IN THE TASMANIAN INDUSTRIAL COMMISSION

Decision Appealed - See T1946

Industrial Relations Act 1984

Introduction

This long service leave dispute between Mr J. Wallace and Mr J. McAra (the employees) and Coats Patons Pty Ltd (the Company) was referred to the Commission by the Secretary for Labour (the Secretary) pursuant to Section 13(2) of the Long Service Leave Act 1976.

Subsequently the matter was referred to me in accordance with Section 15(1)(e) of the Industrial Relations Act 1984.

The circumstances which gave rise to this dispute was the refusal by the Company to recognise as service, for the purposes of calculating long service leave entitlements in accordance with the Long Service Leave Act 1976 (the Act), the respective periods of employment undertaken by the employees at Baldwins Limited in the United Kingdom prior to their transfer to Coats and Baldwins (Australia) Ltd.

The employment facts are as follows:

MR WALLACE

9/10/1950 commenced Patons and Baldwins Limited UK
13/5/1957 commenced Patons and Baldwins (Australia) Ltd
31/10/1987 retired

MR McARA

26/9/1955 commenced Patons and Baldwins Limited UK
18/10/1966 commenced Patons and Baldwins (Australia) Ltd
31/10/1987 retired

In relation to those facts Mr Wallace claimed 3.847 weeks long service leave and Mr McAra 7.5203 weeks; being the calculated pro rata entitlement for service completed in the UK. The money amounts are $2223.48 and $5439.20 respectively.

Mr Williams representing the Secretary assisted the Commission and the parties by outlining the results of his investigations in this matter. His entire report is incorporated in transcript.

In discussing the issues in this matter, Mr Williams posed this question:

"Is employment in another country with a corporation which is associated to the corporation in Tasmania deemed to be employment for the purposes of the Act?"

Transcript p.7

The Secretary in supporting the claim of the employees obviously considers that it is. Mr Williams said that the Secretary based his conclusions on the advice of the Solicitor-General and the most recently decided case in International Computers (Australia) Pty Ltd v Weaving1 (the Weaving Case).

The Company, represented by Mr Smith of the Tasmanian Confederation of Industries, contended inter alia that the question of overseas service, where the contract of employment was first entered into outside of Australia, has not been dealt with authoritatively by tribunals in this country.

To support that assertion, he referred me to paragraph 36/205 of the Australian Law Reporter which states:

"This question has not been dealt with authoritatively by Australian industrial tribunals, except to the limited extent of Timken's case, and see also International Computers (Australia) Pty Ltd versus Weaving."

Subsequently Mr Smith indicated that in the NTIA Long Service Leave Brochure the following question was posed:

"Does an employee, who started employment with a company overseas before transferring to a subsidiary or holding company in Australia, receive credit for his overseas service for the purposes of long service leave?"

And the answer:

"This question has not been dealt authoritatively by Australian industrial tribunals, except to the limited extent of Timken's case."

Similarly, the Victorian Department of labour advised the Company, through its solicitors, that the question in issue had not been dealt with. The appropriate extracts of the advice forwarded by the Victorian Department are as follows:

"The question of overseas service being counted for long service leave purposes, has not been dealt with authoritatively by Victorian or Australian industrial tribunals.

The few cases that have been decided that suggest that where an employee is engaged under a contract of employment made within Australia, and the worker performs part of his or her service with the same employer or a related company overseas, and is subsequently transferred back to Australia, then the total period of employment, including the overseas segment should be counted for long service leave purposes."

It should be recognised generally long service leave is not an entitlement in overseas countries.

Transcript pp.91-93

Mr Smith submitted that in the decided cases relied upon by the Secretary and the Solicitor-General, the contract of employment was first made in Australia.

He sought to distinguish those circumstances from those in this case where the originating contract of employment was made in the United Kingdom.

At the crux of the dispute is whether or not Sections 5, 6 and 7 of the Long Service Leave Act 1976 have applications to the respective periods of employment undertaken by the employees with the Company in the United Kingdom.

The relevant extracts from those particular sections of the Act are as follows:

"(5) Where an employee transfers from employment with a corporation to employment with a corporation associated with that corporation -

(a) the continuity of his employment should be deemed not to have been broken by reason only of his so transferring; and

(b) the period of his employment with the corporation to employment with which he so transfers shall be deemed to include the period of his employment, and any period deemed to be a period of employment, with the corporation from employment with which he so transfers.

(6) For the purposes of subsection (5) a corporation shall be deemed to be associated with another corporation if those corporations are related to each other within the meaning of Section 7(5) of the Companies (Tasmanian) Code.

(7) Without prejudice to the provisions of Subsection (6) where -

(a) ...

(b) ...

(c) the employee believes on reasonable grounds that he has remained in employment with the same employer,

this Act has effect in relation to that transfer as if those corporations were associated corporations within the meaning of subsection (5).

Section 7(5) of the Code states -

(a) ...

(b) is a subsidiary of another corporation

(c) ...

that first mentioned corporation and that other corporation shall for the purposes of this Code be deemed to be related to each other."

Underlining mine

As parties in the proceedings agreed that the employing corporations in England and Australia are related to each other and are therefore associated corporations within the meaning of subsection (5) of the Act, I have decided not to include in this decision the bulk of the material assembled by the Secretary which unequivocally establishes that fact.

On that point Mr Smith said:

"... it has accordingly been conceded by the Company that the service by the two employees in the United Kingdom was service with a related corporation within the meaning of the Act."

Transcript p.49

Similarly it was acknowledged by Mr Smith that the employees transferred. He said:

"As I have indicated to you Mr Commissioner, that it is not now contested by the Company, because in any case by virtue of section 5 subsection (V) of the Long Service Leave Act, 1976 it states that where employment is transferred and I don't think the Act necessarily means a transfer in the normal context of an employee/employer relationship, but in any case I'm not going to pursue that point.

It also goes on to say that the continuity of his employment shall be deemed not to have been broken by reason only of his so transferring.

So the point is not an issue."

Transcript p.47

Accordingly, the platform from which this matter is further developed is that the employment of Mr McAra and Mr Wallace was continuous and that it was with associated corporations as referred to in Section (6) of the Long Service Leave Act 1976.

The Case For The Employees

Mr Williams, in support of the case for the employees, drew attention to a November 1978 letter from the Secretary to the Company indicating that overseas service is to be counted for long service leave entitlements.

At that time the Secretary also made reference to a 1957 Solicitor-General opinion supporting the recognition of overseas service.

The relevant extracts from the Secretary's letter, read into transcript, are as follows:

"I must say the question of continuity of employment is one of fact. If therefore the employment of an overseas employee is not terminated prior to his commencing work in Australia all continuous employment including that overseas, will be counted towards determining long service leave entitlements under the Tasmanian Act."

and later:

"In 1957 the Solicitor-General expressed opinion, service in this State or elsewhere may be included in calculating the period of service for the purpose of the Long Service Leave Act 1956. As continuity provisions of the 1976 Act are basically similar to those applying in 1957. I am of the opinion the Solicitor-General's advice is still relevant."

Mr Williams added that in forming a view in this matter the Secretary had sought a further opinion from the Solicitor-General which was received by him in June 1988.

That opinion was read into transcript (p13-14) and also tendered as Exhibit DLI2.

In that opinion the Solicitor-General specifically addressed the question of whether employment in another country which is associated with an employing corporation in Tasmania is to be deemed employment for the purposes of the Long Service Leave Act 1976. He said:

In my opinion it is, provided the substantial period of employment (ie Wallace 1957-1987, McAra 1966 to 1987) was served in this State. That the termination of employment occurred in this State (as it did) and that Coats Patons Handknittings and Patons and Baldwins Limited, Darlington, England stand in the necessary relationship required by section 9(v) Tasmanian Companies Code.

I am confident that the dicta of Mr Justice Dixon in Broken Hill South versus Commissioner for Taxation, Australia Timken Pty Ltd versus Stone and in Industrial Computers Australia Pty Ltd versus Weaving are sufficient ground to this conclusion under the Tasmanian Long Service Leave Act 1976.

`The continued attachment to an employer for the given period of time remains the same wherever the service is given.' See Selby's Long Service Level at para.521.

I note however, that what must yet be established in these particular cases, is that the English and Australian companies are sufficiently "associated" for the purposes of section 5(v) and (vi) of the Act of 1976."

Underlining mine

In respect of the last part of the Solicitor-General's opinion; as already indicated the "association" of the respective companies involved is not contested.

The references referred to by the Solicitor-General and adopted by the Secretary require some analysis.

The Weaving and Timken Cases

The Weaving case was an appeal to the Industrial Commission of New South Wales in Court Session against the decision of the Chief Industrial Magistrate ordering long service leave to be paid to a worker whose employment was undertaken in numerous localities other than, and including in New South Wales where the Company was incorporated.

In the appeal proceedings the thrust of the appellant's argument was that if the service of the employee with the various related companies had taken place in New South Wales, then he would have been entitled to long service leave as awarded by the Chief Industrial Magistrate.

The appellant contended that the Magistrate had erred because "the service prior to December 1975" had apart from the period in 1966, been outside New South Wales.

The Commission in Court Session in its deliberations referred to the Timken case where the question of entitlement to long service leave under the New South Wales Act, where the contract of employment was entered into outside New South Wales and an essential portion of the qualifying period of employment was served outside New South Wales, was considered.

In the Timken case it was held:

"... that the benefits provided for in the Act accrue if at the time of the occurrence of the completion, termination or cessation of service, the service which was being performed had a substantial connection with the State of New South Wales."

Underlining mine

Whilst the above finding was referred to in the Weaving case, the reference was drawn from the decision in the Timken case presided over by McKeon, Sheldon, Sheppard JJ, reported in AR (NSW)(1971) pages 246-257.

The principal tenets established in Timken are that in New South Wales the relevant section of the Long Service Leave Act there operates on the completion, termination or cessation of service, provided that the service had a substantial connection with that State.

Their Honours in the Weaving case put it this way:

"It would seem to us strange if the Act were intended to apply only to those employees who had in fact performed the whole of their service in New South Wales subject to temporary absences.

In these circumstances it might be thought that the legislature would regard as critical, in the consideration of what events or circumstances need to be connected with New South Wales, the actual occasion or event which gives rise to liability to give leave or to pay money. That event is the completion of 15 years continuous service or the termination or cessation in the circumstances mentioned in the later provisions of the section of the service in less than 15 but more than 5 years in the one case or 10 years in the other. The event upon which the section operates is such completion, termination or cessation. We will refer to this as "the relevant event". Unless there is such a completion or such termination or cessation there is no liability arising under the Act and nothing upon which the Act operates. The occurrence of the relevant event in circumstances where the service which is being performed is substantially, although not necessarily predominantly, connected with New South Wales is clearly sufficient to justify the validity of the Act. The question arises whether the legislature required any further connection with New South Wales before liability was in fact to arise.

1981 2 NSW LR at p.69

In short it was concluded that liability under the Long Service Leave Act arises upon the happening of an event, the relevant event, that is the completion, termination or cessation of the service provided that the service was substantially, although not necessarily, predominantly, connected with New South Wales.

It was held in that case that the service must be connected with the State where the long service provisions have application, however their Honours said that the appellants in the Weaving case go too far in their submissions:

"... when they involve the proposition that the service (subject to temporary absences) which is to be rewarded must be performed entirely in New South Wales. We think that the benefits provided for in the Act accrue if at the time the relevant event occurs (that is, completion, termination or cessation) the service which was being performed up to that time has a substantial connection with this State. This interpretation seems to us to accord with the purpose and policy of the Act without being in any way inconsistent with its language. It is to be assumed that the legislature intended the statute to bear a meaning which would have regard to the practical situation in industry and would leave as few anomalies as possible. We believe that the interpretation we favour achieves this result. This view does not make it necessary, as in the case of workers' compensation legislation, that the relevant event must occur within the State but it is essential that, at the time of its occurrence, the service, looked at as a whole, may fairly be said to be to a substantial extent New South Wales service. Whether it is or not must be a question of fact and degree in each case. If, however, the service is actually being performed here at the time when the relevant event occurs, this is strong although not conclusive evidence that the service has a substantial connection with New South Wales. While we realise, on this pragmatic test, that there will be some cases close to the border, we see no difficulty in the present case."

and later:

"Conversely there may be cases on non-entitlement where the relevant occurs here but the service, looked at as a whole, is such as it cannot be said to be connected with New South Wales to a substantial extent. In summary we find that, while the place where the relevant event occurs is of important evidentiary significance, the critical test of liability is that, when that event occurs, there is service which, when looked at as a whole is substantially connected with New South Wales."

Underlining mine (No.2)(1971)AR(NSW) 251-254

The critical conclusions in Timken that the service has to have substantial connection with the State, in this case it would be Tasmania, was the subject of further comment in the Weaving case.

Whilst their Honours endorsed the findings in Timken, they went further on the question of substantial connection of service having to be established before the Long Service Leave Act applied.

They said:

"One further aspect which could be said to affect this appeal arises from Timken's case (1971) AR (NSW) 246, at p.253. In our view, it would put the position too highly if it were to be said that service did not fall within the purview of the Act unless the total service was to be a substantial extent New South Wales service. In this regard we would differ, with respect from a view which one conclusion in Timken's case (1971) AR (NSW) 246 may suggest in the reference to it being that, at the time of the occurrence of the relevant event, the service, looked at as a whole, may fairly be said to be a substantial extent New South Wales Service.

Any requirement dependent on some proportion of what can be termed New South Wales service relative to the worker's total service, would introduce, by judicial interpolation, a factor for which we see no basis in the terms of the statute. There can be no question that the employment relationship and circumstances overall need to be considered in determining whether or not the service, at the relevant time, was New South Wales service, we see no room, however, for a test which is based on the length of service of itself."

Underlining mine (No.2) (1981) NSWLR at p.76

Prima facie the findings in Weaving and Timken support the position of the employees in this matter.

There, not only was the service of the employees, in the context of the Timken case substantially connected with Tasmania, but when regard is had for Weaving, there is no doubt at all, that at the time of the "relevant event", the service was connected with Tasmania.

However, at this point it is necessary to explore Mr Smith's submissions going to the territorial limitations of the Act and the further considerations that arise as a consequence.

Mr Smith referred me to the Weaving decision where their Honours said:

"It is trite that it would be reasonable to read the section as applying to workers under all contracts of employment anywhere in the world and that some territorial limitations must be introduced in the construction of the relevant section."

Transcript p.95

(1981)2NSWLR at p.67

Mr Smith advocated that the Solicitor-General and the Secretary overlooked territorial considerations in reaching their respective conclusions. He said that in order for the UK service to be recognised for long service leave:

" ... clear and express words should be present in the Act before it could be interpreted in such a manner as to take into account the UK service.:

Transcript p.96

Mr Smith submitted that contrary to the Weaving and Timken cases, where the contracts of employment originated in Australia, in this case the contracts were make in the UK.

Mr Smith, in Exhibit S9 Legal Assumptions, sought to demonstrate that the Act does not apply to UK service. That exhibit is as follows:

"Courts approach the interpretation of legislation with a number of basic assumptions in mind. These assumptions are often designated rules, but this is misleading. They are but assumptions and most of them readily give way in the face of an indication in the legislation that it is to operate contrary to them.

These assumptions are based on the expectation that certain tenets of our legal system will be followed by the legislature.

For example, it is not anticipated that parliaments will pass legislation that applies to persons in other countries; hence a presumption is adopted by the courts that legislation will not have extraterritorial effect."

Transcript p.104

Mr Smith said that these assumptions could alter only if the legislation provides something specifically contrary to them.

In other words the Act would have to say that it is intended to apply, in this case. To service of employees undertaken outside of Australia.

The fact that the Act doesn't do that means that it was not intended to apply to that service and therefore the appropriate legal assumption should be adopted by me.

The following extracts from Exhibit S9 add to the arguments advanced by Mr Smith:

"Legislation is presumed not to have extraterritorial effect. One of the clearest statements of this presumption is provided by O'Connor J. in Jumbunna Coal Mine No Liability verses the Victorian Coal Miners' Association."

And it goes on to say:

"In the interpretation of general words in a statute there is always a presumption that the legislature does not intend to exceed its jurisdiction. Most statutes, if their general words are taken literally in their widest sense, would apply to the whole world, but they are always read as being prima facie restricted in their operation within territorial limits."

The logic of Mr Smith's reasoned submissions in respect of the territorial authority or limitations of the Act must be tested.

It is clear from the Timken case that an act of parliament operates independently of the will of the parties to the contract of employment wherever the contract has been made and whatever its proper law.

In considering the question of territoriality I prefer the view expressed by Timken by McKeon, Sheldon and Sheppard JJ. Their sucking view was expressed as follows:

"Although, as we have said, the proper law of the contract of employment in this case was the law of Victoria that does not matter because. Where the provisions of the Act prescribed as conditions precedent to entitlement to leave (and to payment for leave) are fulfilled so as to make the Act operate in a particular case, the Act so operates independently of the will of the parties to the contract, and this is so wherever the contract has been made and whatever its proper law. Nor was it argued, as indeed it could not have been, that the New South Wales legislature could not attach to the happening of an event in New South Wales legal consequences of the doing of an act outside New South Wales. What was argued was whether that legislature had done so in such a way as made such consequences attach in this case. Thus the question which has arisen is not whether the Long Service Leave Act was within the territorial competence of the legislature of this State; the question is one of the construction of that Act. It is not a question of whether that legislature could, by its Long Service Leave Act, make service in employment outside New South Wales count for the purpose of a worker's qualifying for leave, but whether it has done so."

and later:

"At this point we should reiterate that we are not concerned in this case with any question of legislative power, about which there could be no argument. If, contrary to the appellant's argument, `service' in the section does comprehend some service or, for that matter, all service outside New South Wales then it is clearly within the competence of the New South Wales Parliament to enact that leave shall be afforded in the circumstances set out in the section provided of course there is otherwise some nexus or connection with New South Wales. It was emphasised by Dixon J. (as he then was) in Broken Hill South Ltd v. Commissioner of Taxation (N.S.W.) that `it is within the competence of the State legislature to make any fact, circumstance, occurrence or thing in or connected with the territory the occasion of the imposition upon any person concerned therein' of a liability and that `it is of no importance upon the question of validity that the liability imposed is ... altogether disproportionate to the territorial connection'."

Underlining mine 1971 AR 246 at pp.250-251

In Broken Hill South Ltd v. Commissioner of Taxation, Dixon J, (as he then was) (Exhibit DLI 2) dealt with the power of the State to make laws.

His Honour said, inter alia:

" ... The power to make laws for the peace, order and good government of a State does not enable the State Parliament to impose by reference to some act, matter or thing occurring outside the State a liability upon a person unconnected with the State whether by domicil, residence or otherwise.

But it is within the competence of the State legislature to make any fact, circumstance, occurrence or thing in or connected with the territory the occasion of the imposition upon any person concerned therein of a liability to taxation or of any other liability. It is also within the competence of the legislature to base the imposition of liability on not more than the relation of the person to the territory. The relation may consist in presence within the territory, residence, domicil, carrying on business there, or even remoter connections. If a connection exists, it is for the legislature to decide how far it should go in the exercise of its powers.

As in other matters of jurisdiction or authority courts must be exact in distinguishing between ascertaining that the circumstances over the power extend exist and examining the mode in which the power has been exercise. No doubt there must be some relevance to the circumstances of the power. But it is of no importance upon the question of validity that the liability imposed is, or may be, altogether disproportionate to the territorial connection or that it includes many cases that cannot have been foreseen."

Underlining mine 1936 56 CLR (1936-1937) 337 at p.375

Obviously, the Solicitor-General and the Secretary had regard to the finding in Dixon J.

Therefore if I adopt, as I do, the findings in the Timken and Broken Hill South cases, the question of territorial limitations can be set aside as being irrelevant in so far as the ability of the State legislature to make laws recognising certain eventualities even is those eventualities invoking the power of the Act, occur outside Tasmania,

That is to say, having regard to Dixon J. it is within the power of the State legislature to provide, as it has, in the Long Service Leave Act for the recognition of service with related corporations. However, there can be no argument that the Tasmanian Long Service Leave Act does not apply to employees in the UK where the service of those employees is totally unconnected with this State.

Accordingly territoriality should be viewed in that way. Not that the Act could not apply to the service of the employees once they are employed with a related corporation in Tasmania, but whether it should with respect to all prior service.

In that regard I am of the opinion that the critical test to be applied comes from the Weaving and Timken cases where their Honours concluded that some connection or nexus of the service, in this case UK service, to the state must be able to be established.

In Timken it was held that the connection must be substantial. In the Weaving case their Honours, whilst not endorsing the requirement of substantiality, nevertheless concluded that a connection with the State must be there.

Viewed in that way the reference in Weaving to the application of extra territorial limitations to the construction of the Act is put into proper perspective.

It is my opinion that the Act does not apply extra territorially to service not connected with the place where the legislature has provided in the Long Service leave Act for the recognition of that service with an associated corporation.

In my opinion therefore the critical test of connection of service, as I will refer to it, with Tasmania, must be applied in this case.

Having regard to what I have said thus far and having regard to the tenets in the Timken and Weaving cases and the associated references, I consider it would be going too far to say that the prior service in the UK is connected with Tasmania.

I therefore conclude that the UK service of the employees in this matter was unrelated service for the purposes of the Long Service Leave Act 1976.

The direction I have taken in this decision is reinforced when regard is had to the findings in Mynott and Others v. Barnard which was referred to in the Weaving case. It was held in that case (reported in 1939, 62 CLR at pages 68 to 94) that an Act of Parliament cannot apply universally all over the world. Some territorial limitations must be introduced in the construction of the relevant section, in this case the appropriate section of the Tasmanian Long Service Leave Act.

Having regard to all I have said, and for the reasons stated, the application by the employees is refused.

R.K. Gozzi
COMMISSIONER

1 [1981] 2 NSW Law review Report p.64