State v Arbitration Tribunal, ex parte Air Pacific Ltd [2001] FJLawRp 37; [2001] 2 FLR 111 (8 May 2001)

STATE v ARBITRATION TRIBUNAL ex parte Air Pacific Limited

High Court Judicial Review Jurisdiction
6 February, 8 May, 2001 HBJ 14/00S

Judicial Review - Whether permanent arbitrator erred in law in issues before him – whether arbitrator reached certain findings of fact which no properly directed tribunal could have reached on the evidence – whether, on the evidence the company had complied with clause 29.1 of the collective agreement to consult with a union once the company decided that jobs must be shed – High Court Rules O.53 r.3(9); Trade Disputes Act (Amendment) Decree 27/92 s5A; Employment Act; Trade Disputes Act; 1997 Constitution s33(3)

The Interested Party's restructuring of operations and staffing review identified 12 members to be made redundant. The Applicant filed a trade dispute with the Permanent Secretary for Labour and Industrial Relations. The Applicant sought a Judicial Review to quash a decision of the Arbitration Tribunal which ruled that the Applicant had breached a clause of the collective agreement between it and the Interested Party when it declared 12 members redundant. The Court found that clause 29.1 of the collective agreement required an active process of consultation between a company and a union – the company must disclose names of personnel or positions which it is proposing to make redundant, and a union cannot frustrate the redundancy process by refusing to enter into discussions. The court found that while the Applicant was never really prepared to enter meaningful discussions with the union, the union, having rejected the redundancies had also rejected talks which should follow the taking of the decision to restructure. Neither party was prepared to put the clause to work.

Held–(1) Judicial review proceedings are not concerned about the correctness of the arguments advanced by counsel or the tribunal under review.

(2) In the absence of a legislative framework in Fiji the appropriate starting point for consideration of redundancy principles is not New Zealand law; but, in public law, clearly established principles of Fiji common law of fairness, and in private law - by reference to contracts between employee and employer.

(3) An entitlement to fair labour practices by 1997 Constitution s33(3) does not mean a tribunal is entitled to import or incorporate into the law of employment detailed practices considered to be fair in some other overseas jurisdiction. An arbitrator cannot pick and choose and impose whichever form of system of fairness he decides to approve.

(4) The concept of whether a dismissal was unjustified is not a concept known to the common law of Fiji.

(5) The permanent arbitrator erred in his legal approach to the reference and wrongly evaluated the facts in reaching his conclusion.

Arbitrator's award set aside.

[Note: The Court of Appeal allowed leave to appeal to the Supreme Court in respect of questions 1 and 3 as posed and certified them as questions of significant public importance: 1. did the permanent arbitrator err in law by stating burdens of substantive and procedural justification distinct from the obligations in the Collective Agreement and in particular clause 29.1 and applying those distinct burdens to Air Pacific; and 3. did the permanent arbitrator err in law by interpretating the first and second sentences of clause 29.1 as applying to situations of redundancy where those employees being made redundant were not in a common pool of employees but each held a distinct position (rephrased by the Supreme Court). The Supreme Court [CBV 0006/03S] on 17 September 2003 answered the questions affirmatively, and remitted the matter to the Permanent Arbitrator for further consideration, with a recommendation for a just settlement. The Trade Disputes Act has been repealed by the Employment Relations Promulgation 2007 WEF 1 October 2007]

Cases referred to in Judgment
dist Aoraki Corporation v McGavin [1998] NZCA 88; [1998] 1 ERNZ 601
dist Brighouse Ltd v Bilderbeck [1994] 2 ERNZ 243
dist Diners Club (NZ) Limited v Prem Narayan FCA Reps 97/457
dist G.N.Hale & Sons Ltd v Wellington Caretakers IUOW [1991] 1 NZLR 151
cons Johnson v Unisys The Times 23 March 2001
foll Telecom South Limited v Post Office Union [1992] 1 NZLR 275

John Stephen Kos with Richard K. Naidu & Gwen Phillips for the Applicant
Hemendra K. Nagin for the Interested Party, Fiji Aviation Workers Association

8 May, 2001 JUDGMENT

Scott, J

This application for judicial review proceeds under the expedited procedure provided by RHC O 53 r 3 (9). The Applicant seeks to quash a Decision of the Arbitration Tribunal (the Arbitrator-Jon Apted Esq.) dated 30 December 1999 in which the Arbitrator held that the Applicant had breached clause 29.1 of a collective agreement between itself and the Interested Party when, on 25 May 1998 it declared 12 members of the Interested Party to be redundant.

The only evidence in support of this application is the affidavit filed on 14 March 2000 by the Applicant which exhibits a copy of the Award. The minutes of the proceedings before the Arbitrator were later also filed by consent together with a very large bundle of agreed documents and authorities which were filed on the day of the hearing.

Counsel for the Applicant filed written submissions on 9 June 2000 and 21 August 2000. Counsel for the Interested Party filed a written submission on 7 August 2000. In addition, oral submission were heard on 6 February 2001. This case raises important questions which I have not found it easy to answer. I am grateful to both counsel for their carefully considered assistance.

With one important exception the facts are not in dispute. In December 1997 Mr. Michael McQuay took up appointment as the Applicant's Chief Executive Officer. At that time the Applicant was returning a very small profit on capital. Mr. McQuay was instructed by the Applicant's Board "to rejuvenate the company, improve productivity and improve the relationship between management and staff to maximise overall financial performance".

Almost immediately the Applicant took steps designed to improve its position. These included the renegotiation of aircraft and ground leases and other purchases and procurement. It also undertook a staffing review.

In March 1998 the Applicant decided to adopt a new operating structure. Principally this involved reducing the number of divisions from 4 to 3. The 3 general managers of the new divisions were then told to undertake a staffing review within the new divisions. As a result of this review 19 redundancies were tentatively identified. Seven were senior management positions with which these proceedings are not concerned and 12 were senior members of staff who were members of the Interested Party.

On 25 June 1998 a trade dispute was accepted by the Permanent Secretary for Labour and Industrial Relations. On 15 October it was referred to the Arbitration Tribunal for settlement under the provisions of Section 5A of the Trade Disputes Act (Amendment) Decree 27/1992. Although the terms of reference are somewhat loosely worded it is clear that the Arbitration Tribunal was required to rule whether:

(a) the Applicant had acted unfairly and in breach of Clause 29.1 of the Collective Agreement in declaring the 12 redundant; and

(b) whether the 12 should be reinstated to their former positions.

In the event the Arbitrator only ruled on the first question, the matter of remedy being left for further submissions.

The Arbitrator made the following award: "in terminating the employment of the 12 grievors for redundancy the company breached clause 29 (1) of its collective agreement with the association. It acted in a manner which was substantively unjustified and procedurally unfair."

These proceedings were issued on 14 March 2000. The grounds upon which the application for leave was made as set out in the application filed are framed somewhat differently from the grounds advanced in the Applicant's first written submissions filed on 13 June 00. It also seems clear that the legal approach to the reference which is now being advocated is somewhat different from that which was being advocated before the Arbitrator. Thus, for example, page 25 of the award contains a statement that "the company submitted that it was appropriate for the Tribunal to apply the legal principles that are followed in New Zealand" whereas the first of the 3 submissions advanced by the Applicant in its written submission to this Court was that the common law of Fiji as exemplified in Diners Club (NZ) Limited v Prem Narayan (FCA Reps 97/457) is the starting point for consideration of the issues raised. It is also a fact that the 28 page closing submission by the Applicant to the Arbitrator (document E3 in the bundle of agreed documents) makes no mention at all of Diners Club or of the "primacy of the common law". Instead the submission advanced the proposition on page 1 that "New Zealand's law is an appropriate precedent in Fiji given that neither Fiji nor New Zealand have any extensive legislation providing for redundancy".

Despite these detailed differences in approach the Applicant's first general submission to this court is that the Arbitrator erred in law in his consideration of the issues before him. The Applicant's second contention, to which I will return, is that the Arbitrator reached certain important findings of fact "which no properly directed tribunal could have reached on the evidence". This submission was not pursued in the written submissions filed in this court and was only quite briefly raised in oral submissions before me.

In the absence of any argument before him involving the "primacy of the common law" of Fiji the Arbitrator accepted that the law as it has developed in New Zealand was the appropriate starting point. In adopting this approach the Arbitrator restated his view that:

"in redundancy disputes employers are subject to the same rules and principles that apply in unjustified dismissal claims but modified somewhat in view of the unique context of a redundancy situation". (award page 36)

The Arbitrator accepted that the broad principles to be applied were those set out in the 3 leading cases cited by Counsel for the Applicant both in his submissions to the Arbitrator and his submissions to this court namely:

• G.N. Hale & Sons Ltd v Wellington Caretakers IUOW [1991] 1 NZLR 15
• Brighhouse Ltd v Bilderbeck [1994] 2 ERNZ 243
• Aoraki Corporation v McGavin [1998] NZCA 88; [1998] 1 ERNZ 601
  

The Applicant's general allegation of error of law is that the Arbitrator wrongly applied one or more of the principles set out in these authorities to the reference before him. A particular error of law complained of is that the Arbitrator misunderstood the dissenting judgment of Thomas J in Aoraki and misapplied it.

These being proceedings for Judicial Review I am not confined to considering the correctness of the arguments advanced by counsel or indeed the tribunal under review and I have anxiously had to consider whether the New Zealand approach to the matters in issue is the correct starting point at all. I have come to the conclusion that it is not.

As pointed out by the Fiji Court of Appeal in Diners Club "Fiji does not have legislation protecting employees from arbitrary or unjustified dismissal as is the case in England, Australia and New Zealand". This is not, with respect, strictly accurate as Fiji does have an (admittedly obsolete) Employment Act (Cap. 92) which confers some protection. Fiji also has the much more important Trade Disputes Act (Cap 97) under the provisions of which this matter was referred to the Arbitration Tribunal. The fact, however, remains that there is in Fiji no statutory concept of unfair dismissal of the kind introduced in England by the Industrial Relations Act 1971 and followed in New Zealand in a somewhat similar form in 1973.

In the public law context it has been clearly established in Fiji that employees have a right to have decisions respecting their employment taken fairly but this reference, albeit that it is concerned with the settlement of a trade dispute, is not concerned with public law.

In private employment law unamended by statute an employee's complaints can only originate in the terms of the contract between himself and his employer, either express or implied. Where, as is the case here, there was in existence between the parties a collective agreement which specifically provided in clause 29.1 for a redundancy procedure to be followed it had to be alleged breaches of that procedure which founded the grievors complaint not a general allegation that the employer had acted unfairly.

While I agree with the Arbitrator (page 44 for the award) that the Arbitration Tribunal must have regard to international law standards as an aspect of its duty to ensure that workers enjoy the "fair labour practices" to which they are entitled by Section 33 (3) of the 1997 Constitution I do not agree that this means that the Tribunal is entitled to import or incorporate into the law of employment detailed practices considered to be fair in some other overseas jurisdiction. Apart from anything else, what may be in law unfair in New Zealand may not be unfair in Australia or Canada or England or USA. It can not be the case an Arbitrator has the right to pick and choose and impose whichever form of system of fairness which he decide to approve. There has, as was observed by Richardson J in Brighhouse to be a "level of certainty" in these matters.

While it might correctly be said (paragraph 1.4 of the Applicant's submission to the Arbitrator – document E3) that:

"when and how redundancy may be effected is a matter of common law"

I do not agree that redundancy which is not substantially justified or procedurally unfair in NZ may amount to unjustified dismissal in Fiji.

It must be remembered that the common law of Fiji is not the same as the common law of New Zealand. If, for the purposes of this discussion, the common law is taken to include those principles, usages and rules of action laid down by the courts which do not rest for their authority upon any express or positive declaration of the will of the legislature then such pronouncements of the New Zealand courts as are contained in the 3 New Zealand cases already cited can properly described as part of the common law. But they are only part of the common law of New Zealand, not the common law of Fiji since they are predominantly concerned with the application of the New Zealand Employment Contracts Act 1991 which has no equivalent in Fiji.

It is important to distinguish common law rights from statutory rights. As was said by Richardson J. in Telecom South Ltd v Post Office Union [1992] 1 NZLR 275:

"clearly Parliament had departed from the common law approach not only in relation to procedures and remedies but also in formulating the basic concept of unjustifiable conduct within the employment relationship under the Act".

In Brighhouse Cooke P said (at page 253):

"... the very raison d'etre of the statutory jurisdiction was the perceived inadequacy in many cases of common law contractual rights and remedies".

And:

"It is elementary that a dismissal may be unjustifiable within the meaning of the statute although an exercise of the employer's common law rights. A dismissal on contractual notice or with payment in lieu of contractual notice may be unobjectionable at common law but that is certainly not determinative of the generality of unjustifiable dismissal cases under the statute".

As recently as March this year the House of Lords again underscored the divide between the common law and statute when in Johnson v Unisys (the Times 23/3/01) it declined to recognise a common law right to damages for unfair dismissal.

As is clear from Aoraki (page 616) the questions raised by the 3 cited New Zealand cases were essentially questions of statutory construction. This statute has no equivalent in Fiji. As a matter of interest its relevant sections were repealed in October 2000 by the Employment Relations Act 2000. In my opinion the Arbitrator erred in law in approaching the reference before him from the point of view of the concept of unjustifiability, a concept which is a purely statutory construct and which does not exist in Fiji's common law. I do not believe that a piece of "major social and economic legislation" (Aoraki, page 616) can be introduced into Fiji as it were through the back door of the Arbitration Tribunal, however noble the aim.

In my opinion the proper approach to the question before the Arbitrator was to consider whether, in the light of the evidence, the company had complied with Clause 29.1 of the collective agreement. That clause requires an active process of consultation between the company and the union to take place once the company has decided that jobs must be shed. It does not give the union a right to frustrate the redundancy process by refusing to enter into discussions. It does not protect a company which refuses to disclose the names of the personnel or the positions which it is proposing to make redundant. The clause envisages a situation where as a result of negotiations the company's initial proposals may undergo modification.

His consideration of this issue resulted in the Arbitrator concluding that the applicant never intended to enter into discussion with the Union (page 42 of the award). This conclusion is extensively examined on pages 23 to 26 of the Applicant's submission to this court. I do not agree that certain New Zealand principles of common law may properly be applied to the facts resulting in a conclusion that the Arbitrator erred in law in holding that clause 29.1 required the Applicant to hold discussions on selection. Even if, as the Schedule to the written submission appears to be designed to demonstrate, there was little actually to discuss, discussions were part of the collective agreement and could not, in my judgment properly get under way without a detailed disclosure by the Company of its plans including the names of the persons proposed to be affected.

While I accept the Arbitrator's conclusion that the Applicant was never really prepared to enter into meaningful discussions with the union the matter does not end there since the question which then fairly arises is whether the union was, for its own part, prepared to enter into meaningful discussions with the Applicant. As has been seen, the Applicant's ground J (iii) was that the Arbitrator reached the unreasonable conclusion that the Applicant was responsible for the breakdown in discussions between the parties.

On 14 April 1999 the Union wrote to the Applicant. After calling for discussions on the proposed redundancies Mr. Singh wrote:

"We will insist that ... savings can not be from enforced redundancies" and

"whatever strategies we employ must ensure that no one becomes jobless as a result because they have nowhere to go. That is the bottom line."

This letter was followed by publication of the Union's monthly newsletter. An article relating to the Applicant's redundancy plans was headlined:

"No to Air Pacific Redundancies".

It contained the following sentence:

"We can not let any member become jobless. That is the decision of our members meeting of 1st April. This decision has been endorsed by your executive Committee".

Mr. McQuay's position was that the Union had rejected the redundancies decision and had therefore rejected the talks which, under the agreement should have followed the taking of that decision. In my opinion that contention is unanswerable.

I am aware that this is not an appeal from the Arbitrator's award, although given the nature of the submissions placed before me it has proved more than usually difficult to separate the Arbitrator's conclusions from the methods used to reach them. I also remind myself that only findings of fact which are manifestly unreasonable will be liable to be set aside. Notwithstanding these considerations I have found myself impelled to the clearest conclusion that the reason clause 29.1 of the collective agreement was not activated was that neither the Applicant nor the Union, for reasons of their own was prepared to put the clause to work.

The consequence of reaching the conclusion first that the Arbitrator adopted the wrong legal approach and that secondly he wrongly evaluated the facts is, I accept, not a tidy or perhaps fortunate one. The award must be set aside but one effect of this may be to reopen the issues between the parties.

Judicial review succeeds.

Marie Chan