[2013] FWC 8237

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.739 - Application to deal with a dispute

"Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union" known as the Australian Manufacturing Workers' Union (AMWU)
v
Toyota Motor Corporation Australia
(C2013/1395)

DEPUTY PRESIDENT GOSTENCNIK

MELBOURNE, 23 OCTOBER 2013

Alleged dispute concerning progressive accrual of sick/carer's leave.

Introduction

[1] Toyota Motor Corporation Australia (TMCA) and the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (AMWU) are covered by a single enterprise agreement known as the Toyota Motor Corporation Australia (TMCA) Workplace Agreement (Altona) 2011 (Agreement). Put simply the AMWU and TMCA are in dispute about the proposed introduction by TMCA of a new method for sick/carer’s leave accrual and credit. It involves a shift away from the current practice of crediting sick/carer’s leave to certain employees on each anniversary of employment to progressive accrual in accordance with the National Employment Standards (NES).

[2] The proposed change does not affect employees in their first year of employment, whose sick/carer’s leave already accrues progressively and has historically done so. The proposed change affects employees in their second and subsequent years of employment with TMCA. As a consequence of this dispute, the AMWU and TMCA are also in dispute about the proper construction of clause 70 of the Agreement, and about the effect of the “no extra claims” provision in clause 4 of the Agreement upon the capacity of TMCA to proceed with its proposal.

Background

[3] Apart from the AMWU and TMCA, the Agreement also covers TMCA’s employees employed at its Altona manufacturing site who are performing work in classifications provided for in the Agreement 1. There are in excess of 3000 employees employed at TMCA’s Altona site, at which are manufactured the Camry, Camry Hybrid and the Aurion motor-vehicles2.

[4] The Agreement is described as comprehensive 3 and provides for various entitlements including sick/carer’s leave4. The Agreement was approved by Fair Work Australia (FWA) on 25 November 2011 and came into operation on 2 December 2011 with a nominal expiry date of 6 March 20155.

[5] It is common ground that TMCA has for some time adopted a practice of sick/carer’s leave accrual and credit, whereby in the first year of employment, sick/carer’s leave accrues and is credited progressively throughout the year. In the second and subsequent years of employment the full year’s available sick/carer’s leave is credited to an employee at the commencement of that year of employment. In effect since at least 26 July 2010 it has been the practice of TMCA’s to credit to an employee:

● in his or her first year of employment one day of sick/carer’s leave in each of the first 10 months of that employment; and
● his or her second or subsequent years of employment 10 days of sick/carer’s leave at the beginning of that year of employment 6.

[6] It is also common ground that changes to the method of accrual and crediting of sick/carer’s leave was the subject of some discussion between TMCA and employee bargaining representatives during the negotiations for the Agreement, although the precise outcome of those discussions is disputed 7. The disputed outcome is not a matter that I need to resolve in order to determine the issues in dispute.

[7] In September 2012 TMCA raised the method of accrual and crediting of sick/carer’s leave with the AMWU local representatives and advised those representatives that it intended to change the method of accrual and crediting of sick/carer’s leave for employees in their second or subsequent years of employment to one in which sick/carer’s leave accrues progressively throughout the year of employment. This was said to be consistent with its practice for an employee in his or her first year of employment and the NES. 8 Between the end of September 2012 and the beginning of August 2013, TMCA undertook some further enquiries about the implementation of its proposed method of accrual and crediting of sick/carer’s leave and commenced an upgrade of its payroll system. Together this meant that TMCA was unable to advance its proposal during this period9.

[8] On 2 August 2013 Mr Charlie Marmara a delegate of the AMWU and the senior site coordinator for the unions represented at the Altona site, was advised by TMCA that it intended to implement the new method of accrual and crediting of sick/carer’s leave with effect from 1 September 2013 10. On 5 August 2013 Mr Marmara sent an email to Ms Joanne Romano the Manager HR Business Partner for TMCA advising her that as the proposal would disadvantage members of the AMWU, the proposed change was rejected11.

[9] Thereafter the problem resolution and disputes avoidance procedure under the Agreement 12 was invoked and it is common ground that the procedure has been followed. On 3 September 2013 the AMWU lodged an application under s 739 of the Fair Work Act 2009 (Act) for the Fair Work Commission (Commission) to deal with a dispute in accordance with the dispute settlement procedure of the Agreement. Conferences were conducted by the Commission between the disputing parties in an attempt to conciliate or mediate the dispute. These attempts were not successful and ultimately the matter was referred to me to arbitrate the dispute. The Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (CEPU) also lodged an application under s 739 of the Act, but TMCA objected to the standing of the CEPU to make the application because it was not covered by the Agreement. Ultimately the CEPU’s application was not proceeded with and permission was given to Mr Michael Crea (Intervener), a delegate of the CEPU whose employment is covered by the Agreement, to intervene in the AMWU application and to be represented therein by the CEPU13. Although the new method of sick/carer’s leave accrual and credit was proposed to commence on 1 September 2013, the commencement date has been delayed until 31 October 2013 following a series of undertakings given by TMCA to the AMWU and CEPU, and ultimately to the Commission.

Issues in dispute

[10] Both parties and the Intervener proceeded on the basis that the resolution of the dispute turned upon the proper construction of the Agreement and in particular clauses 4 and 70.

[11] It is common ground that clause 70 does not provide for any method of accruing and crediting sick/carer’s leave. Clause 70 of the Agreement provides:

“70. SICK/CARER'S LEAVE

Sick/Carer's Leave will be authorised when the conditions for 'Reason', 'Notification' and 'Proof/Documentation' are satisfied.

Amount of Sick/Carer's Leave

Employees are entitled to 10 days of Sick/Carer's Leave per year.

Sick/Carer's Leave is cumulative from one year to the next.

NOTE: There are a maximum number of days an Employee can be absent without a medical certificate during anyone year of service. This varies with length of service (refer to 'Proof/Documentation' below).

70.1 Reason

Unable to attend work due to:

• Personal illness - Employee is sick or injured; or

• The need to provide care to an immediate family member or member of the Employee's household.

70.2 Notification

• Prior notification of absence should be made when known, to allow Supervision to manage labour availability.

• Acceptable notification is as soon as practicable and during the ordinary hours of the first day or shift of such absence.

• Where it is not practicable to advise of absence within ordinary hours an Employee must advise within 24 hours of absence.

70.3 Proof/Documentation

In all cases, medical certificates must be issued and signed by an authorised person, and must not have been altered. The medical certificate should identify the medical need, expected duration and the Employee making the claim or Immediate Family member that the Employee is required to provide care for. Retrospective medical certificates or any other documentation will not be accepted.

When an Afternoon Shift Employee cannot obtain a medical certificate on the actual day of absence, the medical certificate issued must make reference to the actual period of absence.

Carer's Leave, proof must be provided on all occasions:

• A medical certificate or statutory declaration may be submitted as proof of the need to provide care to an Immediate Family member or member of the Employee's household.

• In such cases, the medical certificate or statutory declaration must identify the medical need, expected duration and identify the person is a member of the Employee's Immediate Family or household, and the Employee is required to provide care for the person.

• A maximum of ten days in a twelve month period (in accordance with an Employee's anniversary date) may be covered by statutory declarations as proof.

Proof will always be required where the guidelines are not complied with, and in the following circumstances:

• The absence is for 2 or more working days in a row and acceptable notification has not been provided

• The absence is immediately before or after annual leave or a Public Holiday

• The Employee has a current written warning or formal counselling for absenteeism

• The Employee has already had one or more absences, without proof, on the day before or after an ROO/PDO, in the preceding 12 months.

70.4 Maximum Number of Days without Proof (for Personal illness only)

If the Supervisor does not require proof as above, the following table outlines the maximum number of days Employees may be absent without proof.

Length of Service	Maximum Number of Days Without Proof
All employees	5 days

Note: The above table does not apply if guidelines are not complied with and therefore an Employee is required to always submit proof.”

The diagram at clause 70.4.1 has been omitted.

[12] Clause 4 of the Agreement provides:

“4. OPERATION OF AGREEMENT & NO EXTRA CLAIMS

This comprehensive Agreement resolves the enterprise bargaining claims by The Parties and shall operate seven days from the date of approval by FWA and will nominally expire on 6 March 2015.

TMCA and the Union agree to start negotiations for renewal of this Agreement, three months prior to its expiry.

The parties agree they will not prior to the end of this agreement;

• make any further claims in relation to wages or any other terms and conditions of employment; and

• take any steps to terminate or replace this Agreement without the consent of the other parties.

Written commitments as outlined in the letter to FVIU chairperson dated 16 September 2011 will be honoured by all parties.”

[13] In order to resolve the dispute it is necessary to ask whether, on a proper construction of the Agreement, TMCA can proceed to implement its proposed method of sick/carer’s leave accrual and credit. In answering that question it is necessary to consider whether:

● the current method of sick/carer’s leave accrual and credit is expressly or by implication, a term of the agreement; and/or
● TMCA’s proposed method of sick/carer’s leave accrual and credit is a “further claim” within the meaning of clause 4 of the Agreement, and thereby is prohibited by the Agreement.

Position of the parties and the Intervener

[14] Both the AMWU and the Intervener argued that TMCA was prevented from proceeding with the proposal to change the method of accrual and credit of sick/carer’s leave because it was a “further claim” made contrary to the prohibition of such claims in clause 4 of the Agreement.

[15] In addition the AMWU argued that whilst the Agreement did not expressly proscribe the method of sick/carer’s leave accrual and credit proposed by TMCA it equally did not provide for it. In consequence the text of the Agreement was insufficient to provide a decisive answer and I should therefore have regard to extrinsic material, particularly evidence as to a proposal for a new method of sick/carer’s leave accrual and credit advanced by TMCA during bargaining for the Agreement, and evidence of the rejection of that proposal by the AMWU. This was said to assist in ascertaining objectively the intention of the parties, that being, the sick/carer’s leave entitlement of 10 days per year would be accrued and credited in accordance with the method of accrual and credit applied by TMCA at the time the Agreement was made. The AMWU also submitted that I should have regard to the text of the Agreement in light of its industrial purpose and the commercial and legislative context and also to the evidence about how the provision in the Agreement has been historically applied by TMCA.

[16] The Intervener submitted further or in the alternative to its argument that TMCA’s proposal is prohibited by clause 4 of the Agreement, that the method of sick/carer’s leave accrual and credit applied by TMCA both before and after the making of the Agreement was a term that is to be implied into the Agreement.

[17] TMCA argued that the proposal to alter the manner in which sick/carer’s leave is accrued and credited is not a “further claim” within the meaning of clause 4 of the Agreement, and therefore clause 4 does not provide any barrier to the implementation of its proposal. Further TMCA argued that there is no ambiguity in words of, or the entitlement conferred by, clause 70 of the Agreement. Clause 70 is not susceptible to more than one meaning and regard should not be had to any extrinsic material as an aid to interpretation and, in any event, the pre-negotiation evidence sought to be relied upon by the AMWU merely served to disclose that different subjective intentions were held by the parties. Finally TMCA submitted that there are no implied terms in enterprise agreements.

Proper construction of the Agreement

Principles of construction of enterprise agreements

[18] 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 14 (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).” 15 

[19] To this I would add the oft-quoted observations of Madgwick J in Kucks v CSR Limited 16 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.” 17

[20] 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 18.  For example, similar observations were made in Amcor Limited v CFMEU19 (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.” 20 

[21] The ultimate decision in Amcor is perhaps an example of the Court reasonably straining for a meaning that avoided inconvenience or injustice as contemplated by Madgwick J in Kucks.

[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 Geo 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.”” 21

[23] It is these principles that I apply to the determination of the proper construction of the Agreement.

Meaning of clause 70 of the Agreement

[24] It is relatively straightforward to discern the meaning of, and the entitlement conferred by clause 70. It means exactly what it says, namely, that an employee is entitled to 10 days of sick/carer’s leave per year. Self evidently the commencement point of such ‘year’ will differ for each employee as it will commence on each employee’s anniversary of employment. Sick/carer’s leave that is not used in a year accumulates from year to year.

[25] The method of accrual and credit of sick/carer’s leave is not addressed in the Agreement, unlike for example the accrual of annual leave 22. This is not surprising when viewed against the backdrop of the NES which deals with accrual and credit of personal/carer’s and the current method utilised by TMCA. However the absence of such a provision does not in my view render the clause unclear, create ambiguity or make the conferral of the entitlement under clause 70 unworkable.

[26] The proposal advanced by TMCA does not alter the entitlement under the Agreement that each employee has in each year of employment to 10 days’ sick/carer’s leave. It is not inconsistent with any express provision of clause 70 nor is it prohibited by clause 70. There is nothing in the language of clause 70 or the Agreement as a whole (putting to one side the effect of clause 4 to which I will return later) which would, in my view prevent, TMCA from proceeding with its proposal.

[27] It is for this reason the AMWU urged that I should have regard to the extrinsic material it offered in support of its construction of clause 70 and to evidence of the manner in which TMCA has hitherto accrued and credited to an employee the sick/carer’s leave entitlement. It is also for this reason that the Intervener urges that there should be implied into the Agreement, a term which sets out the current method of accrual and credit of sick/carer’s leave utilised by TMCA.

Use of extrinsic material as an aid to interpretation

[28] 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 Justice Mason in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales 23 (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.” 24

[29] In the course of argument the AMWU referred to a decision of the Full Bench of FWA in the AWU- WA Branch v Cooperative Bulk Handling Ltd 25. In that case the Full Bench overturned a decision of Commissioner Williams in which he refused to permit the use of extrinsic material is relation to custom and practice and what had transpired during the course of negotiations for a proposed agreement in the course of resolving a dispute about the construction of provisions in the Geraldton Plant Operators Union Collective Agreement 2008.

[30] There is no suggestion on the face of the Full Bench’s decision that there is any departure from the proper approach set out in Codelfa. Indeed it is apparent from the decision that the Full Bench found, contrary to the finding of the Commissioner, that there was an ambiguity in the clause at issue, and so there was appellable error because the Commissioner had misconceived his ability to have regard to extrinsic material 26. Far from being any departure from Codelfa, the Full Bench decision is an example of its application.

[31] In any event, lest there be any doubt about the continued application of Codelfa, that doubt is erased by the recent reaffirmation of Codelfa as binding of authority in Western Export Services Inc v Jireh International Pty Ltd 27. Consequently, as in my view there is no ambiguity in clause 70 of the Agreement and there is no basis upon which the extrinsic material about the surrounding circumstances sought to be relied upon by the AMWU to be admitted as an aid to interpreting clause 70 of the Agreement. As I have earlier indicated, the absence of a provision setting out a method for the accrual and credit of sick/carer’s leave does not render the provision, which unambiguously confers an entitlement to 10 days’ sick/carer’s leave per year, ambiguous.

[32] Even if the extrinsic material were to be admitted, it would merely demonstrate that during bargaining for the Agreement there were claims and discussions about including in the Agreement, a provision for the accrual and credit of sick/carer’s leave by employees 28. Ultimately, on Mr Marmara’s evidence, the proposition advanced by TMCA was rejected29. Further the evidence suggests that the negotiating parties deliberately decided that the Agreement should not deal with, and remain silent on that subject matter30. To paraphrase Mason J in Codelfa this evidence of prior negotiations may establish the objective background facts which were known to both parties and the subject matter of the Agreement. To the extent that this evidence has that tendency, it is admissible. But in so far as the evidence consists of statements and actions of the parties which are reflective of their actual intentions and expectations, they are not admissible as the statements and actions reveal the terms of the proposed agreement which the parties subjectively intended or hoped to make. These hopes and intentions are superseded by, and merged in, the Agreement itself. In any event the evidence does not help the AMWU in the construction which it seeks to advance as it merely shows that a proposal to include a provision about accrual and credit of sick/carer’s leave was proposed and rejected. This says nothing about whether the existing TMCA method is part of the Agreement.

[33] Furthermore, even if I were of the view that the words in clause 20 were ambiguous and I had regard to the extrinsic material, it would be stretching the language of clause 20 to the point of incredulity, to adopt the construction urged by the AMWU that the words of clause 20 mean one thing in the first year of employment and another, altogether different thing in the second and subsequent years of employment.

Implied term as to accrual and credit of sick/carer’s leave

(a) Whether it is appropriate to imply a term into an enterprise agreement

[34] The Intervener submitted that the existing method used by TCMA for the accrual and credit of sick/carer’s leave should be a term implied into the Agreement.

[35] Enterprise agreements such as this Agreement made under the Act are a product of statute. The rules governing the conduct of negotiations, the right to take protected industrial action and the content of enterprise agreements are set out in the Act. An enterprise agreement is negotiated through ‘parties’ that are bargaining representatives and ‘made’ once a valid majority of employees whose employment will be covered by the agreement approve it, but it depends, for its enforceable legal status, upon approval by the Commission, following the application of statutory criteria. Such agreements, by themselves are not enforceable under the common law, but under the Act. Moreover, the terms of such agreements will cover and apply to persons who become employees for within scope of relevant agreement in the future. They also cover employees who did not vote to approve the making of the agreement and those who voted against that approval. In many respects, it is a misnomer to describe an enterprise agreement made under the Act as an ‘agreement’ at all. In this regard, the Agreement is by all accounts a different creature in character and substance to a contract.

[36] In Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v Skilled Engineering Ltd 31 (Skilled Engineering) Finkelstein J considered the question whether, and the circumstances in which a term should be implied into a certified agreement made under the Workplace Relations Act 1996 (WR Act). His Honour said:

“[16] I have found two cases, an English decision (where the legislation is analogous but not precisely the same) and one from the Federal Court which have considered whether a term might be implied into a certified agreement. The English decision, Ali v Christian Salvesen Food Services Ltd [1997] 1 All ER 721 concerned a collective agreement which introduced a system of annual pay where employees were to receive a standard wage for working a total of 1,824 hours in a twelve month period: effectively a 40 hour working week. There were no provisions for the eventuality that an employee might cease his employment before the expiry of the twelve month period. The plaintiff was made redundant after working twenty-two weeks. He claimed that the hours he worked had exceeded 40 hours per week and he applied for a determination that he be paid pro-rata for the excess based on an alleged implied term which he constructed to cover his situation. His application was refused. Waite LJ, with whom Saville and Otton LJJ agreed, said (at 726):

"Should there be any topic left uncovered by an agreement of that kind, the natural inference, in my judgment, is not that there has been an omission so obvious as to require judicial correction, but rather that the topic was omitted advisedly from the terms of the agreement on the ground that it was seen as too controversial or too complicated to justify any variation of the main terms of the agreement to take account of it."

As Waite LJ highlighted, it would be extremely difficult to devise a term to cover the different circumstances in which an employment contract would be terminated prematurely. He instanced the employee who fell sick and was dismissed for incapacity, the employee who was dismissed for misconduct, and the "zealous latecomer". He then went on:

"Once it is apparent that the situation for which it is sought to imply a term is only one of the numerous eventualities on which the agreement is silent, it becomes difficult, if not possible to devise for any particular eventuality, a term of which it can be predicated with certainty that the negotiating parties would inevitably have been of one mind about it if a decision had been taken to make specific provision for it in the agreement."

[17] The second decision is Construction, Forestry, Mining and Energy Union v Henry Walker Eltin Contracting Pty Ltd (2001) 108 IR 409. The certified agreement in that case made provision "for a 2 panel 5½ day roster working 2 x 12 - hour shifts". The employer introduced a different roster to meet its changed needs. The union contended that the certified agreement should be construed as to allow a change in salary to cover the case of a change in the roster. In the alternative, it submitted that there was an implied term of the certified agreement which provided for the alteration of salary in accordance with any change in the work done due to an alteration in the roster. Neither the construction argument nor the putative implied term nominated a salary that was to be paid in changed circumstances. Presumably the salary was one that that was fair and reasonable. Branson J rejected both submissions, substantially for the same reasons. Some of her reasons were dependent upon the particular terms of the certified agreement. However two were more general. Branson J said (at 419):

"It would, in my view, be contrary to the intention of the legislature as disclosed by these provisions of the Act [s 178 and s 179], for the amounts payable to an employee under a certified agreement to be other than certain and capable of determination by reference to the agreement itself.

And later (at 420):

"[T]he implication of [an alleged implied] term would not be reasonable and equitable, it is not necessary to give business efficacy to the Agreement, would not be an obvious reflection of the apparent intention of the parties to the Agreement, is not capable of clear expression and would contradict the express terms of the Agreement (see Codelfa Construction Pty Ltd v State Rail Authority of (NSW) [1982] HCA 24; (1982) 149 CLR 337 per Mason J at 347)."

[18] These cases suggest that the general approach is to apply the principles of contract construction, but with a predisposition against the implication of a term. For example, it was accepted in Ali v Christian Salvesen Food Services that there was a gap in the agreement which produced unfairness. However, this was not sufficient to convince the court that the gap should be filled. As a collective agreement is usually a carefully negotiated compromise between parties who have equal bargaining power, the tendency is to assume that the omission is intentional.” 32

[37] The decision in Skilled Engineering was considered and questioned by Siopis J in McAleer v the University of Western Australia (No 3) 33(McAleer). After referring to the passages reproduced above Siopis J said:

“[105] Finkelstein J used the contractual test to imply terms into the certified agreement. In determining whether and, if so, on what basis, a term could be implied into a certified agreement registered under the Workplace Relations Act, Finkelstein J considered the juridical nature of a certified agreement. However, in discussing the juridical nature of a certified agreement, Finkelstein J made no reference to the Full Court decision in Actew. There is some tension between the observations of the Full Court in Actew which characterise a certified agreement as having solely a statutory, rather than a contractual, basis, and the following observations of Finkelstein J at [12]:

On one view a certified agreement is no different from a private contract (a binding exchange of promises) between two or more persons, save that the machinery for its enforcement is conferred by statute. On this view the ordinary rules according to which a term can be implied into a contract will apply to a certified agreement. Terms can then be implied as a rule of law, as representing the imputed intention of the parties or by custom.

[106] Further, Ali was an English case and the Court of Appeal did not refer to any statutory underpinning of the collective agreement it considered in that case. In fact, it was accepted by the Court of Appeal that the collective agreement had become part of each of the employee’s individual contracts of employment. Also, Eltin, the other case referred to by Finkelstein J, was decided before Actew. Accordingly, it may be necessary to approach the Skilled Engineering decision with some caution.”

[38] The reference by His Honour to the decision in Actew is to a decision of the full Federal Court in ACTEW Corp v Pangallo 34. The decision in Actew concerned an appeal against the decision of the Supreme Court of the Australian Capital Territory which had held that it had jurisdiction to make declarations of right in relation to a certified agreement made under the WR Act. In upholding the appeal, the Court observed:

“A certified agreement now may be rather more like an award was at the time of that decision than it might be now. However, the trend towards consensual arrangements has not resulted in any fundamental change to the nature and effect of a certified agreement. The submission for the appellant that a certified agreement is solely a creature of statute having force by virtue of the statute remains correct. In a sense, the term "agreement" is a misnomer because it will bind individuals whether or not they authorise it or are in favour of it. There is no scope for private law concepts of contract or equity in such circumstances. (See, in a different setting, McHugh J in I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41 at [84].) We do not see that the circumstance that a certified agreement can now be made without settling an industrial dispute has any significance in this context. Once the process has been gone through, and the agreement is certified, it has force in precisely the same way as a certified agreement which settles an industrial dispute. The application of administrative law remedies does not arise in considering the question of law at issue in this appeal . . .
All in all, we accept the submission that the Act has created the concept of a certified agreement, has given it statutory force and has also regulated the means by which it may be construed and enforced in accordance with the principle in Josephson v Walker. In our opinion, the statute excludes a court of general jurisdiction of a State or Territory from the field, except insofar as it is expressly included, and is inconsistent with the ability of such a court to make a binding declaration of right as to the effect of a certified agreement.”

[39] In my view the same observation may be made about an enterprise agreement made under the Act, and consequently the Agreement at issue in this dispute. I agree with the reservations expressed by Siopis J in McAleer. I am of the view, given the statutory nature of the Agreement I have identified earlier, that it would be unwise to imply a term into the Agreement as suggested by the Intervener, and I do not do so.

(b) Is the term implied in fact?

[40] Even if I am wrong in this view and I apply the approach of Finkelstein J in Skilled Engineering, I would not imply a term into the Agreement because the conditions which must be satisfied for implying a term into a contract identified in BP Refinery (Westernport) Pty Ltd v Shire of Hastings 35 are not in this case satisfied in relation to the Agreement. These conditions are that the term sought to be implied must:

1. be reasonable and equitable;

2. be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it;

3. be so obvious that it goes without saying;

4. be capable of clear expression; and

5. not contradict an express term of the contract. 36

[41] I am prepared to assume without deciding that the term sought to be implied would satisfy conditions 1, 4 and 5 and would likely also satisfy condition 3. However in my view the term sought by the Intervener to be implied into the Agreement is not necessary to give business efficacy to the Agreement. Employees who are covered by the Agreement will not have their yearly quantum entitlement to sick/carer’s leave as provided for in clause 70 reduced unless the term sought by the Intervener were implied. The entitlement is clear and unambiguous. A provision as to accrual and credit of sick/carer’s leave will not change that entitlement or render an uncertain or unworkable provision, more effective or workable. The Agreement, and clause 70 in particular, is effective without such a term.

[42] Even if such a term could be implied, no cogent reason has been advanced as to why it would be more efficacious to imply a term reflecting TMCA’s current practice into the Agreement, rather than for example, the accrual method under the NES. Furthermore, no cogent reason is advanced for the implication of a term which is different in the first year compared with subsequent years of employment.

[43] The Intervener referred to the judgement of Deane J in Hawkins v Clayton 37 and in particular to the following passage:

“. . . in a case where it is apparent that the parties have not attempted to spell out the full terms of their contract, a court should imply a term by reference to the imputed intention of the parties if, but only if, it can be seen that the implication of the particular term is necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case. That general statement of principle is subject to the qualification that a term may be implied in a contract by established mercantile usage or professional practice or by a past course of dealing between the parties.” 38

[44] The Intervener submitted, drawing upon the statement of Deane J, that it is apparent, in the circumstances of the Agreement, as an employment agreement, it is necessary to have a provision which describes how sick/carer’s leave accrues and that such a term is necessary to allow clause 70 to properly operate. The statement of Deane J is merely illustrative of the application of one of the conditions identified in BP Refinery discussed above. In effect the Intervener’s submission amounts to no more than a submission that a term describing how sick/carer’s leave accrues is desirable, but that is something that falls well short of being necessary for the effective operation of the Agreement and in particular of clause 70 thereof. I do not agree that such a term is necessary to allow clause 70 of the Agreement to properly operate.

[45] In simple terms the ‘promise’ made by TMCA in clause 70 of the Agreement is that all employees will be entitled to 10 days of paid sick/carer’s leave in each year of employment with TMCA. There is no evidence that for the nearly two years since the Agreement has been in operation, the absence of a provision which is said to be necessary to give business efficacy to the Agreement, in any way interfered with the effective operation of the Agreement or with access by employees to the entitlement in clause 70. TMCA is able to keep the ‘promise’ made by it in clause 70 without the term that is sought to be implied. It follows, in my view, that the Agreement is effective without the proposed provision and the proposed provision is not necessary to give business efficacy to the Agreement. Consequently no term will be implied.

(c) Is the term implied by custom and usage?

[46] To the extent that the AMWU and the Intervener rely on the past and current practice of TMCA relating to the accrual and credit of sick/carer’s leave is said to give rise to the implication of a term as to accrual and credit by reason of custom and usage, that argument is also rejected. In Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd 39 the High Court set out the circumstances in which trade custom or usage might form the basis for the implication of terms into a contract as follows:

“The cases have established the following propositions:

(1) The existence of a custom or usage that will justify the implication of a term into a contract is a question of fact: Nelson v. Dahl (1879) 12 ChD 568, at p 575. The critical dependence of a finding of custom on the facts of the particular case means there is little to be gained by referring (as counsel for the appellant urged us to do) to the practices of the London marine market in the last century, notwithstanding that those practices formed the basis for the implication, in contracts of marine insurance, of a term similar to the first of the terms alternatively contended for in this case (see Power v. Butcher (1829) 10 B & C 329, at p 340; [1829] EngR 162; 109 ER 472, at p 476; Xenos v. Wickham (1867) LR 2 HL 296, at p 319; Universo Insurance Company of Milan v. Merchants Marine Insurance Company (1897) 2 QB 93, at pp 95-97, 99).
(2) There must be evidence that the custom relied on is so well known and acquiesced in that everyone making a contract in that situation can reasonably be presumed to have imported that term into the contract: Young v. Tockassie [1905] HCA 17; (1905) 2 CLR 470, at p 478; Summers v. The Commonwealth [1918] HCA 33; (1918) 25 CLR 144, at p 148; Majeau Carrying Co. Pty Ltd v. Coastal Rutile Ltd [1973] HCA 22; (1973) 129 CLR 48, at pp 60-61. In the words of Jessel M.R. in Nelson v. Dahl, at p 575, approved by Knox C.J. in Thornley v. Tilley [1925] HCA 13; (1925) 36 CLR 1, at p 8:

"[The custom] must be so notorious that everybody in the trade enters into a contract with that usage as an implied term. It must be uniform as well as
reasonable, and it must have quite as much certainty as the written contract itself."

However, it is not necessary that the custom be universally accepted, for such a requirement would always be defeated by the denial by one litigant of the very matter that the other party seeks to prove in the proceedings.
(3) A term will not be implied into a contract on the basis of custom where it is contrary to the express terms of the agreement: Summers v. The Commonwealth, at p 148; Rosenhain v. Commonwealth Bank of Australia [1922] HCA 41; (1922) 31 CLR 46, at p 53. One explanation of this principle is that, in so far as it relates to written contracts, it is simply an application of the parol evidence rule, by which extrinsic evidence is generally inadmissible to add to, vary or contradict the express terms of a contract which has been reduced to writing: Bacchus Marsh Concentrated Milk Co. Ltd (in liquidation) v. Joseph Nathan & Co. Ltd [1919] HCA 18; (1919) 26 CLR 410, at p 427; Hoyt's Proprietary Ltd v. Spencer [1919] HCA 64; (1919) 27 CLR 133, at pp 143-144. A more fundamental explanation is that the presumed intention of the parties, on which the importation of the custom rests (Produce Brokers Company Limited v. Olympia Oil and Cake Company Limited (1916) 1 AC 314, at p 324; cf. Treitel, The Law of Contract (1983) 6th ed., at p 164), must yield to their actual intention as embodied in the express terms of the contract, regardless of whether the contract is written or oral.
It has sometimes been said that the implication of a term into a contract does not depend on the parties' intention, actual or presumed, but on broader considerations: Shell U.K. Ltd v. Lostock Garage Ltd (1976) 1 WLR 1187, at p 1196; (1977) 1 All ER 481, at p 487; Lister v. Romford Ice and Cold Storage Co. Ltd [1956] UKHL 6; (1957) AC 555, at pp 576, 579; Liverpool City Council v. Irwin [1976] UKHL 1; (1977) AC 239, at pp 257-258. But these statements are directed to situations in which the courts have been asked to imply terms amounting to rules of law applicable to all contracts of a particular class. The present case is of a different kind in which it may be necessary to speak of presumed intention. In matters of this kind, that phrase means no more than that the general notoriety of the custom makes it reasonable to assume that the parties contracted on the basis of the custom, and that it is therefore reasonable to import such a term into the contract.
(4) A person may be bound by a custom notwithstanding the fact that he had no knowledge of it. Historically the courts approached this question in a rather different way. It was said that, as a general rule, a person who was ignorant of the existence of a custom or usage was not bound by it. To this rule there was a qualification that a person would be presumed to know of the usage if it was of such notoriety that all persons dealing in that sphere could easily ascertain the nature and content of the custom. It would then be reasonable to impute that knowledge to a person, notwithstanding his ignorance of it (see Halsbury's Laws of England 4th ed., vol.12, pars 467-468; Jones v. Canavan (1972) 2 NSWLR 236, at p 243). In this way, the issue of notoriety discussed in (2) above came to be co-extensive with the question of imputed knowledge. The achievement of sufficient notoriety was both a necessary and sufficient condition for knowledge of a custom to be attributed to a person who was in fact unaware of it. The result is that in modern times nothing turns on the presence or absence of actual knowledge of the custom; that matter will stand or fall with the resolution of the issue of the degree of notoriety which the custom has achieved. The respondent's contention that industry practices unknown to the assured are incapable of forming the basis of an implied term of the contract cannot be sustained.” 40

[47] As I have earlier indicated, the proposed term as to accrual and credit of sick/carer’s leave is not inconsistent with any express term of the Agreement. However, there is no evidence about the other matters to which regard must be had in order to establish custom and usage. There is no evidence about how widespread the custom might be across the industry. There is no evidence about the extent to which the custom is universally accepted or of the level of knowledge of the custom. Such evidence as there exists, is confined to a practice applied by TMCA over an indeterminate period. This is clearly an insufficient basis upon which to find the existence of custom and usage, and from which it may be concluded that a term as to accrual and credit of sick/carer’s leave should be implied into the Agreement. Moreover, even if I were minded to imply a term into the Agreement, there is a serious question as to whether the implication of a term by reason of industry custom and usage is consistent with the objects of the Act which focuses attention on “achieving productivity, and fairness through an emphasis on enterprise-level collective bargaining...”. 41It seems to me, that it would be difficult to reconcile one with the other, however I need not and do not make a finding in relation to this issue.

No extra claims

[48] The Intervener argued that the proposal to alter the method of accrual and credit of sick/carer’s leave was a change to an existing entitlement of employees and was therefore a “further claim” in relation to terms and conditions of employment, which was prohibited by clause 4 of the Agreement 42. The AMWU submitted that the no extra claims provision of the Agreement should not operate to prevent an employer from making day-to-day requests of employees over things like duties, overtime and operational routine, but when one party to an agreement seeks to augment that which the Agreement provides, then this is an extra claim43. The AMWU submitted that as TMCA’s proposal would upset the Agreement’s equilibrium with TMCA attempting to recast the terms that are implicitly part of the Agreement, the proposal falls foul of the prohibition of “further claims” in clause 444.

[49] TMCA submitted that the change to process of accrual does not alter its obligation to provide, or an employee’s entitlement under clause 70 of the Agreement to, 10 days sick/carer’s leave per year. That being the case, TMCA submitted that the change cannot be a “further claim” within the meaning of clause 4 of the Agreement. The change was akin to changes to overtime allocation which have previously been found 45 not to breach no extra claims provisions in particular agreements. By analogy TMCA argued that the change proposed by it amounted to no more than an alteration to the way in which an entitlement to sick/carer’s leave is allocated and not to the entitlement itself46.

[50] The Intervener also urged that I adopt the description of an “extra claim” adopted by Commissioner Simmonds in Metropolitan Fire and Emergency Services Board v United Firefighters’ Union 47. In that matter the Commissioner said that “unless the proposed change contemplates variation to a specific entitlement or obligation or goes outside the scope of the agreement, then it does not amount to an extra claim for the purposes of clause 49”48. Whilst this description is helpful it should not be taken to be a general definition of an extra claim. The description was formulated by the Commissioner “[T]aking account of the context of the Agreement as a whole”49 and caution should be adopted in seeking to apply that description to other agreements. For present purposes I simply note, without adopting, the Commissioner’s view.

[51] Although clause 4 begins with the words “[T]his comprehensive Agreement resolves the enterprise bargaining claims . . .”, it does not follow that the Agreement deals with all issues relevant to or touching the employment of employees were covered by the Agreement. It does not deal with the accrual and credit of sick/carer’s leave. It does not deal with all duties, rights and obligations that might be found in the contract of employment or under relevant occupational health and safety legislation. The Agreement, for example, makes only passing reference to TMCA’s commitment to comply with the relevant OHS Act and Regulations but says nothing about employee obligations 50.

[52] Further, not every matter touching on employment has contractual force or is enforceable under the Agreement with the effect that there must be agreement between relevant parties to change or alter that matter. Some matters are determined by employer policy or administrative practice. An employer should not be prevented from altering such matters unless there is a clear express provision in an enterprise agreement or contract preventing the alteration, or the prohibition arises, by necessary implication from an express term, for example if the proposed alteration is inconsistent with an express term of an enterprise agreement or contract.

[53] For many years the parties covered by the Agreement, have been content to allow TMCA to determine the manner in which sick/carer’s leave is accrued and credited. The parties have chosen not to have the Agreement deal with that matter, and so in my view, TMCA is permitted to continue to determine that matter subject to meeting its obligation under the NES. It is not suggested by either the AMWU or the Intervener that the method by which sick/carer’s leave is accrued and credited is a term of the employment contract binding any employee and TMCA. I have already concluded that the method of sick/carer’s leave is accrual and credit is neither an express nor implied term of the Agreement. There is no provision in the Agreement nor has any term of a contract of employment that has been identified, which would prevent or prohibit the change proposed by TMCA. Similarly there is no provision in the Agreement nor has any term of a contract of employment been identified, which is inconsistent with the change proposed by TMCA. The proposal is also consistent with method of accrual under the NES.

[54] Viewed in this context, the proposed change to the manner in which sick/carer’s leave is accrued and credited is one that TMCA is entitled to make. This is a case where the pre-existing arrangement determined and administered by TMCA is to change. The proposed change does not require the consent of employees or of the AMWU. It is a decision by TMCA to no longer maintain the pre-existing arrangement. It is not a “further claim” within the meaning of clause 4 of the Agreement.

Conclusion

[55] It follows from the foregoing, that on a proper construction of the Agreement, TMCA may proceed to implement its proposed method of sick/carer’s leave accrual and credit. In my view, the current method of sick/carer’s leave accrual and credit is neither expressly nor by implication, a term of the Agreement.

[56] Further TMCA’s proposed method of sick/carer’s leave accrual and credit is not a “further claim” within the meaning of clause 4 of the Agreement, and therefore is not prohibited by the Agreement.

[57] In determining this dispute it has been unnecessary for me to form a view as to whether TMCA would be in breach of the Agreement if it did not grant an employee, who became ill or was injured immediately following an employee’s employment anniversary for any extended period (of say 10 days) and who had otherwise exhausted his or her accrued sick/carer’s leave, paid sick/carer’s leave of 10 days notwithstanding the employee would not have that level of accrual under TMCA’s proposed method of sick/carer’s leave accrual and credit. For present purposes this question is a hypothetical one and absent a factual matrix it would be unwise to express a view. I am sure that TMCA would be alive to the risk of any breach of the Agreement.

[58] The dispute is determined accordingly and no orders are necessary.

DEPUTY PRESIDENT

Appearances:

B. Terzic for “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union

K. Reidy for Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia for Mr Crea as intervener

P. Wheelahan for Toyota Motor Corporation Australia

Hearing details:

2013

Melbourne:

10 October.