WESTERN AUSTRALIAN INDUSTRIAL APPEAL COURT CITATION : BURSWOOD CATERING AND ENTERTAINMENT PTY LTD -v- AUSTRALIAN LIQUOR, HOSPITALITY AND MISCELLANEOUS WORKERS UNION, WESTERN AUSTRALIAN BRANCH [2002] WASCA 354 CORAM : SCOTT J (DEPUTY PRESIDING JUDGE) PARKER J HASLUCK J HEARD : 1 NOVEMBER 2002 DELIVERED : 18 DECEMBER 2002 FILE NO/S. : IAC 5 of 2002 BETWEEN : BURSWOOD CATERING AND ENTERTAINMENT PTY LTD Appellant AND AUSTRALIAN LIQUOR, HOSPITALITY AND MISCELLANEOUS WORKERS UNION, WESTERN AUSTRALIAN BRANCH Respondent Catchwords— Industrial law - Appellant registered shortly after previous agreement between a related company, BRML, and respondent signed - Inequities to employees resulting - Inference sought that new company created to avoid terms and conditions agreed - Application of wage fixing Principle 10 - Whether corporate veil should be lifted - Commission in Court Session was in error in making new award Legislation— Nil Result— Appeal dismissed Category: B Representation— Counsel— Appellant : Mr T H F Caspersz & Mr D Brajevic Respondent : Mr D H Schapper Solicitors— Appellant : Blake Dawson Waldron Respondent : D H Schapper 202 WESTERN AUSTRALIAN INDUSTRIAL GAZETTE 83 W.A.I.G. Case(s) referred to in judgment(s)— (Commission’s Own Motion) v The Minister for Labour Relations [2001] WAIRC 03333 Briggs v James Hardie & Co Pty Ltd (1989) 16 NSWLR 549 Briginshaw v Briginshaw (1938) 60 CLR 336 Dennis Wilcox Pty Ltd v Federal Commissioner of Taxation (1988) 79 ALR 267 DHN Food Distributors Ltd v London Borough Council Tower Hamlets [1976] 1 WLR 852 Greater Dandenong City Council v Australian Municipal Clerical and Services Union [2001] FCA 349 Smith Stone and Knight Ltd v Birmingham Corporation [1939] 4 All ER 116 Spreag v Paeson (1990) 94 ALR 679 Case(s) also cited— Australian Rail, Tram and Bus Industry Union of Employees, WA Branch v West Australian Government Railways Commission [2000] WASC 196 Gramophone & Typewriter Ltd v Stanley [1908] 2 KB 89 Harold Holdsworth & Co (Wakefield) Ltd v Caddies [1955] 1 WLR 352 Industrial Equity Ltd v Blackburn (1977) 137 CLR 567 Maritime Union of Australia v Geraldton Port Authority (1999) 165 ALR 67 Robe River Iron Associates v Amalgamated Metal Workers & Shipwrights Union (1993) 73 WAIG 1993 Walker v Wimborne (1976) 137 CLR 1 _________ 1 SCOTT J (PRESIDING JUDGE): This is an appeal against the decision of the Commission in Court Session delivered on 12 February 2002 and published at 82 WAIG 544. 2 In its decision the Commission in Court Session agreed to issue an award to cover the employees of the appellant. The award terms were substantially similar to the terms of an agreement between the respondent and Burswood Resort (Management) Ltd (“BRM”) (“the 2001 agreement”) registered in the WA Industrial Commission on 24 August 2001 (AG169 of 2001). There are minor differences between that agreement and the award which will be discussed later in the course of these reasons. 3 The grounds of appeal are— “1. There was a miscarriage of the discretion to make an award in that the Commission in Court Session relied upon findings that— (a) a reason for creation of the appellant was to reduce the terms and conditions of employment from those in an industrial agreement that another employer, Burswood Resort (Management) Limited (“BRML”), had agreed with the Respondent; (b) a reason for creation of the appellant was for BRML to avoid its legal obligations under the industrial agreement; (c) the appellant was the agent of BRML, when— (i) there was no, or no sufficient, evidence to support such findings; (ii) the finding in (c) above was, of itself, an insufficient and improper basis for the exercise of the discretion. 2. The Commission in Court Session— (a) failed to properly exercise its jurisdiction; (b) alternatively, failed to exercise, or to properly exercise, any discretion to make an award pursuant to Principle 10 of the Wage Fixing Principles, in that it purported to rely upon Principle 10 without making any, or any proper, findings necessary for the application of Principle 10.” 4 The history of this matter is of importance. Prior to the creation of the present appellant staff employed at the Burswood Casino who worked in the food and beverage and bar operations were employed by BRM. That company and the present respondent had been involved in a number of industrial disputes which ultimately led to the 2001 agreement being concluded between BRM and the respondent. The 2001 agreement was registered in the Industrial Commission on 24 August 2001. That agreement provided the employees of BRM with wages and conditions that were in excess of those normally applicable to workers in the same industry governed by the provisions of the Restaurant, Tearoom and Catering Workers’ Award of 1979 (“RTC Award”). 5 The present appellant, Burswood Catering and Entertainment Pty Ltd (“BCE”), was registered on 20 September 2001, just less than a month after the agreement between BRML and the present respondent was registered. 6 The reasons for the incorporation of the appellant are important. By a minute, which is undated, but which evidence establishes was prepared on 13 September 2001, Mr John Schaap (“Mr Schaap”) and Mr Michael Egan (“Mr Egan”), the managing director and company secretary of Burswood Ltd, said— “BURSWOOD LIMITED REFERENCE: 4.0 - STRATEGIC MATTERS ITEM 4.3 - CORPORATE STRUCTURE Introduction It has been recognised that catering and entertainment services have the potential to become a significant operation in their own right, both within and outside the Resort. This may include increasing the exposure of our current and new facilities and extending the operations into provision of external services. The purpose of this paper is to identify how the corporate structure can accommodate this strategic objective. 83 W.A.I.G. WESTERN AUSTRALIAN INDUSTRIAL GAZETTE 203 Current Corporate Structure The current corporate structure of Burswood Limited does not need to be detailed here other than to identify that Burswood Nominees has two major wholly owned subsidiaries’ namely Burswood Resort (Management) Limited and Burswood Hotel Proprietary Limited. Burswood Resort (Management) Limited’s primary business function is the operation of the Casino which is the main revenue source for Burswood Nominees. It also currently has responsibility for managing the Hotel. Burswood Hotel Proprietary Limited is the entity which provides labour to the Hotel and ancillary components and is closely linked to the proposed joint venture with Six Continents Hotels and Resorts (Australia) Proprietary Limited to increase the exposure of Burswood internationally and to appeal to a more diverse clientele. Proposed Corporate Structure Given the new and exciting opportunities available to Burswood, it is important to recognise catering and entertainment as a core business function. For this purpose, it is proposed to place employees working in the newly developed facilities under a new corporate entity whose main business function is the provision of catering and entertainment services. The major responsibility of the new entity will be to expand Burswood’s catering and entertainment services within the Resort and externally as market opportunities arise. Our competitors will not only include other Casinos and Hotels but Restaurants, Cafes, Fast Food outlets and Catering Contractors. This competition is significantly different to that faced by Burswood Resort (Management) Limited and Burswood Hotel Proprietary Limited and offers the potential for external contracting of quality catering and entertainment services. Strengths Focussing on catering and entertainment operations as a core business function will allow significant growth into areas which would be otherwise limited through the Hotel or Casino business structure. The ability to achieve economies of scale, sharing of common resources, skills, knowledge, plant and equipment is possible as well as the marketing benefits of presenting a specialised catering and entertainment company - particularly should external market opportunities arise. The current corporate structure clearly identifies the Casino as being the core function of Burswood Resort (Management) Limited and the Hotel as the core function of Burswood Hotel Proprietary Limited. The proposed structure is consistent with this ideology and corporate culture, as well as focussing management and staff on driving the business of catering and entertainment. Opportunities The market opportunities for a dynamic, specialised catering and entertainment company with a five-star background are outstanding. Catering Contractors are facing new and expanded opportunities as many businesses outsource non-core business activities, which have previously been provided in-house. This external focus is a completely new direction for Burswood and is closely connected to the need for an individually identifiable corporate structure. With the Resort, the opportunities to increase Burswood’s exposure to catering and entertainment can be identified in the strategic goals of the redevelopment project. Opportunities include increasing revenue from conventions, functions and the use of the Grand Ballroom, and general attraction to the Resort can be capitalised and expanded by the catering and entertainment company. Existing staff members of both Burswood Resort (Management) Limited and Burswood Hotel Proprietary Limited will not be affected by the new company. Their employment contracts will remain with their current respective employer and they will still perform the same duties in the same areas. However this will not be the case if employees are engaged by the new Company. There will be no effect on current Food and Beverage outlets at this time, which will continue to be operated by the relevant subsidiary of Burswood Nominees. Common Corporate Services The provision of corporate services including Human Resources, Finance, IT, Legal, Marketing and Maintenance should continue to be provided by Burswood Resort (Management) Limited in a similar manner to those arrangements already provided to Burswood Hotel Proprietary Limited. This will avoid costly duplication of resources and fully utilise the skills and knowledge of existing professionals. Recommendation It is recommended that a specialised catering and entertainment company be formed to optimise and achieve our strategic and corporate objectives and that the specialism of the Company be reflected in its name. John Schaap Michael Egan Managing Director Company Secretary” 7 Much attention in the course of the hearing of this appeal focused upon the paragraph under the heading “Opportunities” which refers to the fact that existing staff members of BRM and a further company in the Burswood Group, Burswood Hotel Pty Ltd, will not be affected by the new company. It is said in the memo that those employees will remain with their current respective employer and will still perform the same duties in the same areas. However, that is said not to be the case, if the employees are engaged by the new company. 8 For reasons that I will come to, that paragraph clearly disclosed an error, at least insofar as it related to a number of restaurants at the Burswood complex which were closed down following the creation of BCE. It is also accepted that the memo was in error to the extent that it said that there would be no effect on current food and beverage outlets. That was an error because it was known that a number of restaurants would be closed as a result of a redevelopment which was proposed. 9 The proposed redevelopment was substantial, costing $96,000,000. The redevelopment created a large new eating area within the casino complex. As a consequence of the creation of the new eating area, a number of the existing restaurants were closed and the employees made redundant. The employees previously employed in those restaurants by BRM were then offered new positions with BCE. The positions with BCE, however, were not covered by the 2001 agreement and were offered either on the basis of Australian Workplace Agreements (AWA) or on the terms of the RTC award. In either event, it is common ground that the terms and conditions of employment for the employees of BCE were less than the negotiated terms of the 2001 agreement. 204 WESTERN AUSTRALIAN INDUSTRIAL GAZETTE 83 W.A.I.G. 10 On the findings of the Commission in Court Session, the former employees of BRM who were made redundant were given a choice to remain with BRM in another capacity, or to take employment with BCE. Those who remained with BRM in another capacity, were to retain their current terms and conditions of employment. Those who accepted employment with BCE, were to be employed either under the terms and conditions of the RTC award, or under the AWA, both of which provided terms and conditions of employment less than those provided in the industrial agreement governing the employees of BRM. 11 The findings of the Commission in Court Session were that 113 employees of BRM were given that choice. Approximately 74 employees opted for employment with BCE and two of those chose to be employed on the RTC award. The balance chose to be employed under the AWA. BCE also employed further staff from external sources and at the date of the hearing in the Commission in Court Session employed 284 employees, of whom 260 were employed on the AWA and the remaining 24 employed under the RTC award. 12 Because of the history of this matter, and the inequality between workers at the Burswood Casino governed by the 2001 agreement and those workers employed on the lesser conditions under the RTC award or under the AWA, the respondent lodged an application with the Western Australian Industrial Commission for an award reflecting the terms of the 2001 agreement. The purpose of seeking the award in those terms was to avoid any discrepancy in terms of employment between employees the subject of the 2001 agreement still employed by BRM, and employees doing equivalent work for the appellant who would otherwise receive lesser remuneration and less advantageous terms of employment. 13 There were some minor provisions in the award which did not reflect the terms of the 2001 agreement, but those discrepancies were not material for the purposes of this appeal. Suffice it to say that the terms of the award sought, substantially reflected the terms of the 2001 agreement. 14 The Commission at first instance agreed to the issue of the award called the “Burswood Catering and Entertainment Pty Ltd employees award 2001”. The appellant appealed against the decision to issue the award to the Commission in Court Session which dismissed the appeal. The appellant has appealed to this Court. The grounds of appeal are set out earlier in these reasons. 15 Central to the first ground of appeal is the contention that findings made by the Commission in Court Session by way of inference from the proven facts were not open. In particular, the appellant challenges the findings at pars 40 and 41 of the reasons of the Commission in Court Session— “40. We think a distinction is to be drawn between a contractor which is a business in its own right separate from the Burswood group and BCE, at least for the purposes of work performed within the Resort. Had a decision been taken to contract out the food and beverage work performed by BRML to a totally external catering contractor, then there would be a parallel between that and what occurred in relation to the cleaning and laundry examples referred to in the evidence. On the evidence before us, we have not been able to conclude that BCE is a catering contractor distinct from the Burswood group of companies. 41. Therefore, the decision to have BCE employ staff to do work previously performed by employees of BRML within the Resort has merely reduced the terms and conditions of employment payable for that work. Burswood Limited is effectively contracting to itself. We consider that that has resulted in an inequity. That inequity arises for a number of reasons. One month before the registration of BCE, BRML signed an industrial agreement with the Union which prescribed terms and conditions of employment for BRML employees doing catering and entertainment work. One month after that signing, BCE was created with the intent that BRML would cease to provide catering and entertainment staff to a number of facilities and staff for those facilities would then be supplied by the newly created BCE on reduced terms and conditions of employment. The formal process of making 113 BRML employees redundant (a number which included 5 staff from the canteen) and giving those employees the alternatives of remaining with BRML in another capacity or applying for jobs with BCE at a lower rate of wage was a mechanism for reducing the terms and conditions of employment for the supplying of food and beverage services to the new facilities. Had that not been done, the staff providing those services who were not on workplace agreements or AWA’s would have received the terms and conditions of employment of the 2001 agreement.” 16 Counsel for the appellant contends that these findings by the Commission in Court Session are findings that BCE was created for a prohibited or improper reason, namely, to avoid having to meet the terms and conditions of employment in the 2001 agreement. It is contended that this inference is not open as a matter of law and that, in any event, it is a finding of such gravity that it should not be made unless the evidence was such as to justify such an inference based on the seriousness of the allegation: Briginshaw v Briginshaw (1938) 60 CLR 336. 17 Counsel for the appellant contends that the finding by the Commission in Court Session of an improper purpose in the creation of BCE, was an inference which should not be lightly drawn. In Greater Dandenong City Council v Australian Municipal Clerical and Services Union [2001] FCA 349 Merkel J said at [164] - [165]— “It is also appropriate to observe that common sense answers in determining the reason for engaging in conduct, as with causation issues, can differ according to the purpose for which the question is asked: see Environment Agency v Empress Car Co (Abertillery) Ltd [1999] 2 AC 22 at 29 per Lord Hoffman and J & G Knowles and Associates Pty Ltd v Commissioner of Taxation (2000) 96 FCR 402 at [26] - [27]. In the present case, if the dismissed Council employees were asked the reason for their dismissal, they could understandably say it was because they did not agree to reduce their Award or Agreement entitlements. On the other hand, the Council could understandably say it was because of Silver Circle’s lower price. As was pointed out in J & G Knowles at [27], the answer to the question can be assisted by having regard to the purposes or object of the statutory provision under which question arises. In that regard, as explained earlier, the object of the sections in question in the present case is to protect employees’ freedom of association by protecting them from discrimination by reason of their entitlements under an industrial instrument or order.” 18 [165]— “Further, the cases demonstrate that s 298K is not concerned with the cause of the prejudicial conduct. Rather, it is concerned with the employer’s reason or reasons for engaging in that conduct. Thus, there can be a significant difference between the employer’s subjective reason for engaging in prejudicial conduct and the objective circumstances that led to the employer engaging in the conduct. Where the employer’s reason is inability to pay the award entitlement, the conduct will not breach s 298K(1) because the circumstance that led to the employer engaging in that conduct was the employees’ increased award entitlements.” 83 W.A.I.G. WESTERN AUSTRALIAN INDUSTRIAL GAZETTE 205 19 Merkel J went on to consider the drawing of the inferences in that case and said at [168]— “In my view the proper inferences to be drawn from the primary facts found by the primary judge are that an operative reason for the Council’s resolution to accept Silver Circle’s tender was its lower price and that a circumstance that led to it accepting the lower price was the higher Award and Agreement entitlements of the HACC employees. While the higher entitlements may be causally linked to the Council’s acceptance of the Silver Circle tender, the evidence does not support the primary judge’s conclusion that they were an operative reason for the Council’s acceptance of the tender. No councillor or Council document stated that the entitlements were a reason for the Council’s acceptance. The inference drawn by the primary judge to the contrary was based on an approach that, erroneously, failed to distinguish between the operative reason for the Council acting and the circumstances that led to the price of the in-house bid being higher than the price of the Silver Circle bid. The fact that the councillors were aware of, or considered, those circumstances does not make them a reason for their decision. This is not a case of a Council not being prepared to pay Award or Agreement entitlements or seeking to discriminate against its employees by reason of those entitlements. Rather, it is a case of a Council, that is required by law to engage in a competitive tendering process, accepting the most competitive tender which met the objective criteria it specified.” 20 Turning then to the facts which it is contended justified the inference drawn by the Commission in Court Session at [40 and 41], the following primary facts appear to be the basis from which the inference was drawn— 1. The fact that BCE was incorporated less than a month after the conclusion of the 2001 agreement. 2. The fact that relevant BRM staff were then made redundant. 3. The fact that BRM staff were offered employment either with BCE on reduced terms or to continue with BRM, but in different employment. 4. The fact that existing employees of BRM were offered what was effectively the same work for BCE but at lesser remuneration. 5. The fact that when BCE was incorporated (as I have said, something less than one month after the 2001 agreement was finalised) the respondent was not told of its creation or its purpose. 6. On 9 August 2001, after the 2001 agreement was in the process of finalisation, representatives of BRM indicated that they wished to forge a better relationship with the respondent without telling the respondent of the plans for the incorporation of a function of BCE. 21 The appellant contends that other competing factors should have been taken into account in determining whether or not an inference should be drawn. In particular, it is said that the memo from Mr Schaap, reproduced earlier in these reasons, indicates that BCE was being incorporated for a legitimate reason, namely, to extend the existing catering facilities outside the boundaries of the resort and into the public domain. That required BCE to be competitive with other caterers, which it could not do if its employees were governed by the 2001 agreement. 22 On this ground of appeal I would, finally, refer to the submission by counsel for the appellant that the findings of the Commission in Court Session amount to a finding of conspiracy to subvert the effect of the 2001 agreement. In that respect, it is important to note that nowhere in the reasons of the Commission in Court Session is there any reference to a conspiracy to defeat the effect of the 2001 agreement, nor is there any specific finding of moral delinquency, grave or otherwise, concerning the creation of BCE. At its highest, the inference drawn by the Commission in Court Session was that the creation of BCE was to reduce the terms and conditions of staff employed in the new facilities so as to have a wage structure comparable to catering services performed outside the resort. Those findings, in my view, fall well short of a finding that there was either an unlawful conspiracy or moral delinquency of the kind submitted by the appellant. 23 The next aspect of this ground of appeal relates to the way in which BCE was to operate. By a labour hire agreement dated 31 December 2001, BCE agreed to provide personnel to BRM in accordance with the terms of a written agreement. Amongst the terms and conditions of that agreement it is provided— “4. Rates For the first 12 months of the term, in consideration of the provision of the personnel, BRML agrees to pay to BCE the relevant rates and all other costs as determined by the Restaurant, Tearoom and Catering Workers Award 1978, BCE Australian Workplace Agreement or other industrial instrument.” 24 In my view, it is clear from that provision of the agreement that it was intended that BCE would pay its employees on the lesser terms and conditions of the RTC award or AWA agreements and provide employees to BRM on the same basis. The effect of that agreement was that employees provided to BRM by BCE would not be governed by the 2001 agreement and, therefore, would be employed on less advantageous terms and conditions. The terms of the labour hire agreement would indicate that BCE was to provide labour to BRM at cost so that the provision of labour would not produce any profit to BCE. Again, in my view, this arrangement was of significance in determining whether the drawing of the inference, to which this ground of appeal refers, was open as a matter of law. 25 A second agreement was also entered into between BCE and BRM for the provision of corporate services by BRM to BCE. Recitals A and B of the Corporate Services Agreement provide— “Recitals A BRML conducts human resources, finance, information technology, legal, marketing, maintenance, management and other general corporate services (the services) for companies within Burswood group. Such an arrangement ensures the most economic use of resources within the Burswood group. B BCE, a member of the Burswood group, wishes to appoint BRML to provide the services to BCE on the terms and conditions of this agreement, and BRML accepts such appointment on these terms.” 26 From the terms of the Corporate Services Agreement it is apparent that BRM was to carry out all of the corporate services for BCE. The consideration for the provision of those services is contained in cl 1.4 of the agreement— “1.4 Consideration BRML will provide the Services to BCE in consideration for labour services separately provided by BCE to BRML and in consideration of the payment of a quarterly fee to BRML by BCE which equates to BRML’s costs of providing the Services.” 206 WESTERN AUSTRALIAN INDUSTRIAL GAZETTE 83 W.A.I.G. 27 An analysis of the Corporate Services Agreement indicates that the provision of these services was intended to be costs neutral to BCE. Accordingly, from the agreements referred to, there is no basis upon which BCE was to have an independent income or profit apart from any outsourced work obtained in the open market. In other words, the terms of these agreements were such that the only profit to be derived from BCE would come from catering services performed by BCE in the open market. 28 One of those events for which BCE catered was known as the “Big Day Out” (“BDO”), and the evidence before the Commission in Court Session from Philip Anthony Thow was that even with a cost structure based on the RTC award, it would be difficult for BCE to make a profit. 29 The evidence also indicated that the funding for payment by BCE to BRM for the services provided under the service agreement would be by way of a loan from another company in the Burswood group. The evidence was that such a loan and payments from BCE to BRM were merely internal paper transfers. 30 All of the facts of the matter had to be taken into account by the Commission in Court Session in determining whether to draw the inferences in pars 40, 41 and 48 of the reasons of the Commission in Court Session. Particularly at par 48, the Commission in Court Session held— 48. The evidence, therefore shows that a reason to create BCE was indeed, as the Union has alleged, to reduce the terms and conditions of employment of staff providing food and beverage services in at least the new facilities and to have a wage structure comparable to catering contractors for work performed outside the Resort. However, we do not accept that the evidence supports the action taken to reduce the terms and conditions of employment of staff providing food and beverage services in at least the new facilities in the way that it happened. As the Union points out, no direct evidence was given in the proceedings as to the reason why BCE was created. Ms Dramatis testified that on 29 August 2001 she met with the managing director of the group of companies, Mr Schaap who informed her that he was considering setting up a new company to provide catering and entertainment services. Ms Dramatis says that Mr Schaap had previously discussed with her and others at various management meetings that he wished to expand the role of catering and entertainment beyond the Resort.” 31 In my view, taking all of the evidence into account, the conclusion reached by the Commission in Court Session in pars 41, 42 and 48 of the reasons were conclusions properly open on the evidence. In my view, the Commission in Court Session appreciated the serious nature of the inference that it was asked to draw and did not apply the wrong test in law in drawing such inference. 32 I then turn to the second ground of appeal. The second ground of appeal, set out earlier in these reasons, is directed towards what is said to be the Commission’s failure in making the new award to properly apply wage fixing Principle 10. 33 Wage fixing Principle 10 is contained in a general order of the