ACCC Loses Appeal Against Builder and Union, Over $1 Million in Fines Withdrawn

Builders J Hutchinson and the CFMEU were fined after a contract was terminated following a threat from the union but the High Court has quashed the convictions.

Thousands of union members take part in a protest rally on Sept. 18, 2024 in Melbourne, Australia. Darrian Traynor/Getty Images

The Australian High Court has overturned convictions against both a construction firm and the Construction, Forestry and Maritime Employees Union (CFMEU) for breaching the Competition and Consumer Act after the firm cancelled a waterproofing contract in response to the union’s threat of industrial action.

In 2016, building company J. Hutchinson was the head contractor on a construction project in Queensland known as Southpoint A. It subcontracted Waterproofing Industries Qld for the waterproofing.

An enterprise bargaining agreement between Hutchinson and the CFMEU obliged the builder to consult the union about the appointment of subcontractors, and Waterproofing Industries did not have an enterprise bargaining agreement with the CFMEU.

When the subcontractor performed work at the project site in April and May 2016, a union representative told the site’s project manager that it would “sit the job down” if Waterproofing Industries was allowed back on site. Hutchinson then terminated the subcontract in a letter dated July 26, 2016.

A section of the Act prohibits a business from making an arrangement—or arriving at an understanding—with unions that prevents it from buying goods or services from a third party. This is aimed at preventing “collusion between firms and unions,” as stated in the legislation.

In 2020, the Australian Competition and Consumer Commission (ACCC) took both parties to court and won.

As a result, the judge imposed a fine of $300,000 (US$188,000) on Hutchison and $750,000 on the CFMEU, based on the finding that Hutchinson and the CFMEU had indeed made an arrangement or arrived at an understanding in which Hutchinson would terminate the subcontract.

Misunderstanding of ‘Understanding’

Hutchinson and the union both appealed to the full bench of the Federal Court, which overturned the lower court’s decision, relieving both parties of the obligation to pay a fine.

The ACCC then appealed that decision to the full bench—five judges—of the High Court on the basis that, while there was no actual arrangement between the two parties, there was an “understanding.”

However, the High Court emphatically disagreed, with just one judge dissenting.

“At no point did Hutchinson give the CFMEU any verbal (or written) assent that it would terminate the subcontract or cease to acquire services from the subcontractor,” the majority decision stated.

“To the contrary, prior to termination of the subcontract, Hutchinson’s project manager tried to assist the subcontractor to obtain an enterprise bargaining agreement because he believed that, if one was obtained, the subcontractor would be ‘allowed back on site.’

The judges also noted that there was no evidence of any “communication, express, or tacit, between [Hutchinson and the CFMEU] by which the parties reached a common mind.”

“There is no special category of understandings that are arrived at because of a threat or, more specifically, a threat of industrial action,” the judges said.

“The act of a person succumbing to a threat does not, without more, amount to arrival at an understanding to do what is demanded.”

Effectively, because Hutchison acted unilaterally after the threat was made, and did not discuss what it was going to do with the union, no understanding had been arrived at, and therefore no law had been broken.