Fair Work Act 2009
s.604 - Appeal of decisions

Appeal against decision [2017] FWC 2650 of Deputy President Binet at Perth on 19 May 2017 in matter number C2017/1574.

Introduction and factual background

[1] Farstad Shipping (Indian Pacific) Pty Ltd (Farstad) has lodged an appeal against a decision 1 (Decision) issued by Deputy President Binet on 19 May 2017. The Decision dealt with a dispute involving Farstad and the Maritime Union of Australia (MUA) pursuant to the dispute settlement procedure contained in clause 13 of the Farstad (Indian Pacific) Pty Ltd (Integrated Ratings, Cooks and Caterers) Offshore Oil and Gas Enterprise Agreement 2015 (Agreement). The proceedings before the Deputy President arose from an application made by the MUA on 23 March 2017 under s.739 of the FW Act to deal with the dispute, which concerned the interpretation and application of clauses 23.1 and 23.5(c)(iii) of the Agreement. After two unsuccessful conciliation conferences on 5 and 18 April 2017, the MUA sought arbitration of the dispute. Farstad initially opposed this occurring, but the parties eventually agreed that the Deputy President should arbitrate the following two questions:

1. Whether clauses 23.1 and 23.5 of the Farstad (Indian Pacific) Pty Ltd (Integrated Ratings, Cooks and Caterers) Offshore Oil and Gas Enterprise Agreement 2015 impose any and, if so, what binding obligations on Farstad (Indian Pacific) Pty Ltd?

2. What is the proper interpretation and meaning of the criteria set out in clause 23.5(c)(iii) of the Agreement?

[2] The arbitration hearing took place on 15 May 2017. In accordance with procedural directions made by the Deputy President, the parties had beforehand filed outlines of submissions and witness statements. One witness statement, that made by Daniel Cain, the Assistant Branch Secretary of the Western Australian Branch, briefly described the circumstances of the dispute. The other witness statements 2 were concerned with various matters which were said to bear upon the interpretation of the relevant provisions of the Agreement. It does not appear that there was any agreement between the parties as to the facts of the matter. The only factual matters referred to in the Decision were as follows:

“[9] The Dispute arose when Farstad advised its seafaring employees on 31 March 2017 that it had decided to make a series of changes, including terminating existing job share arrangements for classifications covered by the MUA, which would likely result in around 80 employees being retrenched.

[10] On 2 May 2017, affected employees were given notice of termination of employment. These terminations are scheduled take effect from 9 June 2017...” 

Relevant provisions of the Agreement

[3] The provision of the Agreement said to be the subject of the dispute is clause 23:

“23. Redundancy

23.1 Prior to any redundancies Farstad will first exhaust the following provisions in order to assist the employment of all Employees where possible:

(a) Job share arrangements;

(b) Excess leave balances will be taken;

(c) Employees will be encouraged to take long service leave;

(d) Study leave;

(e) Part·paid leave by mutual agreement; and

(f) Unpaid leave by mutual agreement.

23.2 Prior to any redundancies, casual Employees will be replaced by permanent Employees of the same classification where practicable. Casual Employees and Trainees are not entitled to any redundancy benefits under this provision.

Redundancy Process

23.3 Redundancy arises where the number of positions is insufficient to sustain all permanent Employees.

23.4 For the purpose of redundancy, continuous service commences when the Employee is made permanent.

23.5 If after taking the steps in clause 23.1, redundancy still arises, the following process will be applied:

(a) Farstad will determine the number of redundancies to apply based on operational requirements and classifications required.

(b) Farstad will inform the Union of the redundancy situation.

(c) Farstad will consult with the Union and take into consideration the following aspects for applying redundancies:

(i) Selection for redundancy will be non-discriminatory.

(ii) Applications for voluntary redundancy, which will not be unreasonably withheld.

(iii) For involuntary redundancies, the following criteria:

(A) Redundancy Payment Skills (maximum 38 points)- based on equal points for each skill in the Farstad position description

(B) Experience (maximum 38 points)- based on 2 points for each year of service with Farstad, and

(C) Performance and Behaviour (in accordance with current custom and practice) (maximum 24 points).

(D) Where two or more Employees receive the same amount of points, the Employee with the longest service will be given preference.

Redundancy Payment

23.6 Where employment is terminated because of redundancy, an Employee will be entitled to redundancy pay in accordance with the NES for the first two years of service and then, three weeks per year of service thereafter, at the Permanent Employee's current annualised salary and pro rata for completed months.

23.7 A redundancy payment will not exceed 78 weeks.”

[4] One of the issues in the proceedings concerned leave accruals. Clause 49 establishes the leave accrual entitlement of employees under the Agreement as follows:

“49. Leave Accrual

49.1 A permanent Employee will accrue an entitlement to time off at the rate of 1.153 days leave for each Duty Day, which compensates for public holidays, weekends, intervals of leave, annual leave, personal/carer's leave, compassionate leave, and time spent travelling in Off Duty time.

49.2 A casual Employee will accrue an entitlement to time off at the rate of one day's leave for each Duty Day, which compensates for public holidays, weekends, intervals of leave, annual leave, carers and compassionate leave and time spent travelling in Off Duty time.”

[5] A maximum limit on the accrual of leave is provided for in clause 50.3:

“50.3 The maximum time off an Employee may accrue is 105 days. Unless agreement has been reached between Farstad and the Employee, an Employee will be required to take time off to ensure that the maximum of 105 days is not exceeded. Where an Employee is scheduled on the basis of a four week swing cycle, the maximum accrual shall be 84 days, excluding last swing.”

[6] As earlier stated, the arbitration of the dispute occurred pursuant to clause 13, Dispute Settlement Procedure, of the Agreement. The provisions of clause 13 authorising the Commission to determine disputes are as follows:

“…

Step 4:

In the event that the preceding steps have failed to resolve the matter, the dispute may be referred to the FWC by either party for conciliation and/or arbitration pursuant to Section 739 and Section 595 of the Act.

13.2 Where Step 4 of sub-clause 13.1 applies, the FWC may deal with the dispute in two stages:

(a) The FWC will first attempt to resolve the dispute as it considers appropriate, including by mediation, conciliation, expressing an opinion or making a recommendation; and

(b) If the FWC is unable to resolve the dispute at the first stage, the FWC may then:

(i) Arbitrate the dispute; and

(ii) Make a determination that is binding on both the parties.

…

13.6 The parties to the dispute agree to be bound by a decision made by the FWC in accordance with this term, but note that a decision of a single member of the FWC can be appealed to the full bench of the FWC.”

[7] The dispute settlement procedure in clause 13 also contains the following requirement:

“13.3 It is essential that the dispute and the reasons for or against are accurately defined and recorded by those concerned to ensure that ambiguities do not arise. It is important that prompt and careful consideration is given to all claims, requests and industrial questions. Equally, a reasonable time is required to enable proper investigation to take place in order to satisfactorily resolve the dispute.”

The Decision and the appeal grounds

[8] In the Decision the Deputy President, after referring to the limited factual background and the principles of interpretation of enterprise agreements referred to in Australasian Meat Industry Employees Union v Golden Cockerel Pty Ltd 3, engaged in a general analysis of clause 23 as invited by the two questions advanced by the parties for determination. It is only necessary to refer to those parts of the Deputy President’s analysis which are subject to challenge in Farstad’s appeal. We shall do so by identifying the part of the Decision that is challenged and then the relevant appeal ground (in the order in which the appeal grounds appear in Farstad’s notice of appeal).

[9] In relation to the general operation of clause 23.1, the Deputy President said:

“[29] Clause 23.1, unlike a standard redundancy provision, does not contemplate Farstad making a business decision that it intends to reduce the number of positions by a certain number and then exploring the means by which the impact of redundancy might be mitigated, such as by redeployment. The activities enumerated in clause 23.1 must be exhausted before a decision is made that a certain number of redundancies must occur. The purpose of the clause is to prolong employment with the hope that the commercial prospects of the business improve, rather than to mitigate the impact of the loss of a specified number of positions predetermined by the employer.”

[10] In its first ground of appeal, Farstad contended:

“1. The Deputy President erred in holding that sub-clause 23.1 of the Farstad Shipping (Indian Pacific) Pty Ltd (Integrated Ratings, Cooks and Caterers) Offshore Oil and Gas Enterprise Agreement 2015 (the Agreement) does not contemplate Farstad making a business decision that it intends to reduce “the number of positions” by a certain number before exploring the means by which the impact of redundancy might be mitigated (Decision at paragraph [29]), when on its proper construction:

(a) the word “redundancies” in sub-clause 23.1 refers to terminations of employment rather than to positions becoming redundant; and

(b) the sub-clause does permit Farstad to determine the number of positions to be reduced (but not to terminate the employment of employees) before investigating or exhausting the provisions in paragraphs 23.1(a) to (f).”

[11] The Deputy President addressed the use of the expression “where possible” in the chapeau to clause 23.1 as follows:

“[32] The parties chose to use the word ‘possible’ rather than the commonly used words of limitation such as reasonable or practicable in clause 23.1 when they could, and have used, the term practicable and reasonable elsewhere in the Agreement. In fact, the term ‘where practicable’ is used within clause 23 at clause 23.2. See also, clause 11.5, which uses the phrase ‘to the extent that it is reasonably practicable’, clauses 12.4 and 36.12 which use the phrase ‘as soon as is practicable’, clause 43.7 which uses the phrase ‘where it is practicable’, clause 56.4 which uses the phrase ‘as soon as is reasonably practicable’, clause 13.1 which uses the phrases ‘all reasonable efforts’ and ‘all reasonable steps’ and clause 16.11 which uses the phrase ‘will make every reasonable endeavour’.

[33] The ordinary meaning of the word ‘possible’ is ‘able to be done or achieved’. The ordinary meaning of the word ‘practicable’ is ‘able to be done or put into practice successfully’. The ordinary meaning of the word ‘reasonable’ is ‘fair and sensible’. The word ‘possible’ carries with it no qualifier other than it is able to be done or achieve. It is not qualified by a measure of success or concepts of equity or rationality.

[34] The parties did not agree that Farstad’s obligations extended only as far as what Farstad determined was reasonable or practicable. Instead, the clause contemplates that Farstad must do what is ‘possible’ to preserve employment. Obviously this obligation does not extend to Farstad, for example, agreeing to all employees undertaking study leave in circumstances where Farstad has no work to be performed, as this would lead to Farstad becoming financial unviable and the employment of employees not in fact being preserved.

[35] To this extent, the use of the word ‘possible’ used in the context of this Agreement can be distinguish[ed] from the meaning White J (and Bromberg J) attached to it in NTEU v La Trobe University [2015] FCAFC 142 at [128] and relied upon by Farstad to introduce concepts of reasonableness and practicability not expressly included in clause 23.1. The NTEU case involved a clause which contained ‘motherhood’ statements and provided no parameters as to what the employer might be required to do to satisfy the obligation to avoid redundancies and use compulsory retrenchment as a last resort. In those circumstances White J found that:

“The University’s obligation [in cl 74] is to avoid, whenever possible, redundancies and to use compulsory retrenchment as a last resort. It would be natural to read in a word such as “reasonably” or “practically” into cl 74 so that the obligation imposed on the University applies whenever it is “reasonably possible” or “practically possible”. That is because it is appropriate to regard cl 74 as operating in a practical environment so that mere theoretical or impractical possibilities may be ignored.”

[36] In this case, clearly delineated parameters exist. The activities which the employer is required to explore are specifically listed, and the boundary of those activities specified. For example, Farstad is required to invite employees to take paid leave but cannot force them to do so. The listed activities are not limitless, theoretical or impractical. They are all activities which could reasonably and practicably preserve the employment of employees who would otherwise be excess to requirements.”

[12] This reasoning is challenged in Farstad’s second appeal ground:

“2. The Deputy President erred in holding that Farstad’s obligations in sub-clause 23.1 are not qualified by any measure of reasonableness, practicability, “equity or rationality” (Decision at [30], [32]-[36]):

(a) by attributing weight or excessive weight to the fact that the words “reasonable” and “practicable” had been used elsewhere in the Agreement, but not in clause 23.1, when the Agreement was known to be based on an earlier agreement and was likely to have been the product of several different authors; and

(b) by failing to construe the sub-clause in a manner which would contribute to a sensible industrial outcome such as should be attributed to the parties who negotiated and executed the Agreement and failing to recognise that, viewed objectively, Farstad is not likely to have agreed to a provision which required it to do more than was reasonable, practicable or rational or which would lead to absurd outcomes.

Particulars of ground 2(b)

By way of example, unless a requirement of reasonableness or practicality is read into the words “exhaust” or “where possible” in the preamble to clause 23.1 Farstad would be forced to:

(i) agree to any job sharing arrangement proposed by employees regardless of the practicality of that arrangement as long as it was “able to be done”;

(ii) implement and continue with job share arrangements even if to do so would imperil Farstad’s financial viability or ability to compete for new contracts;

(iii) require employees to take excess leave balances regardless of any operational difficulties which might ensue, or hardship which that might impose on individual employees; and

(iv) agree to employees going on unpaid leave indefinitely (if the employees so agreed) even if there was no foreseeable prospect of any work for employees to return to.”

[13] The Deputy President dealt with the reference to “Job share arrangements” requirement in clause 23.(1)(a) as follows

“[24] The scope or ‘possibility’ of job share is limited by the positions which are required to be performed, any parameters agreed by the parties and (given there is no mandatory requirement for participation) the employees prepared to participate. Given the nature of the rosters provided for in the Agreement, job sharing arrangements should not result in continued accrual of leave thereby creating an excess leave balance to be utilised in accordance with clause 23.1(b). Instead, it should work alongside clause 23.1(b) to reduce excess leave balances.”

[14] The Deputy President’s reference to “any parameters agreed by the parties” is contended to be in error in Farstad’s third appeal ground:

“3. The Deputy President erred in holding that the scope or “possibility” of job share is limited by “the positions which are required to be performed, any parameters agreed by the parties and . . . the employees prepared to participate” (Decision at [24]):

(a) if and to the extent that the Deputy President was referring to the MUA and Farstad as the “parties”, because there was no support in the text for the proposition that the scope or “possibility” of job share is limited by parameters agreed between the MUA and Farstad and it was not permissible to take into account the MOU (referenced in the footnote to paragraph [24]) which the MUA and Farstad made almost 12 months after the Agreement was made; and

(b) if by that it was meant that the matters stated in paragraph [24] of the Decision were the only matters limiting the scope or possibility of job share, because the scope or possibility of job share may also be limited by:

(i) external factors such as the refusal by a client to permit job sharing; and

(ii) what is reasonable and practicably possible”.

[15] In relation to the requirement in clause 23.(1)(b) that “Excess leave balances will be taken”, the Deputy President said:

“[23] Contrary to the submissions of Farstad, clause 23.1(b), via the use of the phrase ‘will be taken’, clearly authorises Farstad to direct employees to take excess leave balances in the same way that: clause 50.3 authorises Farstad to direct employees with more than 105 days of accrued leave to take leave, clause 51.1 authorises Farstad to direct employees to take more than 14 days leave in advance and clause 61.4 authorises Farstad to direct employees to take accrued long service leave.

[24] The scope or ‘possibility’ of job share is limited by the positions which are required to be performed, any parameters agreed by the parties 4 and (given there is no mandatory requirement for participation) the employees prepared to participate. Given the nature of the rosters provided for in the Agreement, job sharing arrangements should not result in continued accrual of leave thereby creating an excess leave balance to be utilised in accordance with clasue 23.1(b). Instead, it should work alongside clause 23.1(b) to reduce excess leave balances.”

[16] Farstad’s fourth appeal ground contended the above reasoning is in error in a number of respects:

“4. The Deputy President erred in construing paragraph 23.1(b) of the Agreement (Decision at [23], [24]):

(a) by implicitly finding that the words “excess leave” meant all leave (or perhaps all leave accrued under clause 49 of the Agreement);

(b) by failing to give any or adequate reasons for that finding;

(c) by finding that the paragraph authorised Farstad to direct employees to take all of their leave (or all of their leave accrued under clause 49 of the Agreement); and

(d) further and in the alternative, if the Deputy President made no finding as to the meaning of the words “excess leave”, by failing to determine a matter which had been referred to her and by failing to find that the words “excess leave” meant only leave in excess of the limits prescribed in sub-clause 50.3 of the Agreement.

Particulars of grounds 4(a) to (d)

(i) The Deputy President was required, by the questions posed for determination, to determine what binding obligations sub-clause 23.1 imposed on Farstad and the meaning of the words “excess leave” was a live issue at the hearing;

(ii) The word “excess” had to be given meaning and work to do;

(iii) The ordinary meaning of “excess” is an amount of something that is more than necessary, permitted or desirable and the words “excess leave” are not apt to describe any positive leave balance;

(iv) It was the evidence of Cain and it was not in dispute in the proceeding that the word “leave” in the industry referred to leave accrued under clause 49 of the Agreement (MUA submissions, Ex A1 at [34]; Cain, Ex A2 at [10]);

(v) Sub-clause 50.3 of the Agreement expressly prescribes the maximum amount of leave which may be accrued under clause 49, absent agreement between Farstad and the employee;

(vi) Sub-clause 50.3 entitles Farstad to require employees to take leave in excess of the limits prescribed in the sub-clause;

(vii) A requirement for all employees to exhaust all of their leave accrued under clause 49 (which leave includes annual, personal carer’s and compassionate leave) could impose significant hardship on employees and is not to be construed lightly. It is not likely that the parties would have agreed to a provision which required and/or empowered Farstad to direct all employees to immediately reduce their (annual, personal and compassionate) leave balances to zero leaving them with no leave for emergencies and regardless of the rostering and other operational difficulties that might occasion for Farstad or the hardship it might impose on individuals;

(viii) If “excess leave” is taken to mean any positive amount of leave then it is unclear how the sub-clause is intended to operate and the clause will lead to anomalous and impractical results which viewed objectively the parties are not likely to have agreed to (such as every employee having to have a leave balance of zero prior to any redundancies).”

[17] Farstad’s fifth appeal ground also contended that the Deputy President erred in relation to the excess leave requirement by “failing to find” certain propositions:

“5. The Deputy President erred in construing paragraph 23.1(b) of the Agreement:

(a) by failing to find that Farstad was required to exhaust excess leave balances only to the extent that it was reasonable and practicably possible to do so; and

(b) by failing to find that it was not necessary for Farstad to reduce employees’ leave balances to zero before applying sub-clause 23.5 and effecting redundancies.

Particulars of grounds 5(a) and (b)

(i) The Deputy President was required by the questions posed for determination to determine what binding obligations sub-clause 23.1 imposed on Farstad and the issues at the hearing included whether Farstad was required to reduce all employees’ leave balances to zero (and how that might be done) before applying sub-clause 23.5 and effecting redundancies;

(ii) Any other conclusion would lead to anomalous and unfair consequences, the moreso if the words excess leave are construed to mean all leave, including, for example:

(A) Employees whose leave had been exhausted and for whom there was no work having to wait until all other employees exhausted their leave balances to zero before being able to access redundancy benefits;

(B) In circumstances where a majority of employees agreed to job share but some refused, Farstad having to require the whole of the workforce to take their excess leave so that the employees refusing to job share could be kept in (full time) employment;

(C) In circumstances where only a small number of positions were to be reduced, Farstad having to apply paragraph 23.1(b) to the whole of the workforce or otherwise having to determine which employees were to be directed to take leave so that the employees in the redundant positions could occupy the positions of employees required to take leave;

(D) In circumstances where only integrated ratings positions were to be reduced, Farstad having to apply paragraph 23.1(b) to cooks and caterers and vice versa; and

(E) In circumstances where Farstad wished to offer and some employees wished to accept voluntary redundancies, Farstad having to require all employees to exhaust their leave balances instead.”

[18] The Deputy President discussed the requirement for employees to be encouraged to take long service leave in clause 23.1(c) as follows:

“[22] In the case of long service leave, Farstad has a higher burden to explore its use than that of part paid leave or unpaid leave. Clause 23.1(c), by virtue of the phrase ‘will be encouraged’, imposes on Farstad a proactive obligation to persuade employees with long service leave balances to take long service leave. The ordinary meaning of the word ‘encourage’ is to persuade (someone) to do or continue to do something by giving support and advice. Merely inviting employees to access their long service leave would not be sufficient to discharge this obligation.”

[19] This reasoning was challenged in Farstad’s sixth appeal ground:

“6. The Deputy President erred in construing paragraph 23.1(c) of the Agreement as requiring Farstad to do more than invite employees to take accrued long service leave (Decision at [22]) because:

(a) an invitation is itself a form of encouragement; and

(b) the effect of the Deputy President’s holding was to introduce uncertainty into the paragraph by imposing some additional obligation of indeterminate content, breach of which would expose Farstad to a civil penalty.”

[20] The Deputy President then dealt with the nature of the requirements imposed by clause 23.5:

“[37] Clause 23.5 sets out a mandatory process to be applied if, after taking the steps in clause 23.1, the number of positions is still insufficient to sustain all permanent employees in accordance with clause 23.3.

[38] Clause 23.5(a) requires Farstad to determine the number of redundancies to apply based on operational requirements and classifications required. Pursuant to clause 23.5(b), Farstad must then inform the MUA of the number of redundancies and the classifications required. Clause 23.5(c) requires Farstad to then consult with the MUA prior to selecting individual employees for retrenchment in accordance with the selection process set out in clause 23.5(c).

[39] Clause 23.5(c) sets out various criteria for selecting employees for retrenchment. It is clear from the use of the phrase ‘the following process will be applied’ that the process set out in clause 23.5 is mandatory.

[40] Farstad submit that the use of the phrase ‘take into consideration the following aspects for applying redundancies’ means that the principles enumerated below clause 23.5(c) at (i) –(iii), provided they are considered by Farstad, need not necessarily be complied with. This is inconsistent with the mandatory nature of the language used in these clauses, such as “will be” and “will not be”.

[41] Subparagraph (iii) of clause 23.5(c) does not contain the same mandatory language as sub paragraphs (i) and (ii) of clause 23.5(c), but is expressed in a mandatory tone (albeit in a passive voice) as follows ‘For involuntary redundancies, the following criteria:…”. 

[42] Subparagraph (iii) of clause 23.5(c) contains no words such as ‘may’ which might suggest a discretion. More compellingly, the criteria contained in sub-paragraph (iii) of clause 23.5(c) are highly prescriptive, specifying both particular attributes as well as a score to be attached to each of these attributes. Sub-paragraph (D) of 23.5(c)(iii) provides for a mechanism to deal with a situation where the scoring of the attributes listed in (A) to (C) produce the same score for two employees. The allocation of points to a particular attribute and a mechanism to resolve equal point scores would be entirely unnecessary if the parties contemplated that Farsad could apply different criteria and/or attach a different value to the chosen criterion.”

[21] The Deputy President then referred to extrinsic evidence of prior negotiations for the Agreement which Farstad had adduced in support of its case. It is not necessary to refer to this evidence, because neither party in the appeal submitted that it was admissible in aid of the interpretation of clause 23 of the Agreement. It is sufficient to set out what the Deputy President said by way of introduction to her discussion of this evidence:

“[43] Given the lack of ambiguity, I do not believe that it is appropriate to refer to extrinsic materials to determine the meaning of clause 23.5. The parties did, however, tender evidence of the negotiations between the parties which pre-dated the approval of the Agreement. In my view, this evidence largely only revealed the subjective intentions or expectations of the parties. To the extent that I am wrong, and it is appropriate to rely on this material, I am satisfied that it is consistent with the interpretation of the clause set out above.”

[22] Farstad’s seventh, eighth and ninth grounds of appeal contended that the Deputy President’s analysis of clause 23.5 was in error as follows (omitting the particulars for ground 9):

“7. The Deputy President erred in construing sub-clause 23.5 as requiring Farstad to consult with the MUA before selecting individual employees for retrenchment, by reading a sequence in sub-clause 23.5(a) to (c) of the Agreement that carried such an obligation (Decision at [38]).

8. Accepting that:

(a) sub-clause 23.5 imposes a binding obligation on Farstad to apply the process set out in the sub-clause; and

(b) that sub-paragraph 23.5(c)(iii) requires Farstad to arrive at a result or set of results for each relevant employee using the listed criteria and point allocations;

the Deputy President erred in construing the criteria in clause 23.5 as a “mandatory and exhaustive list” and sub-paragraph 23.5(c)(iii) as requiring Farstad to not only take those results into consideration (which is all that the introductory words in paragraph 23.5(c) require) but to go further and rigidly adhere to an order of preference based only on those results and take no other considerations into account in selecting employees for redundancy (Decision at [39]-[42], [49]-[50]).

Particulars of ground 8

(i) Paragraph 23.5(c) does not expressly require Farstad to apply the listed criteria when implementing redundancies, only to “take [them] into consideration”. The Deputy President erred by failing to give the words “take into consideration” their plain and ordinary meaning;

(ii) To the extent that the words “take into consideration” conflicted with any other words in paragraph 23.5(c) (Decision at [40]) the Deputy President was required to read all of the competing words conformably and to determine which was the leading provision so that to the fullest extent possible all of the competing words had work to do;

(iii) In construing sub-paragraph 23.5(c)(iii) as requiring Farstad to rigidly apply only the criteria in that sub-paragraph (i.e. as a mandatory and exhaustive list), the Deputy President:

(A) gave no effect to the leading words “take into consideration”; and

(B) failed to have regard to sub-paragraph 23.5(c)(i) and gave that subparagraph no work to do in the case of involuntary redundancies – because, on the Deputy President’s construction, selection for involuntary redundancies is governed exhaustively by sub-paragraph 23.5(c)(iii). The inclusion of sub-paragraph 23.5(c)(i) is a strong indication that the criteria in sub-paragraph 23.5(c)(iii) were not intended to be exhaustive.

(iv) A construction of sub-paragraph 23.5(c)(iii) which requires Farstad to arrive at a result or set of results for each relevant employee using the listed criteria and point allocations and then requires Farstad to take those results into consideration, but which allows Farstad to then also consider other criteria, allows all of the competing words to be given meaning and effect.

(v) Further, if, as the Deputy President found and contrary to appeal ground 9(c)(ii) below, the words “based on” in the context of sub-paragraph 23.5(c)(iii) arguably allowed Farstad to have regard to additional criteria (Decision at [48]), then the Deputy President ought to have given the same meaning to the words “based on” in items (A) and (B) of sub-paragraph 23.5(c)(iii).

9. Further, in construing paragraph 23.5(c) the Deputy President erred in the use she made of the extrinsic materials and in holding that the extrinsic materials supported the construction she determined when the extrinsic materials properly construed either supported Farstad’s construction or were neutral.

(a) The Deputy President erred in finding there was a lack of ambiguity in the language in favour of the construction the Deputy President determined (Decision at [43]).

(b) The Deputy President erred in relying on:

(i) comments made by Farstad’s IR Manager Bob Venema in a bargaining meeting held on 3 October 2014; and

(ii) the fact that in a letter dated 23 October 2014, Farstad outlined its position on redundancy as being “Per Draft Agreement; plus Inclusion of MUA’s weightings table as an indicative guide” and on the fact that the words “as an indicative guide” were not subsequently included in the Agreement;

as evidence that Farstad ”intended to and in fact agreed that the weighted criteria would form a mandatory and exhaustive list of criteria for selection for retrenchment” (Decision at [44], [49]).”

Consideration

Preliminary matters

[23] Both parties contended, on the basis of the Full Bench decision in Metropolitan Fire and Emergency Services Board v United Firefighters’ Union of Australia 4, that clause 13.6 of the Agreement confers an independent right of appeal (in the sense discussed in AMWU v Silcar Pty Ltd5) such that permission to appeal is not required under s.604 of the FW Act. We would not regard it as beyond argument that the words “The parties ... note that a decision of a single member of the FWC can be appealed to the full bench of the FWC” confer such a right of appeal, but given that no party contended that MFESB v UFU (in which the parties likewise agreed that permission to appeal was not required) was incorrectly decided, we will proceed on the basis that Farstad has a right of appeal and that permission to appeal is not required.

[24] Some preliminary observations need to be made about the nature of the arbitral process which the parties requested the Deputy President to engage in. Under clause 13.1, the dispute settlement procedure applies to (among other things) “a matter arising under this Agreement”, and there is no doubt that such language would encompass any dispute about the interpretation and application of a particular provision of the Agreement. In this case it appears, from the limited facts described in the witness statement of Mr Cain and in the Decision, that there was a dispute as to how clause 23, properly interpreted, should apply to the contemplated retrenchment of a number of Farstad’s employees. That dispute, in accordance with clause 13.3, was required to be “...accurately defined and recorded...”. However the questions posed by the parties for determination by the Deputy President did not call for the resolution of any specifically identified issue in dispute concerning the interpretation of the Agreement. Nor did the parties provide the Deputy President with any detail as to the factual background of the dispute such as to permit any proper determination of how the provisions of clause 23, properly interpreted, should be applied in order to resolve the dispute at hand. Instead, the Deputy President was asked to answer open-ended questions about the interpretation of certain aspects of clause 23 in what was virtually a factual vacuum concerning the actual matters in dispute. It appears as if the parties were requesting an advisory opinion from the Deputy President concerning the meaning of clause 23 in order to guide their future conduct rather than undertaking a proper dispute resolution process in accordance with clause 13.2 of the Agreement.

[25] Clause 13.6 of the Agreement does not identify the criterion for the success or otherwise of an appeal against an arbitral determination made by a single member of the Commission under clause 13.2(b). In those circumstances, the parties can be taken to have intended that appeals under clause 13.6 be determined in accordance with s.604 of the FW Act, and accordingly that the demonstration of error in the decision under appeal must be demonstrated. 6 In the case of a decision concerning the interpretation of an enterprise agreement provision which has a disputed meaning, appealable error will exist if the conclusion reached by the Commission member in the decision under appeal is demonstrated to be incorrect. However Farstad’s appeal grounds are not confined to contentions that certain of the Deputy President’s conclusions were incorrect; in a number of respects, they allege that the Deputy President “erred” in answering the questions put to her by not dealing with or “failing to find” certain matters. This approach we consider to be misconceived. Having regard to the open-ended nature of the parties’ questions, we do not consider that error can be demonstrated on the basis that the generalised answer to either of the questions did not deal with a specific matter which a party wanted to be addressed. If there remain specific issues in dispute between the parties which require resolution, the proper course is for the parties to clearly identify what those issues are and to request that the Deputy President determine them. Appellate intervention is not justified where the parties have in the proceedings to date failed to properly identify the issues in dispute and as a result have not obtained a determination with respect to some of those issues.

[26] The MUA advanced a preliminary point that the appeal was incompetent because no appealable determination has yet been made. That argument rests upon a narrow interpretation of the word “determination” as used in clause 13.2(b)(ii) of the Agreement. The MUA’s submission is, in effect, that a “determination” is something akin to an order and must be expressed as being a determination. We reject that submission. We do not consider that, in arbitrating a dispute under clause 13.2(b), the Commission’s determination needs to take any particular form. What is required is for a clear conclusion to be stated in respect of an issue in dispute, and we consider that the Deputy President’s conclusions in the Decision are readily identifiable. To the extent that the MUA characterised the Decision as “a set of reasons that might, but does not, lead to a determination of the dispute”, that is we think a result of the general and ill-defined nature of the parties’ questions which did not, as earlier stated, adequately define the real issues in the dispute or the precise facts to which the interpretation of clause 23 sought was to be applied.

[27] There is no dispute in the appeal that the issues concerning the interpretation of clause 23 of the Agreement which arise in the appeal are to be determined consistent with the principles summarised in the Full Bench decision in AMWU v Berri Pty Limited. 7 It is only necessary for present purposes to refer to the well-established proposition, restated in Berri, that the construction of an enterprise agreement, like that of a statute or contract, begins with a consideration of the ordinary meaning of the relevant words, and the resolution of a disputed construction of an agreement will turn on the language of the agreement having regard to its context and purpose.8

Appeal ground 1

[28] We consider that the Deputy President’s conclusion about the operation of clause 23.1 as stated in paragraph [29] was correct. The word “redundancy” as used in clause 23 appears to have a dual meaning in clause 23. Clause 23.3 provides (as earlier set out) that a redundancy “arises where the number of positions is insufficient to sustain all permanent Employees”, and that definition appears to relate to the anterior situation where a number of employees excess to the number of positions required in the future is identified. However in clause 23.5(a), (b) and (c) (but not necessarily in the chapeau to clause 23.5) “redundancy” is used to describe the actual retrenchment of employees who have been identified as surplus to requirements. Farstad’s contention that it is entitled to determine the number of persons to be retrenched (that is, who are redundant in the latter sense) before the mitigating steps in clause 23.1 are taken is directly inconsistent with clause 23.5(a), which entitles Farstad to “... determine the number of redundancies to apply...” only “... after taking the steps in clause 23.1...”. We consider the clause is to be read as operating on the basis that, if a clause 23.3 redundancy situation arises - that is, it is apparent that there are more permanent employees than the number of required positions – the steps in clause 23.1 are taken. If, after this, it remains apparent that there are more permanent employees than positions required, it is at that point that Farstad becomes entitled to determine the number of employees to be retrenched. Appeal ground 1 is therefore rejected.

Appeal ground 2

[29] Farstad’s second appeal ground is, we consider, based substantially upon a misreading of paragraphs [35]-[36] of the Decision. In the Federal Court Full Court decision in NTEU v La Trobe University 9, White J read into a general requirement in an enterprise agreement for the employer to avoid redundancies “wherever possible” the qualifying words “reasonably or practically” because the relevant provision was to be regarded “as operating in a practical environment so that mere theoretical or impractical possibilities may be ignored”.10 Bromberg J similarly equated the “wherever possible” requirement with a “reasonable endeavours” or “best endeavours” contractual requirement11, but importantly said that the requirement in question constituted a limitation (not a prohibition) on redundancies that was “expressed by reference to a general criterion or standard rather than specific prescriptions or proscriptions”.12 That is, the provision in that case did not identify any specific steps the employer had to take to avoid redundancies.

[30] In distinguishing NTEU v La Trobe University in paragraphs [35]-[36] of the Decision, we consider that the Deputy President was simply making the fairly obvious point that clause 23.1 of the Agreement is a provision of a different nature, in that it does not establish a “general criterion or standard” but rather prescribes specific measures which Farstad is required to undertake in order to avoid the need for redundancies. In that circumstance, it is not necessary to imply a requirement of reasonableness as to the steps which Farstad is required to take, because the steps that are required to be taken are actually specified. We do not consider that the Decision is to be read as requiring Farstad to take those steps in a manner inconsistent with the practical reality of its business. That practical business reality will necessarily confine what is possible. The Deputy President, we consider, made that tolerably clear in paragraphs [21], [24], [25], [26] and [34] of the Decision. Consistent with the Deputy President’s reasoning in paragraphs [26] and [34] in particular, we consider that the purpose of exhausting the steps in paragraphs (a) to (f) of clause 23.1 is “…to assist the employment of all Employees where possible”. The limit of the obligation to take the steps is defined by that purpose. Accordingly, if taking one or more of the steps in paragraphs (a) to (f) of clause 23.1 would not “assist the employment of all Employees”, such step(s) would not have to be taken. Appeal ground 2 is rejected

Appeal ground 3

[31] The third appeal ground is misconceived. In paragraph [24] (and contrary to Farstad’s contention in its second appeal ground), the Deputy President identified examples of matters which might limit the possibility of avoiding redundancies through job sharing. The Deputy President was necessarily analysing the issue at a high level of generality because she was not asked to determine any specifically-identified, factually-based dispute concerning the extent to which it was possible for Farstad in identified circumstances to use job sharing to avoid redundancies. It is obviously the case that if Farstad was legally bound to comply with a collateral agreement concerning the use of job sharing, that would operate as a limitation on the extent to which it was “possible” to utilise job sharing as a mitigating measure. That is the way in which the Deputy President’s reference to “any parameters agreed by the parties” should be understood. The Deputy President noted in a footnote (not earlier reproduced) that “the parties have agreed to parameters in a separate Memorandum of Understanding”, but this merely adverts to the possibility that an agreement of the type referred to may exist. The Deputy President was not asked to, and did not, determine whether this Memorandum of Understanding constituted an actual limitation of some description on the use of job sharing. If either party wishes the status of this Memorandum of Understanding to be determined in the context of clause 23.1(a), it should specifically raise that as an issue in dispute requiring determination. The same applies if the parties are in dispute about any other specific issue concerning the application of clause 23.1(a) to identified factual circumstances. However insofar as the Deputy President essayed an analysis of clause 23.1(a) in response to the very general question posed for determination, we detect no error in her approach. Appeal ground 3 is rejected.

Appeal grounds 4 and 5

[32] Insofar as Farstad contends, in its fourth appeal ground, that the Deputy President erred in paragraphs [23]-[24] of the Decision in not accepting the proposition that the operation of clause 23.1(b) is limited to leave balances in excess of 105 days, that appeal ground is rejected. The leave to which clause 23.1(b) refers is the leave accrual entitlement arising under clause 49.1. The first sentence of clause 50.3, which we have earlier set out, establishes a maximum limit on leave accruals at 105 days. The second sentence requires the employee to take leave to ensure that the limit is not exceeded. Clause 50.3, to that point, does not contemplate that the limit of 105 days will ever be exceeded. The requirement to take leave is qualified as being subject to an agreement between Farstad and the employee, but we do not consider that is to be read as authorising a general waiver of the 105-day accrual limit. Rather it simply allows for modification of the automatic requirement to take leave as soon as it is necessary to avoid the 105-day limit being exceeded, so that the leave required to be taken may be taken at a later time. At most, this might lead to an employee temporarily exceeding the 105-day limit. The last sentence of clause 50.3 prescribes a lower accrual limit for employees on an identified type of work roster.

[33] Because clause 50.3 does not permit leave balances to accrue in excess of 105 days except in the limited and temporary circumstances we have described, we do not consider that the expression “Excess leave balances” in clause 23.1(b) is to be read as meaning only leave balances in excess of the 105-day limit, because that would leave the provision with virtually no work to do. We consider that “Excess” should, as submitted by the MUA, be read in accordance with its ordinary meaning, namely “going beyond ordinary or proper limits”; “more than or above what is necessary, usual, or specified; extra”. 13 An excess leave balance would at least need to be a positive balance, it seems to us, but beyond that what constitutes an “Excess leave balance” for an employee would be a matter for judgment based on the employee’s circumstances, including the amount of leave the employee may require to cover their period “Off Duty” before returning “On Duty” as part of their “swing cycle”.14 If there is a dispute about any particular employee, that is a matter which may be dealt with pursuant to the disputes settlement procedure.

[34] Farstad contends that the Deputy President erred by (implicitly) finding that clause 23.1(b) “authorised Farstad to direct employees to take all of their leave...”. We cannot identify that the Deputy President made any such finding. Farstad alternatively submitted that the Deputy President erred because no finding was made about the meaning of the expression “Excess leave balances” and she thereby failed to determine the matter which had been referred to her. For the reasons stated in our preliminary observations, a contention of error of that nature is misconceived having regard to the nature of the questions the parties posed for determination, and in any event we do not regard the expression as being susceptible to a single quantitative definition. The Deputy President was not asked to resolve any specific dispute concerning what constituted an excess leave balance for a particular employee or employees. If any such dispute does arise, the parties may request that such a determinative exercise be undertaken.

[35] For similar reasons, Farstad’s fifth appeal ground does not disclose any proper contention of appealable error and is misconceived. Farstad could not legitimately expect that an open-ended question concerning the nature of the obligations imposed by clause 23.1, absent the identification of any specific dispute grounded in extant factual circumstances, would necessarily require the Deputy President to state conclusions about how clause 23.1(b) should operate in relation to various hypothetical scenarios. Again, if there is any dispute about how the provision should be applied to the actual circumstances of Farstad and its employees, that may be put for determination in the proper way.

[36] We do not consider that there was any error in the Deputy President’s analysis of clause 23.1(b), and accordingly appeal grounds 4 and 5 are rejected.

Appeal ground 6

[37] We reject Farstad’s sixth appeal ground. The Deputy President’s analysis of clause 23.1(c) in paragraph [22] of the Decision applied the ordinary meaning of the words used in the expression “will be encouraged”. A mere invitation is not encouragement.

Appeal grounds 7, 8 and 9

[38] Farstad’s seventh, eighth and ninth appeal grounds all concern the proper interpretation of clause 23.5 of the Agreement, and may be dealt with conjointly. Appeal ground 7 concerns the Deputy President’s conclusion in paragraph [38] of the Decision that the required consultation with the MUA is to occur after the number of redundancies has been identified but before individual employees have been selected for retrenchment. The basis upon which Farstad challenges the Deputy President’s conclusion in this respect is obscure. We consider that the Deputy President’s conclusion is consistent with the plain meaning of clause 23.5(c). The consultation required to occur is about the process for the selection of those employees to be retrenched. Self-evidently, for that requirement to have utility the consultation must occur before the selection decision is made. Textually, the consultation requirement is expressed in conjunction with the selection criteria for retrenchment, pointing to a temporal alignment between the consultation and the process of selection. Appeal ground 7 is therefore rejected.

[39] In appeal ground 8, Farstad contends that the Deputy President erred in concluding that the criteria set out in clause 23.5(c)(iii) were determinative of who is to be selected for involuntary redundancy. In so contending, Farstad points to the use of the expression “take into consideration” in the chapeau to clause 23.5(c) as indicating that it was not required to apply the specified criteria

[40] It may be accepted that a requirement that a specified matter be taken into consideration in relation to a decision-making function would not, in isolation, be read as meaning that the specified matter is to be determinative of the decision to be made. Like the expressions “take into account” and “have regard to”, it would ordinarily mean that the specified matter must be treated as one of significance in the decision-making process. 15 However there are a number of textual indicators in clause 23.5 that the meaning of the expression “take into consideration” must be adjusted for it to operate harmoniously with the rest of the provision:

(1) The chapeau to clause 23.5 as a whole uses mandatory language (“will be applied”) in relation to the process thereafter described.

(2) The selection criteria for involuntary redundancies set out in paragraph (iii) of clause 23.5 are, as the Deputy President observed in paragraph [42] of the Decision, highly prescriptive. Paragraph (iii) creates a mechanism whereby employees are ranked on a points system, and goes so far to specify a “tiebreaker” based on length of service where employees receive the same points score. It seems unlikely to have been intended that the precise results produced by a mechanism of this detailed nature could ultimately be cast aside by the employer in favour of other unspecified criteria in deciding who is to be selected for redundancy.

(3) Farstad’s reliance on the expression “take into consideration” as indicating that that the selection criteria in paragraph (iii) are non-determinative leads to an insuperable difficulty in respect of paragraph (i), which likewise sets out an “aspect” which Farstad is required by clause 23.5(c) to “take into consideration”. Paragraph (i) contains an apparent requirement for the selection of redundancy to be “non-discriminatory”. We take that to mean the selection cannot be unlawfully discriminatory (since any act of selection necessarily involves discrimination). However if Farstad is not bound to treat paragraph (i) as determinative in its selection of those to be made redundant, that leaves open the possibility that the Agreement permits it to unlawfully discriminate. That is clearly an untenable proposition. Paragraph (i) can only be read as intending to establish a binding obligation, which is inconsistent with the proposition that the use of the phrase “take into consideration” necessarily indicates that the selection criteria are non-determinative.

(4) A similar difficulty arises with respect to paragraph (ii), which provides that applications for voluntary redundancy “will not be unreasonably withheld”. If paragraph (ii) is interpreted to establish a non-binding selection criterion, then that would allow Farstad to unreasonably refuse to grant applications for voluntary redundancy. This cannot have been the intended meaning.

(5) There is nothing in clause 23.5 that allows Farstad to take into account any consideration other than the specified criteria.

[41] In order to interpret clause 23.5(c) in a way which allows its constituent parts to operate harmoniously, we consider that the identified selection criteria in paragraphs (i)-(iii) should be read as constituting an exhaustive list of the matters which Farstad is permitted to take into consideration in determining who is to be selected for redundancy, so that Farstad may not take into consideration any other matter. The necessary result of such an interpretation is that the criteria are determinative of who is to be selected, as the Deputy President found. Appeal ground 8 is therefore rejected.

[42] In relation to the ninth appeal ground, the Deputy President did not rely upon the evidence of the negotiations for the Agreement in reaching her primary conclusion, based on textual considerations only, that the selection criteria for redundancy in clause 25.3(c) were determinative in nature. As is apparent from paragraph [43] of the Decision, the Deputy President only referred to this extrinsic evidence in the alternative to her primary conclusion and did not, as the ninth appeal ground contended, rely upon that evidence to reach that primary conclusion. As we have upheld the Deputy President’s primary conclusion, her alternative reasoning does not arise for consideration. Appeal ground 9 is rejected.

Conclusion

[43] The appeal is dismissed.

[44] Because we perceive it to be likely that our reasons and conclusions set out above will not resolve the dispute before the Commission to finality, the dispute proceedings in matter C2017/1574 are referred back to the Deputy President for such further mediation, conciliation or arbitration as may be necessary.

VICE PRESIDENT

Appearances:

J Blackburn SC with D Carlon for Farstad Shipping (Indian Pacific) Pty Ltd.
M Ritter SC with E Palmer for the MUA.

Hearing details:

2017.
Sydney:
19 May.

 1   [2017] FWC 2650

 2   The other witness statements were made by William Tracey, the National Deputy Secretary of the MUA, and Amanda Mansini, the Director of Workplace Relations at the Australian Mines and Metals Association.

 3   (2014) 245 IR 394

 4   [2016] FWCFB 8120; 262 IR 83

 5   [2011] FWAFB 2555 at [26]-[28]

 6   DP World Brisbane Pty Ltd v Maritime Union of Australia [2013] FWCFB 8557, (2013) 237 IR 180 at [46]-[57]; Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v ALS Industrial Australia Pty Ltd [2015] FCAFC 123, (2015) 235 FCR 305 at [40]-[58]

 7   [2017] FWCFB 3005 

 8   Ibid at [114]

 9   [2015] FCAFC 142, (2015) 254 IR 238 

 10   Ibid at [128]

 11   Ibid at [74]

 12   Ibid at [73]

 13   Macquarie Online Dictionary

 14   Clause 35.1 of the Agreement

 15   R v Hunt; Ex parte Sean Investments Pty Ltd (1979) 180 CLR 322 at 329 per Mason J; Edwards v Giudice [1999] FCA 1836, (1999) 94 FCR 561 at [5] per Moore J

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