PN1

JUSTICE ROSS: Can I have the appearances, please, firstly in Sydney?

PN2

MR M NGUYEN: Mr Nguyen, initial M. I appear for the Australian Manufacturing Workers' Union.

PN3

JUSTICE ROSS: Thanks, Mr Nguyen.

PN4

MR T CLARKE: Trevor Clarke, for the ACTU.

PN5

JUSTICE ROSS: Thank you.

PN6

MR S SMITH: If it pleases the Commission, Smith, initial S, of the Australian Industry Group.

PN7

JUSTICE ROSS: Thank you.

PN8

MR L IZZO: Izzo, initial L, seeking permission to appear together with Ms Thomson, initial K, for ABI and NSWBC.

PN9

JUSTICE ROSS: Thank you. In Melbourne?

PN10

MS R LIEBHABER: If it pleases the Commission, Liebhaber, initial R, for the Health Services Union.

PN11

JUSTICE ROSS: Thank you. Can I suggest that you all remain seated and just direct the microphone to where you are, because it will be easier to follow you? Ms Wiles, you're appearing for the TCFUA?

PN12

MS B WILES: I am, your Honour, yes, thank you.

PN13

JUSTICE ROSS: All right.

PN14

MR M GALBRAITH: And Galbraith, initial M, for the SDA.

PN15

JUSTICE ROSS: Thank you, and in Canberra?

PN16

MR R CALVER: If the Commission pleases, Calver, initial R, for the National Road Transport Association.

PN17

JUSTICE ROSS: Thank you.

PN18

MR S HARRIS: If it please the Commission, Harris, S, for the Pharmacy Guild of Australia.

PN19

JUSTICE ROSS: Thank you. Any other appearances? No? Can I just deal with some matters before we get on to submissions? We received advice from ABI yesterday, at about 6 pm, copied to a number of the parties who are represented this morning, advising that at the hearing of the proceedings ABI intend to submit there's no power under section 142 to include standard clause E.1(c) in modern awards, contrary to their earlier position, and apologising for the late advice on it.

PN20

A couple of issues: one is I have a document that I'm proposing to provide to the parties which seeks to identify those albeit relatively limited areas of agreement between the parties. They're areas of agreement based on the secondary position advanced by the ACTU and the unions, that is, if they don't succeed on their primary submission, which is essentially that for various reasons a deduction term shouldn't be included in modern awards, but the ACTU and the unions then go on to say but if such a term is to be included, then it should have certain characteristics.

PN21

A number of those characteristics are agreed by the principal employer parties in the proceedings, albeit sometimes the proposed manner of dealing with the issue is expressed in slightly different terms. So we've tried to capture that in a document, to also provide a bit of focus for the submissions this morning, so we'll give that to you shortly when we stand down. We'll come back at 10 o'clock to give you an opportunity to read it. When we resume we'll ask Mr Izzo - I'll deal with his application for permission in a moment, to appear that is - for Mr Izzo advance the ABI's submission.

PN22

To the extent that it differs from the submission put in similar terms by other parties - and we don't know yet because we don't know the content - but if, for example, they're advancing really the same argument that the ACTU has advanced or one of the other union participants, well all of the other parties know what that argument is and they've had an opportunity to respond to it. If it's a different argument, then we'd need to consider whether any other party wants an opportunity to think about the submission and then to respond to it in writing. It really depends on the scope of the argument - difficult to make any judgment about any of that until we have heard it.

PN23

Can I deal with the application for permission to appear? Is the application opposed by any party? No? I take it the application is put on the basis having regard to the complexity of the matter. We would be assisted, or it would facilitate the proceedings - I better check the exact language - - -

PN24

MR CALVER: Your Honour, could I please raise the preliminary matter which you've already traversed?

PN25

JUSTICE ROSS: No. I'm dealing with the permission to appear point now.

PN26

MR CALVER: Sorry. Thank you.

PN27

JUSTICE ROSS: Do you want to advance the submission and then we might - - -?

PN28

MR IZZO: Yes, it's all on the basis of section 596(2)(a) would enable the matter to be dealt with more efficiently, taking into account the complexity of the matter. That's the primary basis.

PN29

JUSTICE ROSS: All right. Well, we accept the submission advanced and on that basis grant permission. Mr Calver?

PN30

MR CALVER: Yes, I'm sorry, your Honour.

PN31

JUSTICE ROSS: No, that's all right.

PN32

MR CALVER: I didn't realise you hadn't disposed of that matter, one of the disadvantages of video-link. My instructions this morning, sir, are given that the ABI position is such a surprise, the matter, the tenor of their argument, we would seek for us to be able to consider that before we advance our own arguments and whilst obviously we ‑ ‑ ‑

PN33

JUSTICE ROSS: Well, let's not ‑ I just don't ‑ yes, hang on a minute. I don't think we should get ahead of ourselves. None of us have heard the argument. If ABI is advancing, for example, the same argument that another party has put it's difficult to see how any party has not been put on notice about that argument and had an opportunity to respond to it, but we don't know that.

PN34

So let's see what the argument is and then we'll deal with what anyone wants to say about it. And in any event, it doesn't preclude us dealing with all the other aspects that have been canvassed in the submissions.

PN35

What we don't intend to do is to hear ABI and then just adjourn for a period to enable everyone to think about it. There are a number of other aspects advanced in the submissions that have been put and we do not want to waste the time available this morning to deal with all of those.

PN36

So it deals with, as I understand it, the narrower proposition about whether the clause as framed is incidental and essential et cetera.

PN37

MR IZZO: Yes, your Honour, to put everyone at ease, I mean, a large number of the things that we address is already what's been canvassed in the submission. We just have a bit more to say about section 142 and because of that we have changed our position essentially on the merit basis. But I don't think much of what will be said is new although we do have a few additional things to say about section 142 which is what caused us to change our position.

PN38

JUSTICE ROSS: Yes, but you're not changing your position, for example, on the capacity for a deduction term to apply to an employee under 18, for example. So it's none of those aspects, it's really focused on the 142 question?

PN39

MR IZZO: That's correct, your Honour.

PN40

JUSTICE ROSS: Well, we'll hear what ABI has to say in due course and we'll hear what the various parties want to say about it after that. So we'll distribute the background document now. We'll come back at 10. It will be available interstate as well. We've alerted the registries there. Someone there will bring it in to you shortly.

PN41

And we'll come back at 10, hear from ABI and then we'll go through the background document, see whether that accurately reflects the position of the various parties and we have got some questions about parts of that. And then we'll see what remains and what parties wish to say about those issues, okay? Stand down until 10.

SHORT ADJOURNMENT�� [9.42 AM]

RESUMED�� [10.02 AM]

PN42

JUSTICE ROSS: Mr Izzo.

PN43

MR IZZO: Thank you, your Honour. I do just wish to say at the outset that we do apologise for the late change in our client's position. The reason is that following the listing of these proceedings for an oral hearing, both our office and our clients dedicated significant consideration to the relevant statutory framework and looked into it at quite an extensive level, and following the benefit of that further consideration, our clients have effectively revised their position on the way that the test in section 142 should be applied. Having revised this position on that we've formed a different view on whether the prerequisites of the section are met on a merit basis in this particular case. That's the basis for the change in position.

PN44

It doesn't mean, I'll say at the outset, that we resile from most of the matters in our submissions, we don't. We stand by the vast majority of the submissions made. All the matters that we point to, which demonstrate why it is desirable that clause E.1(c) is included in the modern awards remain. We say it is desirable but we're not satisfied that it's essential.

PN45

VICE PRESIDENT HATCHER: That's the clause in its entirety?

PN46

MR IZZO: The clause in its entirety subject to a couple of the agreed matters set out in the background document but, yes. When I say subject to the background document there's some comments about the scope. Points 1, 2 and 3 I think of the background document contain some concessions by ABI so subject to them

PN47

JUSTICE ROSS: I think the Vice President was asking a slightly different question. That is, are we talking about or at least I think - we'll find out. Are we talking about all of clause E.1 or are you simply - - -

PN48

MR IZZO: No, E.1(c).

PN49

JUSTICE ROSS: Right. So as I understand that position it's E.1(c) on your submission that you're about to articulate is not incidental and essential, therefore there's no power to include it. You agree to - in terms of what would remain, E.1(a) and (b), you maintain your position in respect of the question of scope.

PN50

MR IZZO: Yes.

PN51

JUSTICE ROSS: Well that's really - if we accept your submission then that would be the only change we would make to equal 1(a) and (b). We wouldn't need to make the second and third points, the age 18 and the wages due to the employee restriction - - -

PN52

MR IZZO: That's right.

PN53

JUSTICE ROSS: - - - because subclause (c) would go.

PN54

MR IZZO: That's right, your Honour.

PN55

JUSTICE ROSS: But in the event that we're not persuaded by your argument about incidental and essential, you maintain the submissions you've put in much the same way as the union parties have, that if we don't accept their primary submission and we form a view there is power to include a term of the character of subclause (c), then it should be varied in the following respects type of proposition.

PN56

MR IZZO: That's correct. The only thing I would point out at the beginning is we still maintain it's incidental, point 1(c).

PN57

JUSTICE ROSS: Yes, it's the essential point.

PN58

MR IZZO: It's the essential point and I do wish to make that clear because we've had a significant exchange in the written submissions between the ACTU and AMWU and we violently disagree with some of their points about incidental, but we've put all that in writing already.

PN59

JUSTICE ROSS: Yes.

PN60

MR IZZO: So yes, the point I was making is that all of those merit based arguments that are in our submissions we stand by, but we say that only gets you so far as it being desirable, that E.1(c) is included.

PN61

JUSTICE ROSS: Yes.

PN62

MR IZZO: There are three key matters that have caused us to revise our position, and they're the matters that I want to identify before the Commission. The first is the nature of the statutory test that we're to undertake and I'd like to address that first. The second is how one applies that test to individual circumstances, and the third is how it's applied to the present case on what's before the Commission here. They're broadly the only three categories of matters I really wish to address, and that's because otherwise a vast amount of submissions have already been exchanged in writing, so I don't intend to go back over what was exchanged with the parties about the merit for various considerations. Whether it's incidental or not because we've already addressed all of that in writing.

PN63

JUSTICE ROSS: No, and to well put the other parties at ease I wasn't proposing that they did go over their submissions either. It was really intending to focus on the document. We understand what parties - the nuances and what parties say about the range of other issues, people have had an opportunity to respond to what everyone's said about that.

PN64

MR IZZO: So when we talk about the statutory test that's required under 142, for the purposes of these proceedings the starting point is really the decision that's already been handed down, which is the 18 October decision. Because - in these proceedings, because some comments are already made by the Commission about how section 142 operates. I do want to make clear at the outset, we don't disagree with what has been said by the Commission in paragraphs 142 to 144 of the 18 October decision. We agree with what's been put there but we do believe that the findings in that decision could and should be supplemented by some additional considerations or by some additional reasoning. That's what I intend to address.

PN65

I've got a copy of the decision here, your Honours, if you need it but I'm going to briefly allude to it.

PN66

JUSTICE ROSS: Yes, we've got it.

PN67

MR IZZO: So in our view the Commission has correctly identified at paragraph 142 that much of the reasoning pertaining to whether a term is necessary applies equally to the word "essential". That is, in essence, if something's necessary you need it to meet a particular threshold, or if something's essential you also need it. We see that the terminology used, the meaning of it, is similar, if not the same. We accept that and we understand that that's the point that's made in the decision at 142 to 144, and indeed agree with the Commission's comment that the reasoning about what is necessary is apposite to the reasoning about what is essential. So we accept all of that.

PN68

But it cannot be escaped that the word "essential" is more emphatic than the word "necessary" and that indeed comes out of the decision where the decision at 142 quotes the Macquarie Dictionary use or meaning of the phrase "essential" and talks about "absolutely necessary".

PN69

And indeed I note the decision saying at first glance the word "essential" seems to be a word of narrower compass. Well, I wouldn't necessarily ‑ I think "more emphatic" is the way I would prefer to put it, that there seems to be a slight distinction there.

PN70

And we say that if you look at the Macquarie Dictionary definition the reference to "absolutely necessary", that bears that out. But there's more in the statutory context that also bears that out.

PN71

JUSTICE ROSS: But in one way, if you look at this, let's stick with the dictionary definitions for the moment. What does the word "absolutely" add to "necessary"? Because "necessary" is defined as "that which cannot be dispensed with" which is another way of saying "essential". It just seems a bit otiose, the addition of the adjective. I mean, I just don't ‑ ‑ ‑

PN72

MR IZZO: And your Honour, I would agree, and that's why my submission is that they have the same meaning. My submission is that the word "essential" is a little more emphatic in the way it's expressed and I'm going to point out shortly why I think there's a difference in the approach the Commission should take.

PN73

JUSTICE ROSS: Sure.

PN74

MR IZZO: But to go back to this point that's a bit more emphatic, that is reinforced by the statutory context. The Fair Work Act uses the word ‑ an electronic search of the Fair Work Act will reveal that the word "necessary" is used 38 times. I can provide all the sections if that's necessary in due course but our electronic searches revealed it 38 times.

PN75

By contrast, the word "essential" is used five times but most interestingly, four of those times it appears in a compound phrase "essential services" and those sections of the Act are section 27, 30A, 30K, and 195A. So four times it's used, we say, as effectively a noun which is to say it's a compound phrase referring to the essential services which I understand to be utilities, things like energy and gas providers. There's some specific provisions about those.

PN76

JUSTICE ROSS: So the only time it's used without the composite expression is in 142?

PN77

MR IZZO: Section 142. It's the only time, your Honour, what I would submit, that it stands as a standalone adjective in the Act is in section 142 and ‑ ‑ ‑

PN78

JUSTICE ROSS: So "necessary services" doesn't have the same ring to it as "essential services".

PN79

MR IZZO: I think, your Honour, "essential services" may well be a term of art that has ‑ and that's why I say it's a compound phrase which is really a noun. I don't think "essential" is an adjective in the phrase "essential services". I think it's a compound phrase.

PN80

JUSTICE ROSS: Look, I mean, as a general proposition if the legislature uses different words then on the phrase of it that would seem to evince an intention for a different meaning. I'm rapidly coming to the view that in the Fair Work Act I'm not sure that proposition applies with the same force.

PN81

You know, for example, the myriad of provisions dealing with costs in different ways, using different language, the different provisions that deal with the circumstances in which you can strike out a matter all seem to use different language which, you know, there doesn't seem to be anything in the explanatory memorandums that accompany them that suggest some clearly distinct meaning that's intended to be attributed to them or a different test that's intended to apply.

PN82

So I understand the starting point that, "Why would they use two different words?" Well, why would they do a lot of things is probably my question. The Fair Work Act is not a model of consistency in relation to the way language is used throughout it.

PN83

MR IZZO: And I have an answer to that question why, your Honour. I would just say, to slightly add to what you've just said, it's not just that they've used different words. On only one occasion in the entire act have they used the word "essential". And I think that that ‑ ‑ ‑

PN84

JUSTICE ROSS: No, I follow, yes.

PN85

MR IZZO: ‑ ‑ ‑ underlines that it stands out and it's stark. And we say the choice of the word "essential" and the sparse use of the term elsewhere suggests that the legislature wished to signal to the Commission that when exercising its powers under section 142 there really is a requirement for a sound level of confidence to be achieved or satisfied or exist before making a finding that a term is essential.

PN86

So what we say is that the meaning of the word "essential", yes, it's the same as "necessary" but there is a flag, if you like, or a signal from the legislature that this is a power that should be used with some caution and that there really needs to be a sufficient level of satisfaction that the need has been established before moving forward.

PN87

Whilst I appreciate this might sound a little odd, it is not without any precedence. It's actually not too dissimilar to another principle used elsewhere in the law which is the Briginshaw standard. Now, I appreciate this is a little bit of a deviation but there's some analogy to the circumstances.

PN88

As you'd be well aware, in the Briginshaw test derived from the High Court case, Dixon J's comments in that decision, he was talking about the balance of probabilities and he said the test is the balance of probabilities for matters relating to a civil case. But he went on to say that:

PN89

Reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved.

PN90

He said:

PN91

The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description or the gravity of the consequences flowing from a particular finding, are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal.

PN92

And if I can just point out that since that decision has been referred to a number of times and summarised, one of the more recent High Court summaries is Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd, (1992) 110 ALR 449. And again in that case the majority, Mason, Brennan, Dean and Gaudron said:

PN93

On the other hand, the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what is sought to prove, thus authoritative statements have often been made to the effect that clear, cogent or strict proof is necessary where so serious a matter as fraud is to be found.

PN94

JUSTICE ROSS: So is the point that you're putting this, that in Briginshaw it didn't change the standard of proof required, still the civil standard, but what would in particular circumstances what would be required to satisfy a court that the standard had been met might be more cogent evidence than would be the case in other contexts.

PN95

And here you say that, well, while "essential" and "necessary" may have the same meaning, the decision to choose the word "essential" brings with it the suggestion that material to be put before us to persuade us that a term has that character ‑ that is, incidental and essential ‑ has to be more cogent than would be the case if it were merely to persuade us that such a term was necessary?

PN96

MR IZZO: Precisely, your Honour, and I appreciate Briginshaw is a different context but the reason there is some analogy is because, the court has been very clear, it is the same test. The burden is the same.

PN97

JUSTICE ROSS: But isn't the challenge this, that ‑ and it's the issue that's been occupying my mind. There becomes an element of circularity about this because ultimately you have to be satisfied that the terms in a modern award, whether they're included because they must be inserted or they're included because they're within the terms that may be inserted, or they're included under 142, they all have to meet 138.

PN98

So they all have to be necessary ‑ at the end of the day the award can only include terms which are necessary to achieve the modern award objective. So what would be the logic of having two different tests?

PN99

MR IZZO: The logic I say, your Honour, is this ‑ and firstly, it's ‑ sorry, I withdraw that. The logic is this. In the case of Briginshaw, the reason why they take a different approach for serious allegations is because the nature of the allegation is something that was significant, serious, something we wouldn't ordinarily expect. Again, it is quite analogous. The circumstance we have here is that what the Commission would be asked to include under 142 is a term that usually is not a subject matter that the legislature said should be in modern awards. So the legislature in section 136 sets out the various bases upon which certain subject matters may be included in modern awards. It calls up 139, section 55, other sections, and they say these are the subject matters that can go into modern awards.

PN100

Then 142 appears and is dealing with a circumstance where the Commission is to put into a modern award the term which has a subject matter, or at its heart is about something which the legislature does not as a general principle agree should be included in modern awards, and that is why it is signalling with the use of the word, "essential," that there really needs to be a sound level of satisfaction, or a cogent level of proof that the term is necessary, because what the Commission is being asked to do is more than what it's usually asked to do. Usually, in some of these proceedings, we're talking about terms where it's not disputed they can go into modern awards; it's just a merit‑based exercise. Here you're being asked to introduce a term the legislature has said ordinarily shouldn't be in awards, and that is why there is a use of a different expression, and in that sense, again, it aligns with Briginshaw, because what we're talking about is the same test, but because of the magnitude of what this Commission is doing it needs to be satisfied particularly well that the test is satisfied. And that's how we see the legislative framework applying in this context.

PN101

So where we land in relation to how section 142 operates is that, yes, the Commission needs to be satisfied that the term is needed in order for another term to operate in a practical way, but there really does need to be a cogent - whether we call it cogent proof, which is the language used in Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170, or whether we just say that there really does need to be a reasonable satisfaction that there is a sound basis, having regard to the magnitude of what is being asked of the Commission, or what the Commission is proposing to do, which is include a subject matter, or a term in an award which is not ordinarily included or otherwise permitted to be included.

PN102

What we say is to have that sound basis, you're more than likely going to need an evidentiary basis as well, and that's something I'll come to shortly. So that's kind of where we've landed on 142, and as I say, it's not to disagree with what's in the 18 October decision. We agree with everything in there, but we think that some of the things that I have said today really supplement or add to that reasoning and would therefore suggest that the Commission should exercise a degree of caution before including a term in a modern award under section 142.

PN103

VICE PRESIDENT HATCHER: I understand the point you say the use of the language is more emphatic, but I'm not still understanding what the import of that is, that is, what is something that's essential to make something operate in a practical way but not necessary - sorry, it should be other way around - necessary but not essential.

PN104

MR IZZO: The best I can say is it's still the same text. You need to be satisfied that this term is needed in order for the other term to operate in a practical way. That is the test. But I think the use of the different term is signalling that because what is being done is so significant, you just ordinarily would need to have regard - or you need to be really satisfied, for want of a better term; you'd need a very sound basis before proceeding.

PN105

JUSTICE ROSS: Does that then lead you to the view that you need to only operate on the basis of evidence?

PN106

MR IZZO: No, not in every case. There may well be circumstances where it's self‑evident. I don't think I could say in every case you'd need evidence, but in the majority, one would assume that that would assist the Commission in landing at a position that the test that something is essential has been satisfied. I don't think I could say in every case that's necessary. It would really depend on the circumstances.

PN107

VICE PRESIDENT HATCHER: If you can't draw a useful distinction between the standard as between "necessary" and "essential," why would the level of proof or satisfaction be different?

PN108

MR IZZO: Your Honour, I think for the same reason that they have a different level in Briginshaw. It's the same test, but because of the magnitude of what is being done, one does not do that kind of thing lightly. One takes more time and more consideration, and would need a greater level of evidence to satisfy the body before proceeding. It's not too different to varying terms of an award significantly in the way the preliminary issues decision discusses. It talks about certain minor amendments that might not be controversial that could be made with a degree of efficiency, but if there's a substantive, quite large scale change, the evidence that would be needed would need to be quite probative, and that's why we see cases of different magnitude. You have the penalty rates case on the one hand, which was, if you look at the magnitude of what the Commission in the penalty rates case, it was a significant change, and so a significant evidentiary case was put and considered, but we won't have that in other - - -

PN109

JUSTICE ROSS: Let's not re‑litigate the penalty rate case.

PN110

MR IZZO: But we wouldn't have that in other circumstances. It really does depend on what the Commission is doing, and the more significant the function you exercise, the greater you'd want the level of satisfaction before proceeding in some circumstances, and that's what we're saying the legislature is really signalling by using the different term.

PN111

COMMISSIONER HUNT: You say if the word "necessary" replaced the word "essential" in 142(1)(b) that then you wouldn't elect (?) to E.1(c) being inserted?

PN112

MR IZZO: If the word "necessary" was there, I think a large degree of our apprehension would be addressed, in the sense that - - -

PN113

JUSTICE ROSS: Would you say that E.1(c) would meet a test of "necessary?"

PN114

MR IZZO: I don't think I would go that far, your Honour, for the reasons that I'll address shortly when I come to the actual terms. So I don't think I would accept that.

PN115

JUSTICE ROSS: All right.

PN116

MR IZZO: That's essentially what I wanted to say. Unless there are any more questions on 142, that's how we see the test operating.

PN117

JUSTICE ROSS: Are there any other dictionary definitions that might assist, that point to any difference between the meaning of the words "essential" and "necessary?"

PN118

MR IZZO: That's a good question, your Honour, and one which I'm not able to answer, because I've only looked at The Macquarie dictionary, but I think that's a worthy line of exploration.

PN119

JUSTICE ROSS: Well I don't think we'd be exploring it on a frolic of our own.

PN120

MR IZZO: No, so perhaps am I able - I mean, we'll see how the matter unfolds.

PN121

JUSTICE ROSS: We'll see how the matter develops, yes.

PN122

MR IZZO: But if I am able to take that on notice and put something short in on that, then that would be appreciated.

PN123

JUSTICE ROSS: Sure, all right.

PN124

MR IZZO: So that's what we said about 142. If I can then, the second principle I wanted to talk about is how we apply the test in any individual circumstance, and the reason that I want to address this is that there's a number of union party submissions about the fact that there might be an individual in any circumstance where the deductions in clause E.1(c) are either not necessary to dissuade that individual from not providing the appropriate notice, or alternatively even in the judgment itself at paragraph 223, the Commission raises some concern about the fact that in some cases the deduction might be disproportionate to the loss suffered by the employer, and there is a flavour in some of the submissions that there might be individual circumstances where it's not essential. What I'd say about that is, the - - -

PN125

JUSTICE ROSS: I didn't read the submissions that way. I thought it's really putting, as we were suggesting, that there may be individual circumstances where, as currently framed, the provision would operate in a way which was unreasonable, and it would amount to an unreasonable deduction, if, for example, it in effect provided a windfall to the employer in circumstances where the employer suffered no loss.

PN126

MR IZZO: And that is certainly a relevant consideration for section 326, which talks about deductions.

PN127

JUSTICE ROSS: Well that was really the context in which those points were being made in the sections of the decision you're referring to. I must admit I hadn't - and look, I'll re-read them more closely in the light of what you've put but I had thought the point being advanced by the unions was really that the provision's unreasonable. In some ways it's get conflated with fairness because in particular cases it may have this result.

PN128

MR IZZO: The submission that we wish to make is just to confirm that in our view what the Commission needs to be satisfied of is that on an aggregate basis the term is - that is included, you need to be satisfied on an aggregate basis that it is essential. It might not necessarily be essential in every particular case, if we look at every permutation and every combination, you may have outlines but we just wanted to make the point that whether something is essential does need to be assessed on an aggregate basis.

PN129

JUSTICE ROSS: Well it couldn't be a counsel of perfection could it? It couldn't be that you would have to satisfy yourself that it was essential having regard to the circumstances of every employer and employee covered by the award.

PN130

MR IZZO: That's right, that's right, your Honour.

PN131

JUSTICE ROSS: Yes.

PN132

MR IZZO: So that's all I wish to say about that. It's just to make that point that it is an assessment on an aggregate basis. We then come to well is the term essential in the present case and as I said, we've raised a whole heap of reasons that we say support the inclusion of the term, we say they certainly demonstrate a desirability on the part of the employers to have the term included. But we also need to recognise that the Act has pre-existing enforcement measures within it, and those enforcement measures are discussed in the judgment, section 45 provides an availability to seek remedies for breaches of modern awards. And indeed it is not common for awards to contain with them their own penalty or enforcement measure given the already existing enforcement framework which is contained within the Fair Work Act.

PN133

JUSTICE ROSS: It's not common but it's not unheard of.

PN134

MR IZZO: That's right, your Honour. One of the areas where I'm certainly aware of it existing relates to the late payment of wages, for instance, where our organisation's been quite active in seeking to have those terms removed if all they seek to do is be a penalty on an employer for paying late. Where it was compensating employees for still being at the workplace, that's a different matter but in both the timber award proceedings in the four yearly review and the payment of wages common issue proceedings, we have generally adopted a position that a penalty within the award is not necessarily desirable, it's certainly not a clause which is permitted by section 139. I suppose all I'd say on this is that we just need to recognise there is a pre-existing enforcement regime in place.

PN135

JUSTICE ROSS: Well really this probably a situation that makes good the proposition that we referred to in our earlier decision, that reasonable minds may differ as to whether or not a particular incidental term is essential. In this case you've looked at the question and concluded there's a pre-existing enforcement mechanism. Ai Group on the other hand has made the point that well, you know, they don't think the existing enforcement mechanism is particularly practical or effective. A point that others have made, and there's been the exchange between the parties about the circumstances in which a penalty would be paid to the applicant in enforcement proceedings.

PN136

Ai Group makes the point, I think that the small claims procedure's not available in this particular instance. Now it then becomes an exercise of judgment. You say you've looked at those factors and you think that well that might make it desirable but it doesn't make it essential. Ai Group takes a different point. They say well, we've looked at them and we think it makes it essential. They think it's both desirable and essential.

PN137

MR IZZO: I think - - -

PN138

JUSTICE ROSS: Whereas I mean the unions well are with you in part. They think it's neither desirable nor essential but, you know - - -

PN139

MR IZZO: I think the pre-existing enforcement measures don't mean it's not possible to include it at all. It's just something that forms part of that context and I suppose our issue is we have a pre-existing enforcement regime - - -

PN140

JUSTICE ROSS: Yes.

PN141

MR IZZO: We have the absence of, as I said, an evidentiary case really in this particular instance, and we have what we say is quite a high threshold under section 142 that needs to be satisfied before the Commission includes this type of term in a modern award. You combine all of those factors and we say on an aggregate basis, we're just not satisfied. Even though we accept that there will be individual cases where it really is needed for some employees and there might be individual cases where it's not needed. But we just think in terms of what we have before us today, on an aggregate basis it is very difficult to say that it is essential.

PN142

JUSTICE ROSS: Right.

PN143

MR IZZO: That's broadly all I want to say. I am instructed to put one final submission and that is this. That because this is primarily concerned with compliance with the award provision about giving the right amount of notice, and because this is really about - more about enforcement, there is a real question about whether this term actually is about the practical operation of the term it is seeking to supplement.

PN144

That is the practical operation of a term usually addresses matters pertaining to how it's applied in practice, there might be evidentiary requirements, there might be other procedural elements that are needed in order to practically make a term operate well. This term is not about that. It is about ensuring compliance. I think there is a real question as to whether a term which is solely about compliance is actually addressing practical operation. That's a - I won't put it any higher than that but that's the position that I've been instructed to put.

PN145

JUSTICE ROSS: I'm not sure where that submission leaves us. Are you saying - are you advancing the submission that clause (c) is not for the purpose of making a particular award term operate in a practical way. Leave aside whether it's essential or not.

PN146

MR IZZO: If you accept what I've just said then yes. Which would mean that then there is no power, because it doesn't actually meet the - - -

PN147

JUSTICE ROSS: So you accept that it's incidental.

PN148

MR IZZO: Yes.

PN149

JUSTICE ROSS: You say that on the material before us we couldn't be satisfied or ought not be satisfied that it meets the test that it's essential.

PN150

MR IZZO: Yes.

PN151

JUSTICE ROSS: Further, for the same reasons we ought not be satisfied that it is for the purpose of making a particular term operate in a practical way. In relation to the latter point, you say look it's not really about making a particular term operate in a practical way, it's really about compliance. That assumes you can separate - that would involve us accepting the proposition that a term that is intended to encourage compliance with another term is not a term that can be characterised as being for the purpose of making a particular term operate in a practical way.

PN152

MR IZZO: That's right, and there's a question of degree here. I mean if there's - you can understand an argument on one side which says well, if people aren't complying with the term practically it's not working well. Some employer parties might argue therefore you need the supplementary term, but is it - - -

PN153

JUSTICE ROSS: Well just as unions might argue around waiting time et cetera, that it's necessary.

PN154

MR IZZO: That's right, but really the question that arises is well, is this about how the term operates? Because the term's operation take a different example. It's about more you're entitled to personal leave but then there's all sorts of questions. Well how do we prove whether someone qualifies for personal leave or not? And that's where you get evidentiary requirements and so on. that's more about practical operation. It is - the highest I will put it for the purpose of today's proceedings is that I think there's a real question of when you look at the character of this clause, it's penalising in order to ensure enforcement. It's not rectifying some practical operation issue with the substantive term it's supplementing.

PN155

JUSTICE ROSS: Right.

PN156

MR IZZO: They're the submissions that we wish to make.

PN157

JUSTICE ROSS: Well let's deal with for the moment just the issue of ABI's submissions as they've been put orally, and let me go round the parties and get an indication as to - it's put in a slightly different way to the way the unions have advanced the argument, though the essential proposition's the same but on the material before us we ought not be satisfied that a term in the terms of E1C is essential et cetera. But let's go round each party and see what you want us to do with this, whether you're content to respond to it now or how do you want it to proceed in relation to that point only. Mr Smith?

PN158

MR SMITH: Yes, thank you, your Honour. We very strongly oppose the position that's been put by ABI and if the Bench is of the view that those arguments are substantially different and might lead to the Bench forming a different view on what the unions have put, then we would want the opportunity to respond but just ‑ ‑ ‑

PN159

JUSTICE ROSS: I don't know that we'd want to express a view about the extent to which they're substantially different. We've just heard them so we would want ourselves to consider all of that. But the real question is whether you're content to respond to them today or whether you want some further short period to put something in writing in response.

PN160

MR SMITH: We're happy to give an initial response now and I can do that fairly briefly, but we would like the opportunity to consider whether we would like to put anything further, if that could be accommodated. And you know, our submissions are that so much weight is being put on the word "essential" without a lot of weight being put on the bit that follows "essential", "for the practical operation of".

PN161

And in our submission we've set out in a lot of detail why it is necessary and essential for the practical operation of paragraph (a) that we have paragraph (c). As has been pointed out, when you look at the words "necessary" and "essential" it's hard to grapple with exactly how much difference there is.

PN162

And as your Honour's pointed out, there's so many areas of the Fair Work Act where there are different phrases used for apparently no, you know, cohesive reason. And that's perhaps a result of a development process that's set out there in the EN that went on for an extended period with a lot of different parties.

PN163

So we don't accept that there's a difference of substance between the two terms. There are many cases now where section 142, as we looked at, and section 89(a)(vi) was looked at. If you look at how many modern awards there are and how many award provisions in those awards.

PN164

There's, you know, obviously 122 awards. Even if you took the view there's 50 pages in each one, we're talking tens of thousands of pages of award provisions and this cuts both ways. If the Commission took a very narrow view on 142 it would open up a huge contest about a raft of provisions that are either of benefit to employers or employees.

PN165

In our submission we mention trade union training that's now called, of course, dispute resolution training. That was a hard fought case between MTIA and the AMWU and it was allowed in under 89(a)(vi). Now, yes, as the unions have pointed out, there's a difference between the wording there and the wording of 142. But in our view once you start adopting a very narrow conception of 142 all of those things are potentially opened up.

PN166

And as the Bench has pointed out, 138 talks about "necessary" for the purposes of meeting the modern award's objective. That has been looked at in a practical way. A completely different approach is now taken.

PN167

Now, the submission has been put that there's no evidence but this is a provision that has been in awards for many, many years. And it's not a new provision and we obviously recognise what the Bench has said about our submissions about the past doesn't necessarily support maintenance for the future.

PN168

But this is not a new clause. This is a clause that has been there for many, many years so the idea of coming along with evidence and plain language drafting proceedings in support of a clause that's been there, you know, in that form largely since 1984 is, with respect, quite bizarre. So we ‑ ‑ ‑

PN169

JUSTICE ROSS: So Mr Smith, are you making the whole submission now?

PN170

MR SMITH: Those are my points, just to highlight that we strongly oppose those submissions and we would like the opportunity ‑ ‑ ‑

PN171

JUSTICE ROSS: No, no, that's the oral submission you wanted to make in response to Mr Izzo but you also want the opportunity to consider whether you put a further short submission in writing, is that your position?

PN172

MR SMITH: Yes, if flexibility could be allowed for parts ‑ ‑ ‑

PN173

JUSTICE ROSS: Yes, it might need to be a relatively short opportunity, given the time of year, but we'll come back to that.

PN174

MR SMITH: Yes, thank you.

PN175

JUSTICE ROSS: I might just deal with the other employer organisations before I come to you, Mr Clarke. Can I go to Nat Road and the Pharmacy Guild? Do you have a similar position to that put by Mr Smith on behalf of Ai Group or do you have a different view?

PN176

MR CALVER: Your Honour, the conspectus of ‑ ‑ ‑

PN177

JUSTICE ROSS: Can you just speak into the microphone, Mr Calver? We're just having trouble picking you up.

PN178

MR CALVER: Thank you. Your Honour, can you hear me now?

PN179

JUSTICE ROSS: No, you're talking into the transcript microphone, I think. There's a ‑ yes, just see if you can move them together.

PN180

MR CALVER: Thanks, thank you. The conspectus of section 142 is critical to many provisions in modern awards. The sorts of considerations that Mr Izzo has raised were partly raised in the four‑man Full Bench of which the Vice President was presiding. And some of those arguments were traversed there; some were not.

PN181

My instructors, with whom I spoke this morning about the change of submissions by ABI, asked me to put to the Commission that they be considered and then we have an opportunity to respond to them. Our view is that the provision currently labelled E1C is a critical provision for our industry and we can make some further submissions this morning.

PN182

But generally we would like time to consider what Mr Izzo has put, to have discussions with the other employer groups and to then respond.

PN183

JUSTICE ROSS: All right, and the Pharmacy Guild?

PN184

MR HARRIS: Same opinion, your Honour, on that part. I'd prefer if we had a short break to put in a comment in written submissions.

PN185

JUSTICE ROSS: Mr Clarke?

PN186

MR CLARKE: Should I stand?

PN187

JUSTICE ROSS: No, no, it's fine.

PN188

MR CLARKE: Well, your Honour, if we're going to be handing out opportunities we might take you up on one, but I'll tell you what we think of it now which is that we only really got to the punch line at the end which was the only bit that considered that the whole phrase "essential for making a particular term operate in a practical way". And what we heard was a very long‑winded way of adopting paragraph 25 and 26 of our submissions without actually saying they agreed with us. Now ‑ ‑ ‑

PN189

JUSTICE ROSS: I'm not sure Mr Izzo would characterise his submission that way but ‑ ‑ ‑

PN190

MR CLARKE: Well, he's had an opportunity to and he's chosen to stay silent on that but, you know, we can split hairs about that. But it's really concerned with the operation of the term and whether it operates in a practical way. We'll assume that that's been read.

PN191

And if you dispose of that issue, you dispose of the 142 issue and we don't have to be dancing on the heads of pins about what the word "essential" means. There's a shortcut. But if we want to get into this issue about the word "essential" can I just say that as a submission it's very difficult to follow and involves lots of jumps.

PN192

On the one hand we're told that his clients agree with the position put by the Full Bench in its decision of 18 October that "necessary" and "essential" mean the same thing in this context. However, notwithstanding they agree that they mean the same thing, they also mean something a little bit different.

PN193

And what that little bit different is in this regulatory function that the tribunal is exercising is to be informed by reference to a case about evidentiary standards in adversarial proceedings when somebody's facing a penalty. Now, I think that that is a big leap and an entirely irrelevant leap.

PN194

Further, as your Honour identified, where we ultimately have to get to in terms of whether a clause gets in or gets out, if it meets all the other tests is this section 134, section 138 point. 134 identify the problem, 138 formulate a fix that addresses the problem. It would make no sense at all to have all of these subsidiary merit tests operate before you get to the ultimate merit test. We made a submission in September. We were wrong. We accept that, and we've put in further submissions on the basis that we accept that, that the issues addressed in section 142 all took into account and were all interwoven with, and you just couldn't unpick the way they operated with section 134 and so forth - and, you know, we say we were wrong about that, that it's a separate question.

PN195

But let's look at what that separate question is. Much that we heard this morning about the word "essential" was premised on the basis, is the term essential, so that you need to read somehow the discretion may include terms that are essential as subject to some caution on the basis that you were inserting a term that the legislature didn't explicitly say that you could insert. Even if one assumed that there was some logic to that proposition, which we don't accept because the ultimate merit test lies elsewhere, surely those are the types of argument that would be relevant to the actual gateway, the content gateway part of 142, which is 142(1)(a): is the thing incidental or not; is the term essential; is the thing incidental; what is the nexus; how close is the nexus between the thing that's explicitly permitted to be there and the thing that you want to put there. That's where that type of concept, if it could have space for operating, would operate, and we've said it doesn't have a space for operating. That overriding test about whether the term itself is essential is irrelevant when you look at the whole of the phrase, "essential for the purpose of making a particular term operate in a practical way." That's our response.

PN196

JUSTICE ROSS: Do any of the unions have anything to add, if we work on the basis that you will in any event be provided with a short opportunity to put whatever you wish to say in writing in relation to what Mr Izzo has said this morning?

PN197

MR GALBRAITH: Your Honour, Galbraith for the SDA.

PN198

JUSTICE ROSS: Yes.

PN199

MR GALBRAITH: We have nothing further to add in this matter, but do rely on what Mr Clarke has just said.

PN200

JUSTICE ROSS: Yes. I don't need each of you to say that, Mr Galbraith. I really want to know whether you've got anything different, that anyone wants to say.

PN201

MR GALBRAITH: No, nothing different.

PN202

JUSTICE ROSS: No?

PN203

MS WILES: No, your Honour.

PN204

JUSTICE ROSS: We'll expedite the transcript and have the transcript put on the relevant web page. Given the nature of the point put, it's a fairly short point. As Mr Clarke has indicated, it does look a bit like an aspect of the ACTU's submissions, at least part of the argument advanced. We provide an opportunity for those who wish to say something about the submission that has just been put to do so in writing by 4 pm next Tuesday. Mr Izzo, if you wish to say anything in response to any of that, if you can file it by 4 pm next Thursday, and there will be liberty to reply in the event that there are any issues arising. In relation to the dictionary definitions point, I'd ask that you file anything you wish to say about that by 12 noon on Monday; that way the parties will see whatever that is. My recollection is there's nothing in the explanatory or extrinsic material that's going throw much light on this issue, but if I'm wrong about that and anyone wants to refer to anything, then they can do that in their written material. That deals with that issue.

PN205

Can I go to the background document and just touch on - there are obviously other aspects about which there's a more limited form of agreement with some parties, some union and some employer parties, but it did seem to me that the three issues that are identified there, there was a more significant measure of agreement, at least between the ACTU and those supporting its submissions - Ai Group and ABI. Can I go through those three in order and deal firstly with the scope of clause E.1(a), having regard to section 123? Are the propositions set out under there, in the way that we've characterised the ACTU's, Ai Group and ABI's submission, do any of those parties take any issue with that? No? Well really then, if we accept those submissions, then it would just fall to which formulation one adopts. I think ABI is content with either. I didn't get the impression from the reply submissions that there was a particularly strong view advanced by the ACTU or Ai Group in response to what the other had put. The real issue came down to NatRoad's submission. NatRoad I don't think put in a reply submission, and you'll see at 17 that - and NatRoad is submitting no change to the terms of the clause it required for the reasons it sets out at 22 to 27 of its written submission. So Mr Calver, perhaps you can do this when you are filing your material on Tuesday. We'd ask you to just give consideration to your position, having regard to the submissions that have been advanced by others, including submissions that have been advanced in reply to your submission. On a relatively quick reviewable, the other submissions, there didn't seem to be any position that was taken that was particular contrary to the position that was being advanced jointly by the ACTU, ABI and Ai Group. Is that right, or does anyone take a different view, other than NatRoad and I've dealt with NatRoad? No? All right.

PN206

Let's go to the second issue, which is the - it's slightly more complicated - but this is the question of the clause as currently framed would enable an employer to deduct moneys payable to an employee under the NES - accrued annual leave would be the most obvious one - and there's a concession by ABI that there's a reasonable argument that that would be inconsistent with section 55(1), and on that basis they agree to limit the scope of the deduction to wages due to the employee. Ai Group, you see there, Mr Smith (?), I've tried to characterise your submission, because I wasn't entirely sure where you landed, but I'd assumed on the basis of what you had put that you were neither opposing nor supporting the limitation wages due to the employee?

PN207

MR SMITH: We are happy with that characterisation.

PN208

JUSTICE ROSS: And the ACTU is submitting similarly that well it certainly should be limited to deductions from wages due to the employee, but it went further and said wages due to the employee under this award. That proposition was opposed by ABI and Ai Group, though for different reasons. I think Ai Group - ABI went into some detail about the reasons they were advancing - Ai Group, I think, simply said that it wasn't necessary, and I wasn't sure what that - why do you say it's not necessary? I'm not suggesting it is necessary, but I don't understand what was behind the submission that you're advancing.

PN209

MR SMITH: Your Honour, the simpler form of wording, in our view, will cause a lot less complications than the clarification that the ACTU is seeking to put on it. Yes, we didn't go into any detail, but as the Commission is aware from the payment of wage proceedings, there are a lot of complicated issues caught up with wages and moneys that are owed, and complicating it to the extent of just talking about wages due under the award. It will in our view lead to a lot of complications so it's not necessary in our view.

PN210

JUSTICE ROSS: Right. The third issue is the - in it current form, the clause would have no effect in relation to employees under 18 years of age, and the ACTU and ABI and Ai Group agree with the proposition that the scope of the clause has to be confined. No, 22 is in the wrong spot but 23, that it would have no effect in relation to an employee under the age of 18 years because of the operation of section 326. There's a different, then, approach to how does one deal with that problem.

PN211

The ACTU advances the proposition that it would be simpler and fairer to simply exempt an employee under the age of 18 from clause E.1(c). Ai Group advances a proposition that - picks up some of the language of section 326(4). I just wanted to explore that proposition a bit more. Speaking for myself, I can see the force in the ACTU's argument, that it would be simpler if it exempted employees under 18, particularly in circumstances where it is difficult to conceive of a parent or guardian agreeing in writing to the deduction of an amount from the termination payment that's to be paid to their child, or the person for whom they're responsible.

PN212

Speaking as a parent I don't think I'd be doing that. It might be different if it was an ongoing relationship and there was some question of the reasonableness of the deduction and if it was for something provided in kind, something of that nature, that might be a different category. You can see why there a parent or guardian may act to agree in writing, but here it's from a termination payment, there's no ongoing relationship. It'd be just - the effect of it would be to say well yes, you keep that amount of money and it won't go to my child. It just seems unlikely that that would ever happen.

PN213

MR SMITH: We would be happy to leave that issue to the determination of the Commission. We accept what your Honour's saying but we're reluctant to concede that that important provision should disappear for people under 18 years of age.

PN214

VICE PRESIDENT HATCHER: Is it suggested that the authorisation could be an advance so that, for example, you'd start a job and give the authorisation that if you leave without giving notice (indistinct) to get the parent to sign it at that point?

PN215

MR SMITH: We hadn't contemplated that issue. That wasn't our thinking. It was just that when we looked at the issue, we came to the view that the Bench has come to, and others, that the Act does require an amendment around this particular provision. So we were proposing the minimal amendment that will comply with the legislative requirements and there are a lot of issues with people walking out and not giving notice, and so you know - but we're happy to leave it to the Commission's determination on - - -

PN216

JUSTICE ROSS: Right. Mr Izzo, ABI's submission, I had read its initial submission as really being much the same as the ACTU's in the sense that you would propose that a carve out be made for employees under the age of 18. I'd sort of read that as well, the deduction subclause would not apply to employees under 18. Of course when Ai Group put its formulation you said probably not unexpectedly that you didn't oppose that. I suppose I'm asking where do you stand in relation to the ACTU position as opposed to the clause proposed by Ai Group? Are you content with either or are you fixed on one?

PN217

MR IZZO: Your Honour, I think our primary concern is that in its current form the clause is problematic, and so there needs to be some steps taken in relation to employees under the age of 18. It's now apparent that - and we had talked about, I think it's quoted there, having them carved out because that's seemed to us a simple way of dealing with it. The ACTU proposed an approach that kind of gives effect to that. I now see what Ai Group has put and both - it addresses our principal concern, what Ai Group have put, but it also seeks to preserve the ability of an employer to make certain deductions in circumstances where there's parent/guardian authorisation. So I think summing all that up, the concern needs to be addressed, we agree with that. Steps need to be taken. I don't think we'd want to be drawn into the distinction between the two clauses.

PN218

JUSTICE ROSS: A preference between one or the other. Yes.

PN219

MR IZZO: It has to be addressed in some way. When we said you need to carve them out, we're saying just broadly speaking - it's probably loose language but we need to deal with this 18 year old issue. Both of those clauses deal with it, I think that's as far as we'd go.

PN220

JUSTICE ROSS: Well that seems to be where the parties are. We need to deal with it. You're content to leave the question of how we deal with it to us, having regard to what you've put. The ACTU raise a slightly - well more than slightly, a different point that it's sort of raising the broader question or at least making reference to it that you respond to. That is ABI responds to. Which is well, should the whole clause exempt people under the age of 18. That's a separate question. We understand the various arguments that have been put about that but here I'm simply focusing on the deduction and the interaction with 326.

PN221

MR IZZO: Yes, and I didn't want my submissions to be taken that we were in agreement with that element of the ACTU's submissions.

PN222

JUSTICE ROSS: Right. Is there anything else anyone wants to say about those three matters, because they seem to be the areas where there was at least a degree of commonality between the - some of the submissions that were advanced by the unions and the employer organisations. There are a range - sorry, Mr Clarke.

PN223

MR CLARKE: Just in relation to the first issue about the scope matter, the section 123 matter.

PN224

JUSTICE ROSS: Yes.

PN225

MR CLARKE: Now we're not wedded to any particular formulation. We'd just observed that the only difficulty we see with the Ai Group one is that section 123 deals with exclusions from the whole of the division, separately to exclusions from only the notice pay and then separate to exclusions from only the redundancy pay. So there are, you know, three or four subsections addressing different exclusions for different parts of the general division.

PN226

JUSTICE ROSS: Yes.

PN227

MR CLARKE: So that's why I thought something a bit more pointed that section 123 was needed but I just raise that issue. We're not, you know, dying in a ditch about it. Just to sort of highlight I mean the elephant in the room in relation to issue 2 is the view about the extent to which awards regulate reward payments. You know, there's an invitation apparently to cross the bridge, in which case we'll say all right well, Saturday penalty rate is 150 per cent of what, the rate that's actually paid. If we want to cross that bridge we need to have a serious think about what the consequences are.

PN228

JUSTICE ROSS: Right. In relation to the balance of issues, we've got your written submissions. Unless there was anything that any particular party wished to say orally to the other range of issues. Is there anything that anyone wants to add in Sydney?

PN229

MR IZZO: There's just one comment and that is we don't accept that if there is a deduction made in respect of over award payments that that necessarily has any merit flow on effect to other areas where over award issues arise, such as penalty rates et cetera. We think that's an entirely different bucket of issues, and so I don't think - I just want to put on the record that we don't accept that if the Commission is have a provision about deductions which is included in this context, simple, it talks about just deducting wages generally, it's a simple term that therefore meets section 134. In trying to not be over-complicated, that it therefore then results in a merit case somehow that penalty rates should be applicable on actual rates of pay and things like that.

PN230

VICE PRESIDENT HATCHER: It might involve us in effect overriding private contractual arrangements by which over award payments are paid, without having any knowledge about what they say. That is there might be different arrangements for the way these issues of notice are dealt with privately in contracts, and where they're affecting those, without having any evidence before us as to what they might say or what the effect of what we're doing might achieve.

PN231

MR IZZO: That might be the case, your Honour, but that is the nature of the award safety net, in that whenever a term is included in an award it may impact upon and invalidate certain contractual arrangements. To the extent that it deals with deduction if a contract has something different, it doesn't comply with the award provision, then a question could arise about whether that provision is valid. But I think that arises with any provision that's included in an award, so I don't necessarily see that as problematic.

PN232

JUSTICE ROSS: Anyone else in Sydney want to - no?

PN233

MR CLARKE: Sorry, there was a matter arising from the reply submissions of the Ai Group in relation to the unreasonable in the circumstances point.

PN234

JUSTICE ROSS: Yes.

PN235

MR CLARKE: And that's really a matter raised in - this is where they're replying to our submissions and also submissions of - - -

PN236

JUSTICE ROSS: Which particular paragraph are you referring to?

PN237

MR CLARKE: 27. So the controversy really is what do you do about a situation where you reach a view that the operation of a term may be unreasonable in some circumstances, but maybe not all circumstances. What does 151 have to say about that? The AMWU and ourselves take the view that if you can conceive of circumstances where the term would result in a deduction that is unreasonable in the circumstances, then you don't permit that term to be included in the award, and the Ai Group seem to be putting a different proposition. And it's also put against us that the sum of our case is what we say about the Australian Education Union decision and the centrality in that decision accorded to whether or not the deduction gives any benefit to the employee. That is an important part of our submission. But it's only one part of our submission. This is probably the first time you've heard a union official quote Donald Rumsfeld in the Fair Work Commission, but it's about known knowns and known unknowns.

PN238

JUSTICE ROSS: That's actually not true, but anyway.

PN239

MR CLARKE: Yes, well that's an unknown unknown perhaps. What you can guarantee is that in every single circumstance the employee will receive absolutely no benefit from the deduction. That's the known known. That's the Australian Education Union point that we list, that what's described as a central consideration. The known unknown, or what you can't guarantee, is that the employer will have suffered a loss equal to the deduction, or any loss at all, and you've already said in paragraph 222 of your decision that plainly some employers will suffer no loss. So the question is, the culmination of those factors, how does that sit with the prohibition in section 151 on including terms that have no effect because of section 326(1), where that section describes it - you know, terms have no effect, to the extent that they permit something that is unreasonable in the circumstances.

PN240

If you look at what the assessment of unreasonable in the circumstances is in the Australian Education Union decision, particularly paragraphs 176, 182 and 183, you'll see that his Honour, Bromberg J identifies it as an issue: It is a question of fact and degree - an assessment at a given point in time of when the deduction takes place. A term might provide for reasonable deduction in some circumstances but not others. And there's the child care fees example given in paragraph 182 of that decision, where the actual price of the child care changes. But if you accept that the combination of zero benefit to the employee and positive gain to the employer make it unreasonable, and accept that those circumstances might arise, we say that section 151 means that because you can conceive of that circumstance, the term will authorise a deduction that is unreasonable to some extent, in some circumstance - and the HSU submissions give an example of that - and the term can't pass through section 151 as a consequence.

PN241

JUSTICE ROSS: Anything else?

PN242

MR CLARKE: No.

PN243

JUSTICE ROSS: So to turn that on the head, the term has to be such that it can never operate unreasonably to get in?

PN244

MR CLARKE: Yes, if you - - -

PN245

JUSTICE ROSS: That is, if you can conceive of any circumstance in which it would be unreasonable permits it and therefore it can't be - - -

PN246

MR CLARKE: Yes. We agree with the Ai Group that you cannot conceive of every possible circumstance, and that's why you've got two catches here. You've got one that says don't put it in the award in the first place if you can conceive of those circumstances, and another one that says that if those circumstances do arise then it has no effect. You're not expected to be all‑knowing, but where you've got enough material in front of you to conceive of circumstances where it would be unreasonable then it ought to be removed, or not allowed.

PN247

MR SMITH: Your Honour, can I just make a couple of very brief points in response to those - - -

PN248

JUSTICE ROSS: I might get you to come back to it once we've gone through everybody, rather than - otherwise we'll never get - Mr Nguyen, was there anything you wanted to add to your written submissions? No? Thank you. In Canberra, was there anything you wanted to add to your written submissions?

PN249

MR CALVER: Yes, your Honour, just in relation to the point that the ACTU has raised in its reply submission, which seeks to characterise the NatRoad submission as being incorrect in relation to an assertion that compensation was paid to the Commonwealth in the matter. We note that penalties, as noted in paragraph 13 of the ACTU's submission, were paid to the Commonwealth. They were paid to the Commonwealth because of a general proposition that his Honour, Buster J indicated was a matter of principle in determining prosecutions for breach, and at paragraph 20 and 21 of that decision, he says:

PN250

Prosecutions for breaches should not be seen as another method by which agreed applicants can be compensated.

PN251

That sentence is critical to the whole de facto issue that we raised in our second submission, and I repeat it:

PN252

Prosecutions for breaches should not be seen as another method by which agreed applicants can be compensated. Persons should pursue breaches of the Fair Work Act, not because it may enrich them, but because it's the right thing to do in a fair and just society.

PN253

And then he goes on at paragraph 21 at Jetgo 2, to say:

PN254

So therefore, the penalties that I have just awarded against both the applicant and respondent shall be paid to the Commonwealth of Australia.

PN255

That underlines the practical legal aspect of the operation of the provision E.1(c), and the issue of taking proceedings which might otherwise be compensatory for a breach of the award, you are immediately met with that proposition which underlines the basis upon which penalties were awarded to the Commonwealth in the Jetgo (No.2) case.

PN256

JUSTICE ROSS: But that's in one case by a single circuit court judge. What do you say about the AMWU's submissions in reply where they refer to a Federal Court decision and a number of other matters which were - a number of other decisions which were not references in Jetgo? In fact they refer at paragraph 11 to the proposition in United Voice v MDBR123 Pty Ltd No.2, which says that the usual order is that the pecuniary penalty is paid to the applicant in proceedings for breach of provisions.

PN257

I mean you're placing a lot of weight on a single decision by a Federal Court, Federal Circuit Court judge. When there is Federal Court authority to the contrary.

PN258

MR CALVER: I'm not sure that it's to the contrary, other than that wage - - -

PN259

JUSTICE ROSS: Well it is to the contrary because it says - in those decisions it says that the usual order is that the penalty will be paid to the applicant.

PN260

MR CALVER: Well in relation to the point I've just made, the manner in which the ACTU characterised the NatRoad's submission in its submission in paragraph 13, I've corrected. In relation to the AMWU's submission, the experience in Jetgo is the experience that we have and in relation to the Federal Court decision that they there cite, it does seem to be at odds with Jetgo, your Honour, yes.

PN261

VICE PRESIDENT HATCHER: Mr Calver, in any event you can apply for a compensation order under section 454(2)(b) for breach of the civil remedy provision.

PN262

MR CALVER: Yes.

PN263

VICE PRESIDENT HATCHER: So regardless of whether you get penalty or not, if you've suffered a loss because of the breach you can seek and obtain a compensatory order.

PN264

MR CALVER: Which Jetgo did, yes. Which Jetgo did. The issue though is that in relation to the framework of the Fair Work Act, containing a mechanism by which enforcement and compensation could be awarded, it was not considered by the Full Bench in the preliminary matters to the Timber Industry Award as sufficient to exclude the penalty provision which was then in question in relation to payment of wages. In other words, the argument that there exists a separate compensatory mechanism in the Fair Work Act as a basis upon which to exclude a penalty provision, was argued before that Full Bench, and was rejected as a basis upon which the provision would be outside of power.

PN265

VICE PRESIDENT HATCHER: I think you called it a penalty provision.

PN266

MR CALVER: I think the subsequent Full Bench in the timber industry matter so called it as well, Vice President.

PN267

VICE PRESIDENT HATCHER: Right.

PN268

JUSTICE ROSS: Thank you, Mr Calver, was there anything else?

PN269

MR CALVER: Thank you.

PN270

JUSTICE ROSS: No?

PN271

MR CALVER: No, thank you.

PN272

JUSTICE ROSS: Anything from the Pharmacy Guild? No?

PN273

MR HARRIS: Nothing from ourselves at the moment, your Honour.

PN274

JUSTICE ROSS: Thank you. Anything from the unions in Melbourne or are you content to rely on Mr Clarke's oral submissions and written submissions you've already advanced.

PN275

MS WILES: Your Honour, it's Ms Wiles, for the TCFUA. We'll just put on the record that the TCFUA supports the written submissions of the AMWU and the ACTU and Mr Clarke's oral submissions today. Thank you.

PN276

JUSTICE ROSS: Thanks. You had something in response, Mr Smith?

PN277

MR SMITH: Yes, just very briefly. On that point that flows from paragraph 27 of our reply submission, this issue of whether every conceivable circumstance needs to be considered in the context of determining whether something is unreasonable. The point we'd make to supplement what we've said there is that every day the Commission needs to determine the effect of existing and proposed award provisions employers and employees, and a practical approach is typically taken with that, looking at what the effect would be. That it is absolutely impossible for the Commission to perform its functions in a way that requires knowledge of every circumstance of every employer and every employee, which is really the point we make in paragraph 27.

PN278

The other point that Mr Clarke raised about, you know, his submission that you can be sure that paragraph (c) in all circumstances will not benefit employees and will benefit employers, we'd make the point you cannot in our submission be sure, because if paragraph (c) was not there, then paragraph (a) as the Bench has point out in its 18 October decision, does give an employer the ability to seek the imposition of a civil remedy provision on an employee and the FWO. We're not saying that would happen - - -

PN279

JUSTICE ROSS: The problem with that argument is that a deduction doesn't give indemnity and that's a point we made in response to NatRoad's submission, in the earlier decision. There's no - at the moment you can deduct and sue. You can institute prosecutions for a penalty and perhaps even a compensation order if the deduction you make wasn't sufficient to compensate for all the loss. But one doesn't cancel out the other. So how does it benefit to the employee?

PN280

MR SMITH: Well the point we make in, I think it was our main submission following the 18 October decision, is that it's almost unheard of for claims to be pursued or actions to be taken against employees, and there are a few examples that the Bench mentions in its decision. We make the point the FWO does not have a practice of pursuing those matters. We were not aware of any employers that are members of ours ever having done that, and we're not suggesting it would occur, but the fact that there is a provision in there that does provide a measure of automatic remedy to deal with those circumstances. You know, it must have some impact on that or potentially have some impact. So the submission that has been put that in all circumstances you can be sure that there is no benefit to an employee, our submission is you can't be so sure.

PN281

JUSTICE ROSS: But look even if you're right that we couldn't be so sure, that isn't what's required to make good Mr Clarke's point. He's submitting that he only has to show that there are some instances where it won't be of a benefit to the employee but it will be unreasonable. That's the argument that he's advancing. If you can find one such case well that's sufficient.

PN282

MR SMITH: Our response to that is that's not what that statutory provision states. It talks about the unreasonableness of the provision, not - and it shouldn't be interpreted in a way as applying that, in an award context to every employee when there could be hundreds of thousands of employees covered under one award, like the Manufacturing Award. It needs to be looked at in a practical way.

PN283

VICE PRESIDENT HATCHER: Well let's assume an employee fails to give the required notice, but that has - that causes for whatever reason no inconvenience or loss for the employer. For example, he might be a low skilled position, the employer has access to a pool of casuals they can just use to fill in the gaps. Is it reasonable in that circumstance for the employer to do that?

PN284

MR SMITH: Yes, for all of the reasons that we've set out in our submissions. The provision has a very practical, useful benefit and purpose, and that is to encourage compliance with subsection (a), and a deterrent, without (c).

PN285

VICE PRESIDENT HATCHER: So it's be like a warning to the others.

PN286

MR SMITH: And it acts as a deterrent to that employee.

PN287

VICE PRESIDENT HATCHER: Well if the employees are gone it's not a deterrent to them.

PN288

MR SMITH: But there would be a lot more employees just going with all of the disruption and cost to employers without (c) being there. We, as we've said in our submissions, we disagree with the point that NatRoad have raised, that this is not necessarily well understood. We think this is well understood. It's been there for, you know, 30-odd years.

PN289

JUSTICE ROSS: Well as the AMWU puts against you, there's recent research to suggest employees don't have a good understanding of their award terms and conditions.

PN290

MR SMITH: But all of the efforts that have been made in recent years should have addressed that. Now there's an obligation to make copies of awards available. They're readily available online.

PN291

JUSTICE ROSS: There's always been an obligation to display awards or provide copies. It's that I think the qualitative research that's been done just seems to reflect the practical reality that employees may not have a clear understanding of all of their rights and obligations, just as employers don't.

PN292

If you were right we wouldn't have any prosecutions. We wouldn't have had 7‑11. We wouldn't have had these because they would have all been perfect knowledge and everyone would have understood their rights and obligations. But almost daily experience suggests that isn't the case.

PN293

MR SMITH: But at the end of the day the terms of the award need to meet that test of being fair to employers and employees and this is a very important provision for employers that is balanced. It's got great merit as we'll get to, of course, in the next part of the proceedings.

PN294

But we do not accept this proposition, even on the words that are there, that every single employee must be not disadvantaged. It's completely unworkable to interpret it in that manner and all the well‑worn statutory interpretation principles would be relevant to that about the purpose and objects and so on. If the Commission pleases.

PN295

JUSTICE ROSS: Thank you. Is there anything further? Mr Nguyen?

PN296

MR NGUYEN: Your Honour, I'm not sure if Mr Smith understands clearly the point so I just want to just emphasise and take the parties to section 151 which says that a modern award must not include a term that has no effect because of (a) subsection 3261 et cetera, (b), 3263,(?)11.31.14 et cetera.

PN297

So just to be clear, so that I understand Mr Smith's submissions properly, in terms of the extent of what he's arguing, I think he's only referring to 326 which we acknowledge. 326 only knocks out a term "to the extent". So 326 includes "has no effect to the extent". If I read the full 3261 it says:

PN298

A term of a modern award and enterprise agreement or a contract of employment has no effect to the extent that the term permits ‑

PN299

‑ et cetera, et cetera. So I think Mr Smith's points do go to those words about "to the extent". But then if there is any extent, then that means the term has no effect which would mean that it would be caught by 151. That's all, your Honour.

PN300

JUSTICE ROSS: Nothing further?

PN301

MR NGUYEN: No, your Honour.

PN302

JUSTICE ROSS: All right. Well, we'll deal with these issues on the basis of the further submissions to come in by 4 pm Tuesday and the submissions in reply by 4 pm Thursday. And if anyone has any dictionary definitions they want to share, if they could do that by 12 noon on Monday with liberty to apply. Nothing further? Thanks very much. We'll adjourn.

ADJOURNED UNTIL WEDNESDAY, 20 DECEMBER 2017 �� [11.32 AM]