[2014] FWCFB 7447

The attached document replaces the document previously issued with the above code on 27 November 2014.

By correcting a typographical error at paragraph [20].

Annastasia Kyriakidis

Associate to Justice Ross, President

Dated 2 February 2015.

Fair Work Act 2009
s.604—Appeal of decision

Appeal against decision [[2014] FWC 3974] of Senior Deputy President Richards at Brisbane on 19 June 2014 in matter number C2014/3197 - principles of construction of agreements - no appellable error - no public interest - permission to appeal refused.

Introduction

[1] The Australasian Meat Industry Employees Union (Appellant) applied to the Fair Work Commission (Commission) under s.739 of the Fair Work Act 2009 (the FW Act) for the Commission to deal with a dispute in accordance with the dispute settlement procedure in the Golden Cockerel Certified Workplace Agreement 2012 (Agreement). 1 The dispute concerned a decision by Golden Cockerel Pty Ltd (Respondent) to alter working hours’ arrangements, in particular those affecting Mr Tony Menz and Mr Ian Shaw,2 consequent upon changes made to distribution processes by Coles Supermarkets Australia Pty Ltd, a major client of the Respondent.3

[2] The central issue in the resolution of the dispute was the competing constructions of the effect of clauses 1.10, 3.71 (e) and (f), 4.1.3, 4.1.6, 4.1.7 and 4.4 of the Agreement. 4 A further issue raised by the dispute concerned whether the Respondent had complied with its obligations under the model consultation term as set out in schedule 2.3 of the Fair Work Regulations 2009 which is taken to be a term of the Agreement.5

[3] The dispute was determined by Senior Deputy President Richards in favour of the Respondent for the reasons set out in his Honour’s decision of 19 June 2014 (Decision). 6 In summary the Senior Deputy President concluded that on a proper construction of the relevant provisions of the Agreement the Respondent:

• was entitled to alter the start time of Mr Menz and Mr Shaw in accordance with the Agreement;



• can direct an employee to perform reasonable overtime;



• has no obligation to maintain an employee’s shift rosters and allowances where operational or business reasons necessitate changes; and



• had conformed to the requirements of the consultation clause in the Agreement in explaining the changes to the employees likely to be affected. 7

[4] By notice of appeal lodged in the Commission on 2 July 2014 the Appellant seeks permission to appeal the Decision.

Nature of the appeal

[5] An appeal of a decision is not as of right and permission to appeal must first be obtained. 8 Subsection 604(2) requires the FWC to grant permission to appeal if satisfied that it is ‘in the public interest to do so’. The task of assessing whether the public interest test is met is a discretionary one involving a broad value judgment.9 The public interest is not satisfied simply by the identification of error, or a preference for a different result.10 In GlaxoSmithKline Australia Pty Ltd v Makin a Full Bench of Fair Work Australia identified some of the considerations that may attract the public interest:

“... the public interest might be attracted where a matter raises issue of importance and general application, or where there is a diversity of decisions at first instance so that guidance from an appellate court is required, or where the decision at first instance manifests an injustice, or the result is counter intuitive or that the legal principles applied appear disharmonious when compared with other recent decisions dealing with similar matters...” 11

[6] Other than the special case in s.604(2), the grounds for granting permission to appeal are not specified but examples of considerations which would usually justify the grant of permission to appeal include that the decision is attended with sufficient doubt to warrant its reconsideration; and that substantial injustice may result if leave is refused. 12

[7] The nature of the decision that is the subject of this appeal depends on a consideration of the determinations the Commission was required to make. In this case the Senior Deputy President was resolving a dispute by arbitration by answering questions that involved interpreting the Agreement. There is no discretion involved in such a task. It follows therefore that, if permission to appeal is granted, we must determine whether the interpretation of the Agreement adopted by the Senior Deputy President is correct. 13 

[8] Insofar as the Decision resolved a dispute about whether the Respondent consulted with employees in accordance with the model consultation term, that part of the Decision was one in which the Senior Deputy President was required to be satisfied of a particular state of affairs. It required the decision maker to form a particular opinion, albeit by reference to the facts and circumstances of the case. Therefore that part of the Decision may be described as a discretionary decision, 14 and is amenable to appeal on grounds of the kind identified in House v King.15

Appeal grounds

[9] We do not propose to reproduce the many grounds of appeal advanced by the Appellant. It is sufficient that we summarise them as follows.

[10] Grounds 1, 3, 4, 6, 7 and 10 are concerned with the construction of the Agreement preferred by the Senior Deputy President, the application by him of relevant principles and authorities concerning the construction of such instruments and his application and use of extrinsic material as an aide to construction.

[11] Ground 2 is concerned with the Senior Deputy President’s conclusion that the Respondent had met its obligation under the Agreement to consult.

[12] Ground 5 is concerned with an alleged failure to take into account relevant considerations, namely that the Senior Deputy President did not take into account the impact of the change on the employees or whether the Respondent had acted reasonably and fairly in implementing the change having regard to the bounds of “legitimate managerial prerogative and discretion”.

[13] Ground 8 is concerned with criticisms of the Senior Deputy President’s fact finding in relation to both the construction of certain provisions of the Agreement and as to consultation. Specifically it is said that particular findings were contrary to the evidence, against the weight of evidence and made in a perverse and capricious manner without regard to the material before the Senior Deputy President.

[14] Ground 9 alleges a failure to take into account and correctly apply the status quo provision of the dispute settlement clause of the Agreement.

[15] Ground 10 is a procedural fairness ground and alleges a failure by the Senior Deputy President to accord the Appellant a “due hearing”.

[16] Ground 11 is concerned with a failure by the Senior Deputy President to address the issues of law and the arguments advanced in relation to those issues.

[17] Ground 12 alleges that the Senior Deputy President unreasonably exercised the statutory power conferred on the Commission.

[18] Before turning to the decision at first instance we propose to consider the general approach to the construction of enterprise agreements.

Principles of construction of agreements

General approach

[19] The general approach to the construction of instruments of the kind at issue here is set out in the judgment of French J, as he then was, in City of Wanneroo v Australian Municipal, Administrative, Clerical and Services Union  16 (Wanneroo):

“The construction of an award, like that of a statute, begins with a consideration of the ordinary meaning of its words. As with the task of statutory construction regard must be paid to the context and purpose of the provision or expression being construed. Context may appear from the text of the instrument taken as a whole, its arrangement and the place in it of the provision under construction. It is not confined to the words of the relevant Act or instrument surrounding the expression to be construed. It may extend to ‘...the entire document of which it is a part or to other documents with which there is an association’. It may also include ‘... ideas that gave rise to an expression in a document from which it has been taken’ - Short v FW Hercus Pty Ltd (1993) 40 FCR 511 at 518 (Burchett J); Australian Municipal, Clerical and Services union v Treasurer of the Commonwealth of Australia (1998) 80 IR 345 (Marshall J). ” 17

[20] To this we add the oft-quoted observations of Madgwick J in Kucks v CSR Limited  18 that a narrow pedantic approach to interpretation should be avoided, a search of the evident purpose is permissible and meanings which avoid inconvenience or injustice may reasonably be strained for, but:

“. . . the task remains one of interpreting a document produced by another or others. A court is not free to give effect to some anteriorly derived notion of what would be fair or just, regardless of what has been written into the award. Deciding what an existing award means is a process quite different from deciding, as an arbitral body does, what might fairly be put into an award. So, for example, ordinary or well-understood words are in general to be accorded their ordinary or usual meaning.”  19

[21] Although their Honours were each dealing with the proper interpretation of an award, the same principles are apt to apply to the interpretation of enterprise agreements 20.  For example, similar observations were made in Amcor Limited v CFMEU21 (Amcor):

“Clause 55.1.1 must be read in context. It is necessary, therefore, to have regard not only to the text of cl 55.1.1, but also to a number of other matters: first, the other provisions made by cl 55; secondly, the text and operation of the Agreement both as a whole and by reference to other particular provisions made by it; and, thirdly, the legislative background against which the Agreement was made and in which it was to operate.” 22

[22] The fact that the instrument being construed is an enterprise agreement is itself an important contextual consideration. As French J observed in Wanneroo:

“It is of course necessary, in the construction of an award, to remember, as a contextual consideration, that it is an award under consideration. Its words must not be interpreted in a vacuum divorced from industrial realities - City of Wanneroo v Holmes (1989) 30 IR 362 at 378-379 and cases there cited. There is a long tradition of generous construction over a strictly literal approach where industrial awards are concerned - see eg George A Bond and Co Ltd (in liq) v McKenzie [1929] AR (NSW) 498 at 503-504 (Street J). It may be that this means no more than that courts and tribunals will not make too much of infelicitous expression in the drafting of an award nor be astute to discern absurdity or illogicality or apparent inconsistencies. But while fractured and illogical prose may be met by a generous and liberal approach to construction, I repeat what I said in City of Wanneroo v Holmes (at 380):

“Awards, whether made by consent or otherwise, should make sense according to the basic conventions of the English language. They bind the parties on pain of pecuniary penalties.” 23

Use of extrinsic material as an aide to interpretation

[23] As is often the case in disputes that involve the construction of an enterprise agreement, parties will seek to place reliance of a variety of extrinsic material as an aide to interpreting the provisions of an agreement in issue. The use to which extrinsic material of the surrounding circumstances may be put to assist in the interpretation of an instrument is set out in the judgement of Mason J in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales  24 (Codelfa). In Codelfa his Honour said:

“The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.

It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification.

Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties’ presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract.” 25 

[24] Although Justice Mason’s reasoning in Codelfa has commonly been applied as meaning that ambiguity in an instrument must first be identified before extrinsic material may be admitted as an aide to interpretation, this has not been universally accepted. So much is apparent from the following discussion of Codelfa by Nicholson J in BP Australia Pty Limited v Nyran Pty Limited: 26

“In Ray Brooks Pty Ltd v NSW Grains Board [2002] NSWSC 1049 Palmer J said the effect of dicta from the majority in Royal Botanic is to leave it to inferior Courts to puzzle out whether the decision in Codelfa is consistent or inconsistent with the contextual approach adopted in West Bromwich. Palmer J had earlier drawn a distinction between `the two competing schools of thought’ as to the point in time at which the Court may look at extrinsic evidence in order to construe a contract. One, `the literal approach’, gives primacy to the words of the document so that the starting point in the task of construction is always the text. The competing approach he described as `the contextual approach’ which holds that the words of a document, being no more than symbols of language, can never be reliably understood in isolation from the context in which the words were used. After analysing the reasoning of Mason J in Codelfa , Palmer J concluded that the approach of Mason J would be in complete sympathy with the contextual approach promoted by Lord Hoffman in West Bromwich. He said at par [59]:

`His Honour is not saying: evidence of surrounding circumstances is admissible only if it first appears that the language of the contract is ambiguous. His Honour is saying: evidence of surrounding circumstances is admissible only for the purpose of explaining ambiguous language in the contract and not for the purpose of changing the meaning of clear words.’

On the issue of the point of time in the exercise of construction at which reference to extrinsic evidence is permissible, Palmer J was of the view that Mason J agreed with Lord Wilberforce’s approach in Prenn v Simmonds [1971] 1 WLR 1381 and in Reardon Smith Line Ltd v Yngvar Hansen-Tangen (The Diana Prosperity) [1976] 1 WLR 51, the pith of which he considered was that the time has passed when contracts are isolated from the matrix of facts in which they were set and interpreted purely on internal linguistic considerations. Palmer J also referred to the trend of authority on the issue in New Zealand which he considered showed an endorsement and application of the approach in West Bromwich: cf. DW McLauchlan, `A contract contradiction’, Victoria University of Wellington Law Review, vol 30, 1999, p 175.

I am unable to agree with Palmer J that Codelfa and the passages in West Bromwich can be viewed as entirely consistent. That is not the way in which I understand the relevant portions of Codelfa have been understood and applied in relation to the issue of whether ambiguity is not to be found until the contract in issue has been considered in the matrix of facts in which it is set. In LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd [2003] NSWCA 74 the New South Wales Court of Appeal accepted that Australia had kept while England had discarded the concept that ambiguity is necessary to be shown before one looks at the surrounding circumstances: per Young CJ in Eq, Meagher JA and Hodgson JA agreeing. Academic writing has regarded Codelfa as falling far short of Lord Wilberforce’s apparent position in Prenn on the issue of admission of surrounding circumstances to determine ambiguity: H King, `The admissibility of extrinsic evidence as an aid to contract interpretation: pushing objectivity to absurd limits’, Corporate and Business Law Journal, vol. 6(2), 1994, p 187. Yet the law on this is arguably not clear-cut given that in Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 185 ALR 152 at 155 at par [11] Gleeson CJ, Gummow and Hayne JJ relied upon the statement by Lord Hoffman in Investors Compensation at 912 that the interpretation of a written contract involves `the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract’ and referring by footnote in that context to the reasons of Mason J in Codelfa at 350-352 and Lord Bingham in Bank Credit at 739. Furthermore, it has been said by one Australian text author that `the practice of the courts is to have regard to surrounding circumstances in the form of the factual matrix in virtually all cases’ on the ground that most English words are susceptible of more than one meaning so that difficulty of interpretation is sufficient for that reference to be made: JW Carter, Carter on Contract, Butterworths looseleaf, 2002 at p 28,096 at 12-050.

In LMI the Court of Appeal accepted, however, that the Codelfa doctrine appeared `to be not only that a court uses the surrounding circumstances to aid its interpretation and to put itself in the armchair of the parties to look to see what each knew when it was making the contract, but also that inferences can be drawn from the surrounding circumstances virtually to add terms’: at par [45] citing Codelfa at 353. Of such circumstances the Court of Appeal stated at [44] that `the approach in the Royal Botanic Gardens case itself shows that there is, in fact, a tendency to glean much more from negotiations as surrounding circumstances in Australia than would be permitted in England.’ It may be that there is good reason for the approach in Codelfa to be re-examined both in terms of the appropriateness of the approach and in the light of developments in other common law jurisdictions on the issue. However, given the unequivocal statement by the majority in the High Court in Royal Botanic and the factors I have just referred to, I consider I should proceed on the basis there is not consistency between Codelfa and West Bromwich.” 27

[25] His Honour then summed up the relevant principles to be distilled from Codelfa as follows:

“At the risk of repeating what is said in Codelfa, it follows that the issues arising in this matter should be approached in the following manner.

It is necessary firstly to determine whether the contract has a plain meaning or contains an ambiguity. If the contract has a plain meaning, evidence of `surrounding circumstances’ will not be admissible to contradict the language of the contract. If the language of the contract is `ambiguous or susceptible of more than one meaning’ evidence of `surrounding circumstances’ is admissible to assist in the interpretation of the contract.

The concept of `surrounding circumstances’ is to be understood to be a reference to `the objective framework of facts’. It will include evidence of prior negotiations so far as they tend to establish objective background facts known to both parties and the subject matter of the contract. It will also include facts so notorious that knowledge of them is to be presumed. Additionally it will include evidence of a matter in common contemplation and constituting a common assumption. From the evidence of that setting the parties’ presumed intention may be taken into account in determining which of two or more possible meanings is to be given to a contractual provision. What cannot be taken into account is evidence of statements and actions of the parties which are reflective of their actual intentions and expectations. Objective background facts can include statements and actions of the parties which reflect their mutual actual intentions. That is, evidence of the mutual subjective intention of the parties to a contract may be part of the objective framework of facts within which the contract came into existence. It is the mutuality which makes the evidence admissible.” 28

[26] That the view of Nicholson J about the proper application of Codelfa and its binding of authority was correct seemed to be confirmed by the High Court of Australia in its refusal to grant special leave to appeal in Western Export Services Inc v Jireh International Pty Ltd  29 (Jireh). The decision in Jireh concerned an application for special leave to appeal. In refusing special leave the High Court said:

“The primary judge had referred to what he described as "the summary of principles" in Franklins Pty Ltd v Metcash Trading Ltd[. The applicant in this Court refers to that decision and to MBF Investments Pty Ltd v Nolan as authority rejecting the requirement that it is essential to identify ambiguity in the language of the contract before the court may have regard to the surrounding circumstances and object of the transaction. The applicant also refers to statements in England said to be to the same effect, including that by Lord Steyn in R (Westminster City Council) v National Asylum Support Service.

Acceptance of the applicant's submission, clearly would require reconsideration by this Court of what was said in Codelfa Construction Pty Ltd v State Rail Authority of NSW by Mason J, with the concurrence of Stephen J and Wilson J, to be the "true rule" as to the admission of evidence of surrounding circumstances. Until this Court embarks upon that exercise and disapproves or revises what was said in Codelfa, intermediate appellate courts are bound to follow that precedent. The same is true of primary judges, notwithstanding what may appear to have been said by intermediate appellate courts.

The position of Codelfa, as a binding authority, was made clear in the joint reasons of five Justices in Royal Botanic Gardens and Domain Trust v South Sydney City Council and it should not have been necessary to reiterate the point here.” [Endnotes omitted] 30

[27] However, more recently in Electricity Generation Corporation (trading as Verve Energy) v Woodside Energy Ltd 31 (Woodside) the High Court made the following observation in relation to the construction issue before the Court:

“Both Verve and the Sellers recognised that this Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable business person would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding ‘of the genesis of the transaction, the background, the context [and] the market in which the parties are operating’. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption ‘that the parties ... intended to produce a commercial result’. A commercial contract is to be construed so as to avoid it ‘making commercial nonsense or working commercial inconvenience’.” 32 [Endnotes omitted]

[28] A Full Court of the Federal Court of Australia in Stratton Finance Pty Limited v Webb 33 (Stratton) very recently considered whether there was any inconsistency between Jireh and Woodside. In so doing the Full Court said:

“The above reasons are presupposed upon legitimate contextual surrounding circumstances being available for consideration in the process of contractual construction and interpretation before ambiguity is demonstrated from the words of the agreement alone. That proposition was denied as legally permissible by three justices of the High Court in remarks in the disposition of an application for special leave in Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; 86 ALJR 1. In those remarks, criticism was made of the reasons in Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; 76 NSWLR 603, and in particular the reasons at [14]-[18] concerning the lack of need for ambiguity before resort to legitimate surrounding circumstances in the above-mentioned task. The articulated criticism was that the Court in Franklins (and the courts in the other intermediate appellate decisions referred to at [16] in Franklins) had failed to follow the judgment of Mason J in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; 149 CLR 337, especially at 352.

As the reasons in Franklins stated, the conclusion that ambiguity need not be discovered before any resort to legitimate surrounding circumstances in the relevant task was drawn only from existing High Court authority: Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; 210 CLR 181 at 188 [11]; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; 218 CLR 451 at 461 [22]; Zhu v Treasurer of the State of New South Wales [2004] HCA 56; 218 CLR 530 at 559 [82]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165 at 179 [40] and International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; 234 CLR 151 at 160 [8] and 174 [53]. The Court’s view was reached in the light of the totality of Sir Anthony Mason’s judgment in Codelfa, and considering the clear words of those later binding High Court authorities.

After Jireh, and until this year and the publishing by the High Court of reasons in Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 306 ALR 25; 88 ALJR 447, there was a degree of uncertainty as to whether courts (trial courts and intermediate appellate courts) should follow a clearly articulated position expressed by a number of intermediate courts of appeal around the country as to the proper content and significance of binding High Court authorities, or the view of three justices of the High Court in remarks on a special leave application. In 2013, McLure P called it a “heated controversy” in Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66; 298 ALR 666 at [107]; and see also the remarks of Pullin JA in McCourt v Cranston [2012] WASCA 60 at [14]- [22], and the article by the Hon K Lindgren: ‘The ambiguity of “ambiguity” in the construction of contracts’ (2014) 38 Australian Bar Review 153.

In the notice of appeal, Stratton relied, in effect, on the essential proposition from Jireh: see para 3. This was confirmed at a directions hearing. Jireh however, played no substantive part of the argument, because the question, by the time of submissions being filed, had been settled by the High Court in Woodside. This most recent statement by French CJ, Hayne, Crennan and Kiefel JJ of the principles of contractual construction and interpretation was as follows at [35]:

Both Verve and the Sellers recognised that this Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding ‘of the genesis of the transaction, the background, the context [and] the market in which the parties are operating’. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption “that the parties ... intended to produce a commercial result’. A commercial contract is to be construed so as to avoid it ‘making commercial nonsense or working commercial inconvenience’. (Footnotes omitted)

Recently, in Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184, the New South Wales Court of Appeal (Leeming JA, with whom Ward JA and Emmett JA agreed) expressed the view (at [71]) that [35] of Woodside was inconsistent with Jireh. We agree with that conclusion, and with the reasons in elaboration at [72]-[86], and in particular with the comments concerning Codelfa at [78]-[80].

The resolution of this issue, in the terms of [35] of Woodside, may not, however, resolve all issues as to what are legitimate surrounding circumstances: see, for example, the argument dealt with in QBE Insurance Australia Ltd v Vasic [2010] NSWCA 166 at [20]- [35]; and the comments in Kimberley Securities Ltd v Esber [2008] NSWCA 301 at [4]- [5].” 34

[29] As is apparent from the above, the Full Court in Stratton concluded that Woodside was inconsistent with Jireh at least to the extent that Jirah supports the proposition that ambiguity can be evaluated without regard to the surrounding circumstances and the commercial purpose or objects of the instrument being constructed. In doing so, the Full Court expressly endorsed the explanation of Codelfa by the NSW Court of Appeal in Mainteck Services Pty Ltd v Stein Heurtey SA. 35 It is worthwhile therefore to set out that explanation below:

“To the extent that what was said in Jireh supports a proposition that ‘ambiguity’ can be evaluated without regard to surrounding circumstances and commercial purpose or objects, it is clear that it is inconsistent with what was said in Woodside at [35]. The judgment confirms that not only will the language used “require consideration” but so too will the surrounding circumstances and the commercial purpose or objects. Although the High Court in Woodside did not expressly identify a divergence of approach, Jireh was notoriously controversial in precisely this respect. In Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66; 298 ALR 666 at [107] McLure P referred to the “heated controversy” created by Jireh; see further Kevin Lindgren’s analysis in ‘The ambiguity of “ambiguity” in the construction of contracts’ (2014) 38 Aust Bar Rev 153 at 161-167. It cannot be that the mandatory words ‘will require consideration’ used by four Justices of the High Court were chosen lightly, or should be ‘understood as being some incautious or inaccurate use of language’: cf Fejo v Northern Territory [1998] HCA 58; 195 CLR 96 at [45].

The general issue is important, such that it may be useful to state the position in some little detail.

First, in principle, every legal text requires legal interpretation, in order to ascertain its legal meaning, although there is no real scope for dispute about the interpretation of many legal texts. Professor Wigmore long ago wrote that ‘the process of interpretation, then, though it is commonly simple and often unobserved, is always present, being inherently indispensable’: JH Wigmore, A Treatise on the Anglo-American System of Evidence in Trials at Common Law (3rd ed 1940, Little Brown & Co, Boston), Vol 9 p 180; see now �2459 Chardourne Revision, 1981. Lord Steyn said, in the first John Lehane Memorial Lecture, that ‘it is a universal truth that words can only be understood in relation to the circumstances in which they are used’: J Steyn, ‘The Intractable Problem of The Interpretation of Legal Texts’ [2003] SydLawRw 1; (2003) 25 Syd L Rev 5 at 5. His Lordship regarded this as a ‘fundamental principle of linguistic jurisprudence and legal logic’. I do not think there is any understatement in that statement. McHugh J made substantially the same point in Manufacturers’ Mutual Insurance Ltd v Withers (1988) 5 ANZ Ins Cas 60-853 at 75-343:

‘Until a word, phrase or sentence is understood in the light of the surrounding circumstances, it is rarely possible to know what it means.’

Lord Hoffmann, in a passage adopted by the joint judgment in Marley v Rawlings [2014] UKSC 2; [2014] 2 WLR 213 at [20], had said in Kirin-Amgen Inc v Hoechst Marion Roussel Ltd [2004] UKPC 6; [2005] 1 All ER 667 at [64] that:

‘No one has ever made an acontextual statement. There is always some context to any utterance, however meagre.’

Secondly, very often, language when considered in its context will have a single, clear meaning. Very often, there is no dispute as to the ordinary grammatical or literal meaning of a sentence, and no dispute that that is the legal meaning. Very often, nothing in the context will come close to displacing the ordinary grammatical meaning of the legal text. ‘But not always’: Project Blue Sky v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355 at [78]; Taylor v Owners - Strata Plan No 11564 [2014] HCA 9 at [65].

The legal meaning may diverge from its literal or grammatical meaning, especially in the (self-selectingly contestable) cases that reach courts. Words do not have a ‘natural’ meaning that can be determined in isolation. As Lord Hoffmann said in Charter Reinsurance Co Ltd v Fagan [1997] AC 313 at 391, approved in Campbell v R [2008] NSWCCA 214; 73 NSWLR 272 at [48] (Spigelman CJ, Weinberg AJA and Simpson J agreeing) and Dale v The Queen [2012] VSCA 324 at [73] (Weinberg, Harper and Whelan JJA):

‘[I]n some cases the notion of words having a natural meaning is not a very helpful one. Because the meaning of words is so sensitive to syntax and context, the natural meaning of words in one sentence may be quite unnatural in another. Thus a statement that words have a particular natural meaning may mean no more than that in many contexts they will have that meaning. In other contexts, their meaning will be different but no less natural.’

What is the legal meaning of a promise to sell ‘my D�rer drawing’, if the vendor’s wife owns a D�rer drawing which is on display in their home, and the vendor keeps another secretly in his study? What is the meaning of a gift ‘to my niece Eliza Woodhouse during her life’ in a will, if the testator had no such niece, but a grandniece of that name, and another grandniece, who was illegitimate, who lived with him: cf In re Fish; Ingham v Rayner [1894] 2 Ch 83? What is the meaning of cl 7 of the Wild Dog Destruction Regulation 1999, which provided ‘The Wild Dog Destruction Regulation 1994 is repealed’? Contracts, wills and statutes are very different legal texts, to the process of ascertaining whose legal meaning different rules apply, yet all are based on language, and language is unavoidably contextual. If I may repeat what I wrote of the uncertain meaning of the Wild Dog Destruction Regulation in Resolving Conflicts of Laws (Federation Press 2011), p 13, ‘The meaning of even the seemingly clearest legal text can be unclear, hence the importance of attending to context in the first instance.’

For those reasons, to say that a legal text is “clear” reflects the outcome of that process of interpretation. It means that there is nothing in the context which detracts from the ordinary literal meaning. It cannot mean that context can be put to one side; otherwise the three legal texts mentioned in the previous paragraph would be “clear”.

Thirdly, I would not regard anything in the foregoing as inconsistent with the passage in Mason J’s reasons in Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337 at 352 (which was the focus of Jireh):

‘The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning.’

There is no inconsistency because whether contractual language has a ‘plain meaning’ is (a) a conclusion and (b) a conclusion which cannot be reached until one has had regard to the context. That accords with what was said by Allsop P in Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; 76 NSWLR 603 at [17]:

‘the phrase used by Mason J in Codelfa Construction (at 352) ‘if the language is ambiguous or susceptible of more than one meaning’ does not mean that the susceptibility of the language to more than one meaning must be assessed without reference to the surrounding circumstances ...’

Mason J was indicating that there are very real limits to the extent to which grammatical meaning can be displaced by contextual considerations. However, in order to determine whether more than one meaning is available, it may be necessary first to turn to the context.

Fourthly, what I have called “context” was formerly described as the ‘surrounding circumstances’, and then, influenced by Lord Wilberforce in decisions such as Prenn v Simmonds [1971] 1 WLR 1381 at 1384 and Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989 at 997, as the ‘matrix of facts’. See Byrnes v Kendle [2011] HCA 26; 243 CLR 253 at [98]- [100] (Heydon and Crennan JJ) and J Carter, The Construction of Commercial Contracts (Hart Publishing, 2013), pp 8-9.

Although Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28; [1998] 1 All ER 98 at 114 referred to a ‘fundamental change’ in the approach espoused by Lord Wilberforce, the “modern” contextual approach had nineteenth century precursors, at least in relation to commercial contracts. Without seeking to be exhaustive, the Earl of Selborne had deprecated and rejected the ‘extreme literalism’ in the mercantile contract construed in McGowan v Baine [1891] AC 401 at 403 (contrast the (dissenting) speech of Lord Bramwell, who had required ‘necessity, or [something] approaching to it’ in order to displace the ‘primary and natural meaning of the words’: see at 409). To the same effect was Lord Herschell’s rejection of a process of construction by reference to dictionary meaning, and insistence that contractual language must be ‘construed in a business fashion’ and “interpreted in the way in which business men would interpret them” in Southland Frozen Meat and Produce Export Company Ltd v Nelson Brothers Ltd [1898] AC 442 at 444. The approach adopted by Lords Selborne and Herschell anticipated what was popularised by Lord Wilberforce in the following century. Professor Carter has examined the evolutionary process at pp 17-20 of his book referred to in the previous paragraph.

Fifthly, the approach endorsed in Woodside avoids the difficulty of identifying what is meant by ‘ambiguity’, itself an ambiguous term, whose perception ‘differs from one judicial eye to the other’: B & B Constructions (Aust) Pty Ltd v Brian A Cheeseman & Associates Pty Ltd (1994) 35 NSWLR 227 at 234. The various meanings of ‘ambiguity’ in this context are described by M Walton, ‘Where now ambiguity?’ (2011) 35 Aust Bar Rev 176 and D Wong and B Michael, ‘Western Export Services v Jireh International: Ambiguity as the gateway to surrounding circumstances?’ (2012) 86 ALJ 57 at 67-69.

Sixthly, the approach to construction of written commercial contracts reflected in Woodside at [35] accords with what had been said in familiar passages in Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; 218 CLR 451 at [22] (construction “requires consideration, not only of the text of the documents, but also the surrounding circumstances known to Pacific and BNP, and the purpose and object of the transaction”); Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165 at [40] (‘The meaning of the terms ... normally requires consideration not only of the text but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction’); and the endorsement in Wilkie v Gordian Runoff Ltd [2005] HCA 17; 221 CLR 522 at [15] of the proposition that ‘Interpreting a commercial document requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure’. It means also that the Australian approach mirrors that adopted in England, New Zealand, Singapore and Hong Kong: Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38; [2009] 1 AC 1101; Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5; [2010] 2 NZLR 444; Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] SGCA 27; 3 SLR(R) 1029 (where the Court’s reasons delivered by V K Rajah JA for the Court survey much of the English decisions and academic literature); Fully Profit (Asia) Ltd v Secretary for Justice [2013] HKCFA 40; 6 HKC 374.

Seventhly, although evidence of context and purpose expands the scope of the litigation, none of the foregoing should be seen as opening the door to lengthy litigation in commercial causes. As will be seen below, the evidence of ‘surrounding circumstances’ sought to be relied on by Mainteck was lengthy, contested, vague, and divorced - by many months in time, and a markedly different commercial position - from the execution of the Second Consortial Agreement. This makes it quite distinct from evidence which is apt to assist the process of construction. Indeed, I would infer that the primary reason for adducing the evidence was to support Mainteck’s (now abandoned) misrepresentation case, rather than so as to assist in construction. 36

[30] Regard may therefore be had to evidence of the surrounding circumstances before the existence of ambiguity in an agreement is identified as an aide to interpreting the agreement for the purposes of determining whether an ambiguity exists. If thereafter ambiguity is not identified extrinsic material cannot be used to contradict the language of the instrument. If ambiguity is identified the material may be used as contextual material to aide in the interpretation of the instrument. In this context we would make the observation that the law in relation to the interpretation of commercial contracts (Codelfa; Metcash and Stratton) has now aligned with the approach to the construction of awards and enterprise agreements as espoused by Burchett J in Short v FW Hercus Pty Ltd 37 and confirmed by French J, as he then was, in Wanneroo.

Application of the Acts Interpretation Act 1901 to enterprise agreements approved under the Act

[31] Both at first instance and before us the Appellant maintained that the Agreement must be interpreted in accordance with the Acts Interpretation Act 1901 (AI Act). 38 That proposition is made on the basis that an enterprise agreement is an agreement that is made by the Commission pursuant to a power conferred by the Act to make the agreement.39 To make good the proposition the Appellant at first instance relied on the following passage from the judgement of French J in Wanneroo:

“The interpretation of legislative instruments is dealt with in the Legislative Instruments Act 2003 (Cth). Awards and agreements made under the Act are declared, by s 7(1) of the Legislative Instruments Act, not to be legislative instruments – see Item 18 in the table set out in s 7(1). This leaves such awards and agreements within s 46 of the Acts Interpretation Act 1901 (Cth) which provides, inter alia:

‘(1) If a provision confers on an authority the power to make an instrument that is neither a legislative instrument within the meaning of the Legislative Instruments Act 2003 nor a rule of court, then, unless the contrary intention appears:

(a) this Act applies to any instrument so made as if it were an Act and as if each provision of the instrument were a section of an Act; and


(b) expressions used in any instrument so made have the same meaning as in the enabling legislation; and


(c) any instrument so made is to be read and construed subject to the enabling legislation, and so as not to exceed the power of the authority.

An award is an instrument made by an authority, in this case the Australian Industrial Relations Commission, and so attracts the application of the Acts Interpretation Act for the purposes of its interpretation.” 40

[32] The decision in Wanneroo does not support the proposition contended by the Appellant. In Wanneroo Justice French was concerned with the construction of an award under the Workplace Relations Act 1996 (WR Act) and not an enterprise agreement made under the Act. Relevantly, the award in question was an instrument that was not a legislative instrument but was an instrument made by the Australian Industrial Relations Commission pursuant to a power under the WR Act to make the instrument. Consequently French J concluded that the award was “an instrument made by an authority, in this case the Australian Industrial Relations Commission, and so attracts the application of the Acts Interpretation Act (AI Act) for the purposes of its interpretation”. 41

[33] The Appellant also relied on a decision in Cape Australia Holdings Pty Ltd v Construction, Forestry, Mining and Energy Union 42 (Cape Australia). In Cape Australia the issue whether the AI Act applied was not in contention and the parties proceeded on the basis that the AI Act applied.43

[34] Similarly in DP World Brisbane Pty Ltd v Maritime Union of Australia 44a Full Bench of the Commission made obiter observations based on the parties’ acceptance that the AI Act applied to the relevant agreement. The Full bench observed that if the AI Act applied it would allow the consideration of particular extrinsic material, but ultimately proceeded to decide the construction question without regard to the AI Act as no relevant extrinsic material had been identified.45

[35] It follows that the question of whether the AI Act applies to the interpretation of enterprise agreements has not been the subject of a previous Full Bench decision in which the issue has been contested and determined. It is also relevant to observe that the two Full Bench decisions to which we have referred were decided prior to the recent decision of the Full Court of the Federal Court in Toyota Motor Corporation Australia Limited v Marmara 46. We refer to that decision later.

[36] It seems to us that the Act does not confer a power on the Commission to make an enterprise agreement. An enterprise agreement is made in the circumstances described in sections 172 and 182, which are reproduced below;

172 Making an enterprise agreement

Enterprise agreements may be made about permitted matters

(1) An agreement (an enterprise agreement) that is about one or more of the following matters (the permitted matters) may be made in accordance with this Part:

(a)  matters pertaining to the relationship between an employer that will be covered by the agreement and that employer’s employees who will be covered by the agreement;
(b)  matters pertaining to the relationship between the employer or employers, and the employee organisation or employee organisations, that will be covered by the agreement;
(c)  deductions from wages for any purpose authorised by an employee who will be covered by the agreement;

(d)  how the agreement will operate.

Note 1:       For when an enterprise agreement covers an employer, employee or employee organisation, see section 53.
Note 2:       An employee organisation that was a bargaining representative for a proposed enterprise agreement will be covered by the agreement if the organisation notifies the FWC under section 183 that it wants to be covered.

Single-enterprise agreements
(2)  An employer, or 2 or more employers that are single interest employers, may make an enterprise agreement (a single-enterprise agreement):

(a)  with the employees who are employed at the time the agreement is made and who will be covered by the agreement; or

(b)  with one or more relevant employee organisations if:

(i)  the agreement relates to a genuine new enterprise that the employer or employers are establishing or propose to establish; and
(ii)  the employer or employers have not employed any of the persons who will be necessary for the normal conduct of that enterprise and will be covered by the agreement.

Note:          The expression genuine new enterprise includes a genuine new business, activity, project or undertaking (see the definition of enterprise in section 12).

Multi-enterprise agreements

(3)  Two or more employers that are not all single interest employers may make an enterprise agreement (a multi-enterprise agreement):

(a)  with the employees who are employed at the time the agreement is made and who will be covered by the agreement; or
(b)  with one or more relevant employee organisations if:

(i)  the agreement relates to a genuine new enterprise that the employers are establishing or propose to establish; and
(ii)  the employers have not employed any of the persons who will be necessary for the normal conduct of that enterprise and will be covered by the agreement.

Note:          The expression genuine new enterprise includes a genuine new business, activity, project or undertaking (see the definition of enterprise in section 12).

Greenfields agreements

(4)  A single-enterprise agreement made as referred to in paragraph (2)(b), or a multi-enterprise agreement made as referred to in paragraph (3)(b), is a greenfields agreement.

Single interest employers
(5)  Two or more employers are single interest employers if:

(a) the employers are engaged in a joint venture or common enterprise; or
(b) the employers are related bodies corporate; or

(c) the employers are specified in a single interest employer authorisation that is in operation in relation to the proposed enterprise agreement concerned.

Requirement that there be at least 2 employees
(6)  An enterprise agreement cannot be made with a single employee.

182 When an enterprise agreement is made

Single-enterprise agreement that is not a greenfields agreement

(1) If the employees of the employer, or each employer, that will be covered by a proposed single-enterprise agreement that is not a greenfields agreement have been asked to approve the agreement under subsection 181(1), the agreement is made when a majority of those employees who cast a valid vote approve the agreement.

Multi-enterprise agreement that is not a greenfields agreement

(2) If:

(a) a proposed enterprise agreement is a multi-enterprise agreement; and

(b) the employees of each of the employers that will be covered by the agreement have been asked to approve the agreement under subsection 181(1); and

(c) those employees have voted on whether or not to approve the agreement; and

(d) a majority of the employees of at least one of those employers who cast a valid vote have approved the agreement;

the agreement is made immediately after the end of the voting process referred to in subsection 181(1).

Greenfields agreement

(3) A greenfields agreement is made when it has been signed by each employer and each relevant employee organisation that the agreement is expressed to cover (which need not be all of the relevant employee organisations for the agreement).

[37] An application to the Commission for the approval of an enterprise agreement must be made within the period specified in section 185(3) or (4) of the Act. The period within which an application is made is reckoned only after the agreement is made. The Commission’s role is in approving, subject to satisfaction of the statutory criteria, the enterprise agreement already made but there is no power conferred on the Commission by the Act to make an enterprise agreement.

[38] Where the statute intends to confer power on Commission to make an instrument it expressly so provides. 47 The power conferred on the Commission by the Act is limited to approval of agreements that have already been made. Although enterprise agreements made under the Act rely for their legal enforceability on the Commission’s approval, this is not the same as the Commission having power to make the enterprise agreement. An enterprise agreement is therefore not an instrument of a kind described in s.46 of the AI Act.

[39] As mentioned earlier this issue was recently considered by a Full Court in Toyota. Relevantly the Full Court said the following:

“Toyota’s final argument on the construction of cl 4 of the Agreement (ie aside from those that were interwoven with its case on the repugnancy point) was based on the provision of the Agreement that made it an objective to attain cost structures similar to those of other members of the Toyota group worldwide. It was contended that, pursuant to ss 46 and 15AA of the Acts Interpretation Act 1901 (Cth) (“the AI Act”), an interpretation of the Agreement which would best achieve that objective is to be preferred to each other interpretation. We do not, however, accept the premise from which this argument proceeds. Section 46 of the AI Act applies where ‘a provision confers on an authority the power to make an instrument’. There is no provision of the FW Act which confers on the Commission the power to make an enterprise agreement. Such an agreement is made by the employer and the relevant employees under ss 172(2) and 182(1). We consider, therefore, that the constructional questions which arise for resolution in this appeal must be addressed without assistance from the AI Act.” 48

[40] It follows that an enterprise agreement approved by the Commission must be interpreted without recourse to the AI Act.

Summary

[41] From the foregoing, the following principles may be distilled:

1. The AI Act does not apply to the construction of an enterprise agreement made under the Act.

2. In construing an enterprise agreement it is first necessary to determine whether an agreement has a plain meaning or contains an ambiguity.

3. Regard may be had to evidence of surrounding circumstances to assist in determining whether an ambiguity exists.

4. If the agreement has a plain meaning, evidence of the surrounding circumstances will not be admitted to contradict the plain language of the agreement.

5. If the language of the agreement is ambiguous or susceptible to more than one meaning then evidence of the surrounding circumstance will be admissible to aide the interpretation of the agreement.

6. Admissible evidence of the surrounding circumstances is evidence of the objective framework of fact and will include:

(a) evidence of prior negotiations to the extent that the negotiations tend to establish objective background facts known to all parties and the subject matter of the agreement;

(b) notorious facts of which knowledge is to be presumed;

(c) evidence of matters in common contemplation and constituting a common assumption.

7. The resolution of a disputed construction of an agreement will turn on the language of the Agreement understood having regard to its context and purpose.

8. Context might appear from:

(a) the text of the agreement viewed as a whole;

(b) the disputed provision’s place and arrangement in the agreement;

(c) the legislative context under which the agreement was made and in which it operates.

9. Where the common intention of the parties is sought to be identified, regard is not to be had to the subjective intentions or expectations of the parties. A common intention is identified objectively, that is by reference to that which a reasonable person would understand by the language the parties have used to express their agreement.

10. The task of interpreting an agreement does not involve rewriting the agreement to achieve what might be regarded as a fair or just outcome. The task is always one of interpreting the agreement produced by parties.

Proper construction of clauses 1.10, 3.71 (e) and (f), 4.1.3, 4.1.6, 4.1.7 and 4.4 of the Agreement

Provisions of agreement at issue

[43] Clause 1.10 contains definitions of various terms used in the Agreement and defines “early morning shift” as follows:

“Early Morning Shift” means a shift commencing at or after 2:00am and before 4:00am

[44] Clause 3.7 deals with allowances and relevantly provides the following:

(e) An employee, who is employed by the Company before 1 July 2003 and is engaged to work afternoon or night shift and as a result does not rotate with day work then the employee shall not be regarded as working a fixed shift for the purposes of the Agreement. In such circumstances a shift loading of 25% shall be payable on night and afternoon shift.

(f) An employee, who is employed by the Company before 1 September 2012, shall be paid 20% for a fixed early morning shift. This does not apply if the employee requests to be placed on an early morning shift.

[45] Ordinary working hours of the employees covered by the Agreement are set out in clause 4.1 which relevantly provides as follows:

4.1 Ordinary Working Hours

4.1.1 Except as otherwise provided in this Agreement 38 hours shall constitute a full week’s work to be worked by agreement between the Employees and the Company. Management shall retain the discretion to set such hours failing agreement in each establishment concerned, with the following alternatives being available:

(a) 7 hours 36 minutes per day.
(b) 4 days of 8 hours and one day of 6 hours.
(c) 4 hours off per fortnight.
(d) One day off per 4-week cycle.

4.1.2 Subject to agreement with the Employees at the enterprise level, up to 10 ordinary hours per day may be worked.

4.1.3 Departmental starting times may be altered at the Company’s discretion with 36 hours notice or without such notice if by agreement with the Employee.
. . .
4.1.6 Employees, employed prior to 1 September 2012, may be required to perform their ordinary working hours within a spread of 14 hours between 5.00 am/7.00 pm. An employee (other than Delivery Drivers) may agree to commence ordinary working hours at 4.00am. Any time worked between 4:00am and 5:00am will be paid for at overtime rates but will be included as ordinary hours worked.

4.1.7 Employees, employed after 1 September 2012, may be required to perform their ordinary working hours within a spread of 15 hours between 4:00am I 7:00pm. This clause will also apply to any employee, employed prior to 1 September 2012, that requests a start time prior to 5:00am.

[46] Clause 4.4 contains overtime provisions and relevantly provides that the Respondent may require an employee to work reasonable over time at overtime rates as follows:

4.4.1 The Company may require an Employee to work reasonable overtime at overtime rates.
When requiring an Employee to work overtime the Company will consider the interests of the Employee and the Company and in particular the following:-

(i) any risk to the Employee’s health and safety;
(ii) the Employee’s personal circumstances including any family responsibilities;
(iii) the needs of the workplace or enterprise;
(iv) the notice (if any) given by the employer of the overtime and by the Employee of his or her intention to refuse it

4.4.2 Except where otherwise provided, all time worked in excess or outside of the Ordinary Working Hours shall be deemed to be overtime. Such overtime shall be paid for as follows and each day shall stand alone:

(a) In the case of shift workers- at double time.
(b) In the case of day workers- at the rate of time and a-half for the first 3 hours, and double time thereafter:

Provided that where such overtime continues past midnight, double time shall continue to be paid until ordinary starting time next day, subject to clause 4.4.3.

Competing constructions

[47] The Appellant submits that the provisions clauses 4.1.6 and 4.1.7 operate as “grandfathering” provisions the effect of which is to prevent the Respondent from making changes to the shift arrangements that operate for employees whose employment falls within the description in those clauses without their consent. 49 Thus, as Mr Menz and Mr Shaw are both employees protected by the grandfathering provisions, they cannot be required to change their starting times from 3:00 am and 3:30 am respectively to 4:00 am. The change to starting times may only be procured with the consent of Mr Menz and Mr Shaw respectively.

[48] The Appellant submitted that once the Senior Deputy President concluded that the Respondent did not have power to alter the starting times of Mr Menz and Mr Shaw under the Agreement so as to require them to commence work at 4:00 am without their consent, that should have been the end of the matter and the Senior Deputy President erred in determining that the Respondent could direct the employees to perform reasonable overtime between 4:00 am and 5:00 am notwithstanding the grandfathering provisions. 50 The Senior Deputy President’s construction, so it was submitted, was contrary to the industrial purpose and context relating to the Agreement and was one that deprived clause 4.1.6 of its intended effect.51 The intended purpose becomes clear when regard is had to the extrinsic material relied upon by the Appellant.52

[49] The Respondent submits that clause 4.1.6 deals with starting times for working of ordinary hours. Clauses 3.7(e) and (f) deal with allowances and do not preserve or enshrine particular hours of work. Clause 4.4 allows the Respondent to require employees to work reasonable overtime. Mr Menz and Mr Shaw were required to work reasonable overtime between 4:00 am and 5:00 am. This is permitted by the Agreement and clause 4.1.6 does not preclude this. Consequently the Senior Deputy President was correct in resolving the dispute in favour of the Respondent. 53

Extrinsic material

[50] The Appellant relied on a range of materials prepared by or passing between the Appellant and the Respondent during the period leading to the approval of the Agreement by a valid majority of employees. In an email from Elliot Dalgleish an Industrial Officer with the Appellant to Victoria Scriven the Group Manager – Human Services of the Respondent dated 20 September 2012, the following provision was proposed by the Appellant for inclusion in the Agreement:

“Clause 3.9 Employee Protection – “An employee’s roster or level may not be changed with the intent of avoiding payment of penalties or loadings, or other benefits applicable. Should such circumstances arise, that employee shall be entitled to such penalty, loading or benefit, as if their roster or level had not been changed.” 54

[51] On 25 September 2012 Ms Scriven replied to the Appellant’s email and said of the proposed employee protection clause that she believed “that this is covered adequately by the grandfather clauses that were placed in the Agreement”. 55 The proposed employee protection clause was not included in the Agreement.

[52] These emails are of no assistance in resolving the competing constructions and do not provide any basis for suggesting that the provisions of the Agreement at issue are ambiguous. The emails disclosed no more than that the parties did not agree to include the employee protection clause sought by the Appellant.

[53] In any event it seems clear to us that the above exchange of emails, so far as is relevant, is concerned with the preservation of an employee’s roster or level from changes which are brought about with the intention of avoiding the payment to those employees of penalties or loadings or other applicable benefits. There is no suggestion that the parties were discussing let alone that they reached an agreement or came to an understanding that particular provisions of the Agreement would enshrine hours of work or shift arrangements for a particular class of employee, irrespective of other provisions in the Agreement.

[54] The Appellant also relied on a document given to employees by the Respondent during negotiations, which is titled “spread of hours”. 56 That document contains information about current spread of hours and proposed spread of hours and contains the following statements:

No ones (sic) roster will change because of the change in spread of hours

No one will lose money under this proposal. 57

[55] Self-evidently, the document is dealing with the proposed change in the spread of hours and in that context makes the representation that rosters will not change because of the proposed in the spread of hours. It clearly does not say that hours of work or rosters will not change at all or through the proper exercise of rights under the Agreement. The document does not assist the Appellant nor does it identify any ambiguity in the provisions of the Agreement that are at issue.

[56] The Appellant also relies on a document dated 18 September 2012 entitled “EBA – Update”. 58 That document merely provides that early morning shifts, which involve a starting time of between 2:00 am and 4:00 am will only apply to new starters and that current arrangements will apply to all employees. The document provides the same information in relation to the introduction of the new spread of hours.59 The document explains to employees the effect of these changes on current arrangements. It is not in terms or by implication indicated that “current arrangements” will not change if a change is otherwise permitted through a proper application of other terms of the Agreement. The document does not assist the Appellant nor does it identify any ambiguity in the provisions of the Agreement that are at issue.

[57] The other material relied upon by the Appellant, 60 or otherwise referred to,61 is similarly of no assistance and does not identify any ambiguity in the provisions of the Agreement that are at issue.

[58] In our view the provisions of the Agreement at issue have a plain meaning and the extrinsic material does not make good any of the propositions advanced by the Appellant and nor does that material identify any ambiguity in the relevant provisions of the Agreement. The dispute was capable of being resolved, by reference to the plain language of the Agreement.

Was the Respondent entitled to alter the starting times of Mr Menz and Mr Shaw under the Agreement?

[59] Before the change to starting times, Mr Menz and Mr Shaw commenced work at 3:00 am and 3:30 am respectively. Clause 4.1.3 allows the Respondent to alter departmental starting times to its discretion with 36 hours notice or without such notice if by agreement with the Employee. Clause 4.4.1 allows the Respondent to require an employee to work reasonable overtime at overtime rates. The alteration to the hours of work as concerns Mr Menz and Mr Shaw was to the effect that their starting time for working ordinary hours would be 5:00 am. This is permitted by clause 4.1.3 and is not prohibited by any of the grandfathering provisions identified by the Appellant.

[60] The Respondent also required Mr Menz and Mr Shaw to work overtime between 4:00 am and 5:00 am for which they would be paid overtime rates. Subject to the overtime being reasonable, and the Appellant has not suggested otherwise, this is permitted by clause 4.4.1 and is not prohibited by any of the grandfathering provisions identified by the Appellant.

[61] There is nothing ambiguous about these provisions or about the grandfathering provisions identified by the Appellant. In our view the words of the provisions are clear. Clauses 4.1.6 and 4.1.7 deal with starting times for working of ordinary hours. This is clear from the words and from the context in which those appear, namely in a clause dealing with ordinary hours of work. To the extent that these clauses preserve particular hours of work for some employees, they do so only to the extent of preventing ordinary hours being worked before 5:00 am without the employee’s consent. As the Respondent’s change to the starting times of Mr Menz and Mr Shaw results in these employees commencing to work ordinary hours at 5:00 am, their consent is not required.

[62] Clauses 3.7(e) and (f) deal with allowances, they do not deal with a prescription of working hours. This is also clear from the words and from the context in which those words appear, namely in a clause which deals with allowances. Clauses 3.7(e) and (f) do not preserve or enshrine particular hours of work. They preserve, for a limited class of employees, allowances for working particular kinds of shifts.

[63] Clause 4.4.1 allows the Respondent to require employees to work reasonable overtime. Mr Menz and Mr Shaw were required to work reasonable overtime between 4:00 am and 5:00 am. That time was outside the spread of ordinary hours set out in clause 4.1.6 and by reason of clause 4.4.2 is overtime. This is permitted by the Agreement and the grandfathering clauses discussed above do not preclude this. Consequently, the Senior Deputy President was correct in concluding that the Respondent was entitled to alter the starting times of Mr Menz and Mr Shaw and that Mr Menz and Mr Shaw could be directed to perform reasonable overtime.

Has any appellable error been identified?

[64] Returning then to the grounds of appeal advanced by the Appellant. As should be apparent from our analysis above we agree with the Senior Deputy President’s construction of the relevant provisions of the Agreement. It is clear from the reasons for decision that the Senior Deputy President arrived at this view having regard to the plain language of the agreement. 62

[65] The Senior Deputy President considered the evidence of the surrounding circumstances and concluded that it was not of any assistance to the case advanced by the Appellant or to the task of construing the relevant provisions of the Agreement. 63 For the reasons we give earlier above we have concluded that the extrinsic material does not make good any of the propositions advanced by the Appellant, does not assist in identifying any ambiguity in the Agreement and that the dispute was capable of being resolved, and should properly be resolved by reference to the plain language of the Agreement.

[66] It follows that the Senior Deputy President was correct in his analysis of the evidence of the surrounding circumstances. He ultimately resolved the disputed construction by reference to the plain language of the Agreement. This was undoubtedly correct. It follows that Grounds 1, 3, 4, 6, 7 and 10 have no substance.

[67] Ground 5 of the appeal is misconceived. The question of whether the Respondent was entitled to do what it did because it was within its managerial prerogative simply does not arise. On a proper construction of the Agreement, the Respondent was entitled to implement the change.

[68] We agree with the Respondent’s submission that Ground 8 contains nothing more than a bald assertion. Factual findings to resolve the disputed construction were not necessary. As to factual errors said to have been made by the Senior Deputy President in reaching his conclusion that the consultation obligation under the Agreement had been complied with by the Respondent, we deal with that issue separately further below.

[69] As to Ground 9, the alleged failure to take into account and correctly apply the status quo provision of the dispute settlement clause of the Agreement, we observe that this was not a matter that was the subject of the application that was before the Senior Deputy President. The submission of the Appellant before the Senior Deputy President was simply that the Respondent had not adhered to the status quo provision of the Agreement but did not seek any particular outcome. The submission seems to have been put on the basis of providing justification for the employees’ refusal to comply with the Respondent’s direction to work the altered hours. 64 To the extent that the Appellant suggests the Senior Deputy President ought to have taken into account this factor in determining the disputed construction of the Agreement, that is rejected.

[70] As to Ground 10, it seems to us clear from a review of the Decision that the Senior Deputy President took into account and assessed the submissions, evidence and other material advanced by the Appellant. It was not necessary for the Senior Deputy President to recite each and every one of the multiplicity of arguments advanced by the Appellant below in the Decision.

[71] As to Ground 11, it seems to us that the Senior Deputy President considered the relevant legal principles as they applied to construction of an industrial instrument and applied those principles in what appears to us to be a regular fashion. That the Appellant asserted below that certain questions of law arose and advanced arguments in support of those questions does not mean that the questions arose or that the Senior Deputy President was required to deal with questions that did not arise.

[72] As to Ground 12, there is no basis in our view for asserting that the Senior Deputy President unreasonably exercised the statutory power conferred on the Commission. This ground has no substance.

[73] As to Ground 2, the resolution of the question whether the Respondent complied with its consultation obligations under the Agreement turned on the evidence. The Senior Deputy President preferred the evidence of Ms Shannon to that given by Mr Menz and Mr Shaw. His Honour therefore concluded that Ms Shannon’s evidence established that the Respondent had consulted employees about the changes consistently with its obligation. 65 Ms Shannon’s evidence was supported by contemporaneous notes made by her about the consultation. The Senior Deputy President was able to observe each witness and also had concerns about the accuracy of the evidence given by Mr Menz and Mr Shaw. There was in our view a sufficient basis for the Senior Deputy President to prefer Ms Shannon’s evidence. In our view His Honour’s conclusion was reasonably open on the evidence. No appellable error has been identified.

[74] That said, we would observe that consultation provisions in agreements create substantive and important rights. The approach to consultation is not mechanical or formulaic. These provisions give employees likely to be affected by a change the opportunity to influence the decision, to modify the outcome or its impact on affected employees. Consultation must be real. It involves more than just advising employees of a change and allowing for questions to be asked. These issues are dealt with in more detail in the Full Bench decision dealing with the consultation clause in modern awards. 66

Disposition of the appeal

[75] The decision of the Senior Deputy President was in our view correct. The Appellant has not identified any appellable error and there are no public interest considerations apparent to us that would warrant the grant of permission to appeal. Nor are we persuaded that there is any other basis upon which permission to appeal should be granted. We refuse permission to appeal.

PRESIDENT

Appearances:

E. Dalgleish for The Australasian Meat Industry Employees Union

C. Murdoch for Golden Cockerel Pty Ltd

Hearing details:

Brisbane,

2014

3 October

 1   See Attachment A to Outline of Submissions for the Respondent dated 29 September 2014

 2   See AB157 – AB160

 3   AB214 – AB216 at [3] – [9]

 4   AB236 at [3], AB256 – AB257 at [3], [6] – [7], AB291, AB299, AB302 and AB304

 5   AB286

 6   See decision at [2014] FWC 3974; AB1 – AB18

 7  [2014] FWC 3974 at [101]; AB18

 8   Section 604(1)

 9   O’Sullivan v Farrer (1989) 168 CLR 210; Coal & Allied v Lawler [2011] FCAFC 54 at [44]-[46]

 10   GlaxoSmithKline Australia Pty Ltd v Making [2010] FWAFB 5343 at [26]-[27]; Lawrence v Coal & Allied Mining Services Pty Ltd t/as Mt Thorley Operations/Warkworth [2010] FWAFB 10089 at [28], affirmed on judicial review; Coal & Allied Mining Services Pty Ltd v Lawler [2011] FCAFC 54; Ferrymen Pty Ltd v Maritime Union of Australia [2013] FWCFB 8025; and NSW Bar Association v Brett McAuliffe; Commonwealth of Australia represented by the Australian Taxation Office [2014] FWCFB 1663

 11   (2010) 197 IR 266 at [27]

 12   Also see CFMEU v AIRC (1998) 89 FCR 200; and Wan v AIRC (2001) 116 FCR 481. Also see the Explanatory Memorandum to what is now s.604, at para 2328.

 13   Pawel v AIRC (1999) 94 FCR 231, in particular at 238-239

 14   Coal and Allied Operations Pty Ltd v AIRC (2000) 203 CLR 194 at 205

 15   (1936) 55 CLR 499; Note also the reference in the Explanatory Memorandum (EM) to the Fair Work Bill 2008 at [2320] to the decision in Coal and Allied Operations Pty Ltd v AIRC (2000) 203 CLR 194 referring to the application of House v King to appeals in the AIRC, and the intention expressed in the EM to maintaining this jurisprudence in relation to FWA appeals.

 16   (2006) 153 IR 426

 17   Ibid at 438

 18   (1966) 66 IR 182

 19   Ibid at 184

 20   See Swire Cold Storage Pty Ltd v TWU [2008] AIRCFB 397 at [29] and AMWU v Silcar Pty Ltd [2011] FWAFB 2555 at [11]

 21   (2005) 222 CLR 241

 22   Ibid at 253 per Gummow, Hayne and Heydon JJ

 23   (2006) 153 IR 426 at 440

 24   (1982) 149 CLR 337

 25   Ibid at 352

 26   [2003] FCA 520

 27   Ibid at [28]-[31]

 28   Ibid at [32]-[34]

 29   [2011] HCA 45 per Gummow, Heydon and Bell JJ

 30   Ibid at [2] -[4]

 31   [2014] HCA 7

 32   Ibid at [35]

 33   [2014] FCAFC 110

 34   Ibid at [36]-[41]

 35   [2014] NSWCA 184

 36   Ibid at [71]-[85]

 37   (1993) 40 FCR 511 at 518

 38   AB268-AB271 and Transcipt PN271- PN280.

 39   See section 46 of the AI Act

 40   (2006) 153 IR 426 at 438 [52]

 41   Ibid

 42   See AB268; [2012] FWAFB 3994

 43   [2012] FWAFB 3994 at [10]

 44   (2013) 237 IR 180

 45   Ibid at 191

 46   [2014] FCAFC 84

 47   See for example section 157 (1) (b) which provides that the Commission may make a modern award, s. 243 (1) which provides that the Commission must make a low-paid authorisation in particular circumstances and s. 269(1) which provides that the Commission must make a bargaining related workplace determination in particular circumstances.

 48   Ibid at [58]

 49   Outline of the submissions for the appellant at [88]

 50   Ibid at [81] – [82]; see [2014] FWC 3974 at [14]-[17]

 51   Ibid at [83]-[85]

 52   Transcript PN222 - PN223

 53   Outline of Submission for the Respondent at [11]-[18]; Transcript PN404 – PN416

 54   AB143

 55   AB146

 56   AB189

 57   Ibid

 58   AB190

 59   Ibid

 60   AB148 - AB156

 61   AB191 - AB200

 62   [2014] FWC 3978 at [14] - [17]

 63   Ibid at [18] - [90]

 64   AB252

 65   [2014] FWC 3978 at [91] - [100]

 66   [2013] FWCFB 10165

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