Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Kentz (Australia) Pty Ltd

[2016] FWC 718

[2016] FWC 718

FAIR WORK COMMISSION

DECISION

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

Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia
v
Kentz (Australia) Pty Ltd
(C2015/7265)

COMMISSIONER WILSON MELBOURNE, 3 FEBRUARY 2016

Application to deal with a dispute - correct application of an income protection insurance clause of an agreement.

Introduction

[1] An application for the Fair Work Commission to deal with an alleged dispute was made by the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (the CEPU) on 11 November 2015 against Kentz (Australia) Pty Ltd (Kentz).

[2] The alleged dispute is in connection with construction work being undertaken by Kentz on the Ichthys Project in the Northern Territory, with the work itself being performed under the Kentz (Australia) Pty Ltd Ichthys Onshore Construction Greenfields Agreement (the Agreement). The Agreement applies to work being undertaken by Kentz at the Ichthys LNG Onshore Construction Project situated at Blaydin Point, near Darwin. The alleged dispute is identified as a breach on the part of Kentz of clause 19 of the Agreement which deals with income protection insurance. Specifically, it is said by the CEPU that Kentz are not paying income protection insurance to an approved insurer within the meaning of the clause.

[3] Kentz have argued not only that the CEPU’s construction of the disputed clause is incorrect and that there is no breach on their part, but also that the Commission may lack jurisdiction to hear and determine the application, depending upon when the Commission publishes its decision. It is said that if the Commission publishes its decision after the remaining employees are dismissed, the Commission will have no jurisdiction on the matter.

[4] Being satisfied that it was appropriate to do so, for reason of the criterion within s.596(2)(a) of the Fair Work Act 2009 (the FW Act), that it would enable the matter to be dealt with more efficiently, taking into account the complexity of the matter, permission was granted by me for the parties to be represented, at least in part, by a lawyer. Mr Charles Massy, of Counsel, instructed by Hall Payne Lawyers, sought and was granted permission to appear for the CEPU in respect of the jurisdictional question; Mr T Smetana and Ms R Harg, solicitors of HLS Legal, were granted permission to appear for Kentz in both the jurisdictional question and the matter of the merits of the CEPU application. Ms P Rogers, Industrial Officer, appeared for the CEPU in relation to the merits of the union’s application.

[5] The hearing in this matter was held on 1 February 2016, after a request from the CEPU for an expedited hearing against the background both of the imminent termination of employment of the people who work under the Agreement and the jurisdictional objection raised by Kentz.

[6] For the reasons set out in this decision, I find that the Commission has jurisdiction to hear and determine the dispute and that the following is the correct application of the disputed clause;

• The plain meaning of clause 19(a) requires Kentz to make income protection arrangements with an approved insurer such as one of the entities named in each of paragraphs 19(a) (1), (2) and (3). That list is non-restrictive.



• Which of the named insurers listed in paragraphs 19(a) (1), (2) and (3) is to be engaged by Kentz will depend on the classification of the persons it employs, with each paragraph plainly specifying which fund applies in each case.



• There is insufficient material before me for me to express a concluded view about what a party may be required to do if it desires to depart from one of the named insurers listed in paragraphs 19(a) (1), (2) and (3).

Background to the dispute

[7] The matter was the subject of a conciliation conference on 12 January 2016 in which the issues were discussed, as well as the CEPU’s reasoning that the parties’ intention at the time of forming the Agreement was that income protection insurance payments would be directed by Kentz to an insurer nominated by the clause, which in the case of their members is the SPEC Super Scheme, which is now known as Energy Super. 1

[8] Relatively few employees are presently employed under the Agreement, with Anne Davilly, the Kentz Regional Finance Director, giving evidence that at present there are six such employees. 2 It is common ground between the parties that those who are presently employed have now been given their notices of termination. On Tuesday, 19 January 2016 HLS Legal, solicitors acting for Kentz, advised the Commission, in response to Directions on the matter, that Kentz had that day given notices of termination to seven employees. The notification to the Commission was in the following terms;

“In accordance with Direction 6 of the Directions issued by Commissioner Wilson on 14 January 2016, the Respondent notifies the CEPU and the Fair Work Commission of its intention to terminate the employment of the employees working under the Enterprise Agreement.

For the avoidance of doubt, these employees are:
1. Aaron Alberty
2. Julie Potton
3. Anthony Marchese
4. James Ralph
5. Scott Chambers
6. Dylan Paskos
7. Mardi Morrision

The employees were provided with notice of termination today, 19 January 2016.

The termination of employment of the employees, except for James Ralph, is to take effect on 6 February 2016. Mr Ralph’s termination of employment will take effect on 4 February 2016.”

[9] Clause 19 of the Agreement provides:

“19 Income Protection

(a) The Employer will take out income protection insurance for all Employees that provides cover for the Employee for any period of absence on leave without pay for illness, accident or injury, while it remains available, with an approved insurer such as.

(1) SPEC Super – for electrical and instrumentation employees and Storepersons who are members of SPEC Super – ESP (a division of SPEC Super) or Australian Income Protection Pty Ltd.

(2) Wage Guard – for mechanical and fabrication employees, non-destructive testing employees and Storepersons.

(3) Chiefly or Construction Income Protection Queensland – in respect of all classifications within the scope of the classification structure except those classifications listed above in sub-clauses 19 (a) (1) and (2) and appropriate Storepersons.

(b) Provided that the cost of each such policy is no more than 1.4% (inclusive of GST and stamp duty) of the Employee’s gross earnings.

(c) During the period for which an Employee is in receipt of income protection insurance payments, the Employee shall not be entitled to any other accruals or payments under this Agreement.”

[10] The CEPU’s contention in this matter is encapsulated within the determination it seeks from the Commission;

“Upon the proper construction of clause 19 of the Kentz Agreement, unless otherwise "approved" by the parties to the agreement, the employer must take out income protection insurance with Energy Super Income Insurance for electrical and instrumentation employees who are members of SPEC Super.” 3

[11] The further context of the CEPU’s submissions on the matter are that it seeks a finding that clause 19 is to be interpreted in such a manner that, once an employee is a member of SPEC Super for superannuation purposes, then it follows that Kentz will make income protection insurance arrangements for the employee through Energy Super Income Insurance, apparently also known as ESP.

[12] Instead of making income protection insurance arrangements through ESP, Kentz have made arrangements through its insurance brokers, Marsh Pty Ltd, with the policy itself being underwritten through Lloyds of London.

[13] There is a contest between the parties not only about the interpretation of the clause, and whether Kentz’s arrangements are compliant, even in broad concept, but also whether the policy taken out by Kentz is a sufficient policy. The CEPU contend that the policy taken out by Kentz is inferior to that offered by ESP. 4

Jurisdiction

[14] Kentz also disputed the jurisdiction of the Commission to deal with the dispute alleged by the CEPU, with it being contended that finalisation of the dispute would require the purported exercise of judicial power, which plainly the Commission does not have.

[15] In this respect, Kentz initially argued that the CEPU’s proposed determination refers only to employees who are members of SPEC Super, now known as Energy Super, and that none of the six employees to be terminated on 6 February 2016 are members of that fund. It argued that for the Commission to proceed would be the impermissible exercise of judicial power. However, in the course of the hearing on 1 February 2016, it conceded that one employee was a member of Energy Super, and that it no longer relied upon its initial jurisdictional objection.

[16] The second limb of Kentz’s jurisdictional argument was that once the employment of the current employees ends, no later than 6 February 2016, it will not be employing any new employees who will be covered by the Agreement, 5 and at that point, if the Commission had not determined the dispute, the Commission would cease to have jurisdiction to hear the matter. Such eventuality would be whether or not the Commission had finished hearing the matter.

[17] While drawing my attention to the evidence of Ms Divilly that the current employees would finish their employment with Kentz on 6 February 2016, and a submission to the effect that “[t]he Respondent will not be employing any new employees to be covered by the Agreement”, 6 the Respondent brought forward no evidence that it would not again employ under the Agreement during its term.

[18] Its submissions in relation to the jurisdiction of the Commission include the following, making reference to the decisions of the High Court in the matters of Construction, Forestry, Mining and Energy Union v Australian Industrial Relations Commission [2001] HCA 16, [34] and R v Kirby; Ex Parte Boilermakers' Society of Australia (1956) 94 CLR 254;

“11. The Commission cannot determine disputes where the only outcome is the determination of past rights and obligations due to the Constitutional limitations on the Fair Work Commission.

12. As the Employees are not members of SPEC Super and there are no future employees to be covered by the Agreement, it follows that there are no future rights to be determined.

13. Any determination of the Commission under section 739 will be an exercise of powers solely in relation to past rights.

14. What in substance and effect the Applicant seeks is a determination that the Respondent had breached the Agreement in respect of former employees who were members of Energy Super.

15. In substance, this is a section 50 of the Act proceeding.

16. As set out in section 539 of the Act, that is a matter for a court.” 7(original emphasis)

[19] For the purposes of context, s.50 of the FW Act sets out that a person must not contravene a term of an enterprise agreement, and s.539 provides who may make an application for orders in relation to contraventions of civil remedy provisions, and the Court to which such application may be made.

[20] Notwithstanding the date of publication of this decision, I do not find in favour of the Respondent’s jurisdictional argument, and instead find that the Commission has jurisdiction, arising from the dispute resolution procedure of the Agreement to hear and determine the dispute.

[21] The Full Bench in ING Administration Pty Ltd v Jajoo 8 dealt with an application in which an employee, Mr Jajoo, raised with ING the question of whether or not his position had become redundant with the potential obligation that the Respondent pay him a severance payment pursuant to a certified agreement. Prior to resolution of the matter, Mr Jajoo’s employment was terminated.

[22] The Full Bench considered the question of whether s.170LW of the then operating Workplace Relations Act 1996, which at the relevant time provided the following;

“Section 170LW Procedures for Preventing and Settling Disputes

170LW Procedures in a certified agreement for preventing and settling disputes between the employer and employees whose employment will be subject to the agreement may, if the Commission so approves, empower the Commission to do either or both of the following:

(a) to settle disputes over the application of the agreement;

(b) to appoint a board of reference as described in section 131 for the purpose of settling such disputes.” 9

[23] The Full Bench, in majority, per Watson VP and Cargill C, held the following about the capacity of the Commission to deal with the dispute, even though Mr Jajoo was no longer an employee of ING;

“[34] For present purposes, we are concerned with the question of whether the terms of s 170LW, which enables parties to empower the Commission to settle disputes over the application of an agreement, limit the power able to be conferred by the parties to disputes between a current employee and an employer. In other words, is there a limitation in s 170LW such as would deprive an ex-employee of the ability to initiate, or progress, a dispute after the termination of his or her employment? We will return to arguments relating to the terms of the Agreement later in this decision.

[35] While it is undoubtedly true that parties to a certified agreement cannot confer powers on the Commission to deal with disputes which are not “over the application of the agreement,” the question is whether there is a further limitation on the nature of powers that can be conferred on the Commission, to the effect that the parties to a certified agreement are unable to confer powers on the Commission to settle disputes over the application of the agreement, when an employee has ceased to be employed by the relevant employer.” 10

[24] After considering the import of the words within s.170LW regarding procedures for the prevention and settlement of disputes for “employees whose employment will be subject to the agreement” and the wording of relevant parts of the Explanatory Memorandum, the majority accepted that a single person dispute which arises for the first time after the termination of employment is not a dispute between an employer and an employee, but that disputes arising while employment exists and continuing after employment had ended will be a dispute between an employer and employee. 11 The majority then gave consideration to the dispute resolution term of the certified agreement, holding that an employee under the agreement was not disqualified from referring the matter to the then Australian Industrial Relations Commission for conciliation and/or arbitration;

“We do not believe that the words of the Agreement suggest that an employee is disqualified from activating sub-clause (d) if the employment is terminated. Further, we believe that it would be highly artificial to suggest that the parties to the Agreement intended, when making the Agreement, that an employee’s ability to progress a dispute under the procedure would come to an end when he or she ceased to be an employee. Such an interpretation would mean that even a dispute which progresses to a full hearing and a reserved decision of the Commission, would be incapable of finalisation in the event of termination of employment. We see no basis to find that an employee who commences step 4 while still employed can follow that step through to the end regardless of termination, yet an employee who does not reach step 4 while still employed is precluded from accessing the final step in the process. If such serious consequences were intended, it would reasonably be expected that a clearer limitation would be written into the Agreement by the parties.” 12

[25] In the same decision, Acton SDP considered that a former employee was not able to refer a dispute to the Commission. 13

[26] In the matter of CEPU v CDJV Construction Pty Ltd, 14 Richards SDP declined jurisdiction in a dispute notified over whether the Respondent had complied with its obligations arising under an enterprise agreement in relation to termination payments. In the matter before him, Richards SDP was faced with a circumstance in which CDJV, a joint venture named “Clough Downer Joint Venture”, no longer employed any employees covered by the agreement and that it did not intend to do so in the future for the reason it had concluded its scope of work.15 In reference to the Commission’s power of private arbitration; Richards SDP found the following;

“[47] The Commission is not restricted as it might be in exercising arbitral powers when it is exercising powers that arise from an agreement between the relevant parties to submit their disputes as to their legal rights and liabilities for resolution to the Commission (by way of a dispute resolution procedure under an agreement). This is because the Commission in so doing is exercising a power of private arbitration, vested in it by the parties' agreement, and is not otherwise requiring the parties to submit to binding procedures and enforceable outcomes in relation to the determination of legal rights and liabilities (as might a court).

[48] This, in effect, was a consequential finding of the judgment of the High Court in Construction Forestry Mining and Energy Union v Australian Industrial Relations Commission [2001] HCA 16; 203 CLR 645 (15 March 2001) ("Re: CFMEU") (discussed further below).

[49] But this is not to say that the private arbitration power so vested in the Commission is without limitation either by its own terms (by qualifying the scope of the power in some manner) or in a more fundamental, constitutional sense.

[50] In this particular situation before me, no employees are currently employed and there can be no employees employed under the Agreement in the future either. The Agreement cannot any longer employ any persons in relation to the scope of works or in the classifications to perform such work; the Agreement no longer applies to any employee under its own terms, and cannot do so in the future.

[51] Indeed, the employer as it was cannot carry out any scope of works on any sites as the scope of works is completed and the relevant sites have been handed back to the owner. The employer's business has concluded, and it cannot employ anyone else for the purposes of the Agreement, which have been fulfilled.” 16

[27] Further, in discussing the question of the exercise of judicial power, His Honour held he would be acting beyond power if he moved to determine the dispute, for this reason;

“[61] In essence then, an arbitral outcome in the context of this particular dispute, regardless of the origin of the dispute settling power itself, would amount to a determination or declaration as to whether in respect of past employees there had been a contravention for the purposes of Part 4-1 of the Act in relation to an enterprise agreement and the National Employment Standards, which unequivocally is a judicial function. This is so for the purposes of dispute set out above, and in respect of any other asserted breaches of the Agreement.” 17

[28] The situation faced by the Commission in CEPU v CDJV is significantly different to the factual make-up of the matter before me. There are persons employed by Kentz now. They commenced their dispute, through their union, with an application to the Commission on 11 November 2015. While there are submissions on the subject, there is no evidence that Kentz will not employ again under the Agreement during the remainder of its term.

[29] Such situation is plainly distinguishable from the circumstance faced by the Commission in CEPU v CDJV and the Commission’s reasoning is also plainly distinguishable from that of the majority in ING Administration Pty Ltd v Jajoo and it follows there is no lack of comity between the reasoning of the two decisions. There is also then no reason to not apply the ING reasoning.

[30] I therefore find there is jurisdiction for the Commission as presently constituted to hear and determine the dispute as notified by the CEPU.

Construction of the Agreement

[31] Interpretation of enterprise agreements requires construction of the words of the instrument, with the Full Bench in AMIEU v Golden Cockerel Pty Ltd 18 (Golden Cockerel), setting out the principles for such task. In that matter, and after an extensive analysis of the subject, the Full Bench summarised the principles to be applied in the following way;

“[41] From the foregoing, the following principles may be distilled:

1. The AI Act 19 does not apply to the construction of an enterprise agreement made under the Act.

2. In construing an enterprise agreement it is first necessary to determine whether an agreement has a plain meaning or contains an ambiguity.

3. Regard may be had to evidence of surrounding circumstances to assist in determining whether an ambiguity exists.

4. If the agreement has a plain meaning, evidence of the surrounding circumstances will not be admitted to contradict the plain language of the agreement.

5. If the language of the agreement is ambiguous or susceptible to more than one meaning then evidence of the surrounding circumstance will be admissible to aide the interpretation of the agreement.

6. Admissible evidence of the surrounding circumstances is evidence of the objective framework of fact and will include:

(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;

(c) evidence of matters in common contemplation and constituting a common assumption.

7. The resolution of a disputed construction of an agreement will turn on the language of the Agreement understood having regard to its context and purpose.

8. Context might appear from:

(a) the text of the agreement viewed as a whole;

(b) the disputed provision’s place and arrangement in the agreement;

(c) the legislative context under which the agreement was made and in which it operates.

9. Where the common intention of the parties is sought to be identified, regard is not to be had to the subjective intentions or expectations of the parties. A common intention is identified objectively, that is by reference to that which a reasonable person would understand by the language the parties have used to express their agreement.

10. The task of interpreting an agreement does not involve rewriting the agreement to achieve what might be regarded as a fair or just outcome. The task is always one of interpreting the agreement produced by parties.

Submissions

[32] As referred to above, the CEPU contends that Kentz must take out income protection insurance with Energy Super Income Insurance for electrical and instrumentation employees who are members of SPEC Super. This submission arises from the union’s construction of the phrase within clause 19(a) requiring that Kentz take out income protection insurance “with an approved insurer”, with it being argued that “approved” means an insurer agreed between the parties to the Agreement. In particular, the CEPU argued the following about the use of the word “approved” within the phrase referred to;

“12. The agreement does not provide a definition of an "approved insurer". On that basis, and in accordance with the principles set out above, the words must be given their natural meaning.

13. The question is "Who approves the insurer?"

14. The answer, in the Union's submission is that, given the agreement is made between the parties, any approval would have to be by those parties. Were it otherwise, the parties to the agreement would have included the necessary words.” 20

[33] The effect of the CEPU’s submissions on the matter and its proposed determination from the Commission is that it seeks a finding that clause 19 is to be interpreted in such a manner that, once an employee is a member of SPEC Super for superannuation purposes, then it follows that Kentz will make income protection insurance arrangements for the employee through Energy Super Income Insurance.

[34] Evidence was received in this matter on behalf of the CEPU from Peter Ong, CEPU Assistant Secretary; David Hayes, a CEPU Union Delegate; and Murray Bell, Fund Services Manager, Energy Super.

[35] Mr Ong’s evidence relates to negotiation of the Agreement. Mr Hayes’ evidence relates to his experience with the Ichthys Project generally and to the matter of income protection after being employed by Kentz. Mr Bell’s evidence relates to differences between the ESP income protection arrangements and those put in place by Kentz.

[36] Mr Ong gave evidence that he was involved in the negotiations that led to a framework greenfields agreement that would be used for all work on the Ichthys project, and that which led to the formation of the Agreement in question in this dispute. 21 I take from this evidence several considerations that are evidently Mr Ong’s understanding of the workings of the clause;

• He agreed with JKC, the Ichthys Project Owner, and with whom he negotiated the framework greenfields agreement that led to the Kentz Agreement, that employees who were members of SPEC (Energy) Super would have their income protection insurance premiums paid to ESP; 22



• He understood in the course of negotiations directly with Kentz that its representatives agreed on behalf of the Respondent, prior to finalisation of the Agreement, that Kentz Australia would pay income insurance to ESP; 23 and



• There were no discussions with Kentz of a different income insurance policy provider. 24

[37] Kentz’s submissions include that instead of making income protection insurance arrangements through ESP or one of the two other insurers referred to within the body of clause 19(a), Kentz have made arrangements through its insurance brokers, Marsh Pty Ltd, with the policy itself being provided by Corporate Services Network and underwritten by Lloyds of London. 25

[38] It bases this decision on its view that an “approved insurer” is one approved by the insurance regulatory authorities;

“27. The Respondent submits the plain meaning of approved in Clause 19 is that the insurer is approved by the appropriate regulatory authority to provide insurance services within Australia.

28. This is supported by the Macquarie Dictionary which sets out the definition of approved as "to confirm or sanction officially."

29. The Respondent submits that there is no ambiguity as to the plain meaning of approved.” 26

[39] Kentz elaborate that such approval is by the Australian Prudential Regulatory Authority (APRA) under the Insurance Act 1973 (Cth) (the Insurance Act);

“36. The insurer is required to apply to the Australian Prudential Regulatory Authority (APRA) for authorisation to operate as an insurer. APRA makes the decision as to whether it will refuse or authorise an application.” 27 (references omitted)

[40] Kentz submit about the overall scheme of the insurance legislation and the Agreement, that the term “approved insurer” has a plain meaning;

“37. Given this legislative context, the plain meaning of approved is that the insurer is approved by the APRA to provide income protection insurance.

38. This is supported by the dictionary definition of approved which states that approved is to be "confirmed or sanctioned officially."

39. While there is no definition in the Agreement as to "approved", it is clear from the context in which "approved" is used elsewhere in the Agreement that it applies to official sanction or ratification.” 28

[41] In relation to this last point, Kentz point to four other clauses in the Agreement that use the term “approved”;

• Clause 5 which specifies the Agreement operates on and from 7 days after the date on which it is approved by Fair Work Australia;



• Clause 7.5(a) which refers to an “Approved Worker Entitlement Fund”, for the purposes of Redundancy entitlements and which Kentz submits means an entitlement fund approved by the Australian Tax Office;



• Clause 20(a), which requires certain personal protective equipment to be provided to employees, and in particular “approved issue” safety footwear and safety glasses, which Kentz submits is a reference to equipment approved by Standards Australia; and



• Appendix 1, clause (e)(3)(iii), which refers to certain training courses being deemed to be prescribed post-trade courses including an industrial electronics training course approved by the Education Department of Victoria. 29

[42] Kentz make reference to s.12 of the Insurance Act, which is a section that enables APRA to receive applications from bodies corporate “for an authorisation to carry on insurance business in Australia”; to “set criteria for the authorisation of a body corporate to carry on insurance business in Australia”; and to “authorise an applicant to carry on insurance business in Australia.” If it authorises an applicant, APRA must give written notice of its decision and must publish the notice in the Gazette. APRA may impose conditions upon an authorisation; an authorised insurer who breaches conditions may be subject to penalty, and APRA may, in certain circumstances, revoke an authorisation. 30

[43] Kentz argue that when the Agreement uses the term “approved insurer” it means one authorised by APRA under the Insurance Act.

[44] Kentz also submitted that if the CEPU interpretation is correct – that the policy to be used must be agreed between the parties to the Agreement – then it is foreseeable that agreement may not be reached and that employees may be left without insurance coverage, despite it being a requirement of the Agreement. 31 Kentz also see that adoption of the CEPU’s interpretation would lead to employees having a choice about which insurer should insure them, when that purpose is not within clause 19.32

[45] The Respondent provided evidence from two people, Ann Divilly, the Kentz Regional Finance Director, and Ross Bethell, a Managing Principal of Marsh Pty Ltd. Ms Divilly’s evidence relates to the process by which Kentz decided upon its choice for income protection insurer, and Mr Bethell’s evidence relates to analysis undertaken by his firm and advice given by the firm to Kentz about the ESP insurance offering and that adopted by Kentz.

[46] In addition to the question of the meaning of the phrase “approved insurer”, there is also a contest between the parties about whether the policy taken out by Kentz is a sufficient policy. The CEPU contend that the policy taken out by Kentz is inferior to that offered by ESP, 33 including in relation to the continuation of insurance coverage after completion of the project,34 which it argues is important to its members who move from job to job. Kentz argue that the policy they have taken out is similar to the ESP policy, providing an adequate level of cover for employees,35 and that it is the only policy to meet the requirement in clause 19(b) that the cost of the income protection insurance policy is no more than 1.4% (inclusive of GST and stamp duty) of an employee’s gross earnings.36

Consideration

[47] I turn now to the proper construction of the Agreement, and in doing so will refer to and follow the Golden Cockerel principles.

1. The AI Act does not apply to the construction of an enterprise agreement made under the Act.

[48] It has not been contended that the Acts Interpretation Act 1901 should apply, and I have not had regard to its provisions in my decision.

2. In construing an enterprise agreement it is first necessary to determine whether an agreement has a plain meaning or contains an ambiguity.

[49] The phrase in dispute is within Clause 19(a), which I consider has a plain meaning and does not contain an ambiguity. In forming that view, I consider that the construction of clause 19(a) is not affected by the terms of clauses 19(b) or (c), and neither do I consider the meaning of clause 19(a) to affect the interpretation of either clause 19(b) or (c).

[50] The first part of Clause 19(a) provides that Kentz will take out income protection insurance for its employees, with the insurance to be of a certain standard, namely coverage “for any period of absence on leave without pay for illness, accident or injury”. Kentz’s obligation to do so is conditioned by the factual question of whether the insurance “remains available”, presumably meaning it being available in the marketplace. There is no dispute before me on those parts of the clause.

[51] Instead, the dispute is over which insurer the insurance is to be taken out with.

[52] A careful analysis of the whole of clause 19(a) shows that regard has to be had to the whole of the term, and not merely to the phrase “approved insurer”. Such analysis shows the term “approved insurer” to have adjectival effect, and that the operative part of the term are the words that follow, both immediately and in the 3 paragraphs that follow. The operative words that follow are “such as”, which cannot be removed either from the words that follow or the words that precede.

[53] Having regard to the full term leads to the conclusion that the plain meaning of the clause is to require Kentz to make income protection arrangements “with an approved insurer such as” one of the entities named in each of paragraphs 19(a) (1), (2) and (3). The term “such as” plainly makes clause 19(a) a non-restrictive clause, with the Macquarie Dictionary giving meaning to the term as either “of the kind specified” or “for example”. 37

[54] The plain meaning of the disputed term is evident. While non-restrictive, the obligation on Kentz is as follows;

• In the case of electrical and instrumentation employees, as well as Storepersons who are members of SPEC Super, insurance is to be taken out with ESP (a division of SPEC Super) or Australian Income Protection Pty Ltd.



• In the case of mechanical and fabrication employees, non-destructive testing employees and Storepersons who are not members of SPEC Super, insurance is to be taken out with Wage Guard.



• In the case of all other classifications within the scope of the classification structure, insurance is to be taken out with Chiefly or Construction Income Protection Queensland.

[55] Unlike other parts of the Agreement, there is no specific remit within clause 19(a) to allow for an insurer to be determined by some process external to the Agreement. While use of the term “such as” in the clause shows it plainly contemplates something other than one of the entities named in each of paragraphs 19(a) (1), (2) and (3), there is no reference to a decision making process external to the Agreement. While Kentz have made the submission that a consequence of the CEPU’s position that alternatives to one of the listed insurers might be that there was no agreement reached on the subject, that does not pre-dispose of the subject, or negate the possibility. It was the parties who contemplated a non-restrictive list, and the parties who formed the consultation and dispute resolution procedures agreed within the Agreement. Those clauses may, or may not, provide an answer to the proposition raised by Kentz – that agreement on an alternative insurer may not be reached.

[56] Since I have not had argument or evidence about what would happen in the event that a party desired an insurer other than one contemplated in the non-restrictive list, it is not proper that I determine the subject. However, it is foreseeable that in such a case the parties might form a consensus that a further insurer can be used and that to do so would not breach the Agreement; alternatively they might take the view that, even in the face of consensus a variation to the Agreement under the FW Act was either prudent or necessary. Such avenues are plainly available.

[57] It is also possible that, in the absence of consensus about either the use of a further insurer or how such could be done, that a party choose to advance their cause through the dispute resolution clause. Again, I have not heard argument on such possibility and so have not expressed a view on the subject, save to say that such possibility may well exist.

3. Regard may be had to evidence of surrounding circumstances to assist in determining whether an ambiguity exists.

[58] The evidence of surrounding circumstances which I have available to me in forming my view about whether the disputed term contains an ambiguity is that of Mr Ong, which goes to his understanding of the negotiations that led to the Agreement. While Mr Ong’s evidence on the subject of his understanding of the formation of the Agreement was not disputed, it is, however, his subjective understanding of those matters, and so is not to be relied upon by me in determining whether an ambiguity exists. I therefore do not have regard to his evidence on that question.

4. If the agreement has a plain meaning, evidence of the surrounding circumstances will not be admitted to contradict the plain language of the agreement.

5. If the language of the agreement is ambiguous or susceptible to more than one meaning then evidence of the surrounding circumstance will be admissible to aide the interpretation of the agreement.

6. Admissible evidence of the surrounding circumstances is evidence of the objective framework of fact and will include:

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;
c. evidence of matters in common contemplation and constituting a common assumption.

[59] The language of the Agreement is not ambiguous or susceptible to more than one meaning. Consequently, the Commission, as presently constituted, has not had regard to evidence of the surrounding circumstance to assist it in the interpretation of the Agreement.

[60] In any event, I note that even if I had formed the view that the disputed clause contained an ambiguity, I would not have before me admissible evidence of the surrounding circumstances. The evidence of prior negotiations received from Mr Ong are his subjective analysis of what occurred. No corroborative or contemporaneous documents were submitted that would be objective background facts known to all parties. Further, I note that even if it were to be accepted by me that the Insurance Act is contextual knowledge which is to be presumed by the parties, that Act refers not to insurance companies being “approved” by APRA, but rather to them being “authorised”. That circumstance would leave me unable to accept that the legislative construct of the Insurance Act could be evidence of the surrounding circumstances in common assumption. To have formed such a view on the state of the evidence available to me would be unlikely.

7. The resolution of a disputed construction of an agreement will turn on the language of the Agreement understood having regard to its context and purpose.

8. Context might appear from:

a. the text of the agreement viewed as a whole;
b. the disputed provision’s place and arrangement in the agreement;
c. the legislative context under which the agreement was made and in which it operates.

[61] Because I have not found an ambiguity, this principle is not relevant to my decision.

9. Where the common intention of the parties is sought to be identified, regard is not to be had to the subjective intentions or expectations of the parties. A common intention is identified objectively, that is by reference to that which a reasonable person would understand by the language the parties have used to express their agreement.

[62] I have not had regard to the subjective intentions or expectations of the parties.

10. The task of interpreting an agreement does not involve rewriting the agreement to achieve what might be regarded as a fair or just outcome. The task is always one of interpreting the agreement produced by parties.

[63] I have not undertaken any rewriting of the Agreement in making my decision in this matter. Instead, I have interpreted the Agreement produced by the parties and which contained the agreed term found in clause 19(a).

[64] As a result of the foregoing, I find as follows;

• The plain meaning of clause 19(a) requires Kentz to make income protection arrangements with an approved insurer such as one of the entities named in each of paragraphs 19(a) (1), (2) and (3). That list is non-restrictive.



• Which of the named insurers listed in paragraphs 19(a) (1), (2) and (3) that is to be engaged by Kentz will depend on the classification of the persons it employs, with each paragraph plainly specifying which fund applies in each case.



• There is insufficient material before me for me to express a concluded view about what a party may be required to do if it desires to depart from one of the named insurers listed in paragraphs 19(a) (1), (2) and (3).

COMMISSIONER

Appearances:

Mr C Massy (of Counsel) and Ms P Rogers for the CEPU

Mr T Smetana (solicitor, HLS Legal) for Kentz (Australia) Pty Ltd

Hearing details:

2016.

Melbourne (video link to Perth, Darwin, Brisbane).

1 February.

 1   Exhibit CEPU 3, Witness Statement of Peter Ong, [11].

 2   Exhibit Kentz 1, Witness Statement of Ann Mary Divilly, [12].

 3   Exhibit CEPU 2, CEPU Outline of Submissions, [28].

 4 Ibid [27].

 5 Exhibit Kentz 3, Kentz Outline of Submissions, [8]-[10].

 6 Ibid [10].

 7   Ibid [11]-[16].

 8   Print PR974301, (2006) 158 IR 239.

 9 Ibid, at [10].

 10   Ibid, at [34]–[35].

 11 Ibid, at [38].

 12 Ibid, at [55].

 13 Ibid, at [74].

 14   [2014] FWC 7970.

 15   Ibid, at [39]–[41].

 16   Ibid, at [47]–[51].

 17 Ibid, at [61].

 18   [2014] FWCFB 7447.

 19   the Acts Interpretation Act 1901 (Cth)

 20   Exhibit CEPU 2 [12]-[14].

 21   Exhibit CEPU 3 [8], [20]-[23].

 22 Ibid [15].

 23 Ibid [18].

 24 Ibid [22].

 25 Exhibit Kentz 1 [9].

 26   Exhibit Kentz 3 [27]-[29].

 27 Ibid [36].

 28   Ibid [37]-[39].

 29 Ibid [40].

 30   Insurance Act 1973 (Cth), ss 13–16.

 31   Exhibit Kentz 3 [60]-[67].

 32 Ibid [68].

 33 Exhibit CEPU 2 [27].

 34   Exhibit CEPU 4, Witness Statement of Murray Bell, Attachment MB-3.

 35 Exhibit Kentz 1 [48].

 36   Exhibit Kentz 3 [71]-[73].

 37   Macquarie Dictionary (Macquarie Dictionary Publishers Pty Ltd, 5th edn, 2009) 1644.

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