Fair Work Act 2009
s.604 - Appeal of decisions

Appeal against decision [2015] FWC 8325 of Commissioner Roberts at Sydney on 4 December 2015 in matter number C2015/5783.

[1] This is an appeal by the Transport Workers’ Union of Australia (Appellant) against a decision 1 (Decision) made by Commissioner Roberts in dealing with a dispute arising under the Linfox and Transport Workers’ Union Road Transport and Distribution Centres Agreement 2014 (2014 Agreement) pursuant to s.739 of the Fair Work Act 2009 (the Act).

[2] At the hearing on 21 January 2016, Mr Howell of Counsel sought permission to appear for the Appellant and Mr Shariff of Counsel sought permission to appear for Linfox Australia Pty Ltd (Respondent). Given the complexity of the matter, and having regard to s.596 of the Act, permission was granted to both parties to be represented.

Background

[3] The matter concerns the obligation of the Respondent to pay the rates prescribed by the 2014 Agreement to certain of its employees engaged at its Rosehill site, specifically, those who deliver keg and packaged products for the Respondent’s current client, Carlton United Breweries (CUB). These employees had been paid pursuant to the Linfox New South Wales (Foster’s Rosehill – Keg) Alternative Payment Method (Keg APM Agreement) and the Linfox New South Wales (Foster’s Rosehill – Packaged) Alternative Payment Method (Packaged APM Agreement) which contained certain productivity based incentive schemes. The Keg APM Agreement expired on 30 June 2013 and the packaged AGM Agreement expired on 31 December 2013. Nevertheless, the Respondent continued to remunerate certain of its employees according to the process provided for in the APMs after their expiration dates.

[4] The Respondent contended that it was at risk of losing the CUB contract and therefore notified its employees and the Appellant that it would not be making payments pursuant to the expired APM Agreements and would be paying the rates prescribed in the 2014 Agreement. The Appellant argued that the Respondent was obliged to pay the employees in accordance with the terms of the APM agreements.

[5] Each of the APMs provided:

“1.8 OPERATION OF THE APM

1.8.1 The APM operates as an alternative to the hours and overtime method of payment for heavy rigid vehicle drivers engaged in [Keg or Packaging] delivery work at Linfox Foster’s Rosehill.

1.8.2 The APM pays drivers pre-determined rates for each delivery based on the size of the delivery.

1.8.3 The APM will only apply when drivers’ are performing deliveries for Linfox Fosters Rosehill. At all other time drivers will be paid the applicable hourly rate of pay for their grade and classification according to the Agreement.

1.8.4 Wages earned under the APM shall not be less than those payable to the driver under the applicable hourly rate of pay for his/her grade and classification according to the Agreement.

1.8.5 In the event that payment under the APM is less than the amount which the driver would have been paid under the Agreement the driver shall receive payment according to the Agreement.”

[6] The relevant clauses of the 2014 Agreement are set out as follows:

“5. CUSTOM AND PRACTICE

5.1 This Agreement is not intended to, nor shall it, alter a custom and practice applicable to the parties.

5.2 It is the intention of the parties to this Agreement to, during the Term, attempt to reduce to writing any custom and practice applicable to Linfox and the Employees.

5.3 The parties will review and where agreed create a local agreement arising from the custom and practice in accordance with Clause 34.

5.4 Any dispute about the operation of this clause is to be dealt with in accordance with the disputes procedure in this Agreement.

…

8. RELATIONSHIP WITH OTHER AGREEMENTS

This Agreement operates in place of any other award (including a modern award) or agreement (whether certified, or approved, or not).

…

34. FACILITATIVE CLAUSE FOR FURTHER AGREEMENTS AND LOCAL MATTERS

34.1 If, during the life of this Agreement, a new local matters agreement is made or changes are required in respect of existing local agreements made under this clause, the new local agreement or changes to existing local agreements must be agreed between the parties. The new agreement or changes must be agreed to by:

(a) a majority of Employees at the specific worksite; and

(b) the TWU (agreement is to be indicated by the signature of the relevant branch secretary).

34.2 In the event that it is proposed that a local workplace agreement depart from or effectively vary a term of this Agreement, the parties will comply with the requirements of the Act in relation to variation of agreements. The agreement will not come into effect until such compliance is complete and the variation commences operation.

…

45.2 PAYMENT OF WAGES

Linfox may, at its sole discretion, implement or discontinue any productivity or performance based payment arrangements applicable at a local level. Any payments will be supplementary to the weekly wage rates applicable under the terms of this Agreement.”

Decision at First Instance

[7] The matter at first instance was heard on an expedited basis and the Commissioner accommodated Linfox’s request for an urgent decision. The Commissioner dismissed the application on the basis that the two APM Agreements were not incorporated into the 2014 Agreement and therefore the Respondent was entitled to determine its employee’s hourly rate pursuant to the 2014 Agreement. The Commissioner made the following findings:

“[40] It is clear to me that the Keg APM and the Packaged APM were designed as incentive/productivity tools. They have each provided significant financial benefits to employees and increased efficiencies (at least in the past) for Linfox. They have a long history, having been in place for some nine and fifteen years respectively. They are far more than local custom and practice arrangements. Neither party to this dispute has ever sought to incorporate the terms of the APMs into the Enterprise Agreement. They have taken that course for reasons unknown to me.

[41] It is my role to determine whether the terms of the APMs were in any event incorporated into the Agreement and therefore have the force of the Agreement.

[42] In the light of the history of the APMs and the history of relevant enterprise agreements between the parties, I am satisfied that neither the Keg nor the Packaged APM was ever intended to form part of the 2014 Agreement. By the time the 2014 Agreement came into operation, the two APMs had reached their respective expiry dates. In that context, I note that both of the APMs provide a date of commencement and state that they “shall remain in force” until 30 June 2013 for the Keg APM, and 31 December 2013 for the Packaged APM. This is in contrast to the nominal expiry dates provided in both the 2011 and 2014 Agreements. Therefore even if the APM Agreements were incorporated into the 2011 Agreement, their respective ‘sunset clauses’ would have caused them to cease having effect prior to the making of the 2014 Agreement. The fact that Linfox continued to apply the two APM Agreements beyond their expiry dates does not act to extend their operation as is the case when an enterprise agreement is effectively extended until a new Agreement is made or it is terminated.

[43] Accordingly I determine that the two APM Agreements have expired and are not incorporated or otherwise subsumed into the 2014 Agreement and therefore Linfox is entitled to apply the totality of the 2014 Agreement to the relevant employees, including the hourly rates of pay arising from clause 88.2(a).”

[8] The Commissioner’s findings in effect entitled the Respondent to pay its employees at the rate specified in the 2014 Agreement and confirmed that there was no obligation on the Respondent to pay the employees at the rates specified in the APMs on the basis that the APMs were not incorporated into the 2014 Agreement.

The Appeal

[9] The Appellant appealed the Commissioner’s decision on the basis that the APMs were incorporated by the 2014 Agreement. The Appellant contended that the APMs were a custom and practice within the meaning of clause 5 of the 2014 Agreement. At the heart of the appeal was whether the procedures provided for in the APM Agreements were custom and practice and thus incorporated into the 2014 Agreement.

Appellant’s Submissions

[10] The Appellant submitted that the central issues on Appeal were whether on its proper construction:

• The APMs were a custom and practice within the meaning of clause 5 of the 2014 Agreement; and



• If so, whether clause 5 operates to prevent the Respondent from ceasing to pay certain of its employees in accordance with the APMs and apply the rates of pay provided by clause 88 of the 2014 Agreement.

[11] In the Notice of Appeal the Appellant advanced six grounds of appeal and invited the Full Bench to quash the decision of the Commissioner on the basis that the APMs were incorporated into the 2014 Agreement. In summary, the Appellant submitted that:

• the Commissioner erred in concluding that the APMs, including the rate of pay and remuneration method contemplated by the APMs, were not “custom and practice” as defined within clause 5 of the 2014 Agreement (Decision at [40]), and failed to give any or any adequate reasons for that conclusion;



• the Commissioner erred in finding that the Respondent was entitled to pay the drivers at Rosehill in accordance with the hourly rates provided for by clause 88(2) of the Agreement; and



• the function and purpose of clause 5 of the 2014 Agreement is to preserve and protect established local arrangements overlooked as part of the 2014 Agreement making process, and to provide a mechanism for them to be formalised during the life of the Agreement. The Appellant argued that because of this the Respondent cannot ignore that mechanism and unilaterally abandon an established custom and practice during the life of the 2014 Agreement. The Appellant submitted that to do so would undermine the apparent purpose of clause 5 of the 2014 Agreement.

[12] In regards to whether the APMs were a “custom and practice”, the Appellant submitted that the proper approach to the construction of an enterprise agreement requires consideration of the language used in the relevant provision/s, understood in the light of its/their industrial context and purpose. The Appellant submitted that because narrow and pedantic approaches should not be taken, an excessively literal adherence to the technical meaning of words should be avoided. The Appellant further submitted that weight must be given to every part of the 2014 Agreement, and an interpretation of the relevant clause must be consistent with the general intention of the parties to be gathered from the whole agreement.

[13] The Appellant further submitted that the correct approach to construction is to read the Agreement in a way that gives effect to its purpose having regard to its relevant context. The Appellant relied on the evidence of Mr Warnes given at first instance to contextualise the purpose of clause 5. Mr Warnes gave evidence that the TWU sought to include a term that had the effect of protecting the rights of certain workers at the local level who enjoyed benefits under local agreements. The Appellant submitted that the continued application of the APMs beyond their expiry date was further indication that they are custom and practice for the purposes of clause 5 of the 2014 Agreement.

[14] The Appellant referred the Commission to paragraph 41 of AMIEU v Golden Cockerel

Pty Limited (“Golden Cockerel”) where the Full Bench stated:

“The resolution to dispute a construction of agreement will turn on the language of the agreement understood having regard to its context and purpose, including the text of the agreement viewed as a whole.”

[15] The Appellant submitted that the self-evident function and purpose of clause 5.1, viewed in the context of the Agreement as a whole, is to ensure that any existing custom and practice survives the commencement of the Agreement. The Appellant submitted that in these circumstances, clause 5 of the Agreement operates so as to preserve and protect established local arrangements, such as the APMs. In the Appellant’s submission, the Commissioner erred by failing to interpret clause 5 and failed to have regard to its purpose and context.

[16] The Appellant submitted in oral submissions that clause 45 and clause 8 are qualified by clause 5. The Appellant submitted that if the APMs are a custom and practice within the meaning of clause 5, clause 45 and clause 8 do not operate to permit the Respondent to discontinue the application of the APMs.

[17] The Appellant further submitted that the Commissioner’s reasons, reached on an expedited basis, failed to provide the essential grounds for reaching the decision on the disputed issues. 2

Respondent’s Submissions

[18] In the Respondent’s submission, the decision of the Commissioner represented an orthodox application of conventional principles of law to the facts.

[19] With regards to the Appellant’s submission that the Commissioner erred in failing to articulate the essential grounds for reaching the decision, the Respondent submitted that it was the common understanding of the parties that the matter was heard on an expedited basis and the Commissioner was to give brief reasons, noting that he could later offer more lengthy reasons if the parties requested it.

[20] The Respondent further submitted that applying the principles in Golden Cockerel 3 to the construction of an enterprise agreement, the meaning of clauses in the agreement is to be determined objectively with regard to the common intentions of the parties. In doing so, although there may be limited circumstances where consideration of extrinsic material is permissible, the common intentions of the parties are not to be determined by having regard to the subjective intentions of one party. The Respondent submitted that this meant it is impermissible for the Appellant to rely on the subjective views of Mr Warnes regarding the purpose or meaning of clause 5 of the 2014 Agreement. The Respondent submitted that the Full Bench should place no weight on the evidence provided by Mr Warnes and should treat it with caution given the change in the thrust of the Appellant’s approach on appeal.

[21] The Respondent further submitted that after the APMs expired, the Respondent’s decision to maintain the conditions provided in the expired APM could at any time be “rescinded or discontinued at the sole discretion of management” as provided by the 2014 Agreement. The Respondent submitted that since the parties are of a practical bent and are mature in the industry, the idea that the parties were unaware of what local matters arrangements were before them is a nonsense. In the Respondent’s submission the parties paid very close attention to what should be expressly incorporated into the enterprise agreements.

[22] During oral submissions at the hearing, counsel for the Respondent took the Full Bench through the history of the agreements, noting a similar clause 1.5 and clause 20.1 in the 2001, 2004 and 2007 agreements. He noted that from 2000 onwards up until the latest APM in time, all agreements had been subject to the express condition that they can be varied at any time or rescinded or discontinued at the sole discretion of management. The Respondent noted that from 2011 the parties agreed in clause 1.3.1 that the agreement shall operate for a fixed term from 7 March 2011 to 31 December 2013. In the Respondent’s submission this indicated the intention of the parties that they would adhere to their obligations for a fixed term and beyond that point in time, there could be no obligation, guarantee, assurance or expectation that the agreement would continue. In the Respondent’s submission, beyond 31 December 2013, the APM scheme was entirely at the discretion of the Respondent.

[23] On this basis, the Respondent submitted that the parties’ objective intention was to include only the arrangements expressly incorporated into the 2014 Agreement.

Consideration

[24] In the ordinary course, the Fair Work Commission will grant permission to appeal only if it is in the public interest to do so. 4 However, clause 33.1(f)(i) of the 2014 Agreement provides that:

“there shall be a right of appeal to a Full Bench of FWC against the decision, which must be exercised within 21 days of the decision being issued or within such further time as the Full Bench may allow.”

[25] In Australian Manufacturing Workers’ Union v Silcar Pty Ltd 5, a Full Bench of the Fair Work Commission determined that an enterprise agreement provision in terms similar to clause 33.1(f)(i) of the 2014 Agreement “creates an independent right of appeal for which permission to appeal is not required.” This approach was upheld by the Full Bench in Shop, Distributive and Allied Employees Association (Queensland Branch) Union of Employees v Woolworths Limited T/A Woolworths6. In these circumstances, the Appellant did not require permission to appeal as it had an automatic right of appeal pursuant to clause 33.1(f)(i) of the 2014 Agreement. As such, the appeal proceeded by way of a rehearing.

[26] We note the Appellant’s submission that the Commissioner did not provide adequate reasons in the Decision. We also note that the matter came before the Commission on an expedited basis and the Commissioner was urged by the Respondent to reach a quick decision. It was in these circumstances that the Commissioner gave brief reasons in order to provide certainty for the parties and the parties were told that they could request more detailed reasons if they so wished. During the appeal hearing the Appellant made the submission from the bar table that such a request was made to the Commissioner’s chambers but the request for further reasons was denied. In any event and notwithstanding the Appellant’s contention regarding the inadequacy of reasons, the Full Bench has considered in the appeal all material filed by the parties including the transcript of proceedings before the Commissioner and all relevant authorities and, accordingly, the Full Bench is able to determine the matter for itself.

[27] In relation to the Appellant’s contention that the Commissioner erred in finding that the system of work under the APMs did not constitute a “custom and practice” within clause 5 of the 2014 Agreement, the crux of the matter is an issue of construction. That is, whether the APMs are incorporated into the 2014 Agreement through the operation of clause 5 as a “custom and practice.” In Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (“Con-Stan”) 7, the High Court of Australia provided four propositions to consider when determining whether a “custom and practice” exists:

• The existence of a custom or usage that will justify the implication of a term into a contract is a question of fact;



• 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. 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;



• 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; and



• A person may be bound by a custom notwithstanding the fact that he or she had no knowledge of it. 8

[28] This approach has been taken in various other decisions of this Commission and is well-understood as the correct approach for the Full Bench to rely on in determining whether the procedures provided for in the APMs are a “custom and practice” in the relevant industrial context.

[29] The second proposition in Con-Stan, that a custom must be 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, is particularly relevant. In the industrial context of the present case it is very common for parties to continue to apply an agreement long after the agreement has expired. It does not follow that the expired agreement becomes part of the new agreement. We therefore find that the APM was not a custom and practice.

[30] Furthermore, the Appellant’s argument that the APMs should be incorporated into the contract is contrary to an express term of the 2014 Agreement; clause 45.2 of the 2014 Agreement provides that “Linfox may, at its sole discretion, implement or discontinue any productivity or performance based payment arrangements.” Upon an application of the third proposition in Con-Stan to the present matter, we prefer the Respondent’s submission that the APMs were not a “custom and practice” per clause 5 of the 2014 Agreement on the basis that the 2014 Agreement, being a fixed term contract, required an express term that incorporated the APMs.

[31] In Golden Cockerel, the Full Bench of the Commission provided ten principles on the interpretation of enterprise agreements. The principles relevant to this appeal have been extracted as follows:

“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.

…

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…”

[32] These principles indicate that in construing an enterprise agreement the meaning of terms is to be determined objectively having regard to the common intentions of the parties. In doing so, the common intentions of the parties are not to be determined by having regard to the subjective intentions of one party. As such, and applying Golden Cockerel, we prefer the Respondent’s submission that no weight should be placed on Mr Warnes’ evidence as to what the intentions of the parties were. The intention of the parties is to be determined by the language used in the express agreement.

[33] We consider that the language of the 2014 Agreement is unambiguous and has a plain meaning as to the intention of the parties. Clause 45.2 unambiguously entitles the Respondent to discontinue any performance based payment arrangements at its sole discretion. As such, we find that upon reading the language the parties have used in the express agreement, a reasonable person would understand the common intention to be that the Respondent was not bound to the expired APMs and would remunerate employees according to the 2014 Agreement.

[34] In relation to the construction of clause 5 of the 2014 Agreement, the Appellant has urged the Full Bench to read clause 5.1 to mean that the agreement shall not affect custom and practice and not to draw a link between clause 5.1 and clause 5.2 and clause 5.3. In our view, the correct reading of clause 5 is that if there is a custom and practice that’s not in writing, the parties will review this and where agreed, they will create a local agreement arising from the custom and practice in accordance with clause 34. In the Appellant’s submission, the APMs are not a local agreement and we agree that they are not in circumstances where the process in clause 34 has not taken place to create one.

[35] We note that during the hearing counsel for the Respondent was asked whether any of the monetary benefits available under the APMs increased after their expiry. It was submitted that there was a base amount increase, which in our view indicates a departure from the practice under the fixed terms of the agreement following the expiry of the agreement and this weighs against the existence of a custom and practice. Indeed, counsel for the Appellant was asked during oral submissions if he would be making the submission that the APMs were custom and practice if the payments had stopped altogether, to which he replied in the negative. If the payments had stopped altogether, it would have indicated a departure from the previous practice. Likewise, in circumstances where there has been a change in the rates following the expiry, it cannot be said that the arrangement had continued, making it a custom and practice.

[36] In all of the circumstances, we find that the AMPs were not a “custom and practice” and did not form part of the 2014 Agreement. The Commissioner did not fall into error and was correct in concluding that the Respondent was entitled to pay the rates prescribed by clause 88.2 of the 2014 Agreement.

Conclusion

[37] The appeal is not granted and the matter is dismissed.

VICE PRESIDENT

Appearances:

A Howell with T Warnes for the Appellant

Y Shariff with J Fox for the Respondent.

Hearing details:

January 21

2015

Sydney.

Final written submissions:

 1   [2015] FWC 8325.

 2   Appellant’s submissions, 32.

 3   [2014] FWCFB 7447.

 4   Fair Work Act 2009 (Cth) s 604(2).

 5   [2011] FWAFB 2555.

 6   [2013] FWCFB 2814.

 7   (1986) 160 CLR 226.

 8   Ibid at 236.

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