Legal Analysis: Expert Panel Composition & Conflicts in Fair Work Commission, Slides of Finance

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FEDERAL COURT OF AUSTRALIA Financial Services Council Ltd v Industry Super Australia Pty Limited [2014] FCAFC 92 Citation: Parties: File number: Judges: Date of judgment: Catchwords: Legislation: Cases cited: Financial Services Council Ltd v Industry Super Australia Pty Limited [2014] FCAFC 92 FINANCIAL SERVICES COUNCIL LTD ACN 080 744 163 v INDUSTRY SUPER AUSTRALIA PTY LIMITED ACN 158 563 270, FAIR WORK COMMISSION and MINISTER FOR EMPLOYMENT (INTERVENING) NSD 447 of 2014 GILMOUR, FLICK & PERRAM JJ 25 July 2014 INDUSTRIAL LAW - Fair Work Commission - four yearly review of default fund terms - two members of Expert Panel disqualified due to conflicts of interest - Fair Work Act 2009 (Cth) ss 620(1A) and 622(3) - whether President entitled to appoint himself to Expert Panel - whether Expert Panel reconstituted in accordance with Act Acts Interpretation Act 1901 (Cth) (as at 25 June 2009) s 23 Fair Work Act 2009 (Cth) ss 40A, 620, 622, 624 and 627 ABN Amro Bank NV v Bathurst Regional Council [2014] FCAFC 65 cited Anti-Doping Rule Violation Panel v XZTT (2013) 214 FCR 40 cited Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 293 ALR 257 cited Cooper Brookes (Wollongong) Pty Ltd v Federal Commission of Taxation (1981) 147 CLR 297 cited Curtis v Stovin (1889) 22 QBD 513 cited Kelly v The Queen (2004) 218 CLR 216 cited Knightsbridge Estates Trust Ltd v Byrne [1940] AC 613 cited Metropolitan Fire and Emergency Services Board v Churchill (1998) 14 V AR 9 cited Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 cited Thiess v Collector of Customs (2014) 306 ALR 594 cited Date of hearing: Place: Division: Category: Number of paragraphs: Counsel for the Applicant: Solicitor for the Applicant: Counsel for the First Respondent: Solicitor for the First Respondent: Counsel for the Second Respondent: Solicitor for the Second Respondent: Counsel for the Intervener: Solicitor for the Intervener: - 2 - Transport Accident Commission v Treloar [1992] 1 VR 447 cited 6 June 2014 Sydney FAIR WORK DIVISION Catchwords 42 Mr JK Kirk SC and Mr PD Herzfeld Ashurst Australia Mr RM Niall QC and Mr SJ Moore Holding Redlich The second respondent filed a submitting appearance Corrs Chambers Westgarth MrTHoweQC Australian Government Solicitor 3 4 -2 - subject matter experts (' Expert Panel Members') and one must either be the President of the Commission himself or a presidential member appointed by him to chair the panel. A presidential member is the President, either of the Vice-Presidents or a Deputy President. The remaining three positions may be filled by other members of the Commission. They do not need to be Expert Panel Members (although they can be) and can be therefore any of a Commissioner, a Deputy President, a Vice President, the President or an Expert Panel Member. At least so far as this case is concerned, the Expert Panel Members are part-time members of the Commission appointed by the Governor-General following the Minister being satisfied as to their expertise in finance, investment management and/or superannuation. It will be observed that only a minority of an Expert Panel is required to be made up of experts and that the right of the President usually to sit on such a panel as its chair is orthodox. It is confusing, to say the least, that not every member of an Expert Panel is an Expert Panel Member under the legislation. In this case, the President appointed an Expert Panel to conduct the review. Although he was entitled to chair the Expert Panel as the Commission's President, he chose instead to appoint a Deputy President to perform that role. He also appointed, in accordance with the Act, three other ordinary members of the Commission and three Expert Panel Members having the requisite expertise. 5 During the course of the review, two of the three Expert Panel Members became disqualified from the process due to conflicts of interest. In response, the President appointed a further expert to the panel and shortly afterwards he directed that he himself should form part of the panel. On 11 March 2 014 (after the appointment of the new Expert Panel Member, but prior to the appointment of the President to the panel), the Commission called for applications for superannuation funds to be included on the Default Superannuation List by 2 8 April 2 014 and written submissions by 1 0 June 2 014. Subject to any order of this Court, the Expert Panel would have proceeded to deal with those submissions. 6 The short question before this Court is whether the President had the power to direct as he did. On Friday 6 June 2 0 14 this Court declared that he did not have that power and that the Expert Panel was not presently constituted in accordance with the requirements of the Act. With the concurrence of the parties, the Court made no order as to costs. 7 8 9 10 - 3 - What follows are the Court's reasons for making the declarations it did. The Legislation Critical to this case is the interrelationship between two provisions of the Act, ss 620(1A) and s 622. The former specifies how the Commission is to be constituted in order to review the Default Superannuation List and is in these terms: (lA) An Expert Panel constituted under this section for a purpose referred to in subsection 617(4) or (5) consists of 7 FWC Members (except as provided by section 622), and must include: (a) the President, or a Vice President or Deputy President appointed by the President to be the Chair of the Panel; and (b) 3 Expert Panel Members who have knowledge of, or experience in, one or more of the following fields: (i) finance; (ii) investment management; (iii) superannuation. It will be seen that it contemplates an Expert Panel having a particular constitutional quality. There are to be at least three Expert Panel Members and one presidential member of the Commission. Section 622 regulates what is to happen when a vacancy occurs in an Expert Panel. It provides: (1) This section applies if: (a) an FWC Member (the unavailable member) forms part of a Full Bench or an Expert Panel in relation to a matter; and (b) the FWC Member becomes unavailable to continue dealing with the matter before the matter is completely dealt with. (2) The Full Bench or the Expert Panel may continue to deal with the matter without the unavailable member if the Full Bench or the Expert Panel consists of the following: (a) for the Expert Panel - the President and at least 2 Expert Panel Members; (b) for a Full Bench - at least 3 FWC Members, including at least one FWC Member who is the President, a Vice President or a Deputy President. 11 12 13 - 4 - (3) Otherwise, the President must direct another FWC member to form part of the Full Bench or the Expert Panel. After the President does so, the Full Bench or the Expert Panel may continue to deal with the matter without the unavailable member. Note: The new FWC Member must take into account everything that happened before the FWC Member began to deal with the matter (see section 623). It will be seen that s 622 uses the expression 'FWC Member'. That term is defined broadly enough to include both the ordinary members of the Commission and its Expert Panel Members. This appears from the dictionary in s 12 which defines that expression to mean: 'the President, a Vice President, a Deputy President, a Commissioner or an Expert Panel Member.' All parties accepted in this Court that s 622(2)(a) had not been engaged initially and that the President had not purported to act under it. The crucial provision was, therefore, s 622(3). Because of the apparent breadth of the expression 'FWC Member' as including the President it would appear to authorise the President to appoint himself ( or any other member of the Commission, whether ordinary or expert) to a casual vacancy that has occurred on an Expert Panel. If the power in s 622(3) is used to appoint an ordinary member of the Commission to fill a vacancy left by the recusal, as here, of one of the three required Expert Panel Members, then the composition of the Expert Panel will no longer be in accordance with s 620(1A). Thus, to take the facts of this case, the decision of the President to appoint himself to the Expert Panel means that it now consists of five ordinary members (including himself) and two Expert Panel Members. 14 The immediate question is whether s 620(1A) is to be read as curtailing the power in 15 s 622(3) or whether s 622(3) is to be read with all the generality which its ordinary language suggests. If the former is the case, then the President will have lacked power to appoint himself to the Expert Panel; if the latter, it will have been lawful. The Arguments of the Parties The applicant submitted that there were several features of the Act that indicated the centrality of the Expert Panel Members to the process of formulating the Default - 7 - dealing with the Default Superannuation List is concerned, these are specified (relevantly) in s 620(1A)(b) and s 627(4) to be finance, investment management and/or superannuation. No regular member of the Commission need have this expertise: see s 627(1 )-(3). 26 Each of these four matters tends to suggest a need to interpret s 622(3) in a way that is 27 consistent with s 620(1A). The Court would not accept that this conclusion is undermined because, as was argued, s 622(2) was a quorum provision specifying the minimum requirements necessary for an Expert Panel to discharge its functions. Section 622(2) cannot operate in that way: the Expert Panel is expressly contemplated by s 620(1 A)( a) to be able to be convened with a presidential member other than the President in the chair. The specification in s 622(2)(a) that an Expert Panel can proceed with only two Expert Panel Members and the President cannot, therefore, be about its minimum compositional requirements for if it were the panel would be inquorate every time it was convened, as s 620(1A) expressly permits that it might be, without the President. The Court reaches that conclusion notwithstanding its acceptance of the respondent's contention that as originally enacted s 622(2) was intended to be a quorum provision. In its original form, s 622 did not deal with the Expert Panel at all (this feature was not added to the legislation until more recently). It did, however, deal with another panel called the 'Minimum Wage Panel' in terms that are not dissimilar structurally to its current form. Relevantly, s 622 provided: ( I ) This section applies if: (a) an FWA Member (the unavailable member) forms part of a Full Bench or the Minimum Wage Panel in relation to a matter; and (b) the FW A Member becomes unavailable to continue dealing with the matter before the matter is completely dealt with. (2) The Full Bench or the Minimum Wage Panel may continue to deal with the matter without the unavailable member if the Full Bench or the Minimum Wage Panel consists of the following: (a) for the Minimum Wage Panel--the President and at least 3 Minimum Wage Panel Members; (b) for a Full Bench--at least 3 FW A Members, including at least one Deputy President. (3) Otherwise, the President must direct another FWA member to form part of the Full Bench or the Minimum Wage Panel. After the President does so, the Full Bench or the Minimum Wage Panel may 28 29 30 31 32 terms: - 8 - continue to deal with the matter without the unavailable member. At the same time, s 620(1) specified the constitution of that panel. It was in these ( 1 ) The Minimum Wage Panel constituted under this section consists of 7 FW A Members ( except as provided by section 622), and must include: (a) the President; and (b) at least 3 Minimum Wage Panel Members. It will be noted that, unlike the current form of s 620(1A)(a), the Minimum Wage Panel was required to have the President as a member and he was not empowered to appoint another presidential member in his place. The requirement in the former s 622(2) that that panel could continue with only the President and three Minimum Wage Panel Members, therefore, did indeed operate as a quorum provision because the President had to be a member of the panel. In the present situation, where the President does not have to be a member of the Expert Panel, the current form of s 622(2)(a) cannot operate the same way. Whilst the Court accepts, therefore, that the former section was a provision specifying a quorum it cannot accept this characterisation in the case of the current provision. The impossibility of explaining why the Expert Panel would not be inquorate if the President did not initially take the chair precludes any other view of its operation. That may raise a question of whether s 622(2)(a) reveals a drafting error. It is possible, in the Court's opinion, that the legislature overlooked adjusting the terms of s 622(l )(a) to refer to the presidential member presiding rather than the President. Certainly, the same deficiency does not appear in s 622(2)(b) which expressly contemplates a Full Bench continuing with three members one of whom must be a presidential member. On the other hand, the difference in language between s 622(2)(a) and (b) may show a deliberate decision on the part of the legislature to deal with the composition of the Expert Panel in a different way. In some highly circumscribed situations a Court may disregard the language of a statute that is plainly in error: cf. Cooper Brookes (Wollongong) Pty Ltd v Federal Commission of Taxation ( 19 81) 14 7 CLR 297. The precise metes and bounds of this doctrine are, perhaps, a little indistinct. Some authorities suggest it is necessary for the Court to recognize the nature of the drafter's error and to identify it as an error, a formulation which commended itself to Lord Esher MR in Curtis v Stovin (I 8 89) 22 QBD 513 at 517. On the 33 - 9 - other hand, there are statements in Cooper Brookes which suggest that the issue is, at heart, one merely of discerning correctly legislative intention : 'But there are cases' said Mason and Wilson JJ, 'in which inconvenience of result or improbability of result assists the court in concluding that an alternative construction which is reasonably open is to be preferred to the literal meaning because the alternative interpretation more closely conforms to the legislative intent discernible from other provisions in the statute' (at 320). It may be that such statements may not altogether be easily reconciled with more recent statements in the High Court emphasizing the paramount nature of the text in the search for legislative intent: cf. Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 293 ALR 257 at 26 8 [39] ; Thiess v Collector of Customs (2014) 306 ALR 594 at 599 [22]. In any event, it is not necessary for this Court to chart the limits of this doctrine. Wherever the true threshold lies, the Court does not consider that it is in a position to say with any particular degree of confidence that an error has so plainly been made in the drafting of the provision that the literal words fail to give effect to some other demonstrably evident legislative intent. 34 In those circumstances, the Court sees no reason not to give effect to its conclusion that s 622(3) must be construed conformably with the compositional requirements of s 620(1A). Whilst the applicant submitted that the two provisions were directly inconsistent and that the Court should give primacy to the latter over the former ( citing Project Blue Sky Inc v Australian Broadcasting Authority (199 8) 194 CLR 355) the Court does not share that view. Although in practical terms the result is no different, the Court accepts the submission of the Minister that the provisions are not directly inconsistent and that what is involved is rather the process of construing them in an harmonious fashion. In this case, that requires one to read s 622(3) as not extending to empower the President to appoint a fresh member to fill a casual vacancy in a way which is inconsistent with s 620(1A). To reach this conclusion it is merely necessary to read the expression 'FWC Member' not in accordance with the dictionary definition in s 12 (i.e., all members of the Commission regardless of class) but instead only as 'eligible FWC Member'. Although s 12 is not expressed to provide that the definitions which it contains apply unless the context otherwise requires that is, in fact, how s 12 is to be read: see Knights bridge Estates Trust Ltd v Byrne [ 1940] AC 613 at 621; Transport Accident Commission v Treloar [1992] 1 VR 447 at 449-450 (FC); Kelly v The Queen (2004) 21 8 CLR 2 16 at 245 [ 84] and 253 [103] per McHugh J; Anti-Doping Rule