Fair Work Act 2009
s.604 - Appeal of decisions

Appeal against decision [[2014] FWC 6388] of Commissioner Ryan at Melbourne on 7 October in matter number B2014/902 - Whether test for making a scope order correctly applied - Fair Work Act ss. 238 and 604.

Introduction

[1] On 7 October 2014 Commissioner Ryan issued a scope order 1 and decision2 pursuant to s.238 of the Fair Work Act 2009 (the Act). On 28 October 2014 BRB Modular Pty Ltd (BRB), lodged a Notice of Appeal against the decision and order.

[2] At the hearing of the appeal on 12 February 2015, Mr Nicholas Barkatsas appeared for BRB and Mr David Vroland appeared for the Australian Manufacturing Workers’ Union (the AMWU).

Decision under Appeal

[3] The decision of the Commissioner involved the application of the test for making a scope order in s. 238(4) of the Act. That subsection states:

“When the FWC may make scope order

(4) The FWC may make the scope order if the FWC is satisfied:

(a) that the bargaining representative who made the application has met, or is meeting, the good faith bargaining requirements; and

(b) that making the order will promote the fair and efficient conduct of bargaining; and

(c) that the group of employees who will be covered by the agreement proposed to be specified in the scope order was fairly chosen; and

(d) it is reasonable in all the circumstances to make the order.”

[4] In the decision under appeal Commissioner Ryan examined the meaning of s.238 of the Act, in particular ss. 238(4)(b) and 238(4)(c) (at paragraphs 8-72). He found on the evidence that an order should be issued pursuant to s.238 (at paragraphs 73-117). In relation to s.238(4)(b) he said:

“[35] Having regard to the plain words used in s.238(4)(b) the plain meaning of each of the words used as well as the plain meaning of the whole of clause is readily ascertainable and easily understood. There is no need to use synonyms for the words used in s.238(4)(b) the words speak for themselves.

[36] It is difficult to understand how the Full Bench in UFUA v MFESB came to the conclusion that the words in s.238(4)(b) meant “that the tribunal should be satisfied that if an order is made the bargaining will at least be fairer or more efficient or both than it would be if no order were to be made.”

[37] This conclusion appears to be in stark contrast to the decision of the Full Bench to reject the interpretation of s.238(4)(b) and (c) advanced by the AiGroup “that a scope order should not be made against the opposition of a bargaining representative unless one of the bargaining representatives is pursuing a scope for negotiations which is unfair.” As the Full Bench clearly stated:

“[54] That submission must be rejected. It involves adding an additional requirement to those specified in ss.238(4)(b) and (c). If two parties to an application for a scope order advance alternative positions neither of which is objectively unfair but the tribunal is satisfied of the relevant matters and is disposed to make an order, it would be an error not to do so.”

[38] Furthermore the Full Bench specifically decided against introducing a comparative test in relation to s.238(4)(c) when it said:

“[55] The relevant consideration under s.238(4)(c) is whether the specified group is fairly chosen. It may be that a number of groupings might be fair – what this criterion requires is that the group which is included in the scope order is fairly chosen.”

[39] In light of these two specific conclusions it is difficult to discern the reasoning behind the Full Bench saying of s.238(4)(b) that “The implication is that the tribunal should be satisfied that if an order is made the bargaining will at least be fairer or more efficient or both than it would be if no order were to be made”.

[40] The Illustrative Example contained in the EM tells quite strongly against an interpretation of s.238(4)(b) which requires it to be read as ‘that making the order will promote the fairer and more efficient conduct of bargaining than if the order was not made’.

[41] Just because DDS has formed a subjective view that bargaining is not proceeding fairly and efficiently with Cath and Justine does not mean that objectively bargaining is not proceeding fairly and efficiently. It could quite well be the case that the bargaining processes in place have created a very fair and efficient bargaining process. What appears to be the real problem is that the outcomes sought by DDS are best achieved through splitting the bargaining and separating Debt Recovery from Loans.

[42] The interpretation of s.238(4)(b) advanced by the Full Bench in UFUA v MFESB would in some circumstances prevent the Commission from granting a scope order sought by DDS and this would be so if the making of the scope order only promoted a level of fair and efficient bargaining which was equal to or less than what was occurring at the time of the application.

[43] In stark contrast it would appear that the outcome identified in the Illustrative Example could always be achieved if s.238(4)(b) is interpreted without the comparator sought to be imposed by the Full Bench in UFUA v MFESB.

[44] It is permissible for a court or tribunal to read into an act words which aren’t there but the authorities make clear that there must be a real necessity to do so.

[45] The starting point concerning an inclination of a court or tribunal to read words into an act should be the warning given by Lord Mersey in an oft-cited passage from Thompson v Goold & Co 3:

“It is a strong to read into an Act of Parliament words which are not there, and in the absence of clear necessity it is a wrong thing to do”.

[46] The “clear necessity” required by Lord Mersey has given way to a test which has regard to the purpose of the legislation.

[47] In Australian Education Union v Department of Education and Children's Services 4, in a matter involving the construction of an Act concerning the appointment of teachers, French CJ, Hayne, Kiefel and Bell JJ said:

“26. The disposition of this appeal turns upon the correct construction of s 9(4). The process of construction begins with a consideration of the ordinary and grammatical meaning of the words of the provision having regard to their context and legislative purpose.

...

28. The reasoning in the IRC was informed by the view that it was desirable that the Minister have flexibility in the appointment of teachers and that Pt III of the Act might be "unnecessarily prescriptive" in its application to the ad hoc appointments of relief teachers in diverse circumstances. This approach, with respect, emphasised a judicially constructed policy at the expense of the requisite consideration of the statutory text and its relatively clear purpose. In construing a statute it is not for a court to construct its own idea of a desirable policy, impute it to the legislature, and then characterise it as a statutory purpose. The statutory purpose in this case was to be derived from a consideration of the scheme of the Act as a whole, the respective functions of Pts II and III of the Act, and the regulatory requirements of Pt IV of the Act.”

[48] More recently in Taylor v The Owners – Strata Plan No 11564 5 French CJ, Crenna and Bell JJ said:

“The principles

35. In Young Spigelman CJ suggested that the authorities do not warrant the court supplying words in a statute that have been "omitted" by inadvertence per se. Construing the words actually used by the legislature in "their total context", Spigelman CJ suggested that the process of construction admits of reading down of general words or giving the words used an ambulatory operation. His Honour cited Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation as an instance of the former and Bermingham v Corrective Services Commission (NSW) as an instance of the latter. In R v PLV his Honour expanded on his analysis in Young, observing:

"The authorities which have expressed the process of construction in terms of 'introducing' words to an Act or 'adding' words have all, so far as I have been able to determine, been concerned to confine the sphere of operation of a statute more narrowly than the full scope of the dictionary definition of the words would suggest. I am unaware of any authority in which a court has 'introduced' words to or 'deleted' words from an Act, with the effect of expanding the sphere of operation that could be given to the words actually used. ... There are many cases in which words have been read down. I know of no case in which words have been read up." (emphasis in original)

36. In Leys the Victorian Court of Appeal was critical of Spigelman CJ's characterisation of purposive construction as a process of construing "the words actually used" (emphasis in original). Their Honours said that the process requires the court to determine whether the modified construction is reasonably open in light of the statutory scheme and against a background of the satisfaction of Lord Diplock's three conditions. Their Honours questioned the utility of the distinction between "reading up" and "reading down" and rejected the proposition that a purposive construction may not result in an expanded operation of a provision.

37. Consistently with this Court's rejection of the adoption of rigid rules in statutory construction, it should not be accepted that purposive construction may never allow of reading a provision as if it contained additional words (or omitted words) with the effect of expanding its field of operation. As the review of the authorities in Leys demonstrates, it is possible to point to decisions in which courts have adopted a purposive construction having that effect. And as their Honours observed by reference to the legislation considered in Carr v Western Australia, the question of whether a construction "reads up" a provision, giving it an extended operation, or "reads down" a provision, confining its operation, may be moot.

38. The question whether the court is justified in reading a statutory provision as if it contained additional words or omitted words involves a judgment of matters of degree. That judgment is readily answered in favour of addition or omission in the case of simple, grammatical, drafting errors which if uncorrected would defeat the object of the provision. It is answered against a construction that fills "gaps disclosed in legislation" or makes an insertion which is "too big, or too much at variance with the language in fact used by the legislature".

39. Lord Diplock's three conditions (as reformulated in Inco Europe Ltd v First Choice Distribution (a firm))accord with the statements of principle in Cooper Brookes and McColl JA was right to consider that satisfaction of each could be treated as a prerequisite to reading s 12(2) as if it contained additional words before her Honour required satisfaction of a fourth condition of consistency with the wording of the provision. However, it is unnecessary to decide whether Lord Diplock's three conditions are always, or even usually, necessary and sufficient. This is because the task remains the construction of the words the legislature has enacted. In this respect it may not be sufficient that "the modified construction is reasonably open having regard to the statutory scheme" because any modified meaning must be consistent with the language in fact used by the legislature. Lord Diplock never suggested otherwise. Sometimes, as McHugh J observed in Newcastle City Council v GIO General Ltd, the language of a provision will not admit of a remedial construction. Relevant for present purposes was his Honour's further observation, "[i]f the legislature uses language which covers only one state of affairs, a court cannot legitimately construe the words of the section in a tortured and unrealistic manner to cover another set of circumstances."

40. Lord Diplock's speech in Wentworth Securities laid emphasis on the task as construction and not judicial legislation. In Inco Europe Lord Nicholls of Birkenhead observed that even when Lord Diplock's conditions are met, the court may be inhibited from interpreting a provision in accordance with what it is satisfied was the underlying intention of Parliament: the alteration to the language of the provision in such a case may be "too far-reaching". In Australian law the inhibition on the adoption of a purposive construction that departs too far from the statutory text has an added dimension because too great a departure may violate the separation of powers in the Constitution.

[49] In the same decision Gageler and Keane JJ in dissent said:

“65. Statutory construction involves attribution of legal meaning to statutory text, read in context. "Ordinarily, that meaning (the legal meaning) will correspond with the grammatical meaning ... But not always." Context sometimes favours an ungrammatical legal meaning. Ungrammatical legal meaning sometimes involves reading statutory text as containing implicit words. Implicit words are sometimes words of limitation. They are sometimes words of extension. But they are always words of explanation. The constructional task remains throughout to expound the meaning of the statutory text, not to divine unexpressed legislative intention or to remedy perceived legislative inattention. Construction is not speculation, and it is not repair.

66. Context more often reveals statutory text to be capable of a range of potential meanings, some of which may be less immediately obvious or more awkward than others, but none of which is wholly ungrammatical or unnatural. The choice between alternative meanings then turns less on linguistic fit than on evaluation of the relative coherence of the alternatives with identified statutory objects or policies.”

[50] It would appear that applying the tests for statutory interpretation (no matter how expressed by the High Court) to the language of s.238(4)(b) leads to a simple conclusion that the words used do accord with the policy purpose of the Act, the words do not lead to an outcome that would be contrary to the purpose of the Act, the words are used in a context where a comparative test is not required and the words used are simple enough that their meaning can be readily ascertained both within the context of s.238 and within the context of the Act as a whole.

[51] The Full Bench in UFUA v MFESB has rewritten s.238(4)(b) in a way which is too much at variance with the language in fact used by the legislature.

[52] The consequence of the Full Bench decision in UFUA v MFESB can be seen in decisions which apply that decision. In APESMA v Australian Red Cross Blood Service [2011 FWA 2914 at [66], Hampton C said:

“The applicant for a scope order must demonstrate that the making the order would promote, that is encourage and facilitate, bargaining that is fairer and more efficient than if no order was made.”

I only cite this decision because it stands in contrast to the decision of SDP Richards involving the same issue and the same parties and which I have cited earlier in this decision.

[53] The simple language of s.238(4)(b) does not require the Commission to reach a conclusion as to relative fairness or relative efficiency if an order is to be made under s.238.

[54] A further and real practical difficulty with introducing a comparator into s.238(4)(b) is that the presence of a comparator requires a standard to be adopted against which the comparator can work. Where the comparator is ‘fairer’ then a standard of what is ‘fair’ has to be set in order to test whether what will occur will be ‘fairer”. Similarly where the comparator is ‘more efficient’ then a standard of what is ‘efficient’ has to be set in order to test whether what will occur will be ‘more efficient”. The standard introduced into s.238(4)(b) by the Full Bench in UFUA v MFESB is the level of fairness and efficiency attached to the bargaining process at the time the application for a scope order is dealt with. This standard will be a movable feast as the standard will be different in every single application for a scope order.

[55] There is no objective standard of “fair” and or “efficient” in the approach adopted by the Full Bench in UFUA v MFESB against which a comparator of ‘fairer’ and ‘more efficient’ can be applied.

[56] Fair is a word which is value laden, it is a term of relativity and it is term which is used throughout the Act but is never defined in the Act. As the dictionary definition of “fair” makes clear this is a word with many meanings; it is a polysemy. The use of polysemy in legislation can give rise to ambiguity. As G.C. Thornton notes in his textbook Legislative Drafting, 4th edn, at 11 in relation to ambiguity of words:

“The second kind of ambiguity arises from the word itself and not from its use with other words. It arises when a word has more than one meaning, a circumstance which is known as polysemy. A moment’s thought or a glance at a dictionary serves as a reminder that polysemy, or multiple meaning of words, is common in our language. This is not necessarily a bad thing for it is economic if one symbol can serve to convey more than one meaning, and in all but a few cases the context will make clear the sense in which a word is being used. Nevertheless, a drafter must exercise a continuing care to ensure that the potential ambiguity of words with a multiple meaning is nullified by the context in which they are used.”

[57] The context in which the word fair is used within the Act means that it has different meanings in the different contexts in which it is used. For the purpose of Division 8 of Part 2-4 of the Act the word “fair” would appear to have the meaning of “moderately good, large, or satisfactory; not undesirable, but not excellent”.

[58] Attributing meaning to the word “fair” still does not resolve the practical issue of determining what is fair relative to what is not fair.

[59] The issue of relativity needs to be addressed by reference to an objective standard. The courts have dealt with issues of relativity when considering what is “reasonable” and what is “unreasonable” in the context of legislation which neither defines the term nor specifies the criteria to be considered in relation to the term.

[60] Courts have adopted the concept of what would an average citizen consider is reasonable. A similar approach can and should be adopted in relation to what is to be considered “fair and efficient conduct of bargaining”.

[61] The fact that there is no such person as the average citizen or the reasonable person on the Clapham Omnibus in the UK or on the No 96 Tram in Melbourne hasn’t prevented courts from constructing a test which has a strong degree of objectivity and as well as reflecting the social norm. As Gleeson CJ observed, during proceedings in the High Court, reference to the ‘man on the Clapham Omnibus”:

“It is a rhetorical form of objectifying a view about reasonableness”. 6

[62] The Full Bench in UFUA v MFESB has set a standard for comparing “fair” and fairer” and “efficient” and “more efficient” which appears to lack any sense of objectivity.

[63] The Full Bench in UFUA v MFESB has rewritten s.238(4)(b) in an impermissible manner.

[64] A final observation on the context of the Fair Work Act is necessary. Section 596(2)(a) of the Act shows that when Parliament wants to introduce a comparator in relation to efficiency then Parliament expresses itself quite clearly. Section 596(2)(a) reads as follows:

“596(2) The FWC may grant permission for a person to be represented by a lawyer or paid agent in a matter before the FWC only if:

(a) it would enable the matter to be dealt with more efficiently, taking into account the complexity of the matter; or”

[65] In circumstances where Parliament has used the term “more efficiently” in an Act then it is unlikely that when Parliament used the term “efficient” elsewhere in the same Act that they intended the word “efficient” to mean “more efficiently”.

[66] Parliament must be given some credit for having used different words in different sections to mean different things.

[67] There is a convention, which is well founded, that single members should follow decisions of Full Bench’s and it is a brave or foolish member who doesn’t. In this matter I will apply the plain language of s.238(4)(b) and not the words implied into s.238(4)(b) by the Full Bench in UFUA v MFESB.

[68] BRB Modular in its Respondent’s Closing Submissions summarised the bargaining process at paras 12 and 13 and concluded at para 14 that “the Applicant’s own evidence demonstrates nothing extraordinary about how bargaining proceeded, and on the contrary, has a high degree of normality.” At para 16 of its Respondent’s Closing Submissions BRB Modular contended that “the evidence demonstrates bargaining has occurred in an abundantly fair and efficient manner to date”.

[69] I agree with the conclusion that the bargaining process to date has been fair and efficient and this permits me to be satisfied that the parties will, if the AMWU application for a scope order is granted, conduct any bargaining in a fair and efficient manner.

[70] It is possible that the making of a scope order will promote fair and efficient bargaining which could be less fair, more fair or equally as fair and/or could be less efficient, more efficient or equally as efficient, or any combination of these degrees of fairness and efficiency, than if no scope order was made. However I do not need to determine the degree of fairness and efficiency which attaches to the bargaining that will occur if a scope order is made. I need to be satisfied that the making of a scope order will promote the fair and efficient conduct of bargaining and I am so satisfied.”

Appeal Grounds

[5] The grounds of appeal include that the Commissioner adopted the wrong test in applying s.238(4)(b) of the Act, departed from Full Bench authority, made an order not open on the evidence, wrongly applied s.238(4)(c) in ascertaining the group of employees who would be covered by the order, and erred in holding that it was reasonable in all the circumstances to make the order. 7

The Approach to s. 238(4)(b)

[6] We have set out the terms of s.238(4) earlier in this decision. The decision under appeal extracts parts of the Full Bench decision in United Firefighters' Union of Australia and others v Metropolitan Fire & Emergency Services Board,  8 in the course of coming to the conclusion that he should not follow it. The entirety of the relevant paragraphs should be set out. The Full Bench said:

“[54] In its submissions AiGroup sought to limit the circumstances in which an order might be made. We refer in particular to the submission that a scope order should not be made against the opposition of a bargaining representative unless one of the bargaining representatives is pursuing a scope for negotiations which is unfair. That submission must be rejected. It involves adding an additional requirement to those specified in ss.238(4)(b) and (c). If two parties to an application for a scope order advance alternative positions neither of which is objectively unfair but the tribunal is satisfied of the relevant matters and is disposed to make an order, it would be an error not to do so.

[55] The relevant consideration under s.238(4)(b) is whether the order will promote the fair and efficient conduct of bargaining. The implication is that the tribunal should be satisfied that if an order is made the bargaining will at least be fairer or more efficient or both than it would be if no order were to be made. The relevant consideration under s.238(4)(c) is whether the specified group is fairly chosen. It may be that a number of groupings might be fair – what this criterion requires is that the group which is included in the scope order is fairly chosen. This issue is also dealt with in s.238(4A), which we discuss shortly.”

[7] In this case the AMWU submitted before the Commissioner and before us that the reference to promoting the fair and efficient conduct of bargaining in s.238(4)(b) does not require that granting the order will improve fair and efficient bargaining. Rather, it is sufficient if the order is consistent with fair and efficient bargaining, even if not granting the order is also consistent with fair and efficient bargaining. 9 This submission was essentially accepted by the Commissioner in paragraph [70] of his decision which we have extracted above.

[8] In reaching this conclusion Commissioner Ryan relied on a single member decision in The Association of Professional Engineers, Scientists and Managers, Australia v Australian Red Cross Blood Service, 10 and the ‘plain language of the Act’ as well as its ‘purpose’. In examining its purpose he had regard to s.169, which sets out the ‘Guide to this Part’, s.3 ‘Object of this Act’, the Explanatory Memorandum, and dictionary definitions of the word ‘promote’. He expressly disagreed with the observations of a Full Bench of the Commission set out above.

[9] Dictionary definitions of the word “promote” include “to advance in rank, dignity, position, etc” and “to further the growth, development, progress, etc, of: encourage”. This lies at the heart of the Full Bench’s reasoning. The bench did not, as implied by the Commissioner’s decision, determine to read additional words or syllables into the words of the statute. It merely adopted an interpretation of the composite phrase that included the notion of advancement.

[10] The scheme of the Act is that enterprise agreements are made by the employer and employees covered by them and the terms of agreements, including their scope are matters for the parties to address in the bargaining process. The involvement of the Commission in the terms of agreements is very limited. One exception is when the test for issuing a scope order is satisfied. The tests are essentially set out in s.238(4). It is important to apply the tests in context having regard to scheme of the Act and the purpose of the provision.

[11] Section 171 sets out the ‘Objects of this Part’, Part 2-4, which includes s.238 and associated provisions. Section 171(a) provides for collective bargaining for “enterprise agreements that deliver productivity benefits”, which carries a sense that there are productivity benefits to agreements made pursuant to the various steps provided in the Part, that is, which improve productivity in some way. These steps include the making of agreements, and other matters.

[12] The Object of this Act in s.3 also uses the term ‘promotes’. The object is to provide a “balanced framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion for all” by certain means that are then set out in the Object. These include workplace relations laws that amongst other things “promote productivity and economic growth”. Bargaining is also specifically referred to in s.3(f), which refers to “achieving productivity and fairness” through various means. The use of the word ‘promote’ does not carry with it a sense that the Act has a neutral effect on productivity and other objects, but rather has a sense of advancing the specified attributes including productivity and fairness. In our view, the approach of the Full Bench to s.238(4)(b) in UFU v MESFB is consistent with the normal meaning of the entire subsection and the context of the Act, in particular ss. 3 and 171.

[13] The alternative approach advocated by the AMWU and adopted by the Commissioner would mean that s.238 would be uncertain in its application, with little to guide the Commission in exercising its discretion beyond a general test of reasonableness in s.238(4)(d). If that were the case, the consequence would be that s.238, unlike many other provisions of the Act, is relatively neutral in its promotion of fairness and efficiency. Rather the bar would be lowered to the point that it would be sufficient if there was some nebulous correlation between the order and fairness and efficiency, even if there was no improvement, and on the formulation of the Commissioner, even if there was a reduction in fairness and efficiency. In our view, it is most unlikely that Parliament contemplated the Commission issuing orders that interfered with the content of an agreement in a manner which reduced the fairness and efficiency in the conduct of bargaining. We do not consider that the Explanatory Memorandum provides support for the Commissioner’s approach.

[14] We do not consider that s.238 is uncertain in its object and purpose. In our view, the interpretation taken by the Full Bench in UFU v MESFB is consistent with the ordinary meaning of the language, considered in the context of the Act as a whole. It is consistent with the dictionary meaning of the term as ‘to advance in rank, dignity, position etc’ in the Macquarie dictionary. 11 It is also consistent with other decisions in relation to the section including another Full Bench decision in Australian Workers’ Union v BP Refinery (Kwinana) Pty Ltd,12 as well as single member decisions.13

[15] We respectfully do not agree with the interpretation adopted by the Commissioner. In failing to apply the normal meaning of the composite phrase in s.238(4)(b), the decision lowers the bar on the statutory test he was required to apply and is an error of principle of a type that falls within the categories of appealable errors identified in House v King. 14

[16] It is also of concern that the Commissioner expressly decided not to follow the earlier Full Bench authority. The Fair Work Commission is a tribunal and Full Bench decisions are not legally binding on single members in the way that lower courts are bound by decisions of higher courts. Nevertheless, the application of any body of law depends on consistency and respect for precedent. The High Court, for example will follow its earlier decisions, unless it is expressly decided by the Court, upon reconsideration and with all parties on notice that the earlier decision was wrongly decided and should be expressly overruled. The same practice has been adopted by Full Benches of this Commission and its predecessors. Adopting different interpretations of statutory provisions creates confusion to parties who are required to apply the statute and would mean that different approaches are adopted depending on the individual views of the particular members involved in a particular case. The orderly rule of law does not permit such an approach. Unless a previous case is distinguished or expressly overruled by a higher authority or on full reconsideration, it should be followed, especially when it involves the interpretation of statutory provisions. Full Bench interpretations should be followed by individual Commission members. The Commissioner was free to express his disagreement and his alternative reasoning. But having done so he should have applied the established Full Bench approach. Full Bench decisions may be wrong but the role of overruling vests with the higher Court.

The Approach to s.238(4)(d)

[17] In the decision under appeal the Commissioner said the following in relation to s.238(4)(d):

“S.238(4)(d) - it is reasonable in all the circumstances to make the order.

[95] The cumulative effect of the operation of s.238(4) means that even if the Commission is satisfied as to the matters in s.238(4)(a), (b) and (c) the Commission must then consider each of these matters as well as all the circumstances of the matter before the Commission can come to a concluded view that it it reasonable in the all the circumstances to make the scope order sought.

[96] In addition to the matters raised in s.238(4)(a), (b) and (c) BRB Modular also contend that a relevant circumstance is the timing of the application.”

[18] The Commissioner then addressed the question of timing and said:

“[116] The timing of the application is a matter that the Commission can have regard to as part of all of the circumstances of the matter. In the present matter the timing of the application does not weigh against the making of a scope order. Rather it would weigh, although only slightly, in favour of the making of a scope order.

Conclusion

[117] Having considered each of the matters in s.238(4)(a), (b) and (c) and being satisfied as to each of those matters and considering the matter raised by s.238(4)(d), I am satisfied that the scope order as sought by the AMWU should be granted.”

[19] There is no further consideration of the reasonableness of making the order. In our view, the requirement that it is reasonable to make a scope order is an important element of the tests required to be applied by the Commission. An application of the test will necessarily be bound up in the peculiar circumstances of the matter, but it requires a full consideration of those circumstances and a level of satisfaction that the order requiring the parties to adopt a particular scope of an enterprise agreement in continuing their bargaining is objectively justified. For example, the Full Bench in the MFB case expressed its conclusion as follows: 15

“Given the troubled history surrounding the negotiation of conditions for Commanders and ACFOs and the negative effect that it is having on attempts to negotiate a new agreement, it is desirable that Fair Work Australia exercise its powers under s.238 and make an appropriate order. Such an order would also support attempts by the MFESB, referred to in the evidence, to improve organisational efficiency and productivity by promoting better understanding of managerial roles.”

[20] In our view, the Commissioner has not applied the test required by s.238(4)(d) and this is a further error of a House v King type.

[21] In view of our conclusions on the application of ss. 238(4)(b) and (d), it is not necessary that we deal with all other grounds of appeal.

Disposition of the Appeal

[22] Appeals brought pursuant to s.604 of the Act involve an appeal by way of re-hearing, and the Commission’s powers on appeal are exercisable only if there is error on the part of the primary decision-maker. 16  An appeal may only be made with the permission of the Commission.

[23] Permission to appeal may be granted if there is sufficient doubt to warrant its reconsideration or an injustice may result if permission is not granted. 17 If we are satisfied that it is in the public interest to do so, we must grant permission to appeal. In GlaxoSmithKline Australia Pty Ltd v Colin Makin 18 a Full Bench summarised the concept of public interest in the following terms:

“Although the public interest might be attracted where a matter raises issues of importance and general application, or where there is a diversity of decisions at first instance so that guidance from an appellate court is required, or where the decision at first instance manifests an injustice, or the result is counter intuitive, or that the legal principles applied appear disharmonious when compared with other recent decisions dealing with similar matters...”

[24] We are satisfied that this matter raises issues of importance and general application. In the decision under appeal Commissioner Ryan disagreed with at least one Full Bench decision in relation to s.284(4)(b). A Full Bench decision on this issue will provide some guidance in relation to this issue. The decision is also attended by other errors that resulted in the proper tests not being applied to the application.

[25] Further, as stated earlier, in our view the approach taken to s.284 was an error within House v King: 19

“The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.”

[26] We therefore grant permission to appeal, and allow the appeal. It is necessary that the application be reconsidered. We propose to consider the application based on the material before the Commissioner.

Reconsideration of the Application

[27] We now address each element of the test for making a scope order in s.238(4) of the Act.

Has the bargaining representative who made the application met, or are they meeting, the good faith bargaining requirements?

[28] It was either agreed or not contested that:

a) In May 2014 a log of claims was received from the employee bargaining representatives;

b) On 6 May 2014 a log of claims was received from the Applicant;

c) Bargaining meetings were held on 6 and 23 May 2014 and on 10 and 20 June 2014;

d) By 10 June 2014 the majority of claims made by the employee bargaining representatives had been resolved. There were 25 issues outstanding with the Applicant;

e) Bargaining formally ceased on 23 June 2014 when the Respondent advised the Applicant that they were at an impasse; and

f) The Respondent advised that it intended to ask employees to vote on the proposed agreement.

Consideration - s. 238(4)(a)

[29] Neither in its evidence or submissions before the Commissioner nor in their submissions before the Full Bench did the Respondent assert that the Applicant was not meeting the good faith bargaining requirements. It was not a contested issue in the proceeding at first instance or on appeal. In its final submissions the Respondent expressly declined to make submissions on this factor.

[30] Having regard to all of the material before us we are satisfied that the bargaining representative who made the application met, or are meeting, the good faith bargaining requirements.

Will the making of the order promote the fair and efficient conduct of bargaining?

[31] The Applicant called David Miller, AMWU organiser, and Peter Harrison, AMWU Union Delegate to give evidence.

[32] The evidence of Mr Miller can be summarised as follows:

a) He has been an organiser for approximately three and half years 20 and involved in about 50 enterprise agreement negotiations;21

b) He had previously been a shop steward for approximately eight years 22 and involved in enterprise bargaining on three occasions;23

c) His previous experience was that between 6 - 12 meetings were required to reach agreement on an enterprise agreement; 24

d) In his experience negotiations “can go for three to six months” or on “the odd occasion ... more than 12 months”; 25

e) He was invited by an employee of the Respondent “to come and speak with metalworkers at the Fairview Street, Kangaroo Flat site”; 26

f) He represented the Fairview Street employees at “four negotiation meetings with the company”; 27

g) The first negotiation meeting went for approximately two hours. At that meeting the AMWU was given approximately forty-five minutes to talk to its log of claims. No real response was given by the Respondent; 28

h) The second negotiation meeting when for approximately two and half hours. For the first hour of that meeting the AMWU continued to address its log of claims after which discussion turned to other bargaining representatives’ claims. No real response was provided by the Respondent; 29

i) At the third negotiation meeting the Respondent provided a cursory response to the AMWU’s claims. The Respondent indicated in-principle agreement regarding some claims, however, for the most part the Respondent rejected AMWU claims without providing any detailed analysis or reasoning and no documentation; 30

j) The fourth and final negotiation meeting when for approximately an hour and half. That meeting focussed on discussions concerning a draft proposed agreement tabled by the Respondent. At that meeting there were no further discussions of the AMWU’s claims; 31

k) In total the AMWU was given approximately an hour and forty-five minutes to put forward its claims in the course of the negotiations. 32

[33] The evidence of Mr Harrison can be summarised as follows:

a) He attended all of the bargaining meetings; 33

b) At the second meeting he did not think the Respondent was “really listening [in relation to] the rest of the [AMWU’s] claims”; 34

c) At the third meeting “there [was] no movement on the company’s end,” 35 the negotiations were “perhaps a little stale, like there wasn’t much actually happening”36 and the process was “fairly frustrating”;37

d) The fourth meeting was as Mr Miller had described it;

e) The meetings were not really fair; 38

[34] The Respondent called Jarrod Waring, the Respondent’s General Manager, to give evidence.

[35] The evidence of Mr Waring can be summarised as follows:

a) The first meeting occurred on 6 May 2014. It went for approximately two hours. Fifteen minutes were spent on introductions, forty-five on “employee claims” and the balance on “union” claims; 39

b) The second bargaining meeting also lasted for approximately two hours. At that meeting the Respondent submitted its log of claims and gave feedback on the employee and union’s claims. Agreement had been reached on five union claims and a number of employee claims. 40 One hour was spent dealing with union claims,41 generally responding “yes” or “no”.42

c) At the third meeting there was some further discussion of the union’s claims; 43

d) At the fourth meeting the Respondent tabled a draft document for discussion and provided an opportunity for the other parties to comment on it. After this no further meetings were scheduled and the Respondent was keen to finalise the agreement and put it to a vote of employees; 44

e) No written response was provided to the AMWU claims; 45

[36] The Applicant submitted that:

a) The evidence supports a finding that the bargaining had been demonstrably unfair and inefficient; 46

b) “[T]he granting of the scope order would promote fairness and inefficiency in bargaining because the change in scope of the agreement would mean that the Respondent would have to give serious consideration to the claims of employees in the steel section at its Kangaroo Flat site. This is because the absence of other employees/sites involvement would ensure that bargaining is appropriately focussed on the steelworkers’ claims and that the company would be practically prevented from rushing with undue haste to putting a proposed agreement out to an employee vote, such as has occurred in the current negotiations.” 47

c) “... the scope of the currently proposed agreement is a key factor that has enabled the Respondent to practically ignore the claims made [by] employees in the steel section of its Kangaroo Flat site and engage in surface bargaining only. This is because the company is simply taking unfair advantage of the fact that under the current scope, the steel workers are a minority group. Making a scope order in the terms sought by the Applicant would remedy this situation.” 48

[37] The Respondent submitted that:

“There is no evidence the Applicant has been subjected to manifest inefficiency or unfairness during the conduct of the bargaining process. The Applicant’s claims were lodged, the Applicant ‘went through’ them for an hour and forty-five minutes in total, they were subsequently considered by the Respondent, and discussed during the bargaining meetings for a total of approximately four hours. Some claims were rejected. All meetings were planned with lead-in time and ensuring the availability of the Applicant’s organiser. All meetings occurred in a civil, organised, efficient and fair manner.” 49

Consideration - s. 238(4)(b)

[38] In his decision the Commissioner wrote, “I agree with the conclusion that the bargaining process to date has been fair and efficient...” 50 We agree with that conclusion. There is nothing in the evidence which establishes that the bargaining has been unfair or inefficient.

The evidence establishes that the bargaining has been unremarkable; claims have been made, meetings have been held, explanations have been provided for the union’s log of claims, negotiation has occurred, some (many) claims have been rejected (as is the Respondent’s entitlement to do so), the union is unhappy (maybe even frustrated) not to have made greater gains - it has been a relatively normal set of circumstances.

Other than Mr Harrison, none of the employees who would be affected by the scope order gave evidence and Mr Harrison’s evidence did not establish that the employees at Kangaroo Flat had negotiating interests that were difficult to reconcile with other employees to be covered by the proposed agreement.

[39] The major complaints raised by the AMWU go to the conduct of the Respondent in the negotiations with allegations that it was engaged in surface bargaining and not responding properly to the union’s log of claims. These complaints might raise questions about whether the Respondent was engaging in good faith bargaining, but they do not establish that, if the scope order was made, the bargaining will at least be fairer or more efficient or both than it would be if no order were made.

[40] Consequently, having regard to all of the material before us we are not satisfied that the making of the order would promote the fair and efficient conduct of bargaining.

Has the group of employees who will be covered by the agreement proposed to be specified in the scope order been fairly chosen?

[41] In determining whether the group of employees who will be covered by the agreement proposed to be specified in the scope order been fairly chosen it is necessary to take into account whether the group is geographically, operationally or organisationally distinct (s.238(4A)).

[42] The evidence of Mr Miller can be summarised as follows:

a) There is an obvious geographical separation within the Respondent’s operations when it comes to the performance of work by different trades people; with metalwork involving the fabrication of steel frames generally being performed at the Kangaroo Flat site; 51

[43] The evidence of Mr Harrison can be summarised as follows:

a) He is a steel fabricator based at Kangaroo Flat, however, he has attended the Respondent’s former Sunshine and Wood St sites to perform steel work; 52

b) The Kangaroo Flat site is approximately 10 kilometres from the Wood St site; 53

c) Metalwork including steel fabrication, welding and painting in order to construct sub-floors, roofs, balustrading and staircases for the Respondent’s portable buildings is generally carried out at the Kangaroo Flat site by employees who are based there; 54

d) Employees at other sites generally carry out different work such as carpentry, joinery, electrical work and plumbing; 55

e) The metal workers on at the Kangaroo Flat site are distinct from other workers on that site such as office staff and management. 56

[44] The evidence of Mr Wayne Bell, the manager of the Respondent’s Kangaroo Flat factory, can be summarised as follows:

a) Employees at the Kangaroo Flat site work in the “metal field”; 57

b) The Respondent’s general chain of production has modular frames fabricated at Kangaroo Flat and sent to other sites; 58

c) Most work performed by Kangaroo Flat employees at other sites was metal work; 59

d) Employees at other sites have their own sense of identity. 60

[45] The evidence of Mr Kieran Nihill, the manager of the Respondent’s Wood Street facility, can be summarised as follows:

a) There is a clear delineation between the Respondent’s different trades people, electricians, plasterers, painters, carpenters, cabinetmakers, welders/metalworkers at Wood St and welders/metalworkers at Kangaroo Flat; 61

b) The Wood St site and Kangaroo Flat site have different managers and do not integrate with the different management. 62

[46] The evidence of Mr Waring can be summarised as follows:

a) The function of the steel workers, what they do every day, is distinct from others in the business. 63

[47] The Applicant submitted that the evidence establishes that the group of employees sought to be covered by the proposed scope order was fairly chosen. 64

The Respondent submitted that:

a) “Although the proposed scope appears, at first blush, to be ‘geographically distinct’, ... organisational and operational distinctiveness outweigh ‘geographical distinctiveness’ and ought to carry the day; 65

b) “The Respondent’s three Victorian sites are operationally and organisationally intertwined, significantly integrated and heavily reliant on each other to ultimately achieve the Respondent’s objectives of manufacturing, assembling and installing demountable buildings for customers. Put simply, one cannot function without the other two.” 66

c) The requisite level of distinctiveness is not evident. 67

Consideration - s. 238(4)(c)

[48] The evidence in this matter is that the Respondent’s operations in Victoria involve three sites, although the work of all the employees has a connection, there are clear functional differences between the work performed at each site and, in particular, the work done by the employees at Kangaroo Flat falls within a discrete occupational grouping (different from that at other sites).

[49] So much so was found by the Commissioner:

“[92] The group of employees chosen by the AMWU to be covered by its scope application is based upon applying two discriminators. The first discriminator is the geographic location of the Kangaroo Flat site vis a vis the geographic location of all other sites. The second discriminator is based on the type of work performed by employees at that site. The AMWU proposes a scope for an enterprise agreement which is limited to employees who are covered by the Manufacturing and Associated Industries and Occupations Award excluding supervisors and managers and excluding clerical and administrative employees. The result is that the AMWU does not seek to have an agreement which covers employees at the Kangaroo Flat site who are employed in the classification of Supervisor, Office Employee Level 1 or Office Employee Level 2. The group of employees sought to be covered by the AMWU proposed agreement would be employees employed at the Kangaroo Flat site currently employed in the in the classifications of Factory/Yard Labourer, Tradesperson-Welder and Leading Hand(up to 6).

[93] The combination of classifications chosen by the AMWU for inclusion in its proposed agreement is certainly a discrete group of workers within BRB Modular.” 68

[50] Having regard to all of the material before us we agree with the Commissioner; we are satisfied that the group of employees who will be covered by the agreement proposed to be specified in the scope order has been fairly chosen.

Is it reasonable in all the circumstances to make the order?

[51] The Applicant submitted that “if the FWC is satisfied as to the first three elements of s.238(4)... then this criteria would also be met as there is nothing on the evidence to suggest that the making of the order sought would not be reasonable under the circumstances”. 69

The Respondent submitted that it is not reasonable in all the circumstances to make the order because:

a) The Respondent’s evidence demonstrates the views of the Respondent’s employees overwhelmingly support ‘one agreement’;

b) The Applicant effectively seeks a scope order to remedy what are properly characterised as ‘good faith bargaining’ concerns;

c) The Applicant seeks the Commission to grant a remedy to “do indirectly what cannot be done directly”; and

d) The Applicant’s unexplained delay in pursuing the application for a scope order offends the principles of equity and good conscience and fairness between the parties. 70

Consideration - s. 238(4)(d)

[52] We have made the observation above that the major complaints raised by the AMWU go to the conduct of the Respondent in the negotiations and that they are, in essence, allegations that the Respondent was not engaging in good faith bargaining. It is apparent, therefore, that the Appellant was attempting to use the vehicle of a scope order application to address good faith bargaining concerns. It was an improper vehicle to ventilate those concerns.

[53] The scope of an agreement is an open question in many enterprise bargaining exercises. It is frequently a topic of competing claims, discussion and negotiation. Rarely will it be possible to say that one scope proposal is wrong and another correct. There may be justifications for a preference one way or another. Hence it is usually the case that the scope is left to the bargaining parties to determine in the context of the overall enterprise bargaining framework. The reasonableness of making a scope order should be considered against that background.

[54] As we have said above, a consideration of reasonableness requires a full consideration of all of the circumstances and a level of satisfaction that the order requiring the parties to adopt a particular scope of an enterprise agreement in their ongoing bargaining is objectively justified. We are not satisfied that the applicant has established that it is reasonable in all the circumstances to make the scope order. We are satisfied that bargaining can continue and it remains open to the parties to continue to consider the scope of the agreement in the overall context.

[55] For these reasons and having regard to all of the material before us we are not satisfied that it is it reasonable in all the circumstances to make the order.

Conclusion

[56] For the reasons above we grant permission to appeal, allow the appeal and quash the decision of Commissioner Ryan. In re-determining the application, we are not of the view that the Commission should make the scope order. The application for a scope order is dismissed.

VICE PRESIDENT WATSON

Appearances:

Mr Nicholas Barkatsas for the appellant.

Mr David Vroland of the respondent.

Hearing details:

2015.

Melbourne.

12 February.

Final written submissions:

Appellant on 8 December 2014.

Respondent on 5 February 2015.

 1   PR556346.

 2   [2014] FWC 6388.

 3   [1910] AC 409 at 420 (cited in Statutory Interpretation in Australia at [2.32] at page 55.

 4   [2012] HCA 3.

 5   [2014] HCA 9.

 6   Cattanach & Anor v Melchior & Anor B22/2002 [2003] HCATrans 564.

 7   Notice of Appeal, in the Grounds for Appeal, paragraph 2.

 8   Giudice J, Lawler VP and Gay C in [2010] FWAFB 3009.

 9   Outline of Submissions of the Respondent on Appeal, paragraphs 13-18.

 10   Richards SDP in [2010] FWA 3911.

 11   Macquarie Dictionary online, Ryan C, [2014] FWC 6388 at paragraph 31.

 12   [2014] FWCFB 1476 at 22-28.

 13   For example, NUW v Super Retail Group Ltd [2012] FWA 3753 Hamilton DP and United Voice v CPE [2013] FWC 5946 Catanzariti VP.

 14   (1936) 55 CLR 499 at pp. 504-505.

 15   At [70].

 16   Coal and Allied v Australian Industrial Relations Commission (2000) 203 CLR 194 at 203–4 per Gleeson CJ, Gaudron and Hayne JJ.

 17   Wan v Australian Industrial Relations Commission (2001) 116 FCR 481.

 18   [2010] FWAFB 5343 at [27].

 19   (1936) 55 CLR 499 at pp.504-505.

 20   PN21.

 21   PN33.

 22   PN24.

 23   PN26.

 24   PN31.

 25   PN35.

 26   PN43.

 27   PN84.

 28   PN144-152.

 29   PN153-162.

 30   PN167-187.

 31   PN188-193.

 32   PN389.

 33   PN521.

 34   PN553-579.

 35   PN591.

 36   PN595.

 37   PN599.

 38   PN618.

 39   PN1430-1431.

 40   PN1460.

 41   PN1690.

 42   PN1683.

 43   PN1479.

 44   PN1480-1481.

 45   PN1696.

 46   Closing Submissions of the Applicant, 12 August 2014, paragraph 22.

 47   Closing Submissions of the Applicant, 12 August 2014, paragraph 23.

 48   Closing Submissions of the Applicant, 12 August 2014, paragraph 24.

 49   Closing Submissions of the Respondent, 26 August 2014, paragraph 15.

 50   [2014] FWC 6388, [69].

 51   PN75.

 52   PN435-437.

 53   PN439.

 54   PN440-444.

 55   PN445-447.

 56   PN453-456.

 57   PN840.

 58   PN848-849.

 59   PN854-858.

 60   PN920.

 61   PN992.

 62   PN995 and PN1019.

 63   PN1815.

 64   Closing Submissions of the Applicant, 12 August 2014, paragraph 35.

 65   Outline of Submissions of the Respondent, 17 July 2014, paragraph 21.

 66   Outline of Submissions of the Respondent, 17 July 2014, paragraph 22.

 67   Outline of Submissions of the Respondent, 17 July 2014, paragraph 24.

 68   [2014] FWC 6388.

 69   Closing Submissions of the Applicant, 12 August 2014, paragraph 36.

 70   Closing Submissions of the Respondent, 26 August 2014, paragraph 55.

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