Pacific Fishing Company Ltd v PAFCO Employees Union [2011] FJHC 825; ERCA04.2009 (12 December 2011)

IN THE EMPLOYMENT RELATIONS COURT
AT SUVA
APPELLATE JURISDICTION

CASE NUMBER: ERCA NO. 4 OF 2009

BETWEEN:

PACIFIC FISHING COMPANY LIMITED
APPELLANT

AND:

PAFCO EMPLOYEES UNION
RESPONDENT

Appearances: Mr. Valenitabua for the Appellant.
Mr. N. Tofinga for the Respondent.
Date /Place of Judgment: Monday, 12th December, 2011 at Suva.
Judgment of: The Hon. Justice Anjala Wati.

JUDGMENT

Catchwords:
Employment Law – Collective Agreement- Requirements- effect of unregistered agreements.

The Cause

1. The employer appeals against the decision of the Employment Relations Tribunal ("ERT") delivered on the 08th day of June, 2009 where it ruled that the employees were to be awarded an increase of salary at the rate of 4% back dated to 1st January 2007 and a further 5% increase from the date of decision.
   
2. After the appeal was filed, the respondent's representative filed a summons to strike out the appeal on the grounds that it disclosed no cause of action.
   
3. The term "no cause of action" is not applicable to appeals. In an appeal, the appellant has to show an error of law or fact of the lower court giving it a right to file an appeal in the High Court.
   
4. I had informed the parties that the arguments the respondent preferred to raise to strike out the appeal could and should be his opposition to the substantive appeal. The direction was given for proper case management reasons as well.
   
5. There thus remains only the appeal before this Court for determination.
   

The Claim at ERT

6. On 21st May 2008, the Union, on behalf of the employees, had reported an employment dispute in the following form:-
   

"The dispute is about the undue delay and/or refusal of the Pacific Fishing Company Ltd to negotiate meaningful and/or formalise the Union's Log of Claim for 2007. The Union seeks the finalisation of its 2007 Log as soon as possible..."

7. The dispute could not reach a resolution after negotiation and was referred to the ERT for determination.
   
8. At the Tribunal, the parties had reached agreement on all claims in the Log of Claims it had submitted to the employer on 21st February, 2008 except five outstanding matters. Further, in relation to the four of the five outstanding claims, the parties had indicated at the Tribunal that they had agreed upon a formula for resolving those matters, in that, the issues relating to leave, redundancy, transportation and night duty provisions:
   

"will be subjected to Employment Relations Promulgation (2007) and / or current Wages Regulation Orders in the event its provision is more beneficial to the Union members than the existing provisions in the current Collective Agreement".

9. The only issue that the Tribunal was left to decide was that of rates of pay.
   
10. The initial claim in relation to rates of pay was set out on pages 29-32 of the Log of Claims tendered as Exhibit 1 in the Tribunal. At the hearing the Union indicated that its claim was being amended to a flat 19.9% across the board for all union members.
    
11. The basis of the Unions calculation was the gazetted Consumer Price Index (CPI) increases for the year 2003 – 2006 which amounted to a total of 11.9%. The additional 8% was calculated on the basis of 2% for each of the four years from 2004 as an additional transport cost incurred on goods supplied to the maritime provinces.
    
12. It was not disputed that Ovalau (being in the Lomaiviti Province) came within the description of a maritime province.
    
13. The employer had disputed the validity of the 8% additional cost but the ERT found that it did not lead any evidence to contradict the Union's evidence.
    
14. At the Tribunal, the Union conceded that its claim was in effect a claim for a cost of living adjustment pay increase for the years 2004-2007. The Union also relied on the assertion that the Wages Council generally take into account movements in the CPE when determining wage increases.
    
15. Due to the nature of the appeal, I consider it pertinent to quote the necessary excerpts of the ERT's ruling, instead of summarising the same:-
    
16. The ERT ruled as follows:
    

"The Union's evidence indicated that the current wage levels for the various groupings of workers that were set out in the Log of Claims were based on the hourly rate that was agreed by the parties following the Award dated 4 April 2003 by the ad hoc Arbitrator Mr G.P. Lala. It was not disputed that the employer could not afford to implement fully the "Lala Award". There have been no increases in hourly rates since 2003 and it would appear that there was an understanding between the parties that there would be no further increase until the employer was on a "sound footing".

These arrangements were formalized in a Memorandum of Agreement dated 24 September 2003 and signed by the parties. It was accepted by the parties that this agreement had been registered with the Permanent Secretary for Labour pursuant to the requirement that existed at the time under section 34(1) of the Trade Disputes Act Cap 97 (now repealed). That section expressly provided that the requirement for registration also applied to any amendment to the Collective Agreement.

However, there was a second agreement with the heading "Memorandum of Understanding" dated 9 December 2003 that was also signed by the parties. It was acknowledged that this agreement had not been registered. As the agreement contained provisions that related to terms and conditions of employment and hence constituted an amendment to the collective agreement, it also was required to be registered under section 34(1) of the Trade Disputes Act (Cap 97). Registration was a formal requirement.

The employer sought to resist the Union's claim on two grounds. First, it relied upon clause z of the Memorandum of Understanding dated 9 December 2003 (the unregistered agreement). Secondly it was claimed that the employer simply could not afford to pay the wage increases sought by the Union.

Clause z of the unregistered agreement provided that:

"there shall be industrial peace in the next 5 years and wage freeze in the next five years effective from 1 January 2004. However the parties have agreed to conduct reviews and effect change where the exchange rate ...or if the position of the company improves can sit to negotiate bonus or if the production exceeds targets PMS to be established and calculated by the task force where affordability permits .."

The employer claimed that the parties had agreed on a wage freeze for five years from 1 January 2004 to 31 December 2008. It claimed that the Union's claim for COLA increases for the period 1 January 2004 to 31 December 2007 overlapped with the wage freeze agreement.

The Union claimed that the clause did not assist the employer for two reasons. First, the Union's claim was submitted in 2008 and therefore fell outside the wage freeze period. That assertion, whilst ingenious, was rejected by the Tribunal since it was contrary to the spirit of the unregistered agreements.

The second ground put forward by the Union was that the employer could not rely upon the clause because it was part of an agreement that had not been registered in compliance with section 34 (1) of the Trade Disputes Act.

It is therefore necessary for the Tribunal to consider what were the statutory requirements specified in the legislation and what was the effect of any non-compliance with those requirements.

The unregistered agreement was dated 9 December 2003. At that time the Trade Dispute Act was the relevant legislation. Section 34 of that Act required, inter alia, that (1) the collective agreement and any amendment thereof shall be in writing and (2) of copy of every collective agreement and any amendment thereof shall be registered with the Permanent Secretary. The section did not specify what would be the effect of non-compliance with either of those two requirements. However, given the purpose of the requirements as set out in section 34(6), the inference to be drawn was that the agreement was not enforceable at the suit of either party.

The Trade Disputes Act was repealed by the Employment Relations Promulgation 2007 (the Promulgation) with effect from 2 April 2008. Section 166 (3) of the Promulgation states:

"A collective agreement in force at the commencement of this Promulgation is deemed to have made and registered under this Promulgation".

However, the Tribunal has concluded that a collective agreement could only have been in force at the commencement of the Promulgation if it had complied with the requirements of section 34 of the Trade Disputes Act. As the agreement was unregistered at the commencement of the Promulgation, it was not in force and therefore could not suddenly be deemed to have become registered under the Promulgation.

The agreement in effect remained an unregistered agreement under the Promulgation. Section 162(1) of the Promulgation states that:

"a collective agreement has no effect unless:-

(a) it is in writing;

(b) it is signed by each union and employer that is a party to the agreement; and

(c) it is registered by the Registrar".

Therefore a collective agreement (or an amendment thereof) that is not registered has no effect. The consequences of this are set out by implication in section 164(1). The effect of that section is that if the agreement is not in force (ie, has no effect) then it is neither binding on nor enforceable by the union and the employer that are the parties to the agreement.

As a result clause z of the unregistered agreement is neither binding on nor enforceable by the Union and the employer. The union is not bound by the clause and the employer cannot rely on the clause.

The remaining issue raised by the employer concerned its ability to pay the increase sought by the Union. The employer relied on an extract from its audited accounts that showed the amount in dollars payable on interest bearing loans and borrowings for the year ended 31 December 2007. However, this information by itself, did not give any indication as to the trading position of the employer. There was no balance sheet nor any profit and loss statement for the year 2007 put into evidence.

The employer also put into evidence material concerning an agreement for a 2% pay increase to employees who were members of the Public Employees Union (PEU).

However, the Tribunal does accept the evidence given by the witness called by the Employer concerning the difficulties created by the global financial and credit crisis that started to manifest itself in the middle of 2008.

The Tribunal is also concerned at the delay by the Union in bringing a claim for a wage increase and then claiming a substantial increase backdated to 1 January 2007. As the unregistered agreement was not enforceable after 28 days from its date, then it was open to the Union to have claimed wage increases of a modest amount from time to time since February 2004.

Under the circumstances the Tribunal has concluded that it would be appropriate to award the union a 4% increase to be back dated to 1 January 2007 and a further 5% to become payable on and from the date of this decision.

The Tribunal formally directs by consent that the parties proceed in the manner set out in the agreement dated 7 May 2009 in relation to leave, redundancy, transportation and night duty provisions".

The Grounds of Appeal

17. The appellant raised 8 grounds of appeal. However grounds 5 and 6 were withdrawn at the hearing of the appeal.
    
18. The grounds raised are:-
    
    1. "that the learned Tribunal erred in law and in fact in failing to refuse the rate of pay claim due to delay by the Union and global financial and credit crisis affecting the appellants company's business.
       
    2. that the learned Tribunal erred in law and in fact in upholding the Unions rate of pay claim despite holding that the Union delayed bringing a claim for a wage increase and then claim a substantial increase back dated to 1st January 2007.
       
    3. that the learned Tribunal erred in law and in fact in upholding the Union's rate of pay claim despite accepting evidence of the employer that it is facing financial difficulties created by the global financial and credit crisis that started to manifest itself in the middle of 2008.
       
    4. that the learned Tribunal erred in law and in fact in back dating the Union's claims to 1st January 2007 as this would include the period within which t he employer was and continues to face, financial difficulties.
       
    5. that the learned Tribunal erred in law and in fact in holding that the Memorandum of Understanding dated 9th December 2008 is a Collective Agreement for the purpose of the Trade Dispute Act, Cap 97 and the ERP 2007. [WITHDRAWN]
       
    6. that the learned Chief Tribunal erred in law and in fact by holding that the said Memorandum of Understanding must be registered to be binding and enforceable. [WITHDRAWN]
       
    7. that the learned Chief Tribunal erred in law and in fact in failing to determine whether the said Memorandum of Understanding is a Collective Agreement pursuant to section 162 of the ERP 2007
       
    8. that the learned Tribunal erred in law and in fact in holding that clause z of the said Memorandum of Understanding is neither binding against or nor enforceable by, the Union and the Employer respectively and vice versa".
       

The Submissions

19. Mr. Valenitabua made submissions on two subheadings, one being on the unregistered memorandum of understanding entered between the parties on the 9th day of December, 2003 and the other being the financial difficulty of the employer and the late claim by the Union.
    
20. On the memorandum of understanding, Mr. Valenitabua submitted that the ERT should have held that the same was binding on the parties as the parties had substantially conformed to the said agreement and complied with the same. The fact that it was unregistered should not have been used to ignore the said agreement. The parties had agreed to the terms and therefore it was a Collective Agreement. Mr. Valenitabua also stated that the ERT failed to analyse whether the said agreement was a binding Collective Agreement.
    
21. On the second aspect, Mr. Valenitabua submitted that the ERT did not take into account the financial difficulties of the employer and the delay by the Union to bring the claim.
    
22. Mr. Tofinga submitted in respect of all the grounds that the employer failed to disclose how much the global financial credit crisis affected its company nor did it disclose evidence of inability to pay the 19.9% rate of claim made by the Union. The employer also did not refute the Union's arguments that the 20% devaluation of the Fijian dollar had improved the company's profitability given the fact that its products are mainly exported and the prices have long been fixed in American (USD) dollars.
    
23. Mr. Tofinga further submitted that if the Tribunal had not taken the global financial and credit crisis affecting the employer and the delay by the Union to bring the claim, it would not have reduced the remedy from 19.9% to 4% and 5% respectively.
    
24. He also stated that it is a well established practice, which has been in existence for past two decades to backdate the awards.
    
25. Mr. Tofinga also contended that the ERT had carefully considered whether the unregistered memorandum of understanding was a Collective Agreement. It also made a finding under the law that the 2nd memorandum of understanding was not binding as a result of which clause z of the same could not be binding.
    

The Analysis

26. The entire appeal is legally and factually baseless. I only need to comment that the second memorandum of understanding is not binding on the parties because it not registered as required by law. The ERT has carefully laid down the law as to when an agreement becomes a collective agreement and is binding on the parties. I find no error of law in the ERT's analysis of the same.
    
27. Further, the ERT had considered the Union's delay and the employer's financial crisis to reduce the remedy sought substantially from 19.9% to 4% and 5%. It had not backdated the award but made an award as per the claim because the limitation period to make a claim and to grant the award had not expired.
    

Costs

28. I will reiterate that there never was a legal or factual basis for this appeal. The Union has been put to costs of the appeal proceedings and as such it is entitled to costs. The employer should pay costs of the proceedings in the sum of $2,000.
    

Final Orders

29. The appeal is dismissed.
    
30. The appellant must pay costs to the respondent in the sum of $2,000.
    

Anjala Wati
Judge

12.12.11
_____________________________

To:

1. Mr. Valenitabua, counsel for the appellant.
2. Mr. N. Tofinga, representative for the respondent.
3. File: ERCA No. 04/2009.