Coles Group Limited v Costin

Coles Group Limited appealed to the High Court of Australia against a decision of the Full Federal Court, which had affirmed a judgment in favour of the respondent, Mr. Costin. The dispute concerned the interpretation of a clause within Mr. Costin's employment contract with Coles, specifically relating to the calculation of his redundancy pay. Mr. Costin had been employed by Coles for a significant period and was made redundant. The core of the disagreement lay in whether certain payments made to Mr. Costin upon termination, including a payment in lieu of notice and a payment for accrued but untaken annual leave, should be included in the calculation of his redundancy entitlement.

The High Court was required to determine the proper construction of clause 10.3 of the Coles Enterprise Agreement, which stipulated how redundancy pay was to be calculated. The central legal question was whether the phrase "ordinary rate of pay" as used in the agreement encompassed all forms of remuneration paid to an employee, or if it was limited to the base wage. This involved considering the scope of the definition of "ordinary rate of pay" in the context of redundancy entitlements and whether payments for accrued annual leave and payment in lieu of notice constituted part of that ordinary rate for the purposes of calculating redundancy pay.

In their joint judgment, Kiefel and Gageler JJ held that the "ordinary rate of pay" for the purposes of clause 10.3 of the Enterprise Agreement did not include payments for accrued annual leave or payments in lieu of notice. Their Honours reasoned that these payments were distinct entitlements that arose upon termination of employment, rather than being part of the regular remuneration paid for ordinary hours of work during the period of employment. The court applied principles of contractual interpretation, emphasizing that the plain meaning of the words in the agreement, read in their context, dictated that "ordinary rate of pay" referred to the rate of pay for ordinary hours of work, excluding termination-related payments. Consequently, the appeal was allowed, and the judgment of the Full Federal Court was set aside.