that year in September 2012, there were actually around 30 employees made redundant, weren't there?---There was before we took on the licence.
PN127
**** MR CRAIG CHARTER XXN MR CRAWFORD
So obviously the fact that those employees were made redundant before the acquisition meant that under that clause of the agreement CBIC didn't have to take those employees on. Is that right?---CBIC only took on 81 employees. Prior to that, there was additional employees but that was not the responsibility of CBIC.
PN128
Okay, but if CBIC had actually purchased the business or acquired the business in September before those employees were made redundant, they would have been the responsibility of CBIC, wouldn't they?---That never would have occurred. The business case for CBI Australia to actually take on CBIC was something that was very difficult for us to get through approval for our head office. It never ever would have stacked up with further employees in the business. It simply would not have gone ahead.
PN129
I believe Mr Patel's statement, if not yours too, indicates that the owners actually made the decision that the Seven Hills site could be purchased in August 2012. Is that your understanding?---The owners? Are you referring to Broens, are you? Are you referring to Carlos Broens in this question?
PN130
No, the owners of - it would have been CBIA, I assume, approving the purchase of the Seven Hills site?---No, there was no approval to purchase the Seven Hills site in August.
PN131
Have you read Mr Patel's statement?---No.
PN132
I'll just read from paragraph 17 of Mr Patel's statement, it says - I'll read paragraph 16 as well to give you a bit of context?---Okay.
PN133
On 8 August 2012, CBIA registered CBIC for the purposes of acquiring A and F's assets, and operating the Seven Hills site. CBIC is a wholly owned subsidiary of CBIA. Then at paragraph 17, Mr Patel states on 16 August 2012, Frena Ultimate Holdings L.P. approved the decision to acquire certain A and F assets in order to operate A and F's business.
PN134
**** MR CRAIG CHARTER XXN MR CRAWFORD
---You're reading someone else's statement; that's not my statement.
PN135
Okay. So is that - - -?---Do you want me to respond to someone else's statement?
PN136
Well, if you believe that statement I just read to you is not accurate, yes, I would like you to correct it and tell us - - -?---Well, you're talking about different parts of our business. I'm the person that is in charge of the operations of the business, okay, not the commercials of the business. Okay? If there's some preparation taken part in August for a potential of taking over the business, then I guess that, you know, that preparation must take place, but in my dealings with us taking on the licence of the business to begin with, we were struggling right up to the licence period of 12 September to convince our head office that we should go ahead with this. Okay? I don't doubt that there was probably some preparation done from the commercial side of our business to facilitate us taking on the business if we did, in fact, get the end approval, but in my dealings it took all the way to 12 September for us to get the nod, the final nod that we could take on the licence.
PN137
That is entirely consistent with Mr Patel's statement at paragraph 18, he says:
PN138
On 12 September, A and F was placed into voluntary administration. Also on 12 September 2012, CBIC was granted a licence by A and F to continue the operations of A and F at the Seven Hills site whilst A and F was under administration.
PN139
So there's no dispute that the licensing arrangement started on 12 September but Mr Patel's statement appears to indicate that the
ownership basically approved the decision to acquire the business on 16 August 2012. Can you just confirm - - -?
---Yes, I - - -
PN140
**** MR CRAIG CHARTER XXN MR CRAWFORD
Is your recollection that may not be correct?---I think you're getting the context confused in that there's probably an approval to go ahead with setting up to be able to do this but the final approval to go ahead and take on the licence was contingent on a lot of different factors that continued to be discussed all the way through to 12 September. So, sure, there's probably some preparation for the mechanics of it to take place but I'm sure the final approval to actually go ahead and take on the licence took all the way through to 12 September.
PN141
But are you saying they're separate decisions, one to take on the licence and one to ultimately acquire the site, or are they all in the same decision?---I'm saying that there's probably approvals to do certain things to facilitate us being able to take on the assets of the business and they probably need to take place prior to us actually taking on the licence, and then there's further decisions to say, "Yes, you're able to go ahead and do it."
PN142
I'll obviously be asking Mr Patel about that, but the point I was - - -?---I think it's better that you do.
PN143
The point I was making was that there was a decision apparently made on 16 August to acquire certain assets, whether that was a final decision or not, my point is that decision must have been made before 30 employees were actually made redundant in September 2012. Do you agree with that?---No, I don't agree with that. In all of our business case discussions, we were looking at what we could afford to try and take on this business and have a chance of turning it around. In all our discussions, we were looking at all the major costs in the business and it was never a possibility that we could take on the full wage bill, never a possibility.
PN144
Okay. So you were always proceeding on the basis that before you acquired the business, around 30 employees would be made redundant. Is that right?---No, I'm not talking any number of employees. We simply would have been saying to the administrator that there's a maximum in wages that we would be responsible for. Anything beyond that is the administrator's responsibility; otherwise, we weren't able to make a business case. And it wasn't just wages; we were looking at the rental side of the business and doing a better deal there. We had to get a lot of elements in order to be able to even go ahead with this business case.
**** MR CRAIG CHARTER XXN MR CRAWFORD
PN145
So moving on at paragraph 16, you refer to - - -?---Whose statement are we looking at now?
PN146
Yours?---Back to mine?
PN147
Yes, your first statement?---Right. Yes, I've got it.
PN148
So towards the end, you basically - I mean, in that paragraph, you're describing the consequences if the Seven Hills site had shut in 2012. Is that right?---Yes.
PN149
And you're foreshadowing stoppages of the major vehicle manufacturers' production. Is that right?---Yes.
PN150
Can you estimate, if that had occurred, what would have been the financial impact for the CBIA?---Who knows. If the business had have fallen over, what my previous experience is with other automotive component suppliers that have fallen over is that the car companies have to jump in and do a rescue package, and when the car companies do that, they pull in the major suppliers that are affected by that company and, of course, we were the major supplier, and they say, "Righto, we've all got to put in," and they make the shortest time frame exit plan, so maybe they would have, you know, kept it operating, pouring money into the business and us pouring money into that business for a period of six months or so. It would have been a time frame designed to desource the parts from that operation and get them from other sources.
PN151
Is what you're saying, that outcome would have most likely have led to the end of CBIA in the very near future. Is that fair?---Not CBIA; it would have led to CBIC only - or Autocast and Forge only operating supported by the car companies and obviously supported by the major suppliers, being CBIA. It would have only operated until those components could have been set up and flowing as a source form alternative suppliers. That would have cost the car companies a lot of money, it would have cost CBIA a considerable amount of money, and it would have then exposed us to castings coming from overseas.
**** MR CRAIG CHARTER XXN MR CRAWFORD
PN152
You just said "cost CBIA a considerable amount of money". I mean, are we talking hundreds of millions of dollars, tens of millions of dollars? I mean, that's just - - -?---No, I'm not going to pluck a number out of thin air. We didn't do a business case on that, okay, and we wouldn't know until we got into those discussions with the car companies how much they would expect us to put in. You know, you're asking me to pick a number out of thin air on detailled discussions that haven't occurred.
PN153
Would you accept, given you have said it would have cost a considerable amount of money, that having the Seven Hills site close would have ended up costing CBIA more money than actually taking on all of the employees at that point, including the 30 that were made redundant in September 2012?---Let me try and put it in context for you. CBI - if you imagine the business was maybe losing 4 million a year and the car companies came in and rescued it, then I guess at the most it would probably take a year to desource and revalidate, so that 4 million would have to be split up to the different parties. Depending on what's split of that 4 million depends on how much you cop. I can't give you a definitive answer on discussions that have never occurred.
PN154
Can you confirm, Mr Charter, why a separate company CBIC was created to take over the Seven Hills site rather than CBIA acquiring that site directly?---I imagine to set up a subsidiary.
PN155
Why would it have been preferable to set up a subsidiary?---To keep it as a standalone business that needed to be turned around into at least a break even business, if not a profit making business.
PN156
You know more about this than me, but if CBIC ends up hitting the wall in future years and basically going under, is CBIA liable for their debts or not?---As a subsidiary, we're responsible for the subsidiary.
**** MR CRAIG CHARTER XXN MR CRAWFORD
PN157
So you would be liable for the debts of CBIC?---That is my understanding.
PN158
I did touch on this briefly earlier, but are you able to give any indication about why the final acquisition didn't occur until November 2012?---Well, when you enter into a licensing agreement, there's certain items that need to be resolved and so there is a long list of items that needed to be resolved between us and the administrator, and that was the period of time it took to resolve those items.
PN159
At paragraph 19 of your statement, you talk about A and F being placed into voluntary administration and 29 employees being made redundant.
Is that right?
---Yes.
PN160
Did CBIA or CBIC tell the administrator to make those employees redundant?
---We said that we would pay up to a maximum amount of wages if we were to take on their licence.
PN161
Is that basically the same as saying, "We're only going to purchase the business if you offload 29 employees"?---No, it's not. We said we would pay a maximum amount of wages. We could not make a business case for anything more and the responsibility of wages beyond that is the administrator's.
PN162
Does that mean the same thing as saying you weren't going to purchase the business unless there were around 29 less employees?---No. I go back to my previous statement.
PN163
Did CBIC or CBIA tell the administrator to make changes to the shift patterns at the site?---I discussed a number of options with the Autocast and Forge general manager at the time, Kevin Robson as to how the structure of the shifts could be set up more efficiently. Kevin indicated that, you know, with the loss of work that they had, that they did have too many people. They had a potential for 10 shifts of DESA operation, so hence the two shift operation, five day, five on night, and they were only typically getting around six shifts of schedule, so you had about 40 per cent too much capacity and so I discussed with him what were different potential ways that you could set it up to make a more efficient operation.
**** MR CRAIG CHARTER XXN MR CRAWFORD
PN164
So you were discussing with Mr Robson but not the administrator directly. Is that basically what you're saying?---I never spoke to the administrator at all.
PN165
I guess what I'm getting at on a general level is the administrator comes in on 12 September. Within days, he's made 29 people redundant and changed the shift times at the site. Now, I doubt the administrator in a day or two would have enough time to come to grips with the full dynamics of the business in order to make that decision. Do you agree with that?---No, he was discussing with Kevin Robson, obviously, because he won't have the knowledge of how the site works.
PN166
Okay, but Kevin Robson, who was the manager when A and F owned the business is also your factory manager out there now, isn't he?---That's correct.
PN167
So in effect, when the administrator was communicating with Mr Robson, that was, in effect, communicating with CBIC or CBIA, wasn't it?---No, not at the time, he wasn't our employee at the time.
PN168
When did he actually become the employee of CBIC or CBIA?---Well, we took on the licence on 12 September and we gave offers of employment on the November date.
PN169
Were you instructing Mr Robson in terms of what decisions to make before November 2012?---No.
PN170
When the site was under licence from September 2012, CBIA weren't having any communication with Mr Robson about how the site should - - -?---No, from the licence period we were in charge of running the licence so therefore we were liable for what was happening on that site.
**** MR CRAIG CHARTER XXN MR CRAWFORD
PN171
Mr Robson wasn't actually an employee at that stage, though, was he?---We were paying the wages and we were responsible for the site, so we had to be making decisions about the operation of that site because we were responsible.
PN172
Can I refer you to paragraph 39 of your statement. You say CBIC has engaged GEMCO Engineers B.V. and Knight Wendling GmbH to conduct an operational review. Is that right?---Correct.
PN173
Are you aware of the rough cost of that review?---The rough cost, somewhere in the region of $40,000.
PN174
At paragraph 42(a) of your statement, you talk about on 30 October 2012 a notice of representational rights was issued to employees. Is that right?---Yes.
PN175
But CBIC wasn't actually employing anyone at that time, were they?---Look, technically I can't answer that question; it's beyond my expertise. I'm an operations manager. Okay? I'm not across those legal matters.
PN176
But I thought you were just arguing with me about when employees were actually employed by CBIC, naming Mr Robson?---My understanding is that letters of employment, offers of employment went out in November. Okay? I'm not the HR director; I'm in charge of operations. It's not my area of expertise.
PN177
At paragraph 42(o), you mention that the site was basically running at 75 per cent capacity because of overtime bans from 9 March 2013. Is that right?---Yes.
PN178
Does that mean that the Seven Hills site with the current manning levels can only function at 75 per cent capacity unless overtime is worked?---No, this varies on a month to month basis and this was one of the problems that we saw that the order intake and requirement wasn't stable from one month to the next, and so therefore it needed a component of overtime so that the workforce could be flexed to the demand of the customers and so there might be some months where - and there has been in the past - where there is no overtime, there might be other months where there's three hours overtime on the DESA, so we had to flex the workforce to the customer demand.
**** MR CRAIG CHARTER XXN MR CRAWFORD
PN179
Well, I've seen the figures, the wage figures attached to Mr Patel's statement and they indicate that aside from when the overtime
ban was in place, the overtime expenses are not that far off the normal wage expenses. Are you aware of that?
---What you need to understand is that when we took over the site, it was in a state of neglect. For quite a period of time, the
normal expenses in repairs and maintenance, and what I would call basic safety items were just neglected, and the first thing that
we had to do once we got in there, once we were responsible for the licence, was to do an extensive risk assessment. From that,
we identified a lot of potential risks, we prioritised those risks and we immediately dealt with the higher level risks, so a lot
of dealing with those risks involved quite a considerable amount of overtime. We also had to get the housekeeping of the site considerably
improved. It was very dangerous just to walk around the business and it was a deterrent for customers to actually want to do business
when they visited the site.
PN180
Does that mean it was a dangerous environment for employees to work in; is that what you're saying?---It was, from my perspective, unsatisfactory before we took over the licence and we dealt with it immediately when we took over the licence.
PN181
When you say that the site was generally, I think you said, in a state of neglect, do you agree that would also apply to the employees, that they had been neglected in some areas?---I can't answer that question. I was talking from the perspective of repairs and maintenance, and expenditure on what I would call essential safety systems. Okay? I can't answer the question on employees because I wasn't there to witness it.
PN182
At paragraph 45 of your statement, you list all the wage increases that have applied at the Seven Hills site since December 2000. Is that right?---Yes.
PN183
**** MR CRAIG CHARTER XXN MR CRAWFORD
Do you agree that out of those figures there's only ever been one increase of three per cent?---Yes, I do.
PN184
So obviously a wage increase of only three per cent would be significantly lower than what's been the standard at the site. Would you agree with that?---Not significantly but it would be lower.
PN185
Commissioner, I would now like to hand Mr Charter a copy of a document I've prepared comparing the wage rates of Seven Hills with the wage rates at other manufacturing sites that CBIA operate. Can I hand that to him.
PN186
Do you have that, Mr Charter?---Yes, I do.
PN187
Do you have that, Commissioner?
PN188
THE COMMISSIONER: Yes, thanks, Mr Crawford.
PN189
MR CRAWFORD: So what I've done, Mr Charter, is I've used - to try and provide a fair comparison, I've used, effectively, 2011 rates after the relevant wage increase for 2011 was applied. I haven't included anything for 2012 or 2013?---Okay.
PN190
So the first page is the Seven Hills site. Now, I wasn't actually certain, you might be able to clarify, the current Seven Hills agreement contains rates of pay towards the back of the document, it appeared to me that those rates had been - those rates were prior to a three per cent increase being applied in 2011. Are you aware whether that's correct?---I'm not. This is the first I've seen of this document.
PN191
In my document, I have applied, as you'll see, a three per cent increase. I'm assuming that those rates were actually before the three per cent increase, but on the second page I've cited rates of pay from the Bosch Chassis Systems Australia Pty Ltd (East Bentleigh), Enterprise Agreement 2011. Do you have that?---Yes, I do.
**** MR CRAIG CHARTER XXN MR CRAWFORD
PN192
On the third page, I've cited rates from the Bosch Chassis Systems Australia Pty Ltd (Lonsdale), Enterprise Agreement 2010. Do you have those?---Yes, I do.
PN193
East Bentleigh, I believe, is the manufacturing site in Victoria. Is that right?
---Correct.
PN194
And Lonsdale is a manufacturing site in South Australia?---Correct.
PN195
Do you accept that the rates of pay at East Bentleigh and Lonsdale are higher than the rates of pay at Seven Hills?---For which particular classification do you want to talk about?
PN196
Well, if we're talking about the East Bentleigh agreement, for example, for every single classification the rates on my figures are an average of 13.93 per cent higher or $3.72 per hour. You'll see those figures?---On the document you've got here, they appear to be higher.
PN197
Given you are a manager responsible for the manufacturing sites CBIA operates, wouldn't you be relatively familiar with the various
wage rates at different sites?
---No. You get familiar with these when you're in the thrust of doing an EBA. They're not numbers that you commit to memory for
your normal day to day routine. You have so many numbers that you're reviewing on a daily basis. For anyone asking a question on
classification and wage rate, I would always have to go and consult the HR department.
PN198
Well, you certainly have checked what wage increases were payable or agreed to at those sites because you included those figures in your statement as a reason why - - -?---Correct, but they're not numbers that I commit to memory. I still have to refer to them if I'm looking up one.
**** MR CRAIG CHARTER XXN MR CRAWFORD
PN199
I have actually given you the full agreements, so feel free to have a look and check them?---I'm not disputing what you're saying. I'm simply saying they're not numbers that I commit to memory.
PN200
It would surprise me, to be honest, that in your role you wouldn't have an idea about which sites are paid better than others. I mean, do you agree that you probably should have an idea of that?---There's a general knowledge of where the wages are at each site, a general knowledge, it's not to the, you know, second decimal of a percentage knowledge.
PN201
Is your general knowledge that the rates at East Bentleigh are higher than the rates at Seven Hills?---East Bentleigh looked to be a bit higher than Seven Hills and Lonsdale looks to be a bit lower than Seven Hills.
PN202
Well, 13.93 per cent is quite a sizeable figure, you would have to agree?---You're talking about two different enterprises that do completely different functions.
PN203
Okay, but they seem to be both classification structures appear based upon the manufacturing C levels. I mean, is that right?---Yes, they're - - -
PN204
In turning to the Lonsdale agreement, you will notice that some rates in 2011 were actually higher than Seven Hills, the C10, C9, C8, but the rest of the rates at Lonsdale are higher and the average Lonsdale rates still work out to be higher than the Seven Hills rates. Is that right?---The C10, C9 and C8 are lower at Lonsdale, did you say?
PN205
Correct?---Sorry, are higher at Lonsdale or lower?
PN206
They are lower at Lonsdale, so - - -?---Lower, yes.
**** MR CRAIG CHARTER XXN MR CRAWFORD
PN207
- - - Seven Hills has - - -?---Yes, so they've got some lower and they've got some higher, yes.
PN208
Yes, and on average they come out that Lonsdale is marginally above but certainly not to the extent that East Bentleigh is above. Is that right?---Yes, on that maths, it does. Are you weighting the classifications with the number of employees we have in those classifications or are you simply averaging the classifications?
PN209
I didn't have that information so I'm just using the raw - - -?---Okay, well, that makes a big - - -
PN210
- - - dollar figures?---That makes a big difference on how many people we have in each classification as to what the average difference would be.
PN211
Well, it wouldn't make much difference at East Bentleigh, would it, because every single rate is higher at East Bentleigh than it is at Seven Hills?---It would make some difference because it depends - you've got different percentages for each classification, so it would - - -
PN212
But it is impossible that - - -?--- - - - depend on how - - -
PN213
- - - no matter how many employees are in different classifications, that your wages bill at East Bentleigh would be lower than Seven Hills. Do you agree that is impossible?---Overall, East Bentleigh would be higher in the classifications. The exact amount as you're stating here would depend on how many we had in each classification.
PN214
Thank you. Mr Charter, are you aware or do you accept that in addition at the East Bentleigh and Lonsdale sites, the employer pays income protection insurance for employees?---That is part of the EBA.
**** MR CRAIG CHARTER XXN MR CRAWFORD
PN215
Totalling 2.2 per cent, I believe, of the gross margins - - -?---That sounds roughly correct.
PN216
Does that condition apply at Seven Hills?---No, it doesn't.
PN217
Did the unions seek that condition in negotiations for the agreement we're discussing here today?---From memory, I think they might have.
PN218
Did you agree to it?---No.
PN219
Can I turn now to the East Bentleigh agreement. Now, at paragraph 46 of - - -?
---Wait on, I've got to find it. Which paragraph?
PN220
46, sorry, of your statement?---Oh, the statement.
PN221
I'll take you to the clause of the agreement in a second but can you first turn to paragraph 46 of your statement?---Okay.
PN222
Do you have that? And you've got a table outlining the various wage increases at East Bentleigh since 2006. Is that right?---Yes.
PN223
Can I refer you now to clause 42 of the East Bentleigh agreement?---Yes.
PN224
Do you have that?---Yes.
PN225
That's titled Continuous Improvement Payments and it reads:
PN226
The parties are committed to continuous improvement in quality, productivity and customer service. In recognition of the commitment of employees of the company to this principle, continuous improvement payments will be paid on the following dates: $500, 1 November 2011 -
PN227
**** MR CRAIG CHARTER XXN MR CRAWFORD
Then $500 on 1 November 2012 and 2013 as well. Is that right?---Yes, it is.
PN228
Were those payments made to employees at East Bentleigh?---Yes.
PN229
So why in paragraph 46 of your statement haven't you identified that $500 payment each year as part of the wage increases that - - -?---Because it's not an increase; it's part of - it's a set amount that's been in the EBAs for about the last three EBAs, so it's not a percentage increase.
PN230
Well, that's not entirely right. I had a look and the previous agreement had a $400 payment. This agreement, it's been increased to 500, but nevertheless it's extra wages in the pocket of employees, isn't it?---It is.
PN231
Do you think employees at Seven Hills would have been happy to receive an extra $500 from the company if you were willing to put that into the agreement?---I'm sure the employees at Seven Hills would be happy to accept any amount of extra money, whether it's $500, $5000, why would they not be happy to accept that?
PN232
I think that's a valid point. Do you accept that for an employee on a salary of, say, $50,000 per year, that a payment of $500 is effectively a one per cent increase? Well, one per cent of their salary?---That maths works out, yes.
PN233
So why when you recorded the wage increase figures for East Bentleigh didn't you disclose to the commission that those employees actually receive potentially an extra one per cent through this additional $500 payment?---Because that wasn't the item that we were disclosing. The item we were disclosing was the percentage wage increase and that's what we've put in the document and that's what it is.
PN234
I would have thought it's a relevant consideration. I mean, it results in the employer paying more money to the employees?---There are other monetary items that are paid at all sites. There's things like where we give out gift vouchers for when achieve a certain milestone; now, I haven't put that in, either. We provide clothing for people; I haven't put that in, either. We were simply putting in the wage rise percentage. We weren't putting in the whole detail, monetary detail of the EBA.
**** MR CRAIG CHARTER XXN MR CRAWFORD
PN235
But if you were being fair between the sites, why wouldn't you offer at Seven Hills, for example, three per cent plus a $500 payment?---The way - I would like to offer CBIC everything I could possibly offer. I would like to make their life as nice as I could possibly make it. We have one principle that we have to get over first: we have to make the site sustainable. Okay? We can't go on making $2 million losses and be making their life lovely and then the business goes over. I would much rather give a wage rise that is sustainable and fair but maybe not as good as what everyone would like and maybe not as comparable to other enterprises - remember, I have to focus on this as an enterprise - and if I do get to a position where we can make the site sustainable, that's the first objective. The next objective then is to look at those niceties.
PN236
In paragraph 54 of your statement, you refer to being concerned that an increase above three per cent would effectively set the wage floor for negotiations at East Bentleigh and Lonsdale. Is that right? It's in paragraph 54(b)?---54 or - - -
PN237
Yes, sorry, 54(b), about halfway through that paragraph?---Yes, it would set an expectation given that, you know, this was a loss-making business and you were able to offer, you know, higher amounts of increase than - if we're not a loss-making business, then, you know, we can expect a lot higher than that. There would be some expectation in that regard.
PN238
But, I mean, do you think it's fair that on one hand CBIA or CBIC wants to say we want to keep wage increases consistent across our three manufacturing sites, yet on the other hand all the sites aren't on the same wage rates and, for example, at East Bentleigh they're on much higher rates and they get an extra $500 paid to them each year?---Where have I said I want to keep them consistent?
PN239
Well, isn't that implied from you saying that when you talk about a floor for negotiations?---Don't imply things. Have I said it or haven't I said it?
**** MR CRAIG CHARTER XXN MR CRAWFORD
PN240
What you have said is CBIA is concerned that a greater than three per cent year 1 wage increase would effectively set the wage floor
for those negotiations?
---Right. Now, that is not saying I want them all consistent. That is simply saying it could be used as a springboard at another
enterprise who was not making a loss to expect a much higher wage offer. That's very different to what you said.
PN241
Then at paragraph 61 of your statement, you talk about a three per cent increase and say it's consistent with: "(a) increases offered in other CBI businesses." I mean, I would assume that should be - - -?---Well, that's simply a comparison.
PN242
Such as the operation at Lonsdale and East Bentleigh, both East Bentleigh and Lonsdale received a three per cent increase during 2012, but at East Bentleigh they received three per cent plus a $500 payment, which is potentially actually four per cent, isn't it?---It is.
PN243
Mr Charter, on a general level, would you say that cost of living expenses in Melbourne or Adelaide are higher than those in Sydney?---I don't know.
PN244
Can I refer you back to paragraph 54 of your statement. Do you accept, Mr Charter, that - I understand since CBIC took over the Seven Hills site there has been losses incurred. Is that right?---Yes, there has been.
PN245
Those losses haven't been incurred as a result of wage increases, have they?---No.
PN246
Because there haven't been any wage increases at the site?---That's right.
PN247
Mr Charter, do you accept that manning levels at Seven Hills - I mean, I know that you accept that 29 employees were made redundant in September 2012. In our evidence we're saying that around 20 employees were also made redundant at that site in 2010; are you aware of that?---I had heard that.
**** MR CRAIG CHARTER XXN MR CRAWFORD
PN248
Putting those two numbers together, I mean, roughly, the manning levels have decreased by around 50 at that site since 2010. Is that your understanding, roughly?---That sounds about right.
PN249
Would you say that because those manning levels had reduced that the productivity of the remaining employees has probably increased?---That's a ridiculous statement. You need to look at the amount of sales in the business. You can't simply assume that the sales are stagnant at a certain level. In 2008, the business was selling $50 million worth of product. We looked like we're going to just get over the $20 million currently in this financial year, so the sales have dropped something like 60 per cent; the workforce has not dropped 60 per cent.
PN250
So you don't accept that?---Absolutely not.
PN251
Thank you, Commissioner. Thank you, Mr Charter?---Thank you.
PN252
THE COMMISSIONER: Mr Walkeden, did you - - -
PN253
MR WALKEDEN: Yes.
PN254
THE COMMISSIONER: - - - want to cross-examine?
PN255
MR WALKEDEN: Are you all right to proceed, ,Commissioner?
PN256
THE COMMISSIONER: Yes, whenever you want.
<CROSS-EXAMINATION BY MR WALKEDEN [11.16AM]
MR WALKEDEN: Thank you. Mr Charter, you're employed as a director of manufacturing by CBIA. That's correct, isn't it, sir?---Correct.
**** MR CRAIG CHARTER XXN MR WALKEDEN
PN258
And currently CBIA has three manufacturing sites in Australia. That's correct, isn't it, sir?---Correct.
PN259
Those three sites are in Lonsdale in South Australia, East Bentleigh in Victoria and Seven Hills in New South Wales. That's correct - - -?---Correct.
PN260
- - - isn't it, sir?---Correct.
PN261
In your evidence in your first statement, you say there are 65 employees at the Seven Hills site. You say that at paragraph 12 of your first statement, sir. You say there are 65 employees engaged in the manufacturing and maintenance activities?---Oh, right, yes, that sounds right.
PN262
And there's a remaining 16 engaged in administrative and management roles. That's correct, isn't it, sir?---Correct.
PN263
The enterprise agreement that we're talking about today, that will only cover those 65 employees engaged in manufacturing and maintenance activities. That's correct, isn't it, sir?---Correct.
PN264
You're based in the East Bentleigh site?---Correct.
PN265
But you've attended the Seven Hills site on a number of occasions?---I'm responsible for all three sites from an operational perspective, so therefore I need to attend because I need to understand and, you know, have a full - a knowledge of what's going on, and given that's a new business, I've been spending probably about four days a month.
PN266
Four days a month since the mid to end of 2012. Is that correct?---Yes.
**** MR CRAIG CHARTER XXN MR WALKEDEN
PN267
In the course of your visits to the Seven Hills site, you've spoken to the employees on a number of occasions, haven't you?---Yes, I have.
PN268
You would agree with me that you are somebody who is familiar with the employees at the Seven Hills site, aren't you, Mr Charter?---That's a subjective question. There's - I'm familiar to say hello to people.
PN269
Yes, you've met them?---I have met them, yes.
PN270
You've spoken to them?---I've had some communications with them. Would I know them all by face and name? No.
PN271
No, but you've spoken to them, you've met them, you've met them, you've seen them, haven't you, sir?---Correct.
PN272
Would you agree with me that most of the 65 employees at the Seven Hills site have long periods of service?---Yes, I would.
PN273
Are you familiar with Mr Peter Tutton?---Yes, I am.
PN274
You recognise Mr Tutton as sitting at the back of the courtroom, don't you, sir?
---Yes, he's combed his hair but I still recognise him.
PN275
You understand that Mr Tutton is an AMWU delegate?---Yes.
PN276
Mr Tutton says in his statement that he commenced employment on the site in 1975?---Okay, yes, I'll take your word for that.
PN277
You'll take Mr Tutton's word for that?---Yes, I will.
**** MR CRAIG CHARTER XXN MR WALKEDEN
PN278
You would also agree, wouldn't you, sir, that most of the 65 employees are over the age of 45?---Yes, I would.
PN279
So we're talking here about a workforce that is a long-term workforce?---Yes, we are.
PN280
And we're talking about an aging workforce, aren't we, sir?---Yes, we are.
PN281
We're talking predominantly about a male workforce, those 65 employees?---Yes.
PN282
Would you agree with the proposition that if these men were to lose their jobs, they may struggle to find comparable employment?---Absolutely, I'd agree with that.
PN283
You gave evidence that you participated in negotiations for the enterprise agreement at the Seven Hills site?---Yes.
PN284
At paragraphs 42 to 44 of your first statement, you provide a summary of those negotiations?---Yes.
PN285
That's correct, isn't it, sir?---Yes.
PN286
Do you say this morning that summary is correct?---I believe so.
PN287
In that summary, sir, you describe a number of meetings between the company and the unions?---Yes.
PN288
You describe the position taken by the company on various claims advanced by the unions?---Sorry, I missed that.
**** MR CRAIG CHARTER XXN MR WALKEDEN
PN289
You describe the position taken by the company in response to various claims advanced by the unions?---Yes.
PN290
And you also describe the position of the unions, don't you, sir?---Yes.
PN291
At the first bargaining meeting, you attended that meeting?---Yes.
PN292
That meeting occurred on 27 November 2012 as set out at paragraph 42(c) of your statement?---Yes.
PN293
At that first bargaining meeting, do unions provide the company with a log of claims?---Yes.
PN294
That log of claims is a joint log of claims between the AMWU and the AWU?
---Yes.
PN295
A copy of that log of claims is attached to your first statement marked "CC6". That's correct, isn't it, sir?---Yes.
PN296
If I just ask you to turn to that document, sir, CC6 - - -?---Yes.
PN297
- - - that log of claims combined contain the items that the company and the unions then actually negotiated on. That's correct, isn't it, sir?---Yes.
PN298
In the course of negotiations, the company didn't advance any claims of their own?---We had no claims.
PN299
So when you say, sir, at paragraph 44 of your first statement, this is the last sentence at paragraph 44 - - -?---Yes.
**** MR CRAIG CHARTER XXN MR WALKEDEN
PN300
- - - so when you say at that last sentence:
PN301
CBIC has received nothing in return for the proposed wage increases or the other union claims that it conceded during bargaining -
PN302
you would agree with me that the company received nothing because it didn't ask for anything?---I would agree that.
PN303
You can't really complain about getting nothing if you don't ask for anything, can you?---I wasn't complaining.
PN304
So your evidence this morning is: in the course of these negotiations, the company advanced no specific claims or made any proposals to improve productivity on the site?---We made no proposals to improve productivity in the union negotiations. I don't see that as being something that is confined to an EBA document.
PN305
Yes, but if we just focus upon the question and the question was: in the context of those negotiations - - -?---Yes, I answered it.
PN306
Yes. So you agree that there was no specific - - -?---Not within the EBA document.
PN307
Can I take you to paragraph 42(d) of your first statement. Have you got that, sir?
---Yes, I have.
PN308
At paragraph 42(d) you describe what occurred at the second bargaining meeting?---Yes.
PN309
**** MR CRAIG CHARTER XXN MR WALKEDEN
You were present at that meeting?---Yes.
PN310
What you say is that at this second bargaining meeting, which occurred on 4 December 2012, that the company responded to the log of claims of the unions?---Yes.
PN311
A written response was prepared and provided to the unions at that meeting. That's correct, isn't it, sir?---I believe so. I didn't do it, personally.
PN312
There's a document attached to your first statement, which is marked "CC7"?
---Yes.
PN313
Which you say at paragraph 42(d) is a copy of CBIC's response?---Right, yes, CC7.
PN314
CC7? That's the response of the company to the union log of claims, which was advanced or the response was given at that second bargaining meeting on 4 December 2012?---Yes.
PN315
That's correct, isn't it, Mr Charter?---Yes.
PN316
If I ask you to turn to the document marked CC7?---Yes.
PN317
Can you see the first bullet point, the words that read "wage increases"?---Yes, I can.
PN318
You can see that in relation to that item there's a bullet point which is marked three per cent from 13 September 2012, four per cent from 1 July 2013, and four per cent from 1 July 2014. You can see those words, can't you, sir?---I can.
PN319
**** MR CRAIG CHARTER XXN MR WALKEDEN
You can see the words that follow, which read, "Plus a $400 sign on bonus"?---I can.
PN320
You would agree that was indeed the response advanced by the company to the unions at this second bargaining meeting?---Yes.
PN321
During the course of the negotiations, the company has consistently made that position on wages, haven't they?---Yes, we have.
PN322
That is indeed the company's current position on wages, isn't it, sir?---Yes, it is.
PN323
During the negotiations, your evidence is there was no movement at all from the company on wages. Is that correct?---That's correct.
PN324
In your first statement, particularly, Mr Charter, you would agree with me that you describe a number of challenges which face CBIC?---Yes.
PN325
You set those challenges out at paragraph 23, 26 and 35 of your first statement, don't you, sir?---23, yes. What was the other numbers?
PN326
Excuse me. 26 and 35?---Yes. 26, yes, correct.
PN327
And in each of those three paragraphs, you don't mention labour cost as a challenge, do you, sir?---No, I don't.
PN328
If I take you to paragraph 23(b) of your first statement?---Yes, I'm there.
PN329
You say that CBIC's electricity charges have risen by half a million dollars over the past year, don't you, sir?---I do.
PN330
**** MR CRAIG CHARTER XXN MR WALKEDEN
Have you seen the submission that was prepared by the company and filed in these proceedings?---Which document are we referring to now?
PN331
The company filed a document entitled Applicant's Outline of Submission?---I believe I have read that.
PN332
I'll hand you a copy. Just give me a second, I'll just find it. I'll the witness my copy.
PN333
THE COMMISSIONER: Mr Walkeden, do you want to use mine, because I obviously a folder there?
PN334
MR WALKEDEN: Yes, that would be helpful, Commissioner, thank you.
PN335
THE COMMISSIONER: I can just indicate the only thing I have marked on it is highlighted that it says, "Applicant's Outline of Submissions."
PN336
MR WALKEDEN: Thank you, Commissioner.
PN337
THE COMMISSIONER: So there's nothing inappropriate to put before Mr Charter.
PN338
MR WALKEDEN: Mr Charter, I believe the associate has drawn your attention to page 17, the page numbers are marked in the bottom right?---Yes, I've got that.
PN339
If I just ask you just to turn to the first page, you can see the heading Applicant's Outline of Submission, can't you?---Yes, I can.
PN340
At the bottom of the page, you can see, "Lodged by the applicant," with the address for the company's lawyers at the bottom of this document, can't you?
**** MR CRAIG CHARTER XXN MR WALKEDEN
---Yes.
PN341
So would you take my word for it that this is a document prepared by the company's lawyers and filed in these proceedings?---I will take your word for it.
PN342
Thank you. If I just draw your attention to page 17 and if you see - it's actually paragraph 24(d)(iv) but you'll see the top third of the page you'll see paragraph 5 and the words "in comparison to"?---Yes.
PN343
See those words?---Yes, I do.
PN344
Can you see that those words read, "In comparison to a three year first year wage increase - - -"?---Three per cent.
PN345
Sorry, my mistake.
PN346
In comparison to a three per cent first year wage increase, the compound, in effect, over the life of the agreement of: (b) a five per cent wage increase is an additional $268,000.
PN347
---I see that.
PN348
You would agree with me that $268,000 is a significantly lesser amount than half a million dollars?---I would agree with that.
PN349
You would agree with me that over the next financial year, rising electricity costs is likely to be a larger cost for CBIC than a five per cent wage increase in the first year of the enterprise agreement?---Over the next financial year?
PN350
Correct?---I don't know the effect of Kevin Rudd's latest statement about changing the carbon tax, so I couldn't answer that until I was advised as to that effect.
**** MR CRAIG CHARTER XXN MR WALKEDEN
PN351
If electricity prices continue to rise by 15 per cent, you would agree that rising electricity costs is likely to be a larger cost than a five per cent wage increase in the first year of enterprise agreement. You would agree with that, wouldn't you, sir?---Well, that's just straight maths.
PN352
You, obviously being a manufacturing director of a manufacturing company in Australia, you would keep up to date with the current goings on in the manufacturing issue, wouldn't you, sir?---General trends, yes.
PN353
Would you agree with me that there is some concern amongst the business community about rising electricity prices?---Yes, I would agree with that.
PN354
Yes, and the concern is that electricity prices for manufacturers in Australia will continue to increase. You would agree with that, wouldn't you?---Under the Gillard proposal, it was. As I said, I don't know the outcome of what Rudd is proposing in going to the market scheme.
PN355
Would you agree with this proposition, that the challenges facing the company are greater than its labour costs?---No, I wouldn't. Our electricity bill is around the $3 million mark. Our wages bill is - total wages is up around $8 million and EBA wages is around about five and a half million dollars, so wages are significantly larger than electricity as a component.
PN356
Yes, but if you just move on from electricity for a moment, would you agree with the proposition I'm advancing to you that the challenges facing the company are greater than just labour costs?---Absolutely. There's every element of cost in a business that needs to be analysed and minimised.
PN357
Yes. What about this proposition: you couldn't sit here this morning and give evidence on oath, in giving your evidence you couldn't guarantee that if the Commissioner awarded a three per cent wage increase in the first year of the agreement that no workers would be made redundant at the Seven Hills site over the life of the agreement, could you?---Absolutely not. I couldn't give that with a wage freeze. It's all dependant on many factors.
**** MR CRAIG CHARTER XXN MR WALKEDEN
PN358
That's right. Many factors other than just wages. Correct?---I've already said that.
PN359
Likewise, you couldn't guarantee that if the commission in these proceedings awarded a three year - three per cent, sorry, I should say, three per cent wage increase in the first year of enterprise agreement, that the business would still be here in three years' time, could you?---A hundred per cent guarantee, no, but we do have strong plans to turn the business around.
PN360
Dreams aren't always achieved, are they, sir?---Absolutely not.
PN361
With many variables that determine whether the plan can be met?---You're correct.
PN362
Likewise, you couldn't guarantee that if, for instance, there was no wage increase over the next three years at the Seven Hills site, that the company would still be here in three years time, could you?---The word "guarantee", no.
PN363
Thank you. Can I take you to paragraph 54(b) of your first statement?---Yes.
PN364
Can you see the second sentence, this paragraph reads, "CBIA has two enterprise agreements: Lonsdale and South Australia, and
East Bentleigh in Victoria -"?
---Yes.
PN365
"- which reach their nominal expiry date during the next 12 months"?---Yes.
PN366
Mr Crawford from the AWU provided you copies with those enterprise agreements, didn't he?---He did.
PN367
54(b) goes on to read, "CBIA is concerned that a greater than three per cent year 1 wage increase would effectively set the wage floor for these negotiations." You can see those words, can't you, sir?---I can.
**** MR CRAIG CHARTER XXN MR WALKEDEN
PN368
Now, it's not the case that the Victorian or South Australian sites would automatically get the wage increases at the Seven Hills site, is it?---Absolutely not.
PN369
The wage increases at the South Australian site and the Victorian site are the product of enterprise bargaining, aren't they, sir?---Absolutely.
PN370
You would also agree that the wages and conditions at each of the three sites are not identical?---I agree with that.
PN371
Can I take you to paragraph 46 of your first statement. Have you got that, sir?
---Yes, I have.
PN372
You would agree that at paragraph 46(a) you set out the wage increases paid by CBIA since 2006 to its EBA covered employees at the Victorian site?---Yes.
PN373
At 46(b) you repeat that process for the EBA employees at the South Australian site?---Yes, I do.
PN374
From looking through 46(a) and (b), you would agree with me that the timing of those wage increases at those two sites differs, doesn't it, sir?---It does.
PN375
You would agree with me that in 2011 there was a total wage increase of five per cent at the Victorian site and two per cent at the South Australian site. That's correct, isn't it, sir?---Yes, it is.
PN376
You would agree with me that in 2009 there was a four per cent increase at the South Australian site and no increase at the Victorian site. That's correct, isn't it, sir?---Which year?
**** MR CRAIG CHARTER XXN MR WALKEDEN
PN377
2009?---Yes, just through timing, there was one at East Bentleigh toward the end of 08 and a follow up in January 1, 10.
PN378
Yes, but no increase in 2009?---That's correct.
PN379
Thank you. So you would agree with me that since 2006, on your figures, it's not the case that the percentage wage increase at both the Victorian and the South Australian sites have been the same. You would agree with that, wouldn't you, sir?---I do agree.
PN380
You would also have to agree that since 2006 it hasn't been the case that the wage floor at one of these sites is flowed onto the other site, you would agree with that, wouldn't you, sir?---The result hasn't flowed on; the expectation, though, is something that's completely different.
PN381
As a manager, as the manufacturing director, you deal with the expectation of various people on probably a daily basis, don't you?---I certainly do.
PN382
The expectation of your employees?---Yes.
PN383
The expectation of the company's clients?---Yes.
PN384
The expectation of other stakeholders?---Absolutely.
PN385
And you discharge your responsibilities competently, don't you, sir?---I could not answer that. The fact that I'm still employed suggests I must to a certain degree.
PN386
But dealing with expectations is something that you do on a regular basis?
---That's the largest proportion of my job.
**** MR CRAIG CHARTER XXN MR WALKEDEN
PN387
Sir, do you understand what pattern bargaining is?---I do.
PN388
The company doesn't engage in pattern bargaining, does it?---No, it doesn't.
PN389
Do you understand that unions and employees would have no access to protected industrial action if they were pattern bargaining across
the three CBIA sites?
---Yes.
PN390
So the concern that you express about a wages floor that I've taken you to at paragraph 54(b), that's not a particularly well founded concern, is it?---Yes, it is, because as I was trying to tell you, it's the expectation, and dealing with expectations is something that can completely turn around the mood of any discussion and particularly an EBA discussion, so if the shop floor at an enterprise feel like they're being dudded, then the emotions will kick in and you could be in for a one year protracted EBA negative negotiation, okay, very damaging for a business, so that's what I was referring to, not pattern bargaining.
PN391
Would you agree with this, that at paragraph 54(b) the concern you're expressing is really the expectation of employees at other sites?---Absolutely.
PN392
Would you agree that in the course of the negotiations for the enterprise agreement at the Seven Hills site, that the unions made it clear that they wouldn't accept a first year wage increase of three per cent?---They did.
PN393
You would agree that the unions took industrial action in the form of overtime bans from 9 March 2013 until 21 May 2013?---Correct.
PN394
You understand that industrial action was taken in support of the union's claims?
---Yes.
**** MR CRAIG CHARTER XXN MR WALKEDEN
PN395
Principally, the wages?---Yes.
PN396
Your evidence would be that industrial action harmed the company?---Yes.
PN397
In the course of the dispute, you would agree that there was intervention by more senior officials of the various unions to try and
assist in resolving the dispute?
---Yes.
PN398
Indeed, at paragraph 42(q), it's on page 14 of your first statement, you indicate that Mr Tim Ayres of the AMWU attended the sixth bargaining meeting?---Yes.
PN399
You understand that Mr Ayres is the New South Wales state secretary of the union?---Yes.
PN400
For a person who would undoubtedly be considered a senior official - - -?---Yes.
PN401
- - - within the AMWU?---Yes.
PN402
There was similar discussions with senior officials at AWU as well, weren't there?---We didn't have any of those people attend.
PN403
The negotiations on the ground were being handled from the AMWU by, principally, Mr Tutton and Mr Drane?---Yes.
PN404
You understood that Mr Drane ultimately reports to Mr Ayres?---Yes.
PN405
The intervention of those senior officials didn't assist or didn't resolve the dispute, did it?---No.
PN406
**** MR CRAIG CHARTER XXN MR WALKEDEN
Would you agree, and indeed if I take you to paragraph 42(v) on page 15 of your first statement, you can see the last sentence of this paragraph reads, "Mr Barbar advised that the employees had rejected CBIC's wage offer"?---Yes.
PN407
And that in his opinion the employees were unlikely to withdraw overtime bans without any improved wage offer?---I can see that.
PN408
Mr Barbar is Salim Barbar?---Yes.
PN409
He's employed by the AWU?---Yes.
PN410
It's the case that it appears in a lot of the - that Mr Barbar was the principal person for both unions that the company dealt with?---That's correct.
PN411
A lot of the correspondence from the unions emanated from Mr Barbar. That's correct, isn't it?---Yes, it is.
PN412
It's the case that the AWU has more members than the AMWU on the site?
---Correct.
PN413
Would you agree that by May 2013, that the parties had reached an impasse on the first year wage increase?---Yes.
PN414
Would you also agree with me that as at May 2013, it didn't appear that the unions would accept a three per cent first year wage increase?---I agree.
PN415
It appeared that the unions would continue to take protected industrial action - - -?---Yes.
PN416
- - - in support of their claims?---Yes.
**** MR CRAIG CHARTER XXN MR WALKEDEN
PN417
Can I take you to paragraph 54 of your first statement. Can you see the first sentence, Mr Charter, reads:
PN418
Any wage increase above three per cent would send the wrong message to the group's head office.
PN419
---I can.
PN420
If I take you to paragraph 55 of your first statement?---Yes.
PN421
You can see the first sentence reads, or part of the first sentence reads:
PN422
Any wage increase above three per cent would significantly disappoint CBIC's key customers.
PN423
---Yes, I can see that.
PN424
So once again, we're dealing with an expectation management here, aren't we, sir?---We always are.
PN425
You accepted in these proceedings there is a real chance that the Commissioner could determine that the first year wage increase to be an amount greater than three per cent?---I wouldn't presume to say what the Commissioner would do.
PN426
No, but the Commissioner could, in resolution of this - - -?---That is a possible outcome.
PN427
Yes, and the company voluntarily agreed to participate in this process?---Yes, we did.
**** MR CRAIG CHARTER XXN MR WALKEDEN
PN428
And did so in the full knowledge that the determination of the Commissioner could be a first year wage increase in excess of three per cent?---Correct.
PN429
Isn't it the case that the company decided that in resolving this dispute it would be easier to sell to head office and key customers a greater than three per cent increase by blaming the Fair Work Commission - - -?---No, absolutely not.
PN430
Can I finish my question, please?---Of course, yes.
PN431
Isn't it the case that in resolving this dispute, the company made a decision that the best way to resolve the dispute would be to sell a greater than three per cent increase to head office and key customers by blaming the Fair Work Commission rather than making a concession themselves?---Absolutely not. We believed that if we presented correctly the environment and our offer, and the position of the business, that we would be looked upon favourably for our position, that was our belief. Whether that's correct or not is yet to be seen, but that was the logic, it was not looking for a scapegoat to blame someone else. We wear our own decisions.
PN432
Nothing further, Commissioner.
PN433
THE COMMISSIONER: Thanks, Mr Walkeden. Mr Doyle, did you want to re-examine?
PN434
MR DOYLE: Just very briefly, Commissioner.
<RE-EXAMINATION BY MR DOYLE [11.48AM]
MR DOYLE: Mr Charter, you recall that Mr Walkeden asked you a number of questions about the bargaining process - - -?---Yes.
PN436
**** MR CRAIG CHARTER RE-XN MR DOYLE
- - - and he put to you that the company did not make any of its own claims, and you said that it didn't make any of its own claims?---Correct.
PN437
Why is that?---Our logic when we took over the business was that we had to turn around the business as quickly as we possibly could. It was making significant losses in the regions of millions of dollars a year, and so the first approach we took was to address the health and safety neglect that had gone on in the business, and to get the reliability of the equipment correct. We then looked at presenting the place in a suitable manner for our customers and we spent money on the workplace organisation, which was a safety issue as well, and we relaunched the business, and we got a positive vibe happening with the customers, which was very important for repeat orders in the business, so with that positive momentum we thought the best way to proceed is to offer a fair and reasonable offer right up front so that we have a quick and concise EBA. So as I outlined to the officials of the union and the stewards, and as I actually communicated to each of the shifts, we're going to put forward our best offer; we're not going to muck around, you know, "You go high, we say wage freeze, and we argue for 12 months, and we come somewhere in between." We're not going to do that. We're going to offer the very best we can offer in a tough environment with a loss-making business, with the logic that it would be accepted and embraced, and we could just work on the momentum of building this business and turning it around. That was the logic of not asking for anything because we wanted to get a quick resolution.
PN438
Thank you, Mr Charter. No further questions, Commissioner.
PN439
THE COMMISSIONER: All right. Thank you, Mr Charter, for attending and giving your evidence. You may be excused. You can either remain in the room or leave?---Thank you.
<THE WITNESS WITHDREW [11.51AM]
THE COMMISSIONER: I'm just wondering before Mr Patel comes in, do you want to, perhaps, take a five minute break? Does that suit people? I'm only suggesting five minutes, that's all. Is that all right?
PN441
MR DOYLE: Yes, Commissioner.
PN442
MR WALKEDEN: That will be fine.
PN443
THE COMMISSIONER: Okay. We will adjourn for five minutes.
<SHORT ADJOURNMENT [11.51AM]
<RESUMED [11.59AM]
PN444
THE COMMISSIONER: Yes, Mr Doyle.
PN445
MR DOYLE: Thank you, Commissioner. If we can call Madanlal Patel.
<MR MADANLAL PATEL, AFFIRMED [12.00PM]
<EXAMINATION-IN-CHIEF BY MR DOYLE [12.00PM]
MR DOYLE: Mr Patel, you made a statement in these proceedings?---Yes, I did.
PN447
How many?---Two.
PN448
Commissioner, if I can ask that this folder be handed to the witness? Mr Patel, can I ask you to turn to tab 3 of that folder and
have a read of the document that's in that tab? Once you've had a flick through that document, Mr Patel, can you confirm whether
that is the first statement that you filed in this proceeding?
---Yes, they do.
PN449
Does it contain 44 paragraphs?---Yes, it does.
PN450
Does it contain exhibits MP 1 to MP 3?---Yes, it does.
PN451
Have you read that document recently?---Yes, I have.
PN452
Are there any corrections that you would like to make to that document?---Yes, I might point out a minor correction to paragraph 13, the second sentence, where I've indicated an approximate 15 per cent price increase. It should read "up to 15 per cent".
PN453
How would the sentence now read, Mr Patel?---"These included price increases of up to 15 per cent."
PN454
Save for that change, is this statement true and correct?---Yes, it is.
PN455
I tender that statement, Commissioner.
PN456
**** MR MADANLAL PATEL XN MR DOYLE
THE COMMISSIONER: I mark that as Applicant 3.
EXHIBIT #APPLICANT 3 FIRST STATEMENT OF MR PATEL
MR DOYLE: Mr Patel, can you please turn to tab 5 of that folder?---Yes.
PN458
After having a flick through that document, can you confirm whether that document is the second statement that you filed in this proceeding?---Yes, I do confirm that.
PN459
Does that statement contain 10 paragraphs?---Yes, it does.
PN460
Does it contain any exhibits or annexures?---No.
PN461
Have you read that document recently?---Yes, I have.
PN462
Are there any corrections that you'd like to make to that document?---No, none.
PN463
Is it true and correct?---Yes, it is.
PN464
I tender that statement, Commissioner.
PN465
THE COMMISSIONER: I'll mark that Applicant 4.
EXHIBIT #APPLICANT 4 SECOND STATEMENT OF MR PATEL
MR DOYLE: No further questions, Commissioner.
PN467
THE COMMISSIONER: Thank you, Mr Doyle. Mr Crawford?
<CROSS-EXAMINATION BY MR CRAWFORD [12.03PM]
MR CRAWFORD: Mr Patel, you're a director of CBIC, is that correct?---That's correct.
**** MR MADANLAL PATEL XXN MR CRAWFORD
PN469
And you're an employee of CBIA, is that correct?---That's right.
PN470
So you're not actually an employee of CBIC, is that right?---Correct.
PN471
Who are the other directors of CBIC?---It's Graham Scull and Kevin Bergman.
PN472
Sorry?---Kevin Bergman.
PN473
Right. Are either of those gentlemen or yourself a director of CBIA?---Yes, both Graham Scull and myself.
PN474
Who's the CEO of CBIC?---It is Craig Charter. Sorry, I might just correct that. Kevin Robson is the general manager at CBIC reporting to Craig Charter as head of manufacturing for CBIA, so there is no designated CEO of CBIC.
PN475
So Kevin Robson's effectively the highest employee in CBIC?---Correct.
PN476
And Mr Robson was also, I believe, a high level employee of Autocast and Forge, is that right?---I believe so, yes.
PN477
Can I refer to paragraph 11 of your statement, which contains some figures about Autocast and Forge which are also attached at - well, they basically are taken from the attachment MP 1, is that right?---Correct.
PN478
In terms of the 2012 figures on MP 1, you have those?---Yes, I do.
PN479
It appears to me, and I wouldn’t have much knowledge of this type of thing, that EBIT before one off income was minus 4,525, is that right?---That's correct.
PN480
**** MR MADANLAL PATEL XXN MR CRAWFORD
And then one off income was 4,733, is that right?---Correct.
PN481
Does that indicate that Autocast and Forge actually emerged ahead for that year?
---On the face of it, in terms of a presentation in the financial statements, correct.
PN482
Because I was just a bit surprised to see that because a lot of the material I'd seen was indicating that Autocast and Forge was losing massive amounts of money at the Seven Hills site. Have you come across that information too?---Correct. Might I point out, as I mentioned, the 4.73 million was one off income presented in their financial statements. Of that, $3 million was a forgiveness of a loan from Intercast and Forge from whom Broens acquired this business, so it was a non-cash benefit, it is an accounting entry.
PN483
All right?---And also it included almost $1.2 million of an insurance claim that Autocast and Forge lodged that was also of a one off nature, so in terms of its operating losses it is true to say that the operating losses themselves were 4.5 million.
PN484
Right. Are you aware why a separate company, CBIC, was established to run the Seven Hills site?---It was just a formality in terms of keeping separate operations and not necessarily having the complications of absorbing it within the CBI Australia entity. It is part of CBI's policy to keep the structures fairly simple.
PN485
So it was basically simpler to create a new company than to just acquire that business through CBIA?---Correct.
PN486
If CBIC gets into financial trouble, is CBIA liable for those debts?---Not directly as it's a shareholder of CBIC.
PN487
Because I think at paragraph 39 of your statement you indicate CBIC stated:
**** MR MADANLAL PATEL XXN MR CRAWFORD
PN488
An operations of finance by way of loans from CBIA, decisions regarding inter-company financing rests with the board. In short, if the board decides to discontinue CBIC's financial support CBIA has no ability to continue loaning funds to CBIC.
PN489
Is that right?---That's correct.
PN490
Would you say that was a factor in why a separate company was established for the Seven Hills site - - -?---No.
PN491
- - - so that potentially going forward CBIA would not be liable for the debts of that business?---No, that would not have been the reason.
PN492
Can I refer you, now, to paragraph 16 through to 18 of your statement, which basically go through some history of CBIC and CBIA's involvement at the site? At paragraph 16, you indicate that CBIC, that company was registered on 8 August, is that right?---Correct.
PN493
Then at paragraph 17, you indicated that 16 August Frena Ultimate Holders L.P. approved the decision to acquire certain AFF assets in order to operate A and F's business, is that right?---Correct.
PN494
And Frena Ultimate Holdings are the ultimate owners of CBIA, are they?
---Correct.
PN495
So the owners approved the acquisition on 16 August?---Yes.
PN496
Why then, Mr Patel, didn't the acquisition actually formally occur until November 2012?---There were protracted discussions and negotiations and there were conditions precedent on the acquisition going ahead, and some of those could not be satisfied until November.
**** MR MADANLAL PATEL XXN MR CRAWFORD
PN497
Can I ask you: when the owners approved the acquisition on 16 August, were they approving it on the basis that 29 employees would be made redundant before they actually formally acquired it?---No, they did not make a decision on that basis, they made a decision on the expected cost to continue the business at its current levels.
PN498
So "at the current levels" means that the owners actually approved acquiring the site with all of the employees that were currently employed at that time?---No, what they approved is acquiring a business with costs associated, the required costs to run that business. It was determined that there was an excess of employees relative to the volumes that were required.
PN499
And in determining the costs of owning the business, you'd have to factor in how many employees are in the wages bill, wouldn’t you?---Correct. It would be based on the requirement of the number of people.
PN500
That's what I'm getting at, that when they actually said, "Yes, you can acquire the business," how many employees were they assuming that there would be at the business when they acquired it?---If I remember correctly, I think it was about 90 in total.
PN501
So the full amount before the redundancies?---No, sorry. 90 people required which included - the site had contract labor as well. Could I answer that a little differently, if I may?
PN502
If you want?---Effectively, what we identified is approximately 30 fewer people were required than were currently employed by Autocast and Forge.
PN503
When did you identify that?---During the due diligence process.
**** MR MADANLAL PATEL XXN MR CRAWFORD
PN504
That's what I'm asking you. When the owners approved the acquisition on 16 August, did they know that those 29 people, I think it was, wouldn’t actually exist when they formally acquired the business?---Yes.
PN505
So that decision had already been made?---The decision on the cost required to manage the business going forward was determined.
PN506
How could the owners, when they're making that decision, possibly be certain that 29 people would be made redundant before they formally
acquired the business?
---They could not have been certain. In these circumstances, it's always an estimate of what might or might not be required and would
have been based on the due diligence that CBI management performed of the business.
PN507
Are you aware how it transpired that within a few days Autocast and Forge went into administration and an administrator was appointed, and then that administrator made 29 employees redundant and changed the shifts? Do you agree that's the events that occurred?---I was not directly involved with those discussions at the time, all I do know is that what CBI had proposed to the administrator is that during the licence period these are the resources that it requires to maintain the business, and that it would pay for what it believed was required for the business.
PN508
When was the licence arrangement finalised?---Around 12 September.
PN509
And that was negotiated between who?---It was with the administrator as well as with Autocast and Forge.
PN510
In paragraph 19 of your statement, you describe that the purpose of CBI's acquisition was to protect CBI's position by ensuring its ability to continue supply Ford, GMH and Toyota, is that right?---Correct.
**** MR MADANLAL PATEL XXN MR CRAWFORD
PN511
What would you estimate is the financial impact if the Seven Hills site closed in 2012 for CBIA?---It would have been approximately $3 million. If I may just comment further on that, of immediate impact.
PN512
Can I refer to paragraph 23C of your statement? You talk about a figure of $720,000 in due diligence transaction and startup costs, is that correct?---Yes.
PN513
How much of that 720,000 was actually spent on due diligence?---I can't remember the exact figures at the moment, I don't have the detail with me, but I would estimate that it would be between the financial consultants, and the due diligence and the legal cost in completing the transaction would be in the region of about $550,000 to $600,000.
PN514
Did all these budgeted figures that you refer to in your statement emerge from the due diligence process?---Yes.
PN515
Do you accept that a lot of those figures have proven incorrect?---I would not necessarily say they've been proven incorrect, they were estimates made at the time that we went into the transaction and there have been, yes, certain costs that were estimated that were higher than what had transpired as well as there was certain loss of sales.
PN516
So the estimates haven't proven to be all that accurate thus far?---Yes.
PN517
At paragraph 23 and 24 you talk about wage costs at the Seven Hills site, and you indicate in terms of actual expenses not budgeted, that from 12 September 2012 to 31 December 2012 the costs were 2.82 million, is that right?---Sorry, you're referring to paragraph - - -
PN518
**** MR MADANLAL PATEL XXN MR CRAWFORD
24C?---24C, which is for the period of four months to 30 April, yes.
PN519
So that's from the start of 2013 to 30 April?---Correct. For the four months, yes.
PN520
At paragraph 26A, you refer to CBIC's wages costs being higher than budgeted despite lower sales due to increased overtime costs, is that right?---That's correct.
PN521
On a general level, would it normally be cheaper to hire new employees rather than continuing to pay significant amounts of overtime?---On balance, it may be, but you have to take into account the longer term requirement rather than just for a specific period. If I might add, in the industry we do have cyclical volume changes, so to simply hire additional employees for periods of time that you require, overtime does not make financial sense.
PN522
I notice at paragraph 28 of your statement - do you have that there - you estimate profits and losses for the business going forward to 2016, is that right?---No, those were the estimates that we had prepared at the time we were looking acquiring the assets.
PN523
So when, presumably, the owners approved the acquisition, those were the figures they had?---Correct.
PN524
So they were basically approving the acquisition of the business on the basis that it would continue to lose increasingly high amounts of money through to 2016, is that right?---Correct.
PN525
At paragraph 33A of your statement, you talk about the pressure of a high Australian dollar on the business. Has the recent decline in the price of the Australian dollar assisted in that regard at all?---No, and it's not expected to have an impact in the short or the medium term, and historically it needed to be at the region of about 70 US cents to be viable as export.
**** MR MADANLAL PATEL XXN MR CRAWFORD
PN526
So it hasn't dropped enough yet - - -?---Correct.
PN527
- - - to assist. At paragraph 25D of your statement, you talk about a budgeted operating profit of $483,000, is that right, for 2013?---Correct.
PN528
Can you explain why a profit of $483,000 was initially forecast for 2013 yet significant losses were forecast for 2014, 2015 and 2016?---Well, 2014 and 2015 - sorry, going forward in particular, we had factored in certain cost increases, and one of them being wages and salaries, and also increases in rents which were part of the lease agreement.
PN529
But I believe a reduction in rent was actually negotiated at some point?---A reduction in the starting rent which is factored into the forecast for 2013, but as with most rental agreements there is a factor for increases largely inline with CPI.
PN530
Mr Patel, are you aware of the wages bill for the East Bentley and Lonsdale sites?---In what aspect, what detail?
PN531
The rates paid to employees at those sites?---Yes.
PN532
Do you accept that the rates paid to employees at, in particular, East Bentley are much higher than the Seven Hills site?---In terms of the rates themselves, I'm sorry, I apologise, I do not know the rates in themselves, but in terms of the wage increases that have been granted, I do know that.
PN533
You know what percentage increases have been awarded?---Correct.
PN534
Are you aware that employees at East Bentley have received one off payments of $500 in 2011 and 2012 in addition to the wage increases?---I'm sorry, I'm not aware of that itself, I'm aware of the wage level increase, the percentage increase.
**** MR MADANLAL PATEL XXN MR CRAWFORD
PN535
So you're aware of some aspects of the agreed package for the East Bentley site but not all of them, is that right?---Correct.
PN536
You accepted just before that for an individual the wage rate is generally higher at East Bentley than at Seven Hills, is that right?---Sorry, I did retract that to say I did not know that detail.
PN537
Commissioner, can I please show the witness the comparison document I prepared? Do you have that, Mr Patel?---Yes, I do.
PN538
So you'll see on the first page are the rates of pay in 2011 for the Seven Hills site, do they familiar at all?---No, I'm not familiar with that detail.
PN539
Then you'll see on the next page are the rates for the East Bentley site following an increase in 2011, can you see those there?---Yes, I do.
PN540
Can you see that information is indicating that the wage rates at East Bentley are, on average, 13.93 per cent higher than at Seven Hills?---I can see what's in that document but I can't necessarily verify or confirm those because, as I mentioned, I'm not familiar with that detail.
PN541
Thank you, Mr Patel. I have nothing further, Commissioner.
PN542
THE COMMISSIONER: Thanks, Mr Crawford. Excuse me, Mr Walkeden.
<CROSS-EXAMINATION BY MR WALKEDEN [12.23PM]
MR WALKEDEN: Yes, Commissioner, thank you. Mr Patel, you're employed by CBIA?---Correct.
PN544
**** MR MADANLAL PATEL XXN MR WALKEDEN
And you are employed as a chief financial officer?---Correct.
PN545
And you're based at the East Bentley site in Victoria?---That's right.
PN546
You're on the board of CBIC?---Correct.
PN547
Are you also on the board at CBIA?---Yes.
PN548
You're familiar with the operations of both CBIA and CBIC?---Yes, to a certain extent.
PN549
A budget is prepared for both companies?---Correct.
PN550
Ultimately, it is you, as the chief financial officer, who is heavily involved in the preparation of both budgets, is that correct?---Correct.
PN551
In putting together those budgets, a number of assumptions are made?---Yes.
PN552
In putting together those budgets, you would have to be familiar with the challenges the business face?---Correct.
PN553
And you make assumptions based upon those challenges, don't you, sir?
---Correct.
PN554
Your evidence this afternoon is that CBIC faces a number of challenges to its viability, that's what you say, don't you, sir?---Yes, I do.
PN555
If I can just draw your attention to paragraph 33 of your first statement, you set out those challenges at paragraph 33, don't you, sir?---Yes.
PN556
**** MR MADANLAL PATEL XXN MR WALKEDEN
Labor costs aren't mentioned at paragraph 33 of your first statement, are they, sir?---No, not specifically.
PN557
You do say at paragraph 33B that electricity costs have increased per annum since 1 July 2012?---Yes.
PN558
You say the increase costs, electricity costs, are in the order of half a million dollars per year?---Correct.
PN559
If I can just draw your attention, now, to paragraph 32 of your first statement, have you got that?---Yes, I do.
PN560
You can see the first sentence of paragraph 32 reads:
PN561
The compounding effect of a five per cent year one wage increase over the life of the agreement, when compared with a three per cent year one wage increase results in additional wage costs for CBIC of $268,000.
PN562
That's what you say at that paragraph, don't you, sir?---Yes.
PN563
You would agree with me that $268,000 is a significantly lesser amount than half a million dollars?---Yes, it is.
PN564
The statement that we're referring to, your statement, it was signed by you on 14 June 2013, wasn’t it, sir?---Yes.
PN565
There has been a budget prepared for CBIC for the financial year 2013?---Yes.
PN566
In that budget, the company budgeted for further increases in electricity prices, that's correct, isn't it, sir?---Yes, it is.
**** MR MADANLAL PATEL XXN MR WALKEDEN
PN567
And you will agree with me that over financial year 2013, in that budget, rising electricity costs are likely - indicates that rising electricity costs are likely to be a far bigger cost than a five per cent wage increase in the first year of this agreement, that's correct, isn't it, sir?---Correct. By deduction from the numbers, yes.
PN568
Thank you. And you would agree with this proposition: that the challenges facing CBIC are greater than its labor costs?---Yes, they are in terms of the pure value, but the labor cost is a challenge amongst many.
PN569
Don't you say at paragraph 41 of your first statement - can you see the second sentence, which reads, "CBIA management is encountering strong resistance from the board on the basis of CBIC's current losses"?---Yes.
PN570
"The board" is a reference to the board of the ultimate parent company of CBIA, that's correct, isn't it, sir?---Correct.
PN571
Paragraph 41 goes on to read:
PN572
During visits to the East Bentley and Seven Hills sites in January 2013, the group CEO and CFO discuss with CBIC senior management their concern that CBIC is not competitive (even based on a three per cent year one wage increase).
PN573
---Yes.
PN574
You even indicate in your statement that whilst your evidence is obviously important for the company to control their cost, labor cost being one of those costs, that the challenges to the viability of the company are greater than its labor costs. That's your evidence, isn't it, sir?---Correct.
**** MR MADANLAL PATEL XXN MR WALKEDEN
PN575
And you couldn’t guarantee that if the commission was to award a three per cent wage increase in the first year of the Seven Hills enterprise agreement, that CBIC would still be here in three years, could you?---No, nothing of that nature can be guaranteed. I should point out that both CBIA and CBIC management is working seriously hard to try and manage and control some of the other costs. We talked about the electricity cost, for example, and we have a project started already to try and reduce those electricity consumption costs.
PN576
Yes?---And all facets of costs are being considered in terms of ability and innovation required to be able to reduce those costs.
PN577
And that's a normal function of any company, isn't it, to control its costs?
---Correct.
PN578
Indeed, as the CFO, one of your key responsibilities is to keep an eye on those costs and control those costs where ever possible, isn't it, sir?---Correct.
PN579
Just going back to the point earlier. In giving evidence this afternoon, you couldn’t guarantee that if there was no wage increase to the Seven Hills employees over the next three years that the business would still be here in three years, could you?---That's correct. That cannot be guaranteed, however, as I mentioned earlier, CBIA management, CBIC management, and for that matter the company as a whole, needs to ensure that it does everything possible to minimise cost impacts to give it a chance of being competitive.
PN580
Just a moment ago we mentioned the board. Can I just draw your attention to paragraph 15 of your first statement?---Yes.
PN581
"The board" is a reference to the board of Chassis Brakes International BV?
**** MR MADANLAL PATEL XXN MR WALKEDEN
---Correct.
PN582
Which is the parent company of CBIA?---Correct.
PN583
You'd be aware that CBIC is a subsidiary of CBIA?---Yes.
PN584
So in terms of making a decision about the viability of the site, ultimately it's the board of the parent company that makes that
decision, is that correct?
---Ultimately, correct.
PN585
That parent company is a multi-national company?---Yes, it is.
PN586
You are not on the board of the parent company, are you, sir?---No.
PN587
In terms of the parent company, am I correct in saying that it has origins in Europe?---Yes.
PN588
Am I correct in saying that over the years its expanded its operations to places such as India and China?---Yes, it has.
PN589
Am I correct in saying that over the years the company has shifted its manufacturing operations from places like Europe to places
like India and China?
---No, that's not correct, it has established new operations in India and China.
PN590
Has it closed any factories in Europe?---Yes. If I can comment on that a bit further. CBIBV was a company that was calved out from a larger group, the Bosch Group. So there were operations during the ownership of Bosch where facilities in Europe were closed.
PN591
And is that work - - -?---And I do not know exactly which plants and when.
**** MR MADANLAL PATEL XXN MR WALKEDEN
PN592
Do you whether that work that was being in those European factories is now being performed in factories in India and China?---I'm not aware of that.
PN593
The board of the parent company, are there any Australians on that board?---Not that I'm aware of.
PN594
Would you agree with this proposition: that the board of the parent company doesn’t have a strong as commitment to Australian manufacturing as CBIA?---I would not comment on that.
PN595
You wouldn’t comment or you don't have an opinion?---I cannot have an opinion on that. I do not have an opinion on that.
You can't have an opinion because you're an employee of CBIA?---No, it's not because of that, it's simply because I don't know.
I don't know whether they have a greater degree of commitment to the Australian operations compared to others.
PN596
But don't you give evidence about the commitment of the board to continuing manufacturing in Australia?---Correct. But that is on the commitment in terms of the financial performance of the Australian company, not in its preference or greater commitment to other regions other than for financial reasons.
PN597
To the best of your knowledge, the decision about whether manufacturing continues in Australia is based purely on the numbers?---It would have to be. In a commercial organisation, it would have to be.
PN598
As a base principle, would you accept that India and China have lower cost jurisdictions than Australia?---Yes, they are.
PN599
**** MR MADANLAL PATEL XXN MR WALKEDEN
Can I just take you to paragraph 40 of your first statement?---Yes.
PN600
You say there that you describe the current attitude of the board, being the board of the parent company, towards CBIC's current performance and future prospects as not positive?---Correct.
PN601
If I take you back to paragraph 41, you can see - and I took you to this second sentence previously - but I just refer you to part of that second sentence, you can see there you're describing that the group CEO and CFO?---Yes.
PN602
Is the group being a reference once again for the parent company?---Correct.
PN603
So the parent company's CEO and CFO discussed with CBIC's senior management their concern that CBIC is not competitive?---Yes.
PN604
Even based on a three per cent year one wage increase?---Correct.
PN605
If I take you to paragraph 43 of your first statement, you say:
PN606
Should CBIC not comply with the board's directive and urgently improve CBIC's performance, there is a significant risk that the board could withdraw CBIC's funding from CBIA and instead turns its attention to its facility in Dalian, China?
PN607
---Yes.
PN608
Based upon those observations, you'd have to agree that regardless of whether the first year wage increase to the workers at Seven Hills is three per cent there's a significant risk that the company will or close down the factory at Seven Hills and source the castings from its factory in China?---Correct. There is a risk that could happen if financial performance is not improved, and, as I mentioned earlier, wages is only one aspect.
**** MR MADANLAL PATEL XXN MR WALKEDEN
PN609
Yes?---We have to find other areas of improvement to get the business to a reasonably viable position.
PN610
And this risk, you describe this risk as a significant risk in paragraph 43 of your statement, don't you?---Yes.
PN611
In your second statement, if I draw your attention to paragraph 10, have you got that, sir?---Yes, I do.
PN612
Can you see the words at that paragraph, which read, "In light of the board's attitude to CBIC, which I describe at paragraphs 39 to 43 of my previous statement"?---Yes.
PN613
It goes on to read, "The board frequently challenges CBIA's management regarding its approach to sourcing castings in Australia"?---Yes.
PN614
The overall cost of production, which includes labor costs, has been frequently raised in these discussions and bears upon the board's decision making around maintaining CBIC or shifting production of castings to China where the cost of production is much lower.
PN615
You go on to say:
PN616
Whilst the board could decide at any stage to shift casting production to China, the risk of such a decision is greatest during 2014.
PN617
That's what you say at paragraph 10 of your second statement, don't you?---Yes.
PN618
Based upon the paragraphs from your first statement and your second statement we've spoken about, you would have to agree that the board is actively considering closing the Seven Hills site and moving production to China?---No, it's not actively considering that option, but it is an option that they do have if the financial performance of the Seven Hills sites cannot be improved.
**** MR MADANLAL PATEL XXN MR WALKEDEN
PN619
It is something that the board has considered?---I cannot answer for the board as to whether it has considered that other than during our regular monthly regional board meetings where we talk about certain aspects of performance.
PN620
Has it been relayed to you in those regional board meetings that the board of the parent company has discussed shifting production to China?---No, it has not been mentioned in that manner.
PN621
But is something which is possible, isn't it, sir?---Correct.
PN622
You describe it as a significant risk, don't you, sir?---Yes, I do.
PN623
And you describe it as a significant risk regardless of whether the workers at Seven Hills get a three per cent wage increase in the first year of the enterprise agreement, that's correct isn't it, sir?---Yes, it is correct.
PN624
If the parent company was to shut the site at Seven Hills, that would mean all the workers would lose their jobs?---I would imagine so.
PN625
And you say that the workers at Seven Hills should show restraint and assist in ensuring the viability of the site by accepting a three per cent wage increase, don't you, sir?---I say that is what the CBI CEO has expressed.
PN626
Do you agree with his or her view?---I partly share that view.
PN627
Sitting on the fence. Can you see why there may be some opposition to that view, and the view may be expressed that why should the employees show restraint and accept a three per cent wage increase in the first year of this enterprise agreement if there is a significant risk that their jobs may go to China?---Well, we're expressing it in the context of the total business and what the business as a whole is experiencing in terms of the challenges, and the different stakeholders involved with the Seven Hills site and the work that is being done and the compromises made by most of the stakeholders in terms of trying to make that site viable.
**** MR MADANLAL PATEL XXN MR WALKEDEN
PN628
But can you see the logic of the argument? Why should the employees accept a three per cent wage increase if they face a significant risk that their jobs will go to China, can you see the logic of the argument?---I can see the logic of the argument, but may I point out, as I mentioned earlier, both CBIA and CBIC management is working very hard and diligently to improve the performance of the business, which will include, if we can, manage our costs much better which will include additional business. That additional business could not be worn at the current cost base.
PN629
Nothing further, Commissioner.
PN630
THE COMMISSIONER: Thanks, Mr Walkeden. Mr Doyle, do you have any - - -
PN631
MR DOYLE: No questions, Commissioner.
PN632
THE COMMISSIONER: No questions? Okay. Thank you very much, Mr Patel, for coming and giving your evidence, you are excused and may remain in the room or leave, which ever you prefer. Thank you.
<THE WITNESS WITHDREW [12.42PM]
THE COMMISSIONER: That is the conclusion of your witness evidence, I understand, Mr Doyle?
PN634
MR DOYLE: That is, Commissioner.
PN635
THE COMMISSIONER: Right. Okay. Can I just clarify? As I understand it, the union witness evidence is going to be put in without a requirement for cross-examination. Is that the - - -
PN636
MR DOYLE: The applicant doesn’t intend to cross-examine, Commissioner.
PN637
THE COMMISSIONER: I suppose what I'm getting at is: should we deal with that sort of issue now and then come back and launch into submissions rather than holding that up? Was there anything else you needed to put, Mr Doyle, at the moment?
PN638
MR DOYLE: No, Commissioner.
PN639
THE COMMISSIONER: Okay. Mr Crawford, are you - - -
PN640
MR CRAWFORD: Thank you, Commissioner. Commissioner, Salim Barbar is one of our witnesses, we filed a witness statement for him.
PN641
THE COMMISSIONER: Yes.
PN642
MR CRAWFORD: He couldn’t attend today. I should rephrase that. We sought confirmation from the applicant regarding whether Mr Barbar was required for cross-examination, they indicated not, so there's some redundancies going on at WesTrack at the moment so Mr Barbar is basically out there managing that so he hasn’t turn up today, but we would seek to tender his statement into evidence.
PN643
THE COMMISSIONER: And I gather there is no objection to that, Mr Doyle?
PN644
MR DOYLE: No objection, Commissioner.
PN645
THE COMMISSIONER: So that's the statement we can just see. Yes, the statement of Mr Barbar signed and dated 8 July 2013, that's the document, Mr Crawford. Two annexures?
PN646
MR CRAWFORD: SB 1 and SB 2, yes, Commissioner.
PN647
THE COMMISSIONER: Right. I will mark that as exhibit AWU 1.
EXHIBIT #AWU 1 STATEMENT OF MR BARBAR AND TWO ANNEXURES
MR CRAWFORD: Thank you, Commissioner. Commissioner, can I now call Mr Vandine to the witness box?
<WAYNE ANTHONY VANDINE, SWORN [12.45PM]
THE COMMISSIONER: Yes, Mr Crawford.
<EXAMINATION-IN-CHIEF BY MR CRAWFORD [12.45PM]
MR CRAWFORD: Mr Vandine, do you have a copy of the statement that we filed on your behalf in these proceedings?---Yes.
PN651
Is that a statement dated 3 July 2013, signed and dated by you?---Yes.
PN652
Are the contents of that statement true and accurate?---Yes.
PN653
I wish to tender that statement, Commissioner.
PN654
THE COMMISSIONER: Thank you. I will mark that as exhibit AWU 2.
EXHIBIT #AWU 2 STATEMENT OF MR VANDINE
MR CRAWFORD: Nothing further.
PN656
THE COMMISSIONER: That's the evidence and there's no cross-examination - - -
PN657
MR DOYLE: No, Commissioner.
PN658
THE COMMISSIONER: - - - and no re-examination. Thank you, Mr Vandine. I know you're probably disappointed that you weren't in the witness box as long as the other witnesses.
<THE WITNESS WITHDREW [12.46PM]
THE COMMISSIONER: That's your witness evidence, Mr Crawford?
PN660
MR CRAWFORD: Yes, thank you, Commissioner.
PN661
THE COMMISSIONER: Mr Walkeden?
PN662
MR WALKEDEN: Yes, Commissioner. We wish to rely upon the statement of Mr Tutton. Do you require to formally swear it, it's a signed statement.
PN663
THE COMMISSIONER: There it is, I thought I'd lost his statement, no, I've got it here.
PN664
MR WALKEDEN: I just tender that statement.
PN665
THE COMMISSIONER: Thank you. That's the statement of Mr Tutton, dated 8 July 2013. I certainly don't require him to be sworn. Is that any problem with that, Mr Doyle?
PN666
MR DOYLE: No objection, Commissioner.
PN667
THE COMMISSIONER: No. I mean, I notice he is here if we wish to do that. I will mark that as AMWU 1.
EXHIBIT #AMWU 1 STATEMENT OF MR TUTTON
MR WALKEDEN: Thank you, Commissioner.
PN669
THE COMMISSIONER: That's all the evidence, witness evidence?
PN670
MR WALKEDEN: It is, yes.
PN671
THE COMMISSIONER: Thank you. Well, that's probably an appropriate time to break. I'm just wondering, do you want to go and have an hour or through until 2.00, and maybe whether you want to have a discussion between yourselves as to how long you think you're going to be.
PN672
MR DOYLE: On the applicant's part, Commissioner, I mean there is some concern as to whether we might get through the day and complete it. On that basis, I'd be hesitant to have a lunch adjournment longer than an hour.
PN673
MR WALKEDEN: Yes, no more than an hour.
PN674
THE COMMISSIONER: Okay, that's fine, I only give people and hour. We'll adjourn until quarter to 2. Is that suitable?
PN675
MR DOYLE: Thank you, Commissioner.
PN676
THE COMMISSIONER: Okay.
<LUNCHEON ADJOURNMENT [12.47PM]
<RESUMED [1.50PM]
PN677
THE COMMISSIONER: Yes, Mr Doyle.
PN678
MR DOYLE: Thank you, Commissioner. Commissioner, if I may just hand up a folder of authorities. These are the authorities referred to in the applicant's written outline of submissions, Commissioner.
PN679
THE COMMISSIONER: Thank you.
PN680
MR DOYLE: The applicant relies on those written submissions. Rather than restate those and go through them again, Commissioner, what I propose to do is go through the submissions as filed by each of the AMWU and the AWU, and respond to each of those. The way I propose to do that is first deal with some of the principles to be applied in determining the application. Commissioner, we've seen that there is a small dispute between the parties as to those and then, secondly, I will deal with the principles - apply those principles and deal with some of the merit considerations that should be applied in this matter.
PN681
First, Commissioner, each of the respondents takes issue with some of the principles or factors that the applicant has identified in its written outline to be applied in this proceeding. In particular, Commissioner, do you have the AMWU's written outline of submissions there?
PN682
THE COMMISSIONER: I do.
PN683
MR DOYLE: I'll take the tribunal to those.
PN684
THE COMMISSIONER: Yes.
PN685
MR DOYLE: At paragraphs 9 to 11 of its submission, the AMWU submits that as section 240 of the Act does not refer to section 275, the tribunal shouldn't resort to some of the factors listed under 275. 275, as the tribunal would know, is the provisions in relation to workplace determinations. Now, the AMWU goes on to submit at paragraph 12 that the applicant makes the mistake of conflating these two provisions and makes the mistake of relying on principles that are, at least in part, derived from some of the cases that have been determined in the workplace determination context. The AWU makes a similar submission, Commissioner, at paragraphs 6 to 17 of their written outline of submissions by suggesting that the applicant has referred to factors beyond those that have been agreed between the parties.
PN686
Now, with respect to my friends, Commissioner, this misunderstands the applicant's submission. It's accepted that section 240 doesn't list the factors that the tribunal is to take into account; rather, in determining a section 240 application, the tribunal is required, pursuant to 578 of the Act, to take into account the objects of the Act and the equity and good conscience, and merits of the matter. Further, pursuant to 577 of the Act, the outcome is to be fair and just. Now, this is consistent with the terms of the arbitration that have been agreed between the parties, Commissioner.
PN687
The factors set out in section 275 do no more than provide a guide as to some of the factors that will be relevant to the merit. Particularly in circumstances of a section 240 application, it involves an arbitration and wage outcomes, Commissioner. For example, if I can take the tribunal to 275 of the Act, it lists the factors that the tribunal should take into account in determining workplace determination, and if I can step through each of those. In relation to 275(a), the merits of the case, there's no doubt that's relevant in the present circumstances, Commissioner. The same can be said for subparagraph (c), the interest of employers and employees, you will be covered. Indeed, that forms part of the agreed terms of the arbitration as being a relevant factor. Subparagraph (d), Commissioner, the public interest, it can be said that's not relevant for the present circumstances. It's relevant to the merit of the case.
PN688
So in light of this, Commissioner, in this context the reference to some of the principles that have been derived from cases that have been made in the context of workplace determination, they're relevant because they deal with the very principles of merit that will be relevant to this proceeding. The applicant doesn't put it any higher than that; they're just simply instructive and they're relevant to the extent that they're relevant to the merits.
PN689
That's consistent with the approach, Commissioner, taken by Commissioner Hampton in Cobham Aviation [2012] FWA 9444, which was also a section 240 arbitration on wages. I can take the tribunal to that decision, Commissioner. Tab 5, it should be, Commissioner. It's at paragraph 91. At paragraph 91, the Commissioner acknowledges that the application isn't a workplace determination and that there are no explicit statutory considerations to be applied, but at 92, Commissioner, the Commissioner goes on to set out the list of considerations that the tribunal found to be relevant in determining wages outcomes. Now, many of those are very similar or the same to the factors that are considered under section 275, such as the needs of employees and the needs of the business. Finally, the Commissioner said at paragraphs 93 to 94, which I'll read:
PN690
In applying these considerations, the approach taken by Fair Work Australia in various workplace determinations is of assistance provided that the different statutory context and the particular circumstances of those matters are taken into account. In particular, the general approach of the Full Bench in setting wage outcomes is part of the determination in Schweppes is (indistinct)
PN691
To that end, determining the level of wage increases in this context does not lend itself to the adoption of a single consideration or a mathematial formula. Fundamentally, the tribunal is seeking to arrive at an outcome which is fair in all the circumstances and that appropriately balances the interests of the parties.
PN692
The respondents make mention of the fact that the applicant has only relied on a few single instance decisions under section 240, and the reality is, Commissioner, decisions on arbitrated wage outcomes are relatively few and far between. I'm not aware of many, if any, that have progressed to Full Bench level, but authorities aside, these principles make sense; they make sense in accordance with the normal principles of merit. In any event, they're no more than a guide as to the merit considerations that should guide the tribunal in this case. For those reasons, the applicant submits that the tribunal should have regard to those principles.
PN693
The most important of those, Commissioner, in the applicant's submission, that should be applied in this case is the outcome must be consistent with what the parties may otherwise have agreed to had bargaining concluded successfully. I think it's uncontroversial to say the reason the parties have consented to the arbitration, they want a conclusion to the bargaining process without the industrial pain that may otherwise have come with it. They want a third party to help them and, accordingly, it makes perfect sense that the tribunal, as far as possible, should arrive at an outcome that the parties may have ultimately reached themselves.
PN694
This is consistent with the approach, Commissioner, adopted in the section 170MX arbitration between the CFMEU v Coal and Allied; Print R9735 [1997]. If I can take the tribunal to that case, Commissioner, that's at tab 6 of the folder, at paragraph 24 on page 7. That decision at paragraph 24 reads:
PN695
What the union seek is an award that would place them in or close to the position in which they would have been had they done the industrial wall. We are not prepared to do this. The union has chose to engage in warfare. We do not criticise them for this. The company chose to fight back, we do not criticise them for this. We are not, however, prepared to interfere with the result; it would be unfair to do so. The union's claims in the circumstances before us fail on their merit.
PN696
Now, Commissioner, applying this principle to the current legislative environment, section 181 of the Fair Work Act makes it clear that only an employer can put an agreement to vote. Neither the unions nor the employees can force an employer's hand in this regard. The tribunal also doesn't have the power to force the employer's hand. Section 255 of the Act makes that clear. It provides relevantly that this part doesn't empower the tribunal to make an order that requires or has the effect of requiring an employer to request under subsection 181(1) that employees approve the proposed enterprise agreement.
PN697
Now, accordingly, if bargaining were to proceed to its natural conclusions, Commissioner, that is without arbitration, then it's clear that it is the employer who would have sole control over when, and if, to put that agreement to vote. Now, it's accepted that the negotiation and perhaps the terms of that agreement be all subject to the good faith bargaining principles, and there will be a bit of a toing and froing in that regard, but as a matter of commonsense, the employer will not put an agreement to vote unless it was comfortable enough with its terms.
PN698
This context is very relevant in conducting a section 240 arbitration of this type, Commissioner. It's true that the parties have empowered the tribunal to make a determination on the first year wages increase. The overriding merit consideration, in the applicant's submission, is that the ultimate determination should be consistent with an outcome that the parties may have otherwise reached had bargaining proceeded to its natural conclusions. And why shouldn't it be? It comes back to the central proposition, the purpose for this type of application for this arbitration; that is, the parties want to achieve and enter bargaining without the unnecessary industrial pain.
PN699
In the applicant's submission, the tribunal shouldn't interfere with the result, as the Full Bench put it in Coal and Allied, should
reach a conclusion that's consistent with the outcome that would otherwise, or may otherwise, have been reached had bargaining concluded
successfully. That's precisely the approach that was applied by Commissioner Bull, Commissioner, in BlueScope Steel [2013] FWC 1557, which was also a section 240 arbitration on, among other things, the operative date of wage increases. I can take the tribunal to that decision, Commissioner.
Paragraphs 112 and 113 on page 15, tab 1. At paragraph 112, Commissioner, after referring to section 577 and 
578 
of the Act, the Commissioner goes on and says:
PN700
Unlike section 275 of the Act, when the commission is making a workplace determination, there are no stipulated factors the commission must take into
account other than the very generalised factors referred to above at sections 577 and 578 of the Act. There is no rule or formula that the commission must apply in the circumstances of a section 240 arbitration. The task of the commission, in my view, is to arrive at a conclusion which would be regarded as appropriate, taking
into consideration sections 577 and 578 of the Act, which would include arriving at an outcome that may have resulted had the bargaining concluded successfully.
PN701
Now, the AMWU's submissions at paragraph 15 takes issue with this principle on the basis or with reference to the decision of the Full Bench in Transport Workers' Union Australia v Qantas. Sorry, Commissioner, just to step back one step, that's at paragraph 16 to 18 of the AMWU's written submissions. To understand the context of that decision, it's important to have a look at the decisions which it is referring to and the context in which they were made.
PN702
In Qantas, and this is quoted in the AMWU's submission at paragraph 29, the Full Bench said, it's at page 12, Commissioner:
PN703
In particular, we note the consideration by the Full Bench of the earlier authorities and the endorsement of the approach, the task of the tribunal in a matter such as this is to assess the respective positions of the positions in relation to the matters at issue, and by reference to the statutory factors, arrive at a conclusion that would be regarded as appropriate in the context of the bargaining had the bargaining concluded successfully.
PN704
The Full Bench in the Curragh case noted this did not involve a form of subjective prognostication to the outcome of the negotiations. Rather, the task involves an objective assessment, the statutory factors and an overall judgment the appropriate workplace determination to apply to the operations concerned until the parties would place the determination with a new enterprise agreement.
PN705
The AMWU's submissions, Commissioner, relies on the sentence in the middle of that cited paragraph that refers to the Curragh case not involving a form of subjective prognostication and to that extent the AMWU says the task of the tribunal, including in this case, is not to do any crystal ball gazing, it's not to try and anticipate what the outcome would have been, and on that basis it's not appropriate to uphold this principle.
PN706
If I can take the tribunal very quickly to the Curragh case, which is relied on by Qantas, that case is Curragh Queensland Mining Q4464 [1998]. That case was also a section 170MX arbitration under the Workplace Relations Act. At page 21 of that decision in tab 11, Commissioner - there are no paragraphs in this decision, Commissioner, so it's a little bit difficult to follow, but to understand the ultimate finding of the Full Bench, first it's important to go to the submission that the commonwealth made and that appears on page 21, and it starts with at around point 3 on that page, "The commonwealth submitted that the commission should approach section 170 annexed to the Act in the following way." It then goes on at around point 4, Commissioner, and says, "21, in the West Rail case, the commission said the following," and the relevant extract from West Rail is set out at about point 5 or point 6, and that commences with:
PN707
Is an arbitration which concludes a bargaining period and so in regard to the function of the commission in arbitrating under section 170MX has been largely to assess the respective positions of the parties in relation to the bargaining and to arrive at a conclusion which could be regarded as being an appropriate result in the context of the bargaining, which has taken place, had it concluded successfully.
PN708
The criteria set out in 170MX(5) to which the Bench must have regard are, in our view, directed towards that end. In particular, reference to the matters at issue in the bargaining period, the merits of the case and the extent to which the conduct of negotiating parties during the bargaining period was reasonable, clearly manifests an intention on the part of the legislature that the commission pay regard in arriving at a conclusion to the issues which were between the parties in the bargaining process and to the conduct of the parties themselves. Indeed, we see ourselves in this case as in much the same position as the Full Bench of the commissions saw itself in Electrical Trades Union of Australia v Antona Petrochemical Company.
PN709
It goes on, Commissioner:
PN710
Turning from principles generally to this particular case, we have already set out in some detail its unusual background. We think it proper in all the circumstances to put ourselves in a position of the negotiators and to regard the proceedings before us as a prolongation or extension of the negotiations. We will do the best we can to resolve their problems by looking at the matters I looked at, even though they may not be matters normally looked at by the commission.
PN711
Now, all of that, Commissioner, was a citation of the decision in the West Rail case of the Full Bench commission. Now, the commonwealth's submissions in relation to that case go on, onto page 22, and it commences at 22, and reads:
PN712
Much focus has been directed in various submissions to the words of the Full Bench had it concluded successfully and their meaning. If what the Full Bench in the West Rail case meant by those words was that it was required to carry out some form of subjective prognostication as to the outcome, the negotiations, had they continued on and concluded successfully, the commonwealth would, with respect, disagree with such an approach. However, the commonwealth submits that was not what the Full Bench in the West Rail case contemplated. The words "had it concluded successfully" have to be considered in light of what the Full Bench said subsequently in that case. What it said was that the criteria in section 170MX(5) were directed towards the end of successfully concluded the bargaining.
PN713
It goes on, Commissioner. I'll skip a few paragraphs and it continues at point 28:
PN714
Thus, there is no crystal ball gazing proposed by the Full Bench in the West Rail case; rather, the Full Bench was saying that it ultimately relies on those objective factors in section 170MX and the exercise of its discretion as to the outcome of an MX award.
PN715
With that context, Commissioner, the next page on page 23 of the decision, the tribunal considers that submission and it says at about point 6:
PN716
Accordingly, we endorse the views expressed in the West Rail case. In this respect, we also endorse the submission of the commonwealth in this case in discussing the operation of section 170MX(5) of the Act that in no sense was the West Rail Full Bench suggesting some form of subjective prognostication as the outcome of the negotiations had they been concluded successfully by the parties to an arbitration under section 170MX. We believe that the proper construction of what the Full Bench said is, as the commonwealth submitted, that an objective assessment of the factors set out in section 170MX(5) of the Act should be made to determine whether or not to make an annexed award and what such an award should contain.
PN717
So apologies for reading out such a lengthy part of that case, Commissioner, but what it does serve to show is that the principles in West Rail have been upheld subject to that additional pay being imposed in the commonwealth's submissions and by the Full Bench in the Curragh case. The tribunal accepts the proper approach is for the tribunal to arrive at a conclusion which could be regarded as being an appropriate result had bargaining concluded successfully. The Full Bench simply clarifies this point and says, "It's not to be assessed subjectively by trying to work out, on a subjective basis, where this negotiations would have landed, what deal would have been done had this been allowed to continue?" Rather, it is the Full Bench is to - is making the point that it is an objective assessment taking into consideration the statutory factors, confined by the proposition that the tribunal should not reach an outcome which objectively considered wouldn't have been reached by the parties themselves. That is entirely consistent with not undertaking any subjective prognostication as to what the outcome of bargaining might have been.
PN718
Coming to the evidence on this point, Commissioner, it's clear that the applicant - would not have been appropriate for the applicant to have put anything more than a three per cent first year wages off to vote. In fact, it already foreshadowed that three per cent offer would be coming off the table in light of changes to the economic environment. Mr Patel's evidence is that he would never have even made the three, four and four offer had he known the state of the business at the time. He says at paragraph 29 of his first statement, Commissioner:
PN719
Had the 2012 financial results detailled in annexure MP2 been known to CBIC in late December 2012, I consider it unlikely that its wages offer, being three per cent in year 1, four per cent in year 2 and four per cent in year 3, plus the 400 sign-on bonus, would have been made. I would have recommended against it on the basis that the business was not in a position to sustain such an offer and that the business needed to reduce its costs in every area to limit losses to levels closer to the estimates put to the board.
PN720
This is set out in further detail, Commissioner, in an email that's attached to Craig Charter's first statement, and that's at CC10. It's an email from Peter Shortall to a number of recipients, including representatives of the AMWU and AWU. It reads from about point 4:
PN721
As you would appreciate, prior to CBIC taking on the Autocast and Forge business, it was in a very difficult financial state. Having bought the business, CBIC was fortunately able to save many jobs; however, the business remains at risk. I can now confirm that the CBIC business lost in excess of $2 million, including start up costs over the last three months and, as you're aware, A and F lost around $4 million over the previous financial year. We are working very hard to turn this around. It's for this reason that CBIC is unfortunately unable to increase the wages offer as put to you on 21 December 2012.
PN722
This is by no means any criticism of our employees. The work they do is valued by the business but we need to work together through this difficult period to ensure the business remains viable and is able to survive. I can assure you that this is not posturing or merely a negotiating position. It is unfortunately our reality. It is very important that our employees understand this, too. For that reason, we will shortly be holding further briefings with employees about the state of our business and to explain the position we have legitimately adopted in the bargaining process.
PN723
The potential flow-on effects, Commissioner, of a higher wage increase in this particular case were not illusory and that's been made clear from the cross-examination of Mr Patel and Mr Charter today. The consequences were very real and very serious. The risk of products being sourced from China and a complete closure of CBIC's operations was the primary motivating factor for the applicant and one that couldn't be ignored. Objectively considered, Commissioner, the applicant submits it wouldn't have been appropriate for the applicant to put an agreement to vote for the first year wage increase higher than three per cent in light of these circumstances and would not have done so.
PN724
Commissioner, that's all I propose to say about the principles that should be applied in determining the application. I will now move on to the AMWU's submissions as they relate to the merit of the matter.
PN725
Coming back to those submissions, Commissioner, paragraphs 1 to 8 I won't deal with; they're mere context and don't make any substantive submissions on merit. Paragraphs 9 to 22 of the AMWU's outline of submissions attempts to pull apart some of the guidance that the applicant has drawn from case law as to the overriding merit considerations and submits that they're not relevant to the case. The AWU does a similar thing in paragraphs 6 to 17 of their submissions. That part I've already dealt with, Commissioner.
PN726
At paragraphs 23 to 26 of the AMWU's submission submits that productivity isn't relevant to the merits of the case. Despite an attempt at paragraphs 49 to 52 of the AWU's submissions, the AWU similarly doesn't advance any real substantive position to the contrary other than merely saying that employees have worked hard and therefore deserve to be rewarded.
PN727
Moving on, Commissioner, paragraphs 27 to 31 of the AMWU's submissions submits that public interest isn't relevant to the merits in this particular case. It then goes on at paragraphs 32 to 36 where the AMWU seems to suggest that the unions adopted a more reasoned bargaining position as they demonstrated awareness to move on their initial wages offer. It also defends the position that the employees took in taking industrial action in the form of overtime bans.
PN728
The AWU adopts a similar approach at paragraph 41 of their submissions, Commissioner. Now, it's not immediately clear how it is said that these matters are relevant to the merits. In any event, the applicant submits that they are not relevant to the present case and the authorities in support of that proposition, Commissioner, are set out at paragraphs 16 of the written outline of the applicant, and I won't take the tribunal through those again.
PN729
So far, Commissioner, we're at paragraph 36 of the AMWU's submissions and of these the entirety of the submissions so far is nothing more than the AMWU explaining their position as to what isn't relevant to this application, hasn't advanced any real positive submission as to a merit-based consideration that should be taken into account in support of its case. The submissions go on at paragraphs 37 to 42 and at 44 to 45. The AMWU submits that in considering the merits, the tribunal should have regard to maintaining real wages and wage outcomes for the same class of workers in the same industry. The AWU does a similar thing at paragraphs 18 to 22 and at 42 of their submissions.
PN730
In relation to these two points, Commissioner, first, the AMWU concedes that even on the applicant's proposal it will result on the maintenance of real wages. The AWU doesn't make a similar concession, Commissioner, but it's uncontroversial based on the CPI figures referred to at paragraph 53 of Mr Charter's statement.
PN731
It's clear that even on the applicant's proposal the wage increases, even the first year alone, will outpace inflation as currently forecast. Second, it's clear from the bargaining trends data that's also attached to Craig Charter's two witness statements that the applicant's proposal will result in an average wage increase over the life of the agreement that is higher on average than the prevailing increases of the current agreements in the manufacturing industry. That is, the applicant's proposal would result in an average increase of 3.67 per cent; whereas, the average in the manufacturing industry is at 3.5 per cent.
PN732
The AMWU and the AWU's submissions are a little misleading to the extent that they focus merely on that first year wage increase and seek to undertake a comparison with the bargaining trends data based on that one year alone. What the trends data does is take averages across - for the wages increases across the life of the relevant enterprise agreements that are surveyed. For that reason, the same should be done in respect of the current proposal that's on the table. As you must look at all the wage increases that are proposed over the life of the agreement, work out the average and then compare that with the averages that are set out in the trends data, only then is the analysis accurate.
PN733
The same mistake, Commissioner, is made when the AWU tends to draw a comparison with wage increases on the Seven Hills site in respect of previous enterprise agreements. Again, it can't be looked at on a year by year basis; you need to look at the entire package and the average wage increases over the life of the agreement to draw an appropriate comparison. In any event, Commissioner, these comparisons should be viewed with caution. The authorities are relatively clear that whilst a sideways glance can be taken, there is some caution to be had when trying to rely on what's described as comparative wages justice.
PN734
For that proposition, Commissioner, I'll just quickly take the tribunal to the Cobham case, which is at tab 5, Commissioner. It's Australian Licensed Aircraft Engineers Association v Cobham Aviation Services Engineering [2012] FWA 9444. At paragraph 114 on page 20, the Commissioner says:
PN735
In terms of outcomes in airline operations bargaining, this is a relevant consideration; however, care needs to be taken to avoid some form of superficial comparative increase justice. The wage outcomes are negotiated by the parties and occur in a particular context. In my view, it's not appropriate for present purposes to merely select outcomes without a broader consideration of the context, including the actual packages of wages and conditions, the length and scope of the agreement, any changes proposed, including any particular measures to improve productivity and the economic climate relevant to the enterprise. Where these are not known, care should be taken in benchmarking other adjustments and they should be used only as part of the broader considerations.
PN736
I mean, that's quite a fair proposition, Commissioner, where comparisons are sought to be drawn against previous wage increases or against increases at different employers or at different sites. We don't know the reason that those increases were negotiated. They're in respect, in some cases, of different businesses with different problems, no doubt, that they face. We don't know whether there are any additional allowances worked into those figures, any additional hours of work. There are many factors that simply are obscured by looking at nothing more than an hourly rate comparison. It is for these reasons that the authorities, I suppose, allude to the degree of caution that should be exercise when looking at these comparisons.
PN737
In any event, the AWU relies in its submission on the comparison of wages negotiated with Bradken and Intercast, two different companies, Commissioner. The applicant's evidence, in particular Mr Charter, at paragraph 22 of his second witness statement, he makes it clear that these particular enterprises are operating in very different environments, they service different industries. For instance, Bradken supplies castings to the mining industry and accordingly operates much higher profit margins. That's just one of the examples, Commissioner, why caution should be exercised in relying on such a superficial comparison.
PN738
Accordingly, Commissioner, so far of these it's submitted that there is not one sound merit-based consideration in support of anything other than a three per cent wages increase. To conclude the AMWU's submission, at paragraph 46, the submission reads:
PN739
Awarding the employees who showed considerable restraint when exercising their rights to protect industrial action, a wage increase above three per cent will not result the demise of CBIC or the broad automotive industry. Since 2000, there has only been one year where the employees have received a wage increase, less than four per cent; that was in 2011 where a three per cent wage increase was paid. In the very next year, the company was placed into administration and ultimately traded out of such a difficult period. That shows the challenge facing the company is broader than its wages bill.
PN740
Now, Commissioner, in the applicant's submission, the AMWU's submission announced a nothing more than, "Well, we've gotten fours and fives in the past; why shouldn't we again?" On top of that, Commissioner, amounts to a submission that, "Well, the financial difficulties faced by the company and the industry generally, well, they're their problem." The AWU expresses similar contentions at paragraphs 23 to 25 of its submissions and similar sentiments appear throughout their evidence.
PN741
Now, if I may turn, Commissioner, to the AWU's submissions, there are a few additional propositions advanced by the AWU, which I will address briefly, and the first is at paragraph 26 of its outline of submissions. At paragraphs 26 to 29 of the AWU's submission's, Commissioner, submits that Toyota's commitment to manufacturing in Australia and the recent fall in the value of the Australian dollar as against the US dollar indicate a level of improvement in the economy. I'll come to this in some further detail with a reference to the evidence shortly, Commissioner, but on that evidence, if either Toyota or Holden were to falter, Craig Charter is very clear that would destroy the business cases of both CBIC, the applicant, and CBIA, its parent, resulting in the redundancies of 356 employees.
PN742
Now, in relation to the Australian dollar, Mr Charter makes it clear at paragraph 28 of his second statement that for any benefit to come of the reduced value of the Australian dollar, that will need to be sustained for a period of time, and even if that does happen, then any positive benefit that might have in relation to sales will take a number of years to come to fruition, so the extent that earnings is to be made of the very recent fall in the value of the Australian dollar, it amounts to nothing more than pure speculation.
PN743
Second, the AWU submits at paragraphs 30 to 39, and at 45, that the employees only agree to a three per cent wage increase in the previous agreement to help the employer, as it was then, through tough times. It also says that the 30 redundancies and loss of accrued sick leave is somehow relevant.
PN744
Now, it's not immediate clear, Commissioner, how these matters are relevant to the merits and perhaps we'll hear from the union shortly, but to the extent that the AWU is saying that this has improved the applicant's position, then it amounts to nothing more than a submission that, well, things could have been a lot worse. Had the applicant been required to pay out that level of redundancy pay out, the bottom line would have looked a lot worse than it looks now. Commissioner, that takes the matter nowhere. The bottom line is what it is; it is the business is in dire straits, and whether it could have been in a worse position or not is really the subpoint.
PN745
Third, the AWU submits at paragraph 40 that the employees continue to work through uncertainty and agree the shift changes. Now, again, the applicant's submission, this really doesn't take the matter anywhere and, in any event, Mr Charter's evidence at paragraph 19 of his second statement is that whilst the employees were consulted on the change, their agreement wasn't required. Mr Charter goes on and even says:
PN746
Well, notwithstanding this change in shift structure, it actually resulted in employees being better off in many respects as the majority are now earning more as a result of the increase in overtime opportunities.
PN747
Fourth, Commissioner, the AWU submits at paragraphs 44 and 48 that morale at the site is low and suggests at 52 that if a three per cent increase is awarded, it may result in reduced productivity through decreased employee initiative and absenteeism. Now, aside from this coming very close to potentially a threat of unprotected industrial action, Commissioner, it's unremarkable to say that employees would prefer a higher increase. It doesn't go to merit.
PN748
Fifth, Commissioner, Mr Barbar also says at paragraph 48 of his evidence - I'll just take the tribunal to that very quickly - paragraph 48 of Mr Barbar's witness statement reads:
PN749
CBIC are part of a large multinational operation which comprises a number of different companies and their financial position should be viewed in this context.
PN750
At paragraph 21 of his second statement, Mr Charter explains that the position of the broader CBI group is not as rosy as Mr Barbar might imply with a current slim profit margin of three to four per cent. In any event, the real issue, in the applicant's submission, Commissioner, is the ongoing viability of the applicant, that is CBIC, within the broader CBI group. The evidence is clear that the group does have other alternatives for production, but CBIC, the applicant, is doing its best to convince the group that manufacturing at CBIC and indeed in Australia remains a viable option.
PN751
Finally, at paragraphs 46 and 47 of the AWU's submission, the AWU downplays the financial impact of five per cent in the first year as opposed to three per cent. Commissioner, in the applicant's submission, this is an extraordinary position for the AWU to take in circumstances where labour amounts to 30 per cent of the overall expenditure and cost of running the business. 30 per cent is a significant proportion and Mr Patel at paragraph 32 of his first statement that the differential between three per cent and five per cent is 268,000 over the life of the agreement, which represents an ongoing cost.
PN752
Now, wage increases that outpace inflation each year, Commissioner, with no productivity offsets or efficiencies come straight off the bottom line. In the applicant's submission, as a matter of simple economics, it's not sustainable, particularly in a shrinking market with increasing costs and international competition in lower costing bargains.
PN753
Further, Mr Patel's evidence is clear that any increase merely serves to increase the attractiveness of the China alternative. At paragraph 10 of Mr Patel's statement, he explains that the board frequently challenges CBIC's management about its approach in sourcing castings within Australia. I'll take the tribunal just to that paragraph, Commissioner, paragraph 10 of Mr Patel's second statement. It reads:
PN754
Whilst this additional cost is one of many facing CBIC, has a direct impact on CBIC's ongoing viability in light of the board's attitude towards CBIC, which I describe at paragraphs 39 to 43 of my previous statement. The board frequently challenges CBIA's management regarding its approach to souring castings in Australia. The overall cost of production, which includes labour costs has been frequently raised in these discussions and bears upon the board's decision-making around maintaining CBIC or shifting production of castings to China, where the cost of production is much lower.
PN755
Whilst the board could decide at any stage to shift casting production to China, the risk of such a decision is greatest during 2014 when contract negotiations and certification testing would commence in preparation for 2017 production models. Given that the castings will be for new vehicle models, certification tests and tooling costs will need to be incurred whether the CBI group produces the castings in Australia or China. On that basis, the start-up costs, which would be incurred in moving production to China, would no longer be an impediment. The board is well aware of these issues and is highly sensitive to any increase in costs.
PN756
This is a real risk, an unjustifiably high increase, it would send the wrong message to the board and CBIC's customers, and could affect their decisions regarding sourcing castings from CBIC in the future.
PN757
On that basis, Commissioner, the applicant submits that the unions have not so far pointed to any tangible merit-based consideration, a positive merit-based consideration in support of its claim for anything higher than a three per cent increase. On the other hand, the applicant's material in support of a three per cent first year wage increase is extensive.
PN758
First of significant relevance is the entire package. The terms of the agreement as a whole. Now, on the evidence, Commissioner, it's clear that the applicant had not asked for nor received anything in return for proposed wage increases of three, four and four per cent. Given the economic environment, that proposal remains particularly generous. The fact that the applicant didn't ask for anything more, which is the point that the respondent sought to make in cross-examination is beside the point. The evidence is: didn't ask for anything more because it needed a swift resolution to bargaining so that the business could get back to what was most important at the time, is running the business and trying to do its best to ensure its survival.
PN759
Second, Commissioner, it's clear that it's in the interest of both the applicant and its employees that the business be profitable. Coming back to the Curragh case, the Full Bench said, "It is a truism that, unless the mine is profitable, its future and the welfare of its employees will be in jeopardy." The wage increase as sought by the unions must be seen in the context of the current economic environment.
PN760
Starting with the business, Commissioner, the Autocast and Forge business, it is clear, was in a difficult state prior to acquisition. The evidence is that if the business wasn't acquired by the applicant, it would likely have gone into liquidation, which would have resulted in 81 employees losing their jobs. Now, the castings in that case would have ultimately been sourced from China. The applicant stepped in and prevented this situation from occurring. It knew it was going to be tough and the books spoke for themselves, and Autocast and Forge was already operating at a significant loss. However, post acquisition, the applicant discovered that the financial state of the business was much worse than it had discovered and anticipated throughout the due diligence process.
PN761
The reason for this on the evidence, Commissioner, is that there was a drop in sales, there was lost time due to breakdowns and repair, there was higher overtime costs and increased material prices all resulted in massive unplanned losses. The applicant is now facing operating loss of 2.51 million for the 2013 calendar year, significant operating losses over the next three years and a forecast cumulative loss since taking over the business of 5.1 million to 31 December 2013.
PN762
Now, unfortunately, Commissioner, this was only discovered after the applicant made its final wages offer of three, four and four. In good faith to date, the applicant has left that offer on the table and it should be noted, Commissioner, that the estimates that are referred to, that I've just read out and that are referred to in the evidence, all of those estimates and forecasts only take into account a three per cent increase in the first year. So if there's to be more, then, necessarily, those forecasts will be worse.
PN763
Moving on to the manufacturing industry more generally, Commissioner, the difficulties are well known and they're set out in the statements and submissions in some detail but there are a few annexures, in particular, to Craig Charter's statements that I'll quickly take the tribunal to, the first being CC13. CC13 is the trends in federal enterprise bargaining December quarter 2012 report. At page 3 of that report, Commissioner, it notes down the very bottom that manufacturing had an average annualised wage increase of 3.6 per cent, which was down from 3.8 per cent the previous quarter.
PN764
On the next page, Commissioner, again down the bottom, the report identifies that the 3.6 per cent average annual wage increase for manufacturing was the lowest average annual wage increase for the last two years. Pages 9 to 10, the report identifies the changes since proceeding quarters of the number of employees covered by enterprise agreements and at chart 6, which is set out on page 9, there's some further analysis that carries over to page 10, and that reads at point 2:
PN765
Manufacturing was the key industry where there was a reduction in the number of employees under current federal enterprise agreements. It experienced a fall of 13 per cent in employees covered.
PN766
Between the time of filing the applicant's material in chief and the required material, there was a new report that produced, Commissioner, and that's set out at CC21, and that report, just to get the update on each of these figures that I've taken the tribunal to, on page 4 the report identifies that manufacturing made up 11 per cent upon the final board agreements in the quarter with an average annualised annual wage increase of 3.5 per cent. So that's down from 3.6 per cent in the December quarter.
PN767
Pages 9 to 10, at page 9 there's a chart that identifies the number of employees covered by current enterprise agreements and at page 10 the report notes that manufacturing was the key industry whether it was a reduction in the number of employees under current federal enterprise agreements, it experienced a fall of 15 per cent in employees covered. So that is, Commissioner, another fall of 15 per cent on top of the fall of 13 per cent in the previous quarter.
PN768
More specifically, Commissioner, if we focus on the automotive and component parts industries, there's been a lot in the press of late about the difficulties facing that particular sub-industry. Now, Mr Patel stated at paragraph 33, this is his first statement - - -
PN769
THE COMMISSIONER: Sorry, what paragraph was that, Mr Doyle?
PN770
MR DOYLE: Paragraph 33.
PN771
THE COMMISSIONER: 33.
PN772
MR DOYLE: Sorry, Commissioner, I'm having trouble finding that myself.
PN773
THE COMMISSIONER: Well, I found mine, but that probably doesn't help you.
PN774
MR DOYLE: I'm getting there. I don't have tabs in mine, Commissioner. I found them. Paragraph 33 of Mr Patel's first statement, it reads:
PN775
CBIC is faced and continues to face a range of economic and structural challenges to its ongoing viability. These include a high Australian dollar resulting in an increased inability to compete with overseas competitors, increased electricity costs resulting in additional costs in the order of $500,000 per annum since 1 July 2012, lower demand for large cars made in Australia in both domestic and fleet buying sectors, resulting in a significant drop in sales volumes for locally produced cars, and GMH's decision to move to a global platform for its next model, expected to commence in 2016.
PN776
Mr Patel goes on at 34, Commissioner:
PN777
CBIC cannot control any of these challenges. CBIC's ability to influence its own financial performance is limited to controlling and subsequently reducing its cost base and generating additional revenue.
PN778
Now, Ford, which represents 20 per cent of CBIC sales has announced its anticipated closure of its Australian manufacturing operations by 2016. If I could take the tribunal to CC16, to Mr Charter's first witness statement. That reads:
PN779
Ford announced last month it would cease production in its Victorian vehicle-making plants in 2016, sparking concern about the future of the car components industry. The decision to pull out of its Geelong and Broadmeadows manufacturing operations is expected to affect 1200 jobs directly in the automotive component sector.
PN780
Moving on, Commissioner, to CC17, halfway down the article, the union has acknowledged some of the flow-on effects from the Ford closure. ACTU secretary Dave Oliver says these discussions need to address what the knock-on effects of Ford's announcements are, this includes the impact on jobs throughout the supply chain and what can be done to consolidate, to versify and improve access to global markets for Australian car manufacturers. Car manufacturers are struggling with the high dollar and trade values imposed by the companies. We need to ensure that our car industry remains viable so it can be part of a diverse economy we will need after the mining boom. The car industry provides 200,000 direct and indirect jobs and supports hundreds of smaller manufacturing businesses. The 1200 jobs lost at Ford could turn into up to 10,000 across the industry.
PN781
Those difficulties have also been acknowledged by the AMWU itself, Commissioner, at CC19, it reads:
PN782
AMWU national secretary Paul Bastian said the Ford decision was not only a deep blow to about 1200 workers and their families in Victoria but would put intense pressure on hundreds of component suppliers whose viability depended upon making cars in Australia. This is a time of huge uncertainty for our members at Ford and 200,000 other workers in the associated industries which help Australia produce quality cars, a time when they need leadership, which rises above political point-scoring. He said Ford's fate underlined the necessity for Australian industry to be given a certainty and strong encouragement to be competitive in global export markets.
PN783
CC20, Commissioner, at the very bottom it reads:
PN784
The Australian Manufacturing Workers' Union's Leigh Diehm said he had grave concerns about the flow-on effect in the automotive industry and supply chains for Ford.
PN785
At CC26:
PN786
Thousands of jobs are at risk across Australia's car parts industry with at least 50 companies that supply to Ford given a three year deadline to diversify or disappear. The Australian Manufacturing Workers' Union warn 2,500 jobs in the components industry will be lost on top of the 1,200 redundancies announced by Ford yesterday. At least 50 of the 150 components companies in Australia rely heavily on Ford for their work, leaving them without orders from 2016 and the last Falcon and Territory models will be made.
PN787
At CC28, Commissioner:
PN788
Thousands of jobs in the components sector are at risk from Ford's decision to close its Australian factories, which industry warning of devastating domino effects across the supply chain. Australian Manufacturing Workers' Union Victoria assistant secretary Leigh Diehm said, "A rough estimate was that at least 3,500 workers would lose their jobs in the components sector as a result of Ford's decision". We are very concerned about the flow-on effect, the ripple effect into the auto component sector and we have potentially thousands of concerned employees throughout the industry.
PN789
Finally, Commissioner, at CC27, the fourth paragraph reads:
PN790
Deloitte Touche Tohmatsu manufacturing partner Damon Cantwell said there are simply too many component suppliers for the number of cars Australia makes.
PN791
THE COMMISSIONER: Sorry, which one was that? 27, did you say?
PN792
MR DOYLE: CC27.
PN793
THE COMMISSIONER: Oh, we're going backwards, are we?
PN794
MR DOYLE: I apologise, Commissioner, yes.
PN795
THE COMMISSIONER: Right.
PN796
MR DOYLE: Let me know if I'm going a little quick, Commissioner, I'm just mindful of the time.
PN797
THE COMMISSIONER: No, that's all right, it's just that I was heading in an upward direction and then you suddenly went backwards.
PN798
MR DOYLE: That was Ford, Commissioner. Moving onto Holden. The evidence shows that on 8 April, GMH announced 400 redundancies at its South Australia facility and a hundred redundancies at its Melbourne facility. On top of this, GMH is attempting to negotiate not just the wage freeze for its manufacturing workforce but a wage cut. On top of this Commissioner - actually, I might just quickly - it's CC25, Commissioner, if I could take the tribunal to that annexure to Mr Charter's second witness statement on page 2 at point 5 reads:
PN799
Deloitte Access Economics chief economist Chris Richardson said the move was an eminently sensible responsible to Holden's cost pressures.
PN800
He says:
PN801
Their futures are tied together; absent flexibility, everyone loses." We've seen similar deals in similar conditions in other nations around the world. If both sides want to dance, then it would be a real failing of that industrial relations system if it got in their way. We talk about industrial disputation but there should be two groups working towards the same end: survival.
PN802
Moving on from Holden and Ford, Commissioner, Mr Charter also gives evidence of nine foundries, and this is in his first statement, nine foundries having closed in the last 18 months alone, and then he builds on that in his second statement and at paragraph 12 refers to the closure of two more. In light of the car company closures and these reductions, Commissioner, component suppliers, safe to say, are facing extremely tough times.
PN803
Craig Charter makes the point that given Ford's closure, the loss of either Holden or Toyota's business will result in the redundancies of 275 employees CBIA and 81 employees CBIC. Mr Patel emphasises the reality of this prospect in his first statement and at paragraph 38 he says this:
PN804
CBIA is currently in discussion with GMH and Toyota regarding the supply of components for model year 2017 production vehicles. In providing quotes during the course of these discussions with Toyota, CBIA is faced with having to reduce its prices by at least 10 per cent in order to match those of foreign competitors in lower cost jurisdictions. While discussions with GMH have not yet reached the quote stage, I expect that similar price reductions will be required in order to compete with foreign competitors for GMH's business. This, in turn, places pressure upon CBIC to reduce its prices as though prices form a key component of CBIA's prices for GMH and Toyota.
PN805
This is all in the context, Commissioner, where the CBI group has the capacity to source those same products at less cost from China. It's not something the applicant resiles from. In fact, that is the very thing that the applicant is trying to avoid in this application. The reality of those risks set out in clear terms paragraph 54 of Craig Charter's first statement and at paragraph 10 of Mr Patel's second.
PN806
If I may take the tribunal to CC29. In that context at point 7, CC29 reads:
PN807
US Bureau of Statistics figures show Australian manufacturing hourly rates had become grossly uncompetitive between 1996 and 2011 compared with the United States, Germany and Japan, not just cheaper Asian countries. "Looking at these figures, it's a miracle the Australian car industry has lasted as long as it has," Professor Buchanen said.
PN808
The respondent, in the course of cross-examination today, Commissioner, both respondents seem to attempt to rely on the fact that there is a risk of the operations moving to China as a basis to award a higher increase. Now, the reason for that is not clear but it is not a positive merit-based consideration that should support a higher increase. It is tantamount to saying, "Well, the company is facing tough times, there are easier options; let's just open the wallet and pay everyone, and admit defeat." That is tantamount to what that submission is about and instead, Commissioner, the applicant submits that it is those considerations that, in fact, support the contrary view. It is the risk of these alternatives that the applicant is trying to prevent and the applicant is trying to prevent the board and its company from making those difficult decisions.
PN809
Indeed, the applicant has done absolutely everything that it can to improve the financial position of its business to ensure that it's better placed to survive. That point has been very succinctly made by Mr Patel in his first statement at paragraph 40. That paragraph reads partway down that paragraph - I'll read the entire things, Commissioner:
PN810
Based on my attendance at monthly meetings with the board, I would describe the current attitude of the board towards CBIC's current performance and future prospects as not positive. The board has directed CBIA and CBIC management to urgently arrest CBIC's negative financial performance by reducing costs. Further, it is the view of the board that CBIC's customers have worn part of the burden by agreeing to pass increases negotiated upon the motivation of existing contracts from A and F to CBIC. CBIC has worn part of the burden through their investment purchase of A and F's assets, and the costs incurred in bringing the Seven Hills' site up to acceptable standards of reliability and safety. CBIC's landlord has worn part of the burden by agreeing to a rent reduction at the Seven Hills' site. As the remaining stakeholders, CBIC's employees also have a responsibility to ensure the ongoing viability of operations at Seven Hills.
PN811
Now, both the AMWU and the AWU in cross-examination sought to make much of the point that electricity costs and other issues are far more significant issues and problems for the business than an ongoing viability than wages. In the applicant's submission, Commissioner, that propositions just simply can't be accepted in circumstances where wages amount to 30 per cent of the expenditure in running the business, it is a significant proportion, and even aside from that, Commissioner, even if it was two per cent, it just doesn't make sense to say that simply because it is a small part of the problem it shouldn't be addressed. It would not be responsible management to ignore the smaller things; rather, as Mr Patel has put it, the business should do everything within its power irrespective of how small or how large the issue is to address these matters.
PN812
On that basis, Commissioner, the applicant submits that anything higher than a three per cent first year wage increase is simply without justification. The offer of three, four and four is, in the circumstances, a very generous offer given the challenges facing the business. Nothing further, Commissioner.
PN813
THE COMMISSIONER: Thanks, Mr Doyle. Mr Crawford.
PN814
MR CRAWFORD: Thank you, Commissioner.
PN815
THE COMMISSIONER: I can indicate I have also got your outline of submissions and, as I said to Mr Doyle, I don't propose to mark it, but I've read them and obviously will read them again.
PN816
MR CRAWFORD: Yes, Commissioner, and I will be a lot briefer than my friend. Fundamentally, we do rely upon the submissions we've already filed. In terms of the principles that Fair Work should apply to determine this case, our understanding was that a quite deliberate effort was taken to confine, I guess, the principles in writing between the parties, that there's actually a document that exists confirming what was agreed between the parties in terms of factors for Fair Work to take into account. A copy of that document is attached to the AWU outline of submissions.
PN817
Attachment SB2 to Salim Barbar's statement contains an email exchange whereby Mr Shortall, who was here, confirmed that those were the agreed terms, that document I've attached, and the reality is that those two points that appear in paragraph 4 of that document, that is the merits of the case and the interests of the company and its employees were deliberately refined by the parties from a longer list that the company had initially presented, so there was - the factors were quite deliberately refined, and it's a little disappointing that possibly not the company, but certainly their legal representatives have now attempted to move well beyond the agreed terms and apply a number of principles, which were certainly never discussed, and had they been the union's position, the arbitration may have been quite different.
PN818
The primary principles that my friend has just referred today are that the outcome determined by Fair Work must be consistent with what the parties would have agreed to in the negotiations. I mean, that was never discussed when we agreed to arbitrate this issue. I don't know how it really helps in this case because the reality is that the unions weren't moving from their position on wages; the company wasn't moving from their position on wages, so, I mean, who knows where it would have ended up. I mean, it might have been a war of attrition; I mean, that's, in reality, that's why we're having the matter arbitrated here today.
PN819
The references to section 181 of the Fair Work Act and the fact that only an employer can put an agreement to employees to vote upon again, we say that's totally irrelevant. I mean, it appears what my friend is trying to say is that Fair Work should basically look at the position put forward by the employer, basically their final position in negotiations before agreement was reached to arbitrate and just basically stamp that, so the commission stamps their final position because the employer is the only party that can put an agreement out to a vote, so it's only their final position which is relevant, so Fair Work may just turn up today and just stamp the employee's final offer.
PN820
Now, obviously we would say that is not a position that should be endorsed by the commission. I mean, unions would not agree to these types of arbitration if that was to be how the system worked. As I already mentioned, we don't believe that issue takes the commission very far in determining this matter because it's purely hypothetical where the negotiations would have ended up, and what the evidence has disclosed is that there was certainly strong resolve on both sides to not move from their respective positions, and that is absolutely it, that is all the evidence says.
PN821
The other principle that I want to address that my friend has raised is this concept that the whole package should be taken into account by Fair Work in determining this matter, and again, we say that was never discussed with us when we agreed to have this matter arbitrated. The discussions between the parties were purely on the basis that what was being arbitrated was the increase to apply, the first increase to apply under the enterprise agreement, so that is the only relevant issue before the commission. Yes, a number of other terms have been agreed during negotiations, but, I mean, if we're going to look at the increase for the second year and the third year, why not look at what's been agreed on annual leave or every other condition in the agreement as well? I mean, if we're going to look outside of the first year increase, where does it end? We say that is not the proper approach. This arbitration is deliberately confined to this issue of the wage increase for the first year of the agreement and that's exactly where the matter should stay, and Fair Work should not depart from that issue in arriving at its decision.
PN822
So the whole package, the average of wage increases that will apply under the agreement are totally irrelevant. The issue is: what increase should apply in the first year? Is it three per cent, is it five per cent or is it somewhere in between? That's it, and that issue should be determined according to the merits, the interests of the company and the employees, and any other matters that Fair Work is obliged to consider under the Act.
PN823
Turning now to just some brief submissions I would like to make about the merit and the interests - obviously we're mainly concerned with the interests of the employees. We say that these employees at Seven Hills have been treated poorly over the last few years. I believe the words used by Mr Charter today were that the site was in a "state of neglect", so obviously Mr Charter has only come into the site at the last minute and arrived at that conclusion that the employees who will be covered by this agreement have actually endured and lived through that state of neglect for a number of years.
PN824
Around 20 employees were made redundant by Carlos Broens or the company he had set up in 2010. The employees did accept that the site was in trouble and they, on that basis, agreed to basically an interim wage increase of three per cent. As the evidence reveals, that is the only time in the last, at least, 13 years that site has ever agreed to a wage increase of below four per cent. The uncontested evidence from the AWU witnesses is that was always understood to be an interim step and the fact that only three per cent had been agreed to would be addressed in the next negotiations and that the employees would be looking at a significant increase to compensate, I guess, them for accepting the three per cent.
PN825
Now, the employees never actually got that opportunity with Mr Broens because ultimately his corporate entities went into administration and the applicant here took over the site, but it is important to note that the uncontested evidence is that three per cent, the only three per cent ever agreed at that site was on an interim basis and it was always understood, and we say by A and F management at that time, Mr Robson in particular, that was an interim increase and that some of the ground would be made up in subsequent negotiations.
PN826
In 2012, Commissioner, you would be aware now of what transpired from mid 2012 onwards whereby employees were informed that A and F, as it was then, was in a significant amount of trouble and that negotiations for a new agreement could not commence because of that situation. Again, the employees agreed to put off negotiations to try and help the company, to try and get things sorted, and then ultimately in September 2012 the employees were advised that 29 of the existing employees had been made redundant; that was just after an administrator had been appointed. The employees were aware since around June of that year that the applicant, or the CBIA, whatever it may be, were basically conducting due diligence at the site, that they were considering purchasing the business and basically the employees were left in a great deal of uncertainty throughout up until, ultimately, in November 2012, about the future of the site and whether CBIA or their other entities were going to take over the site.
PN827
The 30 employees were made redundant by the administrator. There was no money in A and F at that time to pay the employee entitlements, so they basically were left to rely upon the government's GEERS system, which, as we've noted, does not recognise the payment of accrued sick leave. So basically the redundant employees lost that sick leave entitlement, it was not paid by anybody, and the reality is that in terms of those redundancies in 2012, the federal government certainly lost out because they had to fit the bill for the redundancy entitlements. The employees made redundant lost out because they lost all their sick leave entitlements. The only party that really benefited from those circumstances was the applicant because they basically were able to take on the site with 30 less employees and, I mean, the evidence is certainly not clear about how contrived that outcome was about how involved the applicant was in achieving that outcome, but we believe the evidence does establish that the applicant was certainly heavily involved in the site at that time and they benefited from the events that transpired in September 2012.
PN828
Commissioner, I've made the point, I believe, during cross-examination today about wage rates for the businesses, for the manufacturing businesses operated by CBIA. It is quite clear that the employees at the East Bentleigh and Lonsdale sites in South Australia actually receive higher wage rates than the employees at Seven Hills, so again I would say that's another factor or another example of some poor treatment that the employees at Seven Hills have endured over the years. We've made the point during cross-examination that the applicant's claim that no site was offered higher than a three per cent wage increase for 2012 is not entirely accurate; it doesn't tell the full picture because employees at East Bentleigh actually have received a $500 one-off payment in addition to the wage increases they've received.
PN829
So basically the employees at Seven Hills were paid well below the other manufacturing sites that the applicant operates. There is, in reality, a precedent of the applicant awarding higher than three per cent wage increases for 2012 because they agree to the extra $500 per year payment at East Bentleigh. As I said during cross-examination, that can equate to an extra one per cent for someone on a $50,000 per year salary. Again, we say that is a further example of merit in the case of the employees that they should be awarded more than three per cent for the first year under this new agreement.
PN830
I think it has been made out during cross-examination today that if Fair Work awards only a three per cent increase, it will certainly not guarantee the future of the Seven Hills site. Obviously the employees do have concerns that if it's only a three per cent increase, again, they will be the ones losing out and, ultimately, it won't make any difference. The site may close, in any event, and then obviously they're being paid out on redundancy entitlements based upon only a three per cent increase when obviously they've been seeking five per cent or four per cent, so it's certainly not a case where the applicant can clearly say, and particular Mr Walkeden has put that to the witnesses today that the awarding of a mere three per cent increase will certainly not guarantee the future of the site and Fair Work should not proceed on the basis that it would.
PN831
We would also say on a more general level that given the amounts of money involved here that are being dealt with, the future of the site ultimately might be determined by either a three per cent, four per cent or five per cent wage increase for the first year of this agreement. As the witnesses for the company have accepted, there are a range of factors that affect their ongoing viability and the reality is that first year wage increase, we say, will not be a significant factor in determine the future of the site given the actual quantum amount of money that we're dealing with.
PN832
In summary, Commissioner, we say that Fair Work should be confined to determining this case based on the merit and the interests of both parties. As I've outlined, we think that the employees at Seven Hills are deserving of an increase of above three per cent and those would be my submissions, Commissioner.
PN833
THE COMMISSIONER: Thank you, Mr Crawford. Mr Walkeden.
PN834
MR WALKEDEN: Thank you, Commissioner.
PN835
THE COMMISSIONER: With you as well, I've got your written outline of submissions and have read that.
PN836
MR WALKEDEN: Thank you, Commissioner. Commissioner, for the purposes of submissions made on behalf of the AMWU, I just obviously note that you have read those submissions and what I intend to do this afternoon is really just emphasise a few points which are made in those submissions and also discuss some of the evidence that's been put before you this morning. Now, obviously I'm not going to go through what I indicated at paragraphs 1 through 8 of my submissions. As the heading implies, that is an introduction. The only point I do want to touch upon is paragraph 5 where I talk about the process that we are participating in today.
PN837
As Mr Crawford has rightly pointed out, Mr Crawford has rightly pointed out the process that we're participating in today is governed by an agreement made between the company and the two unions who are participating in the process, and the terms of that agreement are referred to in the various witness statements and set out not only the task of the commission but at paragraph 7B talk about what will happen next. Sorry, I should say paragraphs 5 through to paragraph 8. Effectively, what happens next is that the parties agree to incorporate the arbitrated outcome within the terms of the proposed agreement. Paragraph 6 talks about the parties preparing a final draft of the proposed agreement within three weeks of your decision, and then paragraph 7 details the process for taking that agreement to a vote of employees.
PN838
As you pointed out, Commissioner, at the outset of these proceedings, there is no guarantee that the employees will approve an enterprise agreement with a first year wage increase of three per cent. What the evidence discloses in these proceedings is that from the second bargaining meeting, the company has put an offer to the employees and their unions on wages, and in the course of the negotiations, the company hasn't shifted. Critically, a key plank in that proposal on wages was a three per cent increase in the first year. The employees consistently rejected that proposal and took protected industrial action in the form of overtime bans from mid March to mid May of 2013. So it goes about saying that the employees, to put in the colloquial, had a bit of a skin in the game and have demonstrated that they do not support a three per cent wage increase in the first year.
PN839
Paragraph 7B of the terms commits the parties to actively endorse the approval of the proposed agreement and the AMWU will certainly undertake that commitment, and will certainly actively advise our members, whatever the decision is, to approve the agreement, but it's not necessarily the case that the employees will take that advice on board. That's something that you should consider in determining this matter, the point being that in light of the sustained opposition to three per cent wage increase is not necessarily the case that this arbitration will resolve this dispute.
PN840
At paragraphs 9 through to paragraphs 22, I discuss the approach of the commission. As my friend has taken you to this afternoon, there is a dispute between the parties about the proper approach that should be taken. The AMWU certainly supports the submissions advanced by the AWU, which are the approach of the commission should be consistent with the terms that the parties have agreed to. As Mr Crawford has mentioned, those terms didn't just drop from the sky; they were the result of negotiation between the parties. Ultimately the parties said at point 4:
PN841
These are the factors that the Fair Work Commission will take into account: the merits of the case and the interests of CBIC and its employees who will be covered by the proposed agreement.
PN842
We say that in discharging its function in these proceedings, the Fair Work Commission should hold the parties to the deal they made,
which is, take those two factors into account in determining these proceedings as well as do what the Fair Work Commission does in
every matter, which is to have regard to section 577, 578 , the objects of the Act and the objects of the part. That is the sum total of the matters that the Fair Work Commission should have
regard to. It would be inconsistent with the agreement of the parties for the Fair Work Commission to take into account many of
the so-called principles that my friend suggests exist in the context of an application under section 240.
PN843
As I indicate in my outline, there is a huge problem with these so-called principles that my friend says you must apply, that being there is, in some cases, no support at all from any previous section 240 decision of these so-called principles and, in any event, as I indicate in my submissions, what my friend has suggested to the commission is that you can simply have resort to section 275, which deals with the making of a workplace determination, just apply those factors in a completely separate proceeding. That's not a proper approach. If, when drafting the statute, parliament intended for the commission in determining a section 240 proceeding to have regard to the matters set out at 275, the parliament would have written those factors into section 240; it didn't, and it didn't because the commissions isn't simply to have resort to the factors set out at 275.
PN844
So my friend tries to manufacture some principles that he says should apply. As I point in my submissions, I criticise the company's submission, I call it misleading, because he refers to a number of decisions to manufacture these principles but doesn't point out that many of these decisions are decisions undone, the making of a workplace determination. What he should have done or what the company should have done is to make plain in their outline of submissions that when they're talking about these principles, the origins of these so-called principles is the making of a workplace determination. So I'm critical of the company for that.
PN845
If I can just ask you to turn to paragraph 18 of the company's outline of submission. The last sentence of this paragraph says, "CBIC explains the submission below by reference to the relevant factors (which are expressed in decreasing order of importance or weight)." It goes on to list these principles. What the company says is that in determining this dispute between the parties on wages, the most important principle that should be applied is the commission should undertake an analysis as to whether the outcome is consistent with what the parties may have agreed to if the bargaining had concluded successfully, so that's the most important factor according to the company.
PN846
If you turn the page over and then according to the company the second most important factor is that the parties seeking a change must have made a case for change. The third most important principle according to the company is that the employer's position should not be interfered with unless it's unjust or unreasonable, and then finally have regard to the merits.
PN847
Now, there's a couple of problems with that submission. The first is: there is certainly no guidance in the legislation and certainly nothing else that my friend can point to, to show that there is a list of - the factors actually have an order of priority or importance. The AMWU's submission is that the matters that are relevant must be balanced by the commission and it's the task of the commission to draw the appropriate balance. That's the primary point that we make, but we then go on to actually criticise, starting at paragraph 13 of our submissions, these so-called principles. At paragraph 13, what we say is the company says, "Well, in determining a section 240 application, the parties seeking a change must make the case for change." So the company is trying to say, "Well, the previous agreement, the 2011 agreement, this is set out at paragraphs 21 and 22 of our submission, that's the starting point. Given the dispute concerns wages and given the 2011 agreement provided for one wage increase of three per cent, the unions bear the onus." That's what the company says.
PN848
Now, that submission's origins are, in fact, a workplace determination. The company can't point you to a section 240 application where such a principle has been applied and there is no guidance in the legislation that this principle about onus is a matter relevant to a section 240 application. The parties themselves, in the agreed terms, didn't agree that the consideration of onus is relevant. In conducting what we say is a merits-based arbitration, the concept of onus isn't relevant.
PN849
We go on to criticise the company for their point which they advance at paragraph 23 of their submissions that they say, "Look, another principle you should apply is that the commission shouldn't interfere with the employer's position unless it's unjust or unreasonable." Now, in making this submission, the company do rely upon a single member decision where consent to arbitration was conducted, but as I point out in paragraph 14 my submissions, the issue in dispute in that proceeding was something that quite clearly that principle, the well-known principle laid down the XPT case is notorious for, drug and alcohol testing, as you would know from direct experience, sitting as a member of the commission, I should say. You would know from sitting as a member of the commission that a resolution of a dispute between industrial participants concerning a proposal by the company to introduce drug and alcohol testing or introduce a method of drug and alcohol testing is commonly resolved by reference to the principles in the XPT case whether the employer's position is unjust or unreasonable.
PN850
That is not an appropriate basis to determine whether the wage increase should be three per cent, five per cent or something between three to five. We don't think that principle has any application in this particular proceeding to the extent that principle was applied in a single solitary section 240 application can be distinguished and understood on the issue in dispute.
PN851
Paragraph 15 of my submissions, I'm critical of the company's position that they say the outcome of this determination must be consistent with what the parties may have agreed in the bargaining had concluded successfully. I'm critical of that principal for two reasons. I'll just make this point first before I go there: once again, I point out that the company, in advancing this point, relies upon - two of the three decisions relied upon don't concern a section 240 application and the one that does, being the BlueScope matter, which is a matter I, in fact, appeared in, what I say there is that Commissioner Bull in that proceeding makes one reference to this principle and, as my friend has pointed out, that is at paragraph 113 of the decision, where the commissioner says:
PN852
The task of the commissioner, in my view, is to arrive at a conclusion which would be regarded as appropriate, taking into consideration
section 577 and 578 of the Act, which would include arriving at an outcome which may have resulted had the bargaining concluded successfully.
PN853
You'll see at paragraph 136 and onwards, Commissioner Bull actually makes the determination, and we say paragraph 113 is a reference to this principle in passing. That is not the basis on which the determination in that proceeding was in fact issued. The essential reasons for the decision are set out at 136 and 137 of that decision primarily on the facts of the case being that, in those negotiations, there was a period where the negotiations were suspended for about three months. The facts of the case determined the outcome, that is clear from 136 of the decision, and to the extent that there's any broader principle that can be extracted, we say, Commission Bull at paragraph 137 indicates what that is, which reads:
PN854
Having regard to what is fair and just including the promotion of harmonious and cooperative workplace relations between the parties. It is my view that it would be appropriate to exercise the parties agreed suspension period.
PN855
And it goes on. We say there's no support for the principle advanced by the company, that in determining a section 240 matter the commission must - and, again, remember my friend says this is the most important principle to be applied - the commission must make a determination about what the parties may have agreed to. We say it doesn’t arise. In any event, we say not only shouldn’t you have any regard to this principle but you can't have regard to this so called principle. My friend has taken you to the authorities about how this matter is considered, and I set out paragraph 16, a quote from the Full Bench in the workplace determination concerning the Transport Workers' Union and Qantas.
PN856
You'd recall my friend read the authorities and gave a brief overview of the origins of a subjective prognostication, and the point - - -
PN857
THE COMMISSIONER: Which seems to appear in all the cases.
PN858
MR WALKEDEN: It does. And the point my friend made is that in applying this principle the commission shouldn't get the crystal ball out, the commission shouldn’t embark upon a subjective prognostication. We agree with that point. The problem is that's precisely what the company does on this occasion. At paragraphs 19 through to 20 of their outline of submission, in applying the so call principle the company asks you to get the crystal ball out. The company asked the commission to engage upon a subjective prognostication.
PN859
At paragraph 19, this part of their submissions starts with, "On the evidence, CBIC would never have agreed to a first year wage increase higher than three per cent." It goes on at paragraph 20, second line, it starts with, "Whilst CBIC," and some further words that aren't relevant follow, and it picks up with, "would never have yielded to industrial pressure, in this unique case that finding is clear on the evidence." So, in our submission, the company does precisely what the authority says shouldn’t be done, so no regard, in our view, should be had to the points which were advanced by the company on that issue.
PN860
You'll recall, Commissioner, I said, "Not only should this principle not be applied, it can't be applied," and it can't be applied because you've got to put the crystal ball away to apply this principle, and as a substitute for the crystal ball what the TWU in the Qantas case makes clear is that the commission is to embark upon an objective assessment of the statutory factors. That's how the commission in a workplace determination should determine what the parties may have agreed to if bargaining had concluded successfully. The principle can't be applied in a section 240 because there are no statutory factors.
PN861
Section 240, unlike section 275, doesn’t prescribe a series of factors that the commission should have regard to, so on that basis not only should the principle not be applied, it can't be applied in a section 240. So that's all I have to say about the so called principles, and I repeat what I say at paragraphs 20, 21, 22 about the proper approach that the commission should adopt in determining these particular proceedings. Like any matter which is before the commission, the objects of the Act are relevant, and in my submissions I go on and deal with a number of those objects.
PN862
At paragraphs 23 through to 26, I deal with the question of productivity, and to be clear we don't say that productivity is never relevant per se in a section 240 application, but we say it doesn’t arise in this particular matter. That's because the dispute between the parties is whether the first year wage increase should be three per cent, five per cent or something between three and five, and an application of the authority which is set out at paragraph 24 of my submission, that kind of dispute doesn’t raise the productivity question. The dispute we're confronting concerns the price of labor, and as the Full Bench point out in a Schweppes case, being Schweppes Australia Pty Ltd v United Voice Victoria branch, the price of labor is a different concept to the question of productivity.
PN863
I just repeat the submission at 26, the dispute between the parties is about labor costs. Yes, there would be a positive or a negative effect on the company's bottom line, but the Full Bench warns against that being mistakenly thought to be a question of productivity. The only relevant issue on the productivity question is that it's interesting to note in passing that in the context of these negotiations the company didn't even both to raise any proposals to improve the productivity of the site, that's what the evidence of Mr Charter was. At paragraphs 27 through 31 deal with the concept of a public interest.
PN864
I make the point that the promotion of the public interest, which includes a promotion of national economic prosperity. and social inclusion is a key object of the Fair Work Act. Once again, at paragraph 28, I reference how the Full Bench in the Pilots v Qantas workplace determination explained what the public interest actually is. For relevant purposes, you'll see that about halfway through that quote you'll see that the Full Bench says:
PN865
As a general proposition, issues which enhance productivity, increase competition in a market or create employment will attract the public interest. Conversely, union claims for wage increases, an employer claims to reduce entitlements will not normally have a public interest component.
PN866
What we say, similar to the productivity issue, is that in a section 240 per se the public interest may be a relevant factor, but in this instance the dispute doesn’t enliven the public interest. It is a dispute between three parties, the two unions and the company. This is because the evidence is clear, as much as the company will try and dress it up in their submissions. It can't be said that a awarding a five per cent wage increase in the first year will reduce employment opportunities at the Seven Hills site. It can't be said that awarding a five per cent wage increase in the first year will result in the closure of the site.
PN867
All the negative consequences that are associated with the closure of such a company, which are acknowledged by the union, all of those issues, on the evidence, it can't be said they will arise if these, if the commission determines these proceedings, by awarding a five per cent wage increase in the first year. This was clear from the evidence of both Mr Patel and also Mr Charter. Mr Patel conceded in cross-examination that regardless of the outcome of these proceedings, regardless of whether there was a three per cent wage increase or indeed no wage increase over an entire period of three years, it would not mitigate against, in his words, the significant risk of these jobs going to China.
PN868
In his cross-examination, Mr Charter said even if there was no wage increase he couldn’t guarantee the viability of the site. Indeed, both witnesses described the challenges confronting the company, those challenges are reproduced at paragraph 30 of the AMW submissions, and both Mr Charter and Mr Patel agree with the proposition that the challenges facing the company are greater than its labor costs. The commission shouldn’t be attracted to the submission put that the resolution of this dispute in favour of the company is critical to the ongoing viability of the site, that is not the evidence in these proceedings.
PN869
On that basis, what we say is there's no public interest in resolution of this particular dispute. We accept there is public interest in the continued viability of the Seven Hills site, we accept there's public interest in terms of the broader issues affecting the automotive industry, but a resolution of this dispute won't affect employment opportunities in either the Seven Hills site or the broader industry. At paragraphs 32 through to 36 deal with the concept of good faith bargaining, and at paragraph 32 I reproduce section 3F of the Fair Work Act, which talks about the twin objects of productivity and fairness, and the Act makes clear that those objects are to be achieved through an emphasis on enterprise level collective bargaining underpinned by simply good faith bargaining obligations and clear rules governing industrial action.
PN870
My friend was critical and said, "Look, those submissions are all well and good but they don't advance the AMWU's case at all, there's nothing really in those submissions that's relevant to the case." They're relevant to the case because in our written submissions on page 18 the company's very critical of the unions. The company says, and this is a very long paragraph, Commissioner, it's actually paragraph 2479, about a third of the way down, just above E: wage comparisons within the company and across the industry, the company says, "The claim sought by the union is irresponsible."
PN871
THE COMMISSIONER: Sorry, Mr Walkeden, you've lost me. 24(7), did you say?
PN872
MR WALKEDEN: It's probably easier to just have reference to page 18.
PN873
THE COMMISSIONER: Right. I see 9, yes.
PN874
MR WALKEDEN: Yes. So the company says, "Well, look, the union's claim is irresponsible." That's why the matters set out at paragraphs 32 to 36 are clearly relevant, because what we say there is, what the evidence indicates is there was a deadlock on wages. The company consistently made or stuck to their position, and we don't say that's a breach of the good faith bargaining requirements, but what we do say is that the evidence clearly indicates that there was moderation from the unions on their position, and that's dealt with in the evidence of Mr Tutton, paragraphs 15 to 18, dated 8 July 2013.
PN875
What we say is, if we're talking about whether the union's approached these negotiations in a responsible fashion, we say most certainly they did. Responsibly, of course, a claim was made by the unions, that claim was consistently rejected. In an effort to resolve the dispute, the unions moved closer to the company's position by moderating their claim, and I believe the evidence will show that moderation in position was done well before any industrial action was organised or taken by the employees. I believe the movement occurred in late January 2013 from the unions, so well before any industrial action was commenced.
PN876
The second point to make at paragraph 36 is, in taking the protected industrial action our submission is that the union's approached the protected industrial action in a very responsible manner. This wasn’t a situation where the unions called a strike or went out the gate for a lengthy period of time in support of their claims, the only industrial action that was taken by the unions was an overtime ban. Yes, that is industrial action, and the evidence discloses that harmed the company, but in considering the options available to the unions, the taking of an overtime ban, was most probably at the lower end of the threshold in terms of the action that could be taken.
PN877
We say the criticism of the company that the union's aren't responsible can't be sustained on the evidence. The union's moved closer to the company to reach an agreement and took a moderate and responsible position in terms of the taking of any industrial action. I should put out, draw your attention, that in any event there can be no criticism of the unions for taking protected industrial action, and I refer to a Full Bench decision at paragraph 36 of my submissions. So that's what we have to say about the objects. And then at paragraphs 37 through to 42, we deal with the merits of the competing claims.
PN878
We say, primarily, this is a merits based arbitration, and given the dispute concerns the quantum of a wage increased there are really only two factors the commission should consider. The first is whether the proposal will result in the maintenance of real wages. We make the concession at paragraph 38, assuming CPI remains at 2.5 per cent, we concede that's certainly what the forecast indicates. We certainly concede that the proposal advanced by the company to the first year wage increase will result in real wages of the employees being maintained.
PN879
However, we say, they're a superior merit to the union claim, because an important merits based consideration is the question of wage outcomes for the same class of workers in the same industry. At paragraph 39, I deal with the latest trends, and this is indeed - I must say I'm not that old - I do say there, Commissioner, it's a long way into the future. I should delete the 2 and leave it at 3. In any event, the point being this is the same report that is featured in Mr Charter's second statement, and those numbers can't be argued with. We only need to look at the first year wage increase because the other wage increases are agreed. The company can't have a second bite of the cherry and say:
PN880
Well, yes, we've agreed to the second and third year wage increase," but in determining this dispute, which just concerns the first year wage increase, you need to have regard to those two matters.
PN881
That isn't the case. So you only need to look at the first year wage increase and make that comparison with the trends. Secondly, stands the reason we don't know what future wage increases will look like, so we've got no appropriate point of comparison. So what the trends indicate is that the offer of three per cent is below the average annualised wage increase for al collective agreements in the private sector, approved in the March 2013 quarter, those increases were 3.7 per cent, and at 38B, the wage offer of the company of three per cent is well below what the average annualised wage increase for all collective agreement in manufacturing lodged in the March 2013 quarter, which indeed was 3.5 per cent.
PN882
So those figures don't lie. In any event, in cross-examination Mr Charter agreed that the three per cent wage offer isn't comparable to other sites, being the South Australian and Victorian sites. As Mr Crawford dealt with in his cross-examination of Mr Charter and also in his submissions, it is plain that the Victorians have higher wage rates and superior conditions, and Mr Crawford took the commission to two of those, being income protection and the annual $500 continuous improvement bonus. The evidence quite clearly demonstrates that the three per cent is well below industry peers, and that is a factor, a critical factor, that the commission must have regard to.
PN883
On that basis alone, we say the commission can't possible accept the claim which is being advanced by the company. My friend mentioned the concept of comparative wage justice. Comparative wage justice is the essence, historically, of how this commission approached these sorts of matters. In effect, this arbitral is more like the long history of how this commission and its predecessor dealt with disputes between parties. Made a binding award in resolution of industrial dispute, and it can't be argued that a comparison to the industry, or the concept of comparative wage justice, were something that was at the top of the list, so reference to industry peers is more than appropriate.
PN884
The final point I want to make on merit is that in their submissions the company certainly do complain about getting nothing in return. Mr Charter doesn’t agree it's a complaint, but in my view it certainly is. The company seeks to paint themselves as a benevolent employer, the good guys who are doling around increases, maintaining conditions and not asking for a thing in return. We say let's analyse that claim and let's shine the light on that particular claim, and quite clearly that complaint has no legs. It has no legs because you can't complain about not getting anything if you don't ask for anything.
PN885
If the company had have asked for a number of items, maybe there could be some sympathy for that complaint, but in the absence of asking for anything, in the absence of tabling their own claims there can be no sympathy for the company's complaint that we got nothing back. So that's what we say about the merits of the matter, and the final matter that we say is relevant are the interests of the company and its employees. At paragraph 43, we make the appropriate concession that we can readily see that the interests of the company are best served through the lowest possible wage increase.
PN886
The company, quite rightly in pursuing their interests, would seek to reduce their labor costs. Indeed, the evidence of Mr Patel was that cost restraint was the biggest part of his job. He also agreed that's something that every business does. There should be no surprise there that the company wish to pay the lowest amount possible for their labor, but what we say there is that, that interest must be balanced, properly balanced, against the interests of the employees. The evidence is pretty telling about those employees and it was readily conceded by Mr Charter that the profile of the workforce predominantly is males over the age of 45 with long periods of service.
PN887
Mr Tutton, the AMW delegate, has been employed since 1975. Mr Charter readily agreed that if those employees were to lose their jobs, which Mr Patel says is a significant risk, that those men would struggle to find comparable employment. In discharging your duties in these proceedings, you must have regard to the objects of the Act, and object 3(a) of 3(1)(a) indicates that one of the critical objects of the Act is fairness to working Australians. In considering these proceedings, you need to have regard, Commissioner, to the profile of the workplace, and particular because - and I'll come to this in a moment - particular because there can be no doubt, and we say this in our submissions, we say this at paragraph 44 of our submissions, that it can't be said that the industry doesn’t face some challenges.
PN888
We make that clear and my friend's taken you to various public statements made by various officials of the AMWU. We don't shy away from the difficulties facing this company but other companies in the sector. What we do say is that it shouldn’t be the employees, and I've detailed the profile of those employees, and their families who bear the brunt of these challenges. What history shows is that in 2011 the workers accepted a three per cent wage increase. Mr Tutton, in his statement marked AMW 1, paragraph 7, explains why the workers accepted a three per cent wage increase. He says:
PN889
At the time, Carlos Broens has just recently purchased the business and was telling the workforce that the business was in a difficult financial position." The workforce agreed to a one year enterprise agreement that provided for a three per cent wage increase. This was done to give Carlos Broens some breathing space by keeping costs down.
PN890
Mr Tutton goes over the page at paragraph 8 to say, "In previous bargaining rounds we generally achieved a four or five per cent wage increase over three year agreements," which is what, indeed, Mr Charter's evidence says, and the AWU witnesses say a similar thing to Mr Tutton. In a 10 year period, there's only been one occasions, 2011, where the employees took the three per cent, and the evidence shows what happened the very following year. The company was placed into administration, 30 employees were made redundant, the tab was picked up by these, being a tax payer, it wasn't picked by any corporate entity.
PN891
Shift changes were introduced. Yes, that may have, on the evidence of the company, resulted in some increase in overtime to some employees but perhaps also considerable dislocation to employees and their families in terms of the hours that they had worked, whether they were going from afternoon shift to day shift, that's losing a loading, or vice versa. Also, paragraph 9 of Mr Tutton's statement says that the 2011 agreement provided on redundancy for the payment of accumulated sick leave. Now, the evidence filed by Mr Barbar of the AWU was that sick leave wasn’t paid out.
PN892
From direct experience, Commissioner, assisting industrial business, you would know that would leave a sour taste in people's mouths. We've got a workforce who has been covered by successive enterprise agreements, they agree with the owner to show the restraint that's requested of them, take the three per cent. In the following year, 30 of their workmates go out the backdoor, they don't get paid their severance pay that pay week, they probably have to wait a period of time for the gear scheme to pay their redundancy, and they miss out on their sick leave, their accumulated sick leave, a condition of their employment.
PN893
To use the colloquial, what the evidence shows is that after following restraint in 2011 the employee's got shafted, and so my friend now criticises paragraph 46 of my submissions, and says, "Well, why shouldn’t the employees accept the three per cent?" It's a two way street, and what the evidence shows is that from Mr Patel there's a significant risk of these jobs being sent to China, and that risk remains regardless of whether it's three per cent, five per cent or even no wage increase over a period of three years. So why should the employees show the restraint that they're asked to show, accept the three per cent pay increase, if there is a significant risk they're going to lose their job?
PN894
From direct experience as a member of this commission, you would know that an arrangement entered into between a union and a company to the nature that there will be no forced redundancies for a period of time, generally the length of that enterprise agreement isn't an uncommon arrangement. It features in many enterprise agreements in the manufacturing industry, guarantee is given that's a result of enterprise bargaining. Perhaps the union in those situations drops off on some of its more ambitious claims in return for securing the jobs of their members for a three year period.
PN895
The company wasn’t asked to give the guarantee in these negotiations, I don't believe, but can't give the guarantee today, so why should the employees, why should they bear the risk, why should they take a pay increase below their industry peers when there's no loyalty being shown back, when all they face is a significant risk that the board of a multi-national company will shift their jobs to China? Looking at the interests of the employees, you can't accept the proposition advanced that this is about survival, this isn't about survival. The company witnesses detail the challenges, not their labor costs.
PN896
Yes, cost restraint is important, but, unfortunately, in this proceeding it's not the case that wage restraint will ensure the survival of the site, and that's a factor that you should undoubtedly consider in determining these proceedings, and in looking at the interests of those employees that is a factor that you should give serious consideration to. Those are the submissions of the AMU in these proceedings, Commissioner.
PN897
THE COMMISSIONER: Thanks, Mr Walkeden. Mr Doyle, did you want make submissions in reply?
PN898
MR DOYLE: Just very briefly, Commissioner. There has been a lot of submissions today directed to principles to be applied, Commissioner, and largely much of those submissions I've already dealt with in the first instance, but there are a few points I would like to take the commission to. The issue with the principles to be applied can be quite simply resolved, there's an easy way through. The applicant's position is that in respect of each of them, each of the principles relied on, each of the facts relied on, all relevant to the merit of the case, and the merit is one of the principles that was agreed to between the parties in the agreed terms of arbitration.
PN899
The parties did not agree in the agreed terms of arbitration what merit means, what is in when it comes to merit, what is out when it comes to merit, there was no discussion of that, rather merit has been left on its own in accordance with what it means in the ordinary English language. Commissioner, I don't have a printout, unfortunately, but the Macquarie Dictionary online says, the third definition which is most relevant in the circumstances, "The substantial right and wrong of a matter unobscured by technicalities." It's as simple as that, Commissioner.
PN900
What we haven't heard today from the unions, Commissioner, we've heard a lot of submissions about the appropriateness of the principles advanced by the applicant, what we haven't heard is any submissions directed to the actual subject matter, the facts, the circumstances actually relied on and applied by the applicant. We haven't heard any submissions which provide any of those actually fall outside the definition of merit. It's quite clear why that's the case, Commissioner, it's because each of them falls squarely within the concept of merit. To the extent that it's necessary to resolve these issues of principle, perhaps it's not. Perhaps it's as simple as saying, "Each of these matters is relevant to the merits of the case."
PN901
There are just two or three additional principles in that space that the AWU and the AMWU refer to that I'd like to address, and the first in the AWU is the principle that the whole package isn't relevant to merits, it's only the first increase that's to be looked at. The first increase is to be looked at in a vacuum, not to look any further head at the subsequent increase or any other terms of the agreement or any of the other circumstances at play. That is not consistent with the principle of merit, Commissioner, and in the same breath the union's submit that we're instead to look at comparisons drawn from even other agreements.
PN902
That seems to me, and certainly on the authorities, far less relevant than what is in the agreement itself and what is proposed in respect of the second and third year in relation to wages, that is far more relevant than what exists in other agreements. I've already taken the tribunal to the cases, in particular Cobham Aviation, which expresses some caution. Whether that authority is to be applied in these proceedings or not is beside the point, there's a very good reason for that caution, Commissioner, and it is to reiterate the point I made earlier: we don't know why those wage increases were agreed to in respect of the other sites or in respect of other employees. We don't know what was foregone, we don't know what the employer got in exchange, we don't know what the rosters are like, we don't know what the hours of work are like.
PN903
In the absence of any further material or analysis put forward by the respondents, it is unsafe to rely purely on an hour by hour rate comparison, and that is precisely why the case is whether in a 240 arbitration or workplace determination or any other application, that is why the case has expressed caution. In any event, if we're looking at the Victorian and South Australian sites, a comparison the AWU sought to draw in its final submission and in cross-examination, Mr Charter made very clear in his evidence just today that those sites, they're different businesses, they're different operations, and that is why, again, relying on a straight line-by-line comparison of wage rates is not safe.
PN904
The AMWU, Mr Walkeden, also sought to make a submission based on the views of the employees and seems to suggest that the employees, if there was a finding of three per cent, wouldn’t vote the agreement up, and on that basis that should somehow form part of the consideration of the tribunal. That is an entirely separate stage of this process, Commissioner, and the applicant submits that what the employees may or may not think: (a) it's not before the tribunal on the evidence; (b) that is a matter for the employees.
PN905
The next stage of this process for both parties is to embrace the decision of the tribunal, whatever it is, put it into the agreement and put it to the employees for a vote. To talk through what might happen next is inappropriate, in any event, there is nothing before the tribunal to make such assessments on the evidence. Finally, Commissioner, apart from the submissions of the AWU and AMWU that I drew the tribunal's attention to earlier that are really directed to, "Well, we've got fours and fives in the past, and others are getting fours and fives and on that basis we should get fours and fives again," aside from those submissions, Commissioner, the union's submissions come back to the principle that the risk of outsourcing to China or manufacturing being moved to China remains a risk irrespective of the outcome.
PN906
Now, that may have been the evidence, that might be quite right, but does it follow that the employer, the company, the tribunal, the unions, the employees, does everyone then give up and just concede that's a problem? I mean, does it follow that the employees should say, "Why should we accept the three per cent increase"? To extrapolate that further, Commissioner, when the applicant went to its customers, no doubt a very difficult conversation in respect of standing contracts, to negotiate a price reduction of up to 15 per cent, did the customers say, "Why should we help, your problems are bigger than us."
PN907
Did the landlords say, CBIC, "Why should we negotiate a reduction in rent, your problems are bigger than us, you've got other problems"? They didn't, they were able to negotiate a sensible outcome that was directed to moving the business forward an improving things, and that is precisely what the applicant is seeking today, Commissioner. Nothing further, Commissioner.
PN908
THE COMMISSIONER: Thank you. You might need to move over to a mic, Mr Walkeden.
PN909
MR WALKEDEN: I just want to clarify my friend on one point. We don't know what the landlord said, what don't know what the customer said because there's no evidence about that.
PN910
THE COMMISSIONER: Yes, okay. All right. Did you want to - - -
PN911
MR CRAWFORD: No, I'm fine.
PN912
THE COMMISSIONER: No? Thanks. You want to get to the football, do you not, Mr Crawford?
PN913
MR CRAWFORD: No, I've just generally said my piece, that's all.
PN914
THE COMMISSIONER: Obviously, I'm going to reserve my decision in relation to the matter and will issue it as soon as possible. Thank you all for attending today. Thank you.
<ADJOURNED INDEFINITELY [4.11PM]
LIST OF WITNESSES, EXHIBITS AND MFIs
MR CRAIG CHARTER, AFFIRMED PN54
EXAMINATION-IN-CHIEF BY MR DOYLE PN54
EXHIBIT #APPLICANT 1 STATEMENT 1 OF CRAIG CHARTER PN66
EXHIBIT #APPLICANT 2 STATEMENT 2 OF CRAIG CHARTER PN78
CROSS-EXAMINATION BY MR CRAWFORD PN96
CROSS-EXAMINATION BY MR WALKEDEN PN257
RE-EXAMINATION BY MR DOYLE PN435
THE WITNESS WITHDREW PN440
MR MADANLAL PATEL, AFFIRMED PN446
EXAMINATION-IN-CHIEF BY MR DOYLE PN446
EXHIBIT #APPLICANT 3 FIRST STATEMENT OF MR PATEL PN457
EXHIBIT #APPLICANT 4 SECOND STATEMENT OF MR PATEL PN466
CROSS-EXAMINATION BY MR CRAWFORD PN468
CROSS-EXAMINATION BY MR WALKEDEN PN543
THE WITNESS WITHDREW PN633
EXHIBIT #AWU 1 STATEMENT OF MR BARBAR AND TWO ANNEXURES PN648
WAYNE ANTHONY VANDINE, SWORN PN649
EXAMINATION-IN-CHIEF BY MR CRAWFORD PN650
EXHIBIT #AWU 2 STATEMENT OF MR VANDINE PN655
THE WITNESS WITHDREW PN659
EXHIBIT #AMWU 1 STATEMENT OF MR TUTTON PN668
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