Australian Workers' Union, The v Orica Australia Pty Ltd
[2022] FWC 345
•17 FEBRUARY 2022
| [2022] FWC 345 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.739—Dispute resolution
Australian Workers’ Union, The
v
Orica Australia Pty Ltd
(C2021/6643)
| DEPUTY PRESIDENT BEAUMONT | PERTH, 17 FEBRUARY 2022 |
Alleged dispute about any matters arising under the enterprise agreement and the NES;[s186(6)]
This decision concerns an application made by the Australian Workers’ Union (AWU) under s 739 of the Fair Work Act 2009 (Cth) (Act) regarding a dispute with Orica Australia Pty Ltd (Orica) about the interpretation of subclause 4.2.3 of the Orica Kalgoorlie Reserve Site Agreement 2013 (the Agreement).[1]
The dispute centres on Orica’s refusal to pass on remuneration increases under the Agreement. The AWU contends that with effect on and from the commencement of each calendar year until the nominal expiry date of the Agreement, Orica had provided the employees covered by the Agreement an annual remuneration increase at the rate of at least 3% per annum by applying subclause 4.2.3 of the Agreement. That subclause reads:
4.2.3 Salary increases will be made throughout the lifetime of this Agreement on January 1 in accordance with the Orica Continuous Improvement policy (CI) or 3.0%, whichever is higher. CI provides for automatic yearly adjustments on [sic] in a climate of continuous improvement. The principles of continuous improvement embody a commitment of continuous supply to customers and continuous implementation of improvements in customer service. The CI rate is set by the business.
However, on 31 March 2017 the nominal expiry date passed and no further remuneration increases were provided.
The parties have agreed upon questions to be arbitrated. Those questions are:
1. Does the construction and interpretation of subclause 4.2.3 of the Agreement confer the Employees an entitlement to salary increases of at least 3% at the commencement of each year:
a) until such time that the Agreement is terminated or replaced?; or
b) until the nominal expiry date of Agreement?
It is uncontroversial that: (a) there is a dispute between the AWU and Orica; (b) that the dispute has been properly notified to the Commission; and (c) that the requirements of the dispute settlement procedure have been complied with.
Furthermore, it is not in dispute that the Agreement continues to operate as a consequence of ss 54 and 58 of the Act.
AWU’s submissions
Briefly stated, the AWU’s position is that subclause 4.2.3 entitles employees covered by the Agreement to a salary increase of at least 3% on 1 January of each year, until the Agreement is terminated by the Commission or replaced by a new enterprise agreement. It arrives at this view, based on what it says are the ordinary meaning of the words in the subclause and in the Agreement as a whole.
The AWU submits that the remuneration increase contemplated in subclause 4.2.3 is mandatory due to the use of the word ‘will’. Further, the ordinary meaning of the word ‘lifetime’ means the period where the Agreement is live, applicable and covers Orica employees. Expanding upon the meaning of the word ‘lifetime’, the AWU explained that ‘lifetime’ means until the Agreement is replaced by a new agreement or terminated in accordance with the Act.
In arriving at its interpretation of subclause 4.2.3, the AWU relied upon the decision of the Full Court of the Federal Court in Workpac Pty Ltd v Skene (‘Skene’),[2] and the principles espoused by the Full Bench of this Commission in Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union' known as the Australian Manufacturing Workers Union (AMWU) v Berri Pty Limited (‘Berri’).[3] It emphasised that an overly technical approach to the interpretation of industrial instruments was to be avoided, and that to ascertain the meaning of an enterprise agreement, one must examine the ordinary meaning of the words and in doing so, have regard to the context.[4]
Tackling the ordinary meaning of the word ‘will’, the AWU referred to the definition attributed to it by the Macquarie Dictionary, namely:
1. Indicating future likelihood.
2. Expressing resolve.
The AWU again emphasised that it was commonly understood that when applying the principles of statutory interpretation, the word ‘will’ means that the subject matter is mandatory instead of discretionary in nature. The AWU considered that this was not in dispute between the parties.
Insofar as the meaning of the word ‘lifetime’ was concerned, the AWU relied on both the definition provided by the Macquarie Dictionary and the Oxford Online Dictionary quoting respectively:
1. the term of existence, activity, or effectiveness of something inanimate, as a machine or a lease.
2. the length of time that someone lives or that something lasts; the duration of a thing’s existence or usefulness.
Having examined the Commission’s approval decision of the Agreement, the AWU observes that paragraph [3] of that decision stated:
The Agreement is approved and, in accordance with s.54 of the Act, will operate from seven days from the date of this decision. The nominal expiry date of the Agreement is 31 March 2017.
The AWU submits that this wording is consistent with the industrial definition of ‘nominal expiry date’ which can be found at s 12 of the Act. The AWU continued that any reference to ‘nominal term’ is evidently a reference to the period from when an enterprise agreement commences operation, as noted in the Commission’s approval decision, until its nominal expiry date. This reading is consistent, said the AWU, with subclause 1.3 of the Agreement.
The AWU presses that the words used in subclause 4.2.3 are unambiguously capable of only one meaning, namely, that under subclause 4.2.3 Orica is required to provide a salary increase of at least 3% each year and this salary increase is to continue throughout the lifetime of the Agreement - even after the nominal expiry date has elapsed. The AWU states that this conclusion can be derived from the following:
a) subclause 4.2.3 uses the word ‘lifetime’ rather than ‘term’ or ‘nominal expiry date’ or ‘nominal term’ or ‘nominal lifetime’;
b) the ordinary meaning of the word ‘lifetime’ means the period where the Agreement is live, operational, applicable and covers Orica’s employees, consistent with the cited dictionary definition. ‘Lifetime’ therefore means until the Agreement is replaced by a new agreement or terminated by the Commission in accordance with the Act;
c) this meaning of ‘lifetime’ is consistent with subclause 1.3 of the Agreement regarding the ‘Period of Operation’ of the Agreement; and
d) this is because until the Agreement is terminated or replaced, it continues to exist, be active and be effective, consistent with the Macquarie Dictionary definition of ‘lifetime’.
The AWU explains that the meaning attributed to the subclause would be understood by a reasonable person (as referred to in principle 3 in Berri), and on that basis, if the Agreement has a plain meaning, evidence of the surrounding circumstances will not be admitted to contradict the plain language of the agreement (as referred to in principle 9 in Berri).
Referring to Skene, the AWU relied on the follow passage extracted from that decision:
[W]here a term is undefined, unless there is contrary indication, it ought to be presumed
that the draftsperson intended that the term have its ordinary meaning. Despite the broad
purposive approach to be taken to the interpretation of industrial agreements, that canon
of construction remains applicable as a starting point.[5]
The AWU noted that the word ‘lifetime’ is only used once in the Agreement and every other reference to a duration or timeframe explicitly referenced the words ‘nominal term’ or ‘nominal expiry date’. The AWU submitted that this demonstrated that aside from ‘lifetime’ and ‘nominal term’ or ‘nominal expiry date’ already having defined and distinguished plain English definitions, the drafters had contemplated a difference in the meaning of the words through their choice of usage throughout the Agreement.
The AWU continued that the only conclusion that could be drawn was that the drafter’s chose to use a discrete and unique word for a reason. The Applicant submitted that if a contrary indication was the desired outcome, one would postulate that the drafters would have used wording consistent with the rest of the Agreement, in particular the deliberate inclusion of the word ‘nominal’, or the phrases ‘nominal term’ or ‘nominal expiry date’, in the alternative.
The AWU acknowledged that Berri made it clear that context and purpose are relevant to the construction of an agreement, and both are to be considered, even where the words of the provision being construed appear on their face, to have a clear and unambiguous meaning.[6]
The AWU observed that subclause 4.2.3 is contained within Part 4 of the Agreement entitled ‘Wages and wage related matters’. It sits under subclause 4.2 titled ‘Remuneration’. In contrast, the period of operation of the Agreement is contained in Part 1 of the Agreement under the heading ‘Application and Operation’, where at subclause 1.3 of the Agreement the following is stated:
1.3 PERIOD OF OPERATION
This Agreement shall take effect seven days after it is approved by Fair Work
Australia and will nominally expire on 31 March 2017 and shall supercede [sic] the
Orica Kalgoorlie Reserve Site Agreement 2009.At the end of the nominal term of this Agreement it will continue until replaced by a
new agreement or terminated in accordance with the Fair Work Act 2009 (Cth) (Act).
The AWU further observed that subclause 1.3 specifically elects to use the words ‘nominally’ and ‘nominal’, in the contexts of the phrases ‘nominally expire’ and ‘nominal term’. Furthermore, in the context of the two sentences contained within subclause 1.3, it is apparent, said the AWU, that the nominal term of the Agreement is defined as the period seven days from the date the Agreement is approved by the Commission (30 May 2013) to the nominal expiry date of the Agreement on 31 March 2017.
The AWU continued that in subclause 1.3, the usage of the word ‘term’ or ‘nominal term’ is intrinsically linked to the stipulated nominal expiry date of the Agreement. The AWU continued that it was important to note that throughout this subclause itself, as well as the entirety of the Agreement, the words ‘nominal’ and ‘nominally’ are expressly and deliberately used and included when applicable.
The framework of the Act was also relevant according to the AWU. It submitted that the drafting and inclusion of subclause 1.3, specifically, a subclause regarding a nominal expiry date of an enterprise agreement, is a requirement under the Act in order for the Commission to approve an enterprise agreement (s 186(5)).
It noted that the Agreement defined and set out what ‘nominal term’ and ‘nominally expire’ meant and that use continued throughout the Agreement in a way that was consistent with the purpose of a nominal expiry date under the Act. It demonstrated, according to the AWU, that the drafters knew the difference in duration between when an enterprise agreement is operational as against the nominal expiry date of an enterprise agreement, supporting the position that ‘nominal term’ has a different meaning from the word ‘lifetime’.
The AWU pointed out that the Act operates to keep the Agreement alive and operational post its nominal expiry date. This, said the AWU, was consistent with the ordinary meaning and definition of the word ‘lifetime’.
The AWU pressed that the purpose of subclause 4.2 and subclause 4.2.3 was the provision of annual remuneration increases without requiring the parties to renegotiate pay increases each calendar year or even periodically. This purpose was made clear, said the AWU, within subclause 4.2.3 which provided a base increase of ‘the Orica Continuous Improvement policy (CI) or 3.0%, whichever is the higher’. That same subclause then clarified that the purpose of CI is to ‘provide for automatic yearly adjustments on [sic] in a climate of continuous improvement.’ The subclause further elaborated, said the AWU, that ‘[T]he principles of continuous improvement embody a commitment of continuous supply to customers and continuous implementation of improvements in customer service.’ The AWU stated that one would presume that as Orica had continued to successfully operate its business, it had been continuously supplying product to customers. The AWU contended that this purpose was consistent with the location of subclause 4.2.3 within subclause 4.2 which specifically contemplated remuneration.
Conversely, said the AWU, the nominal expiry date is a statutory mechanism designed to enliven statutory rights under the Act, such as the right to apply to terminate an enterprise agreement (s 225), or undertake protected industrial action (s 417). The nominal expiry date has a particular and narrow industrial application and purpose. The nominal expiry date is not designed to enliven or exhaust entitlements contained in the clauses of an enterprise agreement unless it is explicitly cited to do so.
The AWU proposed that there is a lack of ambiguity in subclause 4.2.3 when one has regard to the text, context and purpose of the subclause as well as the Agreement as a whole. Accordingly, said the AWU, evidence of the surrounding circumstances could not be admitted to contradict the plain language of the Agreement.[7]
The AWU expressed that if extrinsic material is admissible, it may be used to aid the interpretation of a provision in an enterprise agreement with a disputed meaning, but it
cannot be used to disregard or rewrite the provision in order to give effect to an externally
derived conception of what the parties’ intention or purpose was.[8]
In summary, the AWU contends that in interpreting subclause 4.2.3, the Commission need only have regard to the wording of the Agreement and the context and purpose within the Agreement.
Orica’s submissions
Orica contends that it was uncontroversial that the word ‘will’ in subclause 4.2.3 obliged it to pay annual salary increases to employees. But the dispute which had arisen was about how long that obligation endured. This in turn depended upon the meaning of the word ‘lifetime’.
Orica submits that on a correct construction and interpretation of the Agreement, the obligation under subclause 4.2.3 for it to pay employees an annual salary increase, ceased on the nominal expiry date of the Agreement, being 31 March 2017. It follows, says the company, that the appropriate answer to the agreed question for arbitration is ‘until the Nominal Expiry Date of the Agreement’.
Orica argues that the term 'lifetime' is not a term of art and is not defined in the Agreement. It continued that the term could reasonably refer either to the nominal term as set by subclause 1.3 of Agreement (expiring on the nominal expiry date), or the extended operation of the Agreement which occurs as a consequence of ss 54 and 58 of the Act, until the Agreement is terminated or replaced.
Orica presses that either interpretation is arguable, and that it does not contend otherwise. However, in selecting the interpretation to be preferred, it says there are common-sense reasons for preferring its interpretation. Orica listed those reasons as follows:
a)the terms appears in an enterprise agreement, negotiated within a framework where industrial parties are generally negotiating for terms and conditions which are to apply for a defined period, generally set by reference to the nominal term of an agreement. As a consequence of ss 54 and 58, those terms are preserved in operation after the nominal term. However, that is a consequence of the operation of those provisions and is not the consequence of the agreement of the parties; and
b)it would be unusual for an employer in any circumstance to preclude its ability to seek additional efficiencies and concessions from its employees while committing in perpetuity to pay rises which presumably reflect the ‘bargain’ represented by other terms of the Agreement in the context of the business and operational circumstances then prevailing.
Referring to cases that had considered the phrases ‘lifetime of the agreement’ or ‘life of the agreement’ albeit not in the specific context of the continuing entitlement under a relevant enterprise agreement, Orica referred to the following passage in Australian Municipal, Administrative, Clerical and Services Union and others v Sydney Water Corporation:
… [There is] frequently loose usage of the phrase ‘the life of this (or the) agreement’ by parties appearing before FWA. The phrase ‘nominal life of this or the Agreement’ has been used by parties appearing before [her Honour] to include that period over which the life of the Agreement is extended.[9]
Thereafter, further cases referenced included Paul Scudds (Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia),[10] McDonald's Australia Pty Ltd on behalf of Operators of McDonald's outlets,[11] and Construction, Forestry, Mining and Energy Union and another v Anglo Coal (Dawson Services) Pty Ltd.[12] In general terms, the cases were said to highlight that the phrases ‘lifetime of the agreement’ or ‘life of the agreement’ and ‘nominal life of the agreement’ had been treated interchangeably and had at times referred to the nominal term of the enterprise agreement in question.
Orica pressed that while an enterprise agreement must be interpreted as a whole and in context, the cases demonstrated that the meaning of the phrase 'lifetime of this Agreement' was not as unequivocal as AWU had submitted, and in the circumstances the phrase did not have a plain meaning.
Turning to principle 8 in Berri, a principle that sets out that regard may be had to evidence of surrounding circumstances to establish that in fact an ambiguity exists in relation to subclause 4.2.3 of the Agreement,[13] Orica highlighted the following:
a) meeting minutes from bargaining meetings which took place during negotiations for the Agreement (2013 meeting minutes) show that as part of the log of claims:
i.it was agreed between the bargaining representatives that the Agreement would be a ‘4 Year Term Agreement’;[14]
ii.the employee group requested an additional 1% on top of CPI as an annual increase for ‘every year during the term of the Agreement’,[15] and that Orica later proposed the entitlement provided by the current Agreement, ‘for every year of the Agreement’, which the employee group agreed to;[16]
b) the Summary of Changes Document prepared by Orica relating to the Agreement and issued to employees – shows that it was envisaged and communicated that the salary increases were to be provided only for ‘each year of the term of the Agreement’, and the Agreement was a ‘4 year term Agreement’ which was ‘to expire on 31 March 2017’;[17] and
c) the meeting minutes from negotiations for a new enterprise agreement in 2017 (which was then voted down twice) – shows that the negotiating parties discussed the fact that the 3% pay increases provided by subclause 4.2.3 of the Agreement were only applicable for the nominal term of the Agreement, and would no longer apply if a new agreement was not in place after the nominal expiry date of the Agreement.[18]
Orica submits that although subclause 4.2.3 used the phrase 'lifetime of the Agreement', this phrase was not used during bargaining and reference was only made to salary increases being for the period of the four-year nominal term of the Agreement. Orica said that on this basis the Commission could be satisfied that the surrounding circumstances assisted in determining that an ambiguity exists in subclause 4.2.3 of the Agreement, or that the phrase in question, ‘lifetime of this Agreement’, was susceptible of more than one meaning.
Orica continued that having established an ambiguity or susceptibility of the phrase to be accorded more than one meaning, evidence of the surrounding circumstances was admissible to aid the interpretation of the Agreement.
Orica explained that during negotiations for the Agreement, it was evident in its view, that the parties had turned their minds to, and discussed, the operation of the salary increase entitlement. Evidence which tended to establish the subject matter of the Agreement and the objective background facts which were known to both parties included:
a)evidence of prior negotiations in the form of the 2013 meeting minutes – which provided evidence the clause was discussed and both parties agreed that the salary increases provided by subclause 4.2.3 were to be provided each year during the term of the Agreement,[19] and that term of the Agreement was four years;[20] and
b)the 2013 Summary of Changes Document, which provided evidence that employees were told that the salary increases would be '3% or Orica CI, whichever is higher, on 1 January for each year of the term of the Agreement' and the Agreement was a '4 year term Agreement' which was 'to expire on 31 March 2017'.[21]
Orica further relied on the post-agreement conduct of the parties to show that there had been consensus on the meaning of the phrase. On this point, it noted there had been a long-standing practice between it and the employees that the entitlement to a salary increase was only applicable during the nominal term of the Agreement. This, said Orica, was evident from the discussions set out in the 2013 meeting minutes, particularly in the context of those discussions being in relation to subclause 4.2.3 which used the same relevant wording (i.e. the phrase ‘lifetime of this Agreement’) as the relevant clause (also subclause 4.2.3) in the predecessor enterprise agreement (the Orica Kalgoorlie Reserve Site Agreement 2009 (2009 Agreement).[22] Having used the same phrase, and discussing the applicable term of the salary increases effectively being every year for the four-year term of the Agreement in the 2013 meeting minutes, Orica contended that the evidence demonstrated there was a common understanding of the parties that the phrase 'lifetime of this Agreement', used in subclause 4.2.3, meant the same as it did for the 2009 Agreement i.e., for the nominal term of the Agreement.[23]
To further support this proposition, Orica referred to negotiations for a new agreement in 2017 and 2018 which were unsuccessful. Orica submitted that a bargaining meeting between its representative and those of the AWU took place on 21 June 2017 and were contemporaneously recorded by way of minutes. Orica’s representative was said to have explained that given the Agreement had passed its nominal term, the salary increases provided by subclause 4.2.3 of the Agreement would cease to operate, unless a new enterprise agreement was made.[24]
Orica submitted that the 2017 meeting minutes did not record any commentary or opposition from the other parties present in the bargaining meeting to the statement made by Orica’s representative. Orica pressed that this was evidence of a meeting of minds and a consensus between the parties that the entitlement to salary increases provided by subclause 4.2.3 ceased to apply after the nominal expiry date.
Consideration
The source of the Commission's power to arbitrate the dispute is s 739 of the Act. The Commission has broad jurisdiction to decide questions of fact and law, however it does not have jurisdiction to make a decision which is inconsistent with the Agreement.Nor is the Commission able to make an order which would amount to an exercise of judicial power. Therefore, the Commission is unable to make an order requiring payment of any amount which might be due to an employee consequent to a decision where the Applicant’s interpretation of subclause 4.2.3 is accepted.
It appears to have been accepted in this Commission that the principles to be applied in interpreting an enterprise agreement, are found in the Full Bench decision of Berri. In Berri, it was said that the construction of an enterprise agreement, like that of a statute or a contract, begins with a consideration of the ordinary meaning of the relevant words.[25] The disputed words must be construed in the context of the agreement as a whole.[26] The process of interpretative analysis focusses upon the language of the agreement itself, an approach adopted by the AWU in this case.
The framers of the of the Agreement chose specifically to refer to the phrase ‘the lifetime of this Agreement’. Or, more specifically, the word ‘lifetime’. There is no suggestion that the word was used in error. The word ‘lifetime’ is not used elsewhere in the Agreement, and it is uncontroversial that the denotation of the word is that as described or defined in the Macquarie or Oxford dictionary at paragraph [12] of this decision. In short, ‘lifetime’ means the term or duration of existence.
Reference to the temporal in the Agreement is also achieved by reference to the ‘nominal term’,[27] ‘nominally expire’,[28] and ‘nominal expiry date’.[29] The AWU observed that the drafters of the Agreement had defined and set out what ‘nominal term’ and nominally expire’ meant and had used the terms consistently throughout the Agreement (four occasions). It correctly identified that the word ‘lifetime’ had been referenced on only one occasion.
At Part 8 of the Agreement, ‘Miscellaneous Matters’ are traversed. Included in those matters is subclause 8.2 of the Agreement which sets out an obligation to establish a ‘Consultative Committee’. The subclause starts with the words ‘[D]uring the term of this Agreement…’.[30]
From the abovementioned observations, the AWU inferred that the drafters knew the difference in duration between when an enterprise agreement is operational as against the nominal expiry date of an enterprise agreement. The AWU contended that the meaning of ‘nominal term’ was different to the meaning of the word ‘lifetime’, proposing that the only conclusion that could be drawn from its observations was that the word ‘lifetime’ was chosen for a reason. Of course, the AWU pointed to the Act keeping the Agreement alive post the nominal expiry date – which it argued, was consistent with the ordinary meaning of the word ‘lifetime’.
Orica correctly identified that the term 'lifetime' is not a term of art and is not defined in the Agreement. However, Orica’s reference to decisions that have considered the phrase in various contexts was unhelpful in the present context. Those decisions do not inform as to what the framers of this Agreement meant when they chose to use the word.
The word ‘lifetime’ could reasonably refer either to the nominal term as set by subclause 1.3 of Agreement (expiring on the nominal expiry date), or the extended operation of the Agreement which occurs as a consequence of ss 54 and 58 of the Act, until the Agreement is terminated or replaced.
Whilst the words ‘term’, nominal term’,[31] ‘nominally expire’,[32] and ‘nominal expiry date’– are referred to as noted, drawing a conclusion from the consistent or inconsistent use of language in an enterprise agreement is to be cautiously approached. It is accepted that some of the principles that are usually seen in statutory construction have less force in the context of construing an enterprise agreement. In Shop, Distributive and Allied Employees’ Association v Woolworths Limited, Gray ACJ held that the presumption that a word used in one provision of a statute has the same meaning when it is used in another provision of the same statute, applied with less force in the context of an enterprise agreement.[33] Is for example, the word ‘term’ as used in the Agreement at subclause 8.2, indicative of the ‘nominal term’ of the Agreement which may be thought to be that period from commencement to the nominal expiry date, or the continued operation of the Agreement pursuant to ss 54 and 58?
In construing an enterprise agreement regard may be had to evidence of surrounding circumstances to assist in determining whether an ambiguity exists.[34]
The critical issue is one which essentially requires attributing one of two meanings, or perhaps more, to the phrase ‘lifetime of this Agreement’. The interpretation of that phrase, as pressed by each party, appears arguable. However, that is not the relevant point. The task now is to discern whether the phrase, or particularly the word ‘lifetime’, appears susceptible to more than one meaning.
Orica led evidence regarding the negotiations for the Agreement in 2013. That evidence was limited to the direct evidence of the 2013 meeting minutes and an explanatory document (Summary of Changes Document) regarding the terms of the proposed agreement.
Orica’s evidence regarding bargaining meetings had been extracted from its computer system. It was attached to the witness statement of Ms Hannah Couper, its Manager HR Business Partner. Ms Couper commenced employment with Orica in June 2019. She acknowledges that she was not involved in the bargaining for the Agreement. The AWU highlighted the shortcomings of the direct evidence. Those shortcomings have been considered. But, as business records of the company, and in the absence of compelling evidence to err otherwise, I am content to rely upon the direct evidence led by Orica.
The meeting minutes dated 17 January 2013 referred to Orica’s log of claims as including a ‘4 Year Term Agreement’. The claim was recorded as not having been resolved.[35] Those same minutes included the following:
Claim Discussion/Response Resolved? Rollover the current remuneration clause Wage increases may be made throughout the lifetime of the Agreement in accordance with the Orica Continuous Improvement Wages Policy.
Action: Employees to review and respond
No
The meeting minutes of 7 February 2013 reveal again that ‘the parties put forward the Orica log of claims’.[36] The following was recorded in the minutes:
Claim Discussion/Response Resolved? 4 Year Term Agreement Agree Yes Rollover the current remuneration clause No comment – employees to respond at next meeting No
Meeting minutes dated 28 February 2013[37] detail the following:
Claim Discussion/Response Resolved? Rollover the current remuneration clause Employees would like an additional 1% on top of ‘CPI’ as an annual increase for every year during the term of the Agreement, so
that in the case where CPI was zero, an increase would still be passed through. AT explained the difference between the Orica CI and CPI, saying that CPI was included in the CI but this was more of an internal Orica metric that was usually well above CPI.
Action: Business to consider and respondNo
Meeting minutes dated 14 March 2013[38] include:
Claim Discussion/Response Resolved? Rollover the current remuneration clause Employee happy with proposal of 3% or CI whichever is higher, for each year of the Agreement. Yes
It is evident from the meeting minutes of 7 February 2013 that at that time those bargaining for the ‘agreement’ and present in the meeting had agreed to a four-year ‘term’.
The meeting minutes dated 28 February 2013 thereafter show that the remuneration clause was discussed as were pay increases. Minutes of 14 March 2013 report that the proposal of 3% or ‘CI’ – whichever is higher for ‘each year of the Agreement’, was resolved. When the negotiations had concluded an email was sent by a Senior HR Advisor of the business to multiple recipients. That email attached a draft of the Agreement, a voting guide and a Summary of Changes Document.[39] The Summary of Changes Document set out the following:
Salaries to increase by 3% or Orica CI, whichever is higher, on 1 January for each year of the term of the Agreement.[40]
The Full Court of the Federal Court in Skene explained that the language of the agreement is to be understood in light of its industrial context and purpose, and not in a vacuum or divorced from industrial realities.[41] A purposive approach to interpretation is appropriate, not a narrow or pedantic approach, because as observed in Skene, industrial agreements are made for various industries in the light of the customs and working conditions of each, and are frequently couched in terms intelligible to the parties but without careful attention to form and draftsmanship that one expects to find in an Act of Parliament. In Skene, it was noted that the framers of agreements were likely of a ‘practical bent of mind’ and may well have been more concerned with expressing an intention in a way likely to be understood in the relevant industry rather than with legal niceties and jargon.
Having considered the AWU’s submissions and having had regard to evidence of surrounding circumstances, and in this respect, I refer to the evidence led by Orica and the AWU’s criticisms of the same, I nevertheless find that the phrase ‘the lifetime of this Agreement’, particularly the word ‘lifetime’, is susceptible to more than one meaning.
As was said in Berri, having identified such susceptibility, it is permissible to consider evidence of the surrounding circumstances as an aid to the task of interpreting the Agreement. However, the Full Bench in Berri cautioned that the admissibility of evidence of the surrounding circumstances is limited to evidence tending to establish objective background facts which were known to both parties and the subject matter of the contract.
In The Australasian Meat Industry Employees Union v Golden Cockerel Pty Ltd,[42] evidence relevant to the objective framework of facts was said to include the following categories:
a) evidence of prior negotiations to the extent that the negotiations tend to establish objective background facts known to all parties and the subject matter of the agreement;
b) notorious facts of which knowledge is to be presumed; and
c) evidence of matters in common contemplation and constituting a common assumption.[43]
As to category (a), the Full Bench in Berri concluded that evidence of prior negotiations will be admissible – but only for a defined purpose.[44] Drawing upon the judgment of Mason J in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales, the Full Bench in Berri repeated the following passages:
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 parole 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.[45]
During negotiations for the Agreement, it was evident that the parties had turned their minds to, and discussed, the operation of the salary increase entitlement. In my view this evidence establishes part of the matrix of objective background facts which were known to both parties and the subject matter of the Agreement. The evidence referred to has been traversed at paragraphs [59] to [64] of this decision.
However, while Orica proposed that such evidence constituted the background fact that the salary increases provided by subclause 4.2.3 were only to be provided for the nominal term of the Agreement, I am not similarly convinced that this ‘fact’ can be drawn from the direct evidence of the 2013 meeting minutes. At best, there was reference to: ‘wage increases may be made throughout the lifetime of the Agreement’,[46] an annual increase for ‘every year during the term of the Agreement’,[47] and in the minutes dated 14 March 2013, employees being happy with the proposal of 3% or CI whichever is higher, ‘for each year of the Agreement’.[48] It is observed that the minutes dated 14 March 2013, the latter minutes referred to, reported that the claim concerning the rollover of the current remuneration clause was resolved. In my view the evidence at its apogee demonstrates a lack of clarity as to the period in which salary increases would be forthcoming.
When negotiations for the Agreement had concluded an email was sent by a Senior HR Advisor of the business to multiple recipients attaching a draft of the Agreement, a voting guide and the Summary of Changes Document.[49] The Summary of Changes Document set out the following:
Salaries to increase by 3% or Orica CI, whichever is higher, on 1 January for each year of the term of the Agreement – clause 4.2.3.[50]
In the passage extracted from the Summary of Changes Document reference is made to the words ‘term’ and ‘year’, such that the ‘term’ of the Agreement is comprised of years. On balance, I am not convinced by reference only to this single excerpt that the word ‘term’ in this context refers to the Agreement’s ‘nominal’ term, such that the period is a reference to the requirements in s 186(5) of the Act. In this respect I note that the word ‘nominal’ is not used, and it appears a rather large leap to assume that the word ‘term’ reflects the requirement that s 186(5) prescribes. Namely, that the agreement must specify a date as its nominal expiry date and the date will not be more than four years after the day on which the Commission approves the agreement.
However, when one moves further down the page of the Summary of Changes Document the following appears:
4 year term Agreement. Updated Agreement to expire on 31 March 2017.
The Summary of Changes Document serves the purpose of explaining to employees who will be covered by the Agreement, the terms of the Agreement and the effect of those terms. In Berri it was said that evidence as to what employees covered by the agreement were told (either during the course of the negotiations or pursuant to s 180(5)) may be of more assistance than evidence of the bargaining positions taken by the employer or a bargaining representative during the negotiations of an agreement.
Orica has emphasised that on a correct construction and interpretation of the Agreement, the obligation under subclause 4.2.3 for it to pay employees an annual salary increase, ceased on the nominal expiry date of the Agreement, being 31 March 2017. It follows that the ‘lifetime of this Agreement’, as referred to in subclause 4.2.3, draws to an end on the nominal expiry date of the Agreement. The Summary of Changes Document appears to support the interpretation of the phrase as favoured by Orica. This direct evidence constitutes an objective background fact which was known to those who were to be covered by the proposed agreement.
However, at this point it is timely to turn to the fourteenth principle as espoused Berri. It has been said that admissible extrinsic material may be used to aid the interpretation of a provision in an enterprise agreement with a disputed meaning, but it cannot be used to disregard or rewrite the provision in order to give effect to an externally derived conception of what the parties’ intention or purpose was.[51]
Attributing to the phrase ‘lifetime of this agreement’ the interpretation pressed by Orica, does not disregard or rewrite subclause 4.2.3. All that is to be discerned is the meaning intended by the progenitors of the document, bearing in mind that they were likely of a practical bent and expressed intention in ways likely to have been understood in the context of the relevant industry and industrial relations environment. It is therefore justifiable to read an enterprise agreement to give effect to its evident purposes, having regard to such context, despite mere inconsistencies or infelicities of expression which might tend to some other reading.[52]
Of course, as was acknowledged in Berri, the admissibility of the post-contractual conduct as an aid to the construction of a contract is a somewhat vexed issue, in respect of which no clear line of authority has emerged.[53] The Full Bench in Berri appears to have accepted what was said in the judgment of Lambery JA in the Canadian case of Re Canadian National Railways and Canadian Pacific Ltd, that evidence of subsequent conduct is most cogent were parties are individuals, the acts considered are the acts of both parties, the acts can relate only to the agreement, the acts are intentional and the acts are consistent only with one of the alternative interpretations.[54]
The Full Bench in Berri appears to have been guided by the point that where the parties to the agreement are corporations and the acts are the acts of employees of the corporations, then evidence of subsequent conduct is much less likely to carry weight.[55]
However, unlike Berri where the dispute centred on an unpaid laundry allowance, in this case employees covered by the Agreement have not received a salary increase since 31 March 2017. In Berri it was ventured that care must be taken to distinguish a common understanding from a common inadvertence and that in order to have an understanding, it is necessary that there be a meeting of the minds.[56] The Full Bench continued that there can be no meeting of minds, no consensus, if no one has thought about the issue.[57]
It appears remarkable that for some four years whilst Orica has omitted to pass on salary increases pursuant to subclause 4.2.3, there appears to have been no agitation by the AWU or employees.
Little to no evidence was led that the issue between the parties had been percolating for an extended period. In fact, Orica led evidence that during the course of 2017 and 2018 it had attempted to negotiate a new agreement with employees and the AWU. A bargaining meeting between the representatives of the AWU, Orica and employees as part of the negotiations for a new enterprise agreement was said to have taken place on 21 June 2017 and was contemporaneously minuted (2017 minutes). While there was no evidence to suggest that the meeting minutes had been checked and accepted by all in attendance, I am again content to rely upon such minutes on the basis that they form a business record of Orica extracted from its computer system. I note the evidence has not been impugned save speculation about its deficiencies. Present at that meeting were employee representatives and a representative purported to be from the AWU. The minutes read:
*Tiffany explained that now the 3% which was part of the current agreement would no longer be paid if no new agreement was met due to the increase being for the term of the previous agreement which is now expired, however all other conditions would remain in place.
Those same meeting minutes do not record any commentary or opposition from the other parties present in the bargaining meeting to the statement made by ‘Tiffany’, Orica’s representative. Further, there is no evidence prior to August 2021 (meetings were held in August 2021 under the subclause 2.1.1 of the Agreement – Avoidance of Disputes Procedure) that there was dispute over the interpretation of subclause 4.2.3 of the Agreement.
Orica submitted that the evidence of the 2017 minutes constituted evidence that there was a meeting of minds and a consensus between the AWU and Orica that the entitlement to salary increases provided by subclause 4.2.3 ceased to apply after the nominal expiry date of the Agreement. I agree.
Whilst the lack of action on behalf of the AWU or employees to agitate dispute about omission of salary increases might be characterised as post-agreement conduct amounting to little more than the absence of a complaint about the non-payment of such increases – I am not so persuaded given that we are referring to salary increases of at least 3% a year that were not passed on over a period of four years. Further, when Orica alerted those present at the meeting on 21 June 2017 as to the approach it adopted in respect of subclause 4.2.3, no action was taken contemporaneously or for four years thereafter.
Conclusion
As observed, the parties have agreed upon questions to be arbitrated. Those questions are:
1. Does the construction and interpretation of subclause 4.2.3 of the Agreement confer the Employees an entitlement to salary increases of at least 3% at the commencement of each year:
a) until such time that the Agreement is terminated or replaced?; or
b) until the nominal expiry date of Agreement?
My answer is (b).
DEPUTY PRESIDENT
Appearances:
Ms E. Ong for the Applicant;
Mr D. Williams of Minter Ellison for the Respondent.
Hearing details:
Perth (video hearing)
16 December 2021.
[1] [2021] FWCA 3251; PR 537171 (‘The Agreement’).
[2] [2018] FCAFC 131 (‘Skene’).
[3] [2017] FWCFB 3005 (‘Berri’).
[4] Construction, Forestry, Maritime, Mining and Energy Union v Griffin Coal Mining Company Pty Ltd [2020] FWC
5128 at [70] (‘Griffin Coal’).
[5] Skene (n 2) [202].
[6] Griffin Coal (n 4) [79]; Construction, Forestry, Maritime, Mining and Energy Union v Endeavour Coal Pty Ltd T/A Appin Mine [2017] FWCFB 4487.
[7] Berri (n 3) [114].
[8] Ibid.
[9] [2010] FWA 7782 [123].
[10] [2019] FWC 6465.
[11] [2010] FWA 1347.
[12] [2012] FWA 9099.
[13] Berri (n 3) [114].
[14] Witness Statement of Hannah Jane Couper, 8 (‘Couper Statement’).
[15] Ibid 13.
[16] Ibid 16.
[17] Ibid 19.
[18] Ibid 52.
[19] Ibid 13, 14.
[20] Ibid 8.
[21] Ibid 19.
[22] AC322142.
[23]Couper Statement (n 14) 9, 13, 16.
[24] Ibid 52.
[25] Berri (n 3) [41].
[26] Berri (n 3) [41].
[27] The Agreement (n 1) sub-cl 1.3.
[28] Ibid.
[29] Ibid sub-cl 1.6.1
[30] Ibid sub-cl 8.2.
[31] Ibid sub-cl 1.3.
[32] Ibid.
[33] (2006) 151 FCR 513, 518-519.
[34] Berri (n 3) [38].
[35]Couper Statement (n 14) 4.
[36] Ibid 8.
[37] Ibid 13.
[38] Ibid 16.
[39] Ibid 17.
[40] Ibid 19.
[41] Skene (n 2) [197].
[42] [2014] FWCFB 7447.
[43] Ibid.
[44] Berri (n 3) [64].
[45] (1982) 149 CLR 337, 352 quoted in Berri (n 3) [64].
[46] Couper Statement (n 14) 4.
[47] Ibid 13, 16.
[48] Ibid 16.
[49] Ibid 17.
[50] Ibid 19.
[51] Berri (n 3) [114].
[52] Kucks v CSR Ltd (1996) 66 IR 182, 184.
[53] Berri (n 3) [101].
[54] (1978) 95 DLR (3d) 242, 262.
[55] Ibid quoted in Berri (n 3) [107].
[56] ALHMWU v Prestige Property Services Pty Ltd [2006] FCA 11, [44] cited in Berri (n 3) [108].
[57] Ibid.
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