Construction, Forestry, Maritime, Mining and Energy Union v Illawarra Coal Holdings Pty Ltd T/A South32

[2021] FWC 1193

[2021] FWC 1193

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.739—Dispute resolution

Construction, Forestry, Maritime, Mining and Energy Union
v
Illawarra Coal Holdings Pty Ltd T/A South32
(C2020/8565)

COMMISSIONER RIORDAN SYDNEY, 8 APRIL 2021

Alleged dispute about any matters arising under the enterprise agreement and the NES;[s186(6)].

[1] On 24 November 2020, the Construction, Forestry, Maritime, Mining and Energy Union (the Applicant) filed with the Fair Work Commission (the Commission) an application (the Application) relating to the Dendrobium Mine Enterprise Agreement 2018 (the Agreement), pursuant to section 739 of the Fair Work Act (Cth) 2009 (the Act).

[2] Illawarra Coal Holdings Pty Ltd trading as South 32 (the Respondent) were named by the Application as the respondent.

[3] Appendix 3 of the Agreement outlines the particulars of the incentive scheme to be paid to employees of the Respondent working at its Dendrobium Mine (the Mine). The incentive scheme is paid fortnightly and calculated with reference to two performance targets, where satisfaction of a target triggers payment of a set amount. Further, the incentive scheme contains a guarantee by which eligible employees of the Respondent working at the Mine are to be paid a top up payment (the Top Up Payment) at the end of the financial year if the incentive scheme payments do not amount to $7200. The dispute raised by the Applicant concerns whether the minimum Top Up Payment of $7200 is payable to an employee of the Respondent that has commenced work at the Mine within the financial year (a New Starter).

[4] The disputed passage in Appendix 3 of the Agreement (the Disputed Passage) is highlighted below:

“Appendix 3 - Incentive Scheme

The Incentive Scheme will recognise business outcomes that achieve budget and stretch performance and contribute to the long-term success of Dendrobium Mine.

An incentive payment will be available to Employees based on development metres and gate road pillar cycle durations.

If during the financial year there is a major change or significant event (e.g. Global Financial Crisis, Unexpected Mining Conditions) that changes the business outcomes the Company may adjust the measures to meet revised performance outcomes, following consultation in accordance with Clause 3.5.

Employees will be eligible to receive $7200 annually with the opportunity to earn greater based on performance against the components of the scheme. If at the end of each financial year the amount of $7,200 incentive has not be paid, then the difference will be paid as a lump sum in the first full pay period in the new financial year.

Component 1 - Development Metres

An incentive payment will be based on all development metres achieved in a week. Incentive Scheme payments under this component will be paid on a fortnightly basis.

The rates from the commencement of the Agreement are:

Weekly Metres Threshold
0-200m	> 201m
$0.50	$1.50

The Weekly Metres Threshold will be reviewed each year and set to ensure that they are aligned with the business outcomes. The Company will advise Employees of the Weekly Metres Threshold that will be used during each following financial year once they have been signed off, generally in April/May of each year.

Component 2- Gateroad pillar cycle duration

Where pillar cycles are applicable and being achieved in 10 days or less, Component 2 of the incentive scheme will apply in place of Component 1 - i.e. they are not both paid.

The table below will apply for calculating an incentive payment.

Pillar Cycle	7 Days	8 Days	9 Days	10 Days
Single Continuous Miner	$420	$400	$380	$360
2 for 1	$390	$370	$350	$330
Twin Continuous Miner	$360	$340	$320	$300

The pillar cycle duration will be measured from commencement of production in a pillar until commencement of production in the next pillar- i.e. coal to coal, including drivage and panel advance/ belt move.

Incentive Scheme payments under Component 2 will be paid in the pay period following a completed pillar cycle. Where a payment has already been made for a given week under Component 1 of the incentive scheme and a pillar cycle is completed in that same week, the difference between the two amounts will be paid to Employees”

[5] It is uncontroversial that a clause like the Disputed Passage appeared in the Dendrobium Mine Enterprise Agreement 2010 (the 2010 Agreement) and the Dendrobium Mine Enterprise Agreement 2015 (the 2015 Agreement). It is also not in dispute that, since the commencement of the 2010 Agreement, the quantum of a New Starter’s Top Up Payment has been calculated on a prorated minimum based on time served at the Mine (the Current Practice).

[6] The Applicant submitted that the Respondent must pay a Top Up Payment to every employee within the meaning of the Agreement, including New Starters, that would ensure the minimum annual payment paid to an employee, under the incentive scheme, is equal to $7200.

[7] The Respondent submitted that the Current Practice is consistent with the correct construction of the Agreement which has been implemented and followed without question or complaint since its introduction in the 2010 Agreement.

A Brief Summary of the Applicant’s Submissions

[8] The Applicant submitted that the following facts were relevant to the Application:

a. Incentive scheme payments are paid fortnightly.

b. Incentive scheme payments are calculated by reference to key performance indicators for work undertaken by the development crews.

c. Incentive scheme payments are paid to employees that don’t work in the development crews.

d. Employees taking almost all forms of leave are paid incentive scheme payments.

e. The Respondent pays the Top Up Payment at the end of a financial year.

f. New Starter’s Top Up Payment are paid in accordance with the Current Practice.

[9] With respect to the correct construction of Appendix 3 of the Agreement, the Applicant submitted the following:

a. The Disputed Passage’s plain and ordinary meaning is that at the end of a financial year if an employee has not received $7200 in incentive payments then the difference of the amount they have received and $7200 will be paid to them in the first pay period of the following financial year.

b. The Disputed Passage’s purpose is to guarantee that each employee will receive a minimum of $7200 in incentive scheme income per year.

c. Employee is defined by clause 1 of the Agreement as a person(s) employed at the Dendrobium mine in the Classifications under Item 2 of Appendix 1 of this Agreement.

d. New Starters are Employees within the meaning of the Agreement and thus intitled to the full Top Up Payment.

e. The incentive scheme is not a true performance bonus as employees receive a minimum of $7200. Moreover, the performance-based elements of the scheme are based on work performed by development crews, but the bonus is paid to employees that work in other areas of the Mine.

f. Employees who are on long term leave receive incentive scheme payments.

A Brief Summary of the Respondent’s Submissions

[10] The Respondent submitted that the plain meaning of Appendix 3 of the Agreement supports the operation of the Current Practice. The Respondent highlighted the Disputed Passage states employees “will be eligible to receive $7200 annually with the opportunity to earn greater based on performance against the components of the scheme”. The Respondent claimed the inclusion of the words be eligible to supports a construction that a Top Up Payment of $7200 is not automatic. The Respondent submitted that the incentive scheme payments being paid fortnightly throughout the year indicates that the incentive scheme is performance based which requires the employee to be employment in the relevant fortnight to be “eligible for the payment.”

[11] The Respondent submitted that the context of Appendix 3 of the Agreement supports the Respondent’s construction permitting the Current Practice. The Respondent highlighted four contextual provisions that offered support to this assertion:

a. Appendix 1 states that the “concept of an Annualised Salary entails being paid for the job to be done rather than time at work.”

b. Clause 7.4 of the Agreement allows the Respondent to “withhold payment for any period where work is not performed by an Employee...”

c. Appendix 1 states that Permanent part time Employees “will receive a pro rata amount of the Base Salary, Work Pattern Allowance and Incentive Scheme…”

d. Appendix 1 states that Fixed Term Employees are not automatically entitled to incentive scheme payments.

[12] The Respondent submitted that the purpose of Appendix 3 of the Agreement supports the Respondent’s construction permitting the Current Practice. The Respondent emphasised the following:

a. Appendix 3’s express purpose is to “recognise business outcomes that archive budget and stretch performance and contribute to the long-term success of the Dendrobium Mine.”

b.The incentive scheme payments are calculated by reference to two performance-based metrics that are indicative of employee’s contribution to the Mine’s performance.

c. The incentive scheme payments are made to employees taking leave because leave is a statutorily protected entitlement of full-time employment.

d. The Applicant’s construction would result in an employee that had worked 1 day in a financial year and an employee when had worked 52 weeks in a financial year being paid equally under the incentive scheme, if the Top Up provision is excluded.

e. The cost associated with the Applicant’s construction would disincentivise the Respondent from hiring new employees towards the end of a financial year.

[13] The Respondent submitted that there are four admissible relevant surrounding circumstances that supports the Current Practice:

a. The Current Practice has been utilised under the 2010 Agreement, 2015 Agreement and the Agreement.

b. No employee has disputed the Current Practice in the years it has been implemented.

c. Prior to this dispute, the Applicant has not disputed the Current Practice in the years it has been implemented.

d. No bargaining representative has sought to alter the Current Practice while bargaining for either the 2015 Agreement and the Agreement.

A Summary of the Applicant’s Submissions in Reply

[14] The Applicant rejected the Respondent’s submission that the plain text of Appendix 3 supported the Respondent’s construction that the Agreement permitted the Current Practice. The Applicant agreed with the Respondent that the word eligible in the disputed passage indicated that the Top Up Payment was not automatic. The Applicant submitted that the word eligible was used to make clear that only Employees, as defined by Clause 1 of the Agreement, were to receive the payment. The Applicant claimed that a New Starter was an Employee within the meaning of the Agreement. Further, the Applicant rejected the Respondent’s contention that the frequency in which the incentive scheme is paid supports the conclusion that the scheme is performance based.

[15] The Applicant rejected the Respondent’s submission that the context of Appendix 3 supported the Respondent’s construction that the Agreement permitted the Current Practice. The Applicant alleged that the Respondent’s submission regarding the contextual considerations of Appendix 3 encouraged the Commission to find that the Agreement is internally consistent in the way it approaches the calculation of the Top Up Payment between different classes of employees. The Applicant claimed that such internal consistency cannot be presumed. The Applicant addressed each of the contextual examples given by the Respondent in the following:

a. The Applicant characterised the statement that the “concept of an Annualised Salary entails being paid for the job to be done rather than time at work” as a statement of aspiration rather than one of principle.

b. The Applicant claimed that clause 7.4 should not be deemed a relevant contextual consideration because it expressly referred to different and unrelated clauses of the Agreement.

c. The Applicant stated the fact that Appendix 1 states that Permanent part time Employees “will receive a pro rata amount of the Base Salary, Work Pattern Allowance and Incentive Scheme…” supports a conclusion that the Current Practice is inconsistent with the Agreement. The Applicant’s claim was based on the notion that if the Top Up Payment was to be calculated by reference to a prorated incentive scheme figure then it would have done so expressly.

d. Finally, the Applicant claimed that the Respondent’s observation that Fixed Term Employees are not automatically entitled to incentive scheme payments is not relevant.

[16] The Applicant rejected the Respondent’s submissions that the purpose of Appendix 3 supported the Respondent’s construction of the Agreement permitting the Current Practice. The Applicant claimed that it is not correct to characterise the incentive scheme as a performance-based bonus as the incentive scheme sets a minimum payment that must be paid irrespective of the performance of the workforce. The Applicant supported their contention that employees being paid incentive scheme payments while taking leave is indicative that the Current Practice is impermissible by pointing out that the Act does not require the Respondent to pay incentive scheme payments while an employee is taking leave. The Applicant characterised the fourth and fifth submission of the Respondent regarding purpose as attempts to determine the matter with reference to its result.

[17] The Applicant submitted that the jurisdictional bar before the Commission considered the surrounding circumstances was high. Further, the Applicant submitted that the facts relied on by the Respondent are not objective background facts and that they should be disregarded.

[18] The Applicant claimed that there was no evidence which established that there was a common understanding between the parties as to how the incentive scheme would apply to New Starters. Further, the Applicant alleged that there was no evidence that established that this issue was contemplated by the parties during negotiation. To this end, the Applicant relied on the obiter of Justice Gray in Australian Liquor. Hospitality and Miscellaneous Workers Union v Prestige Property Services Pty Ltd [2006] FCA 11, who held:

“… In order to have an understanding, it is necessary that there be a meeting of the minds, a consensus. There can be no meeting of minds, no consensus, if no-one has thought about the issue.” 1

Witness evidence of John Reynolds

[19] Mr Reynolds is employed by the Respondent as a Technician at the Dendrobium Mine.

[20] Mr Reynolds stated that incentive scheme payments are identified as a production bonus on his payslips. Further, Mr Reynolds claimed that all employees are paid an equal production bonus.

[21] Mr Reynolds stated that the incentive scheme payments are calculated by reference to development metres and gateroad pillar cycles.

[22] With respect to the total incentive scheme payments received by Mr Reynolds in the financial year ending 2019, Mr Reynolds stated:

“The total amount of production bonus that I received in the period from 5 April 2019 until 20 July 2019 was $1,944.48.

On 25 July 2019, I received a payment of $516.89, in addition to my usual wages and bonus etc for that particular fortnight. My payslip recorded that payment was in respect ‘’Bonus Top Up’’. I don’t know how that amount was calculated.

The total amount of production bonus that was paid to employees that worked the full financial year ending 30 June 2019 was less than $7,200. Such employees were paid an amount of $2,115.65 to top them up to $7,200.” 2

Witness evidence of Katherine Grant

[23] Ms Grant is the Respondent’s Human Resources Manager. Ms Grant was previously employed as the Human Resources Lead at the Dendrobium Mine.

[24] Ms Grant stated the following with respect to the Incentive Scheme:

“The purpose of the Incentive Scheme is to reward employees who are covered by the 2018 Agreement for their contribution to the outcomes of the business over the course of a full financial year and to drive their performance to meet and exceed business targets.

There are two components to the Incentive Scheme:

a) The first is development metres. This component calculates the incentive payment based on all development metres achieved in a week (with different rates payable for metres up to 200m, and in excess of 200m).

b) The second is gateroad pillar cycle duration. This is payable in place of the development metre component where pillar cycles are applicable and being achieved in 10 days or less.” 3

[25] Ms Grant stated the following with respect to the Current Practice:

“For as long as I have worked for South32, I recall that the Top Up Payment has been prorated for employees who were not employed for the full financial year. The Incentive Scheme operates on a pro rata basis because it rewards employees’ contribution to the outcomes of the business over the course of a financial year. Where an employee has been employed for less than a full financial year, they have contributed to the outcomes of the business on a proportionate basis. Put simply, if an employee is not employed for a portion of the year, they have not contributed to the outcomes of the business for that same portion.” 4

[26] Ms Grant claimed that, from her investigations, there is a common understanding between the parties on the basis that the incentive scheme operated in basically the same manner under the 2010 Agreement and the 2015 Agreement.

[27] Ms Grant submitted that the Applicant did not seek to alter the Current Practice whilst bargaining for either the 2015 Agreement or the Agreement.

Witness evidence of Ben Patten

[28] Mr Patten is the Production Manager at the Dendrobium mine. He is responsible for managing the production personnel.

[29] Mr Patten’s evidence regarding the intention of the incentive scheme was that it incentivises employees to work together to achieve the Mine’s targets. Mr Patten understood that there are two components measured in the incentive scheme, the first of which is the number of development metres achieved in a week and the second being the duration of the gateroad pillar cycle. Mr Patten’s evidence was that these targets have the most impact on the mine’s overall performance. Mr Patten’s stated that the scheme was based on employees’ collective contribution toward business outcomes rather than individual performance.

[30] With regard to the history of the dispute, Mr Patten’s evidence was that he first became aware that there were questions raised regarding the incentive scheme in August 2020. Further, he became aware that the Applicant had raised a formal dispute in November 2020.

[31] Mr Patten stated that, in September and October 2020, he met with nine employees who were affected by the Current Practice in financial year 2019 and financial year 2020. In November 2020, he met with a further five employees who were employed for only part of financial year 2018 to financial year 2019 who were impacted by the Current Practice. Mr Patten’s evidence regarding these sessions was that at least two employees claimed they were unsure why there was a need to go through materials as they thought the application of the payment was clear. Further, none of the employees in those sessions raised any concerns in relation the Current Practice. Mr Patten stated that no other employee has raised any concerns regarding the issue with him.

Witness statement of Daniel Hopkins

[32] Mr Hopkins is the Lodge Vice-President at the Mine.

[33] Mr Hopkins gave evidence that there were several employees that had raised an issue with the Current Practice but were hesitant to voice their concerns directly to the Respondent.

Jurisprudence

[34] Whilst the courts have recently reinforced the relevant principles that a Court and Tribunal should follow when interpreting enterprise agreements, the most concise and comprehensive decision which collated all of the historical precedent was the Commission’s Full Bench decision in Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union’ known as the Australian Manufacturing Workers Union (AMWU) v Berri Pty Limited(Berri)[2017] FWCFB 3005. Relevantly, in Berri the Full Bench enunciated 15 principles:

“[114] The principles relevant to the task of construing a single enterprise agreement may be summarised as follows:

1. 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. The resolution of a disputed construction of an agreement will turn on the language of the agreement having regard to its context and purpose. Context might appear from:

i. the text of the agreement viewed as a whole;

ii. the disputed provision’s place and arrangement in the agreement;

iii. the legislative context under which the agreement was made and in which it operates.

2. 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.

3. The common intention of the parties is sought to be 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, without regard to the subjective intentions or expectations of the parties.

4. The fact that the instrument being construed is an enterprise agreement made pursuant to Part 2-4 of the FW Act is itself an important contextual consideration. It may be inferred that such agreements are intended to establish binding obligations.

5. The FW Act does not speak in terms of the ‘parties’ to enterprise agreements made pursuant to Part 2-4 agreements, rather it refers to the persons and organisations who are ‘covered by’ such agreements. Relevantly s.172(2)(a) provides that an employer may make an enterprise agreement ‘with the employees who are employed at the time the agreement is made and who will be covered by the agreement’. Section 182(1) provides that an agreement is ‘made’ if the employees to be covered by the agreement ‘have been asked to approve the agreement and a majority of those employees who cast a valid vote approve the agreement’. This is so because an enterprise agreement is ‘made’ when a majority of the employees asked to approve the agreement cast a valid vote to approve the agreement.

6. Enterprise agreements are not instruments to which the Acts Interpretation Act 1901 (Cth) applies, however the modes of textual analysis developed in the general law may assist in the interpretation of enterprise agreements. An overly technical approach to interpretation should be avoided and consequently some general principles of statutory construction may have less force in the context of construing an enterprise agreement.

7. In construing an enterprise agreement it is first necessary to determine whether an agreement has a plain meaning or it is ambiguous or susceptible of more than one meaning.

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

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

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

11. The admissibility of evidence of the surrounding circumstances is limited to evidence tending to establish objective background facts which were known to both parties which inform and the subject matter of the agreement. Evidence of such objective facts is to be distinguished from evidence of the subjective intentions of the parties, such as statements and actions of the parties which are reflective of their actual intentions and expectations.

12. Evidence of objective background facts will include:

i. 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;

ii. notorious facts of which knowledge is to be presumed; and

iii. evidence of matters in common contemplation and constituting a common assumption.

13. The diversity of interests involved in the negotiation and making of enterprise agreements (see point 4 above) warrants the adoption of a cautious approach to the admission and reliance upon the evidence of prior negotiations and the positions advanced during the negotiation process. Evidence as to what the employees covered by the agreement were told (either during the course of the negotiations or pursuant to s.180(5) of the FW Act) may be of more assistance than evidence of the bargaining positions taken by the employer or a bargaining representative during the negotiation of the agreement.

14. 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.

15. In the industrial context it has been accepted that, in some circumstances, subsequent conduct may be relevant to the interpretation of an industrial instrument. But such post-agreement conduct must be such as to show that there has been a meeting of minds, a consensus. Post-agreement conduct which amounts to little more than the absence of a complaint or common inadvertence is insufficient to establish a common understanding.”

[35] His Honour, Deputy President Sams in Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Ausgrid[2019] FWC 331, succinctly documented the relevant High Court and Federal Court of Australia decisions which resulted in the Full Bench collating the principles in Berri:

“[51] The ‘Berri Principles’ have as their foundation the long line of authority as to the approach to be applied by Courts, Commissions and Tribunals when called upon to interpret the words in an industrial instrument. Prior to the preponderance of certified agreements and enterprise agreements, this was invariably applied to Awards. Recent iterations of the legislative framework, necessitated a refinement of these principles; but some of the basic fundamentals remain. I refer to some of these cases to make good this proposition.

[52] As mentioned, the early well-known cases dealt with the construction of Awards. In City of Wanneroo v Australian Municipal, Administrative, Clerical and Services Union [2006] FCA 813; 153 IR 426 (‘City of Wanneroo’), French J said at 53:

‘53 The construction of an award, like that of a statute, begins with a consideration of the ordinary meaning of its words. As with the task of statutory construction regard must be paid to the context and purpose of the provision or expression being construed. Context may appear from the text of the instrument taken as a whole, its arrangement and the place in it of the provision under construction. It is not confined to the words of the relevant Act or instrument surrounding the expression to be construed. It may extend to ‘... the entire document of which it is a part or to other documents with which there is an association’. It may also include ‘... ideas that gave rise to an expression in a document from which it has been taken’ – Short v FW Hercus Pty Ltd [1993] FCA 51; (1993) 40 FCR 511 at 518 (Burchett J); Australian Municipal, Clerical and Services Union v Treasurer of the Commonwealth of Australia (1998) 80 IR 345 (Marshall J).’

[53] Then at paragraph 57, His Honour observed:

‘57 It is of course necessary, in the construction of an award, to remember, as a contextual consideration, that it is an award under consideration. Its words must not be interpreted in a vacuum divorced from industrial realities – City of Wanneroo v Holmes [1989] FCA 369; (1989) 30 IR 362 at 378-379 and cases there cited. There is a long tradition of generous construction over a strictly literal approach where industrial awards are concerned – see eg Geo A Bond and Co Ltd (in liq) v McKenzie [1929] AR 499 at 503-4 (Street J). It may be that this means no more than that courts and tribunals will not make too much of infelicitous expression in the drafting of an award nor be astute to discern absurdity or illogicality or apparent inconsistencies. But while fractured and illogical prose may be met by a generous and liberal approach to construction, I repeat what I said in City of Wanneroo v Holmes (at 380):

‘Awards, whether made by consent or otherwise, should make sense according to the basic conventions of the English language. They bind the parties on pain of pecuniary penalties.’’

[54] Madgwick J in Kucks v CSR Ltd [1996] IRCA 166 (‘Kucks’); (1996) 66 IR 182 opined that a narrow pedantic approach to interpretation should be avoided, a search of the evident purpose is permissible and meanings which avoid inconvenience or injustice may reasonably be strained for, but:

“... [T]he task remains one of interpreting a document produced by another or others. A court is not free to give effect to some anteriorly derived notion of what would be fair or just, regardless of what has been written into the award. Deciding what an existing award means is a process quite different from deciding, as an arbitral body does, what might fa rly be put into an award. So, for example, ordinary or well-understood words are in general to be accorded their ordinary or usual meaning.”

[55] As the legislative focus shifted towards agreement making, the same principles were recognised to apply to the interpretation of certified/enterprise agreements. In Amcor Limited v Construction, Forestry, Mining and Energy Union (2005) 222 CLR 241 (‘Amcor’), the High Court, Gummow, Hayne and Heydon JJ said:

“Clause 55.1.1 must be read in context. It is necessary, therefore, to have regard not only to the text of cl 55.1.1, but also to a number of other matters: first, the other provisions made by cl 55; secondly, the text and operation of the Agreement both as a whole and by reference to other particular provisions made by it; and, thirdly, the legislative background against which the Agreement was made and in which it was to operate.”

[56] In the same case, His Honour Kirby J said:

“However, certified agreements such as this commonly lack the precise drafting of legislation. As appears from a scrutiny of the provisions of the Agreement, it bears the common hallmarks of colloquial language and a measure of imprecision. Doubtless this is a result of the background of the drafters, the circumstances and possibly the urging of the preparation, the process of negotiation and the omission to hammer out every detail - including possibly because such an endeavour would endanger the accord necessary to consensus and certification by the Commission.

. . .

The nature of the document, the manner of its expression, the context in which it operated and the industrial purpose it served combine to suggest that the construction to be given to cl 55.1.1 should not be a strict one but one that contributes to a sensible industrial outcome such as should be attributed to the parties who negotiated and executed the Agreement. Approaching the interpretation of the clause in that way accords with the proper way, adopted by this Court, of interpreting industrial instruments and especially certified agreements. I agree with the following passage in the reasons of Madgwick J in Kucks v CSR Ltd, where his Honour observed:

‘It is trite that narrow or pedantic approaches to the interpretation of an award are misplaced. The search is for the meaning intended by the framer(s) of the document, bearing in mind that such framer(s) were likely of a practical bent of mind: they may well have been more concerned with expressing an intention in ways likely to have been understood in the context of the relevant industry and industrial relations environment than with legal niceties or jargon. Thus, for having regard to such context, despite mere inconsistencies or infelicities of expression which might tend to some other reading. And meanings which avoid inconvenience or injustice may reasonably be strained for. For reasons such as these, expressions which have been held in the case of other instruments to have been used to mean particular things may sensibly and properly be held to mean something else in the document at hand.’ [references omitted]”

[57] Again in Amcor, His Honour Callinan J said there was substance in the observations of Madgwick J in Kucks. His Honour then said:

“An industrial agreement has a number of purposes, to settle disputes, to anticipate and make provision for the resolution of future disputes, to ensure fair and just treatment of both employer and employees, and generally to promote harmony in the workplace. It is with the third of these that cl 55 of the Agreement is particularly concerned. It is important to keep in mind therefore the desirability of a construction, if it is reasonably available, that will operate fairly towards both parties.”

[58] In Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 (‘Codelfa’) Mason J, as he then was, (and with whom Stephen, Aickin and Wilson JJ agreed) said:

“The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. 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 parol 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.

Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which thecontract came into existence, and to the parties’ presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract.”

[59] The nature of the present task was emphasised by the Full Bench of the Commission in DP World Brisbane Pty Ltd v The Maritime Union of Australia [2013] FWCFB 8557 in the following terms:

‘[31] Importantly, the task of interpreting an enterprise agreement does not involve rewriting a provision in order to give effect to the Commission’s view of what would be fair and just, without regard to the terms of the agreement. As Madgwick J observed in Kucks v CSR Limited:

‘But the task remains one of interpreting a document produced by another or others. A court is not free to give effect to some anteriorly derived notion of what would be fair or just, regardless of what has been written into the award. Deciding what an existing award means is a process quite different from deciding, as an arbitral body does, what might fairly be put into an award. So, for example, ordinary or well-understood words are in general to be accorded their ordinary or usual meaning.’

[60] All of the above observations are consonant with the approach set out in Golden Cockerel and Berri as have been applied in numerous cases since ‘Berri’. In short, theCommission’s task here is to ascertain the objective intention of the contested words, basedupon the language and terms of the 2012 Agreement, when read as a whole, having regard totheir context and purpose.” 5

(My emphasis)

Consideration

[36] I have taken into account the parties’ submissions and the witnesses’ evidence. I note that none of the witnesses were required for cross examination.

[37] The term ‘eligible’ has ‘work to do’ in the Disputed Passage. The Applicant’s suggested reasoning that, in fact, would make the term redundant. If it was compulsory for every employee to receive a minimum annual Incentive Scheme payment of $7,200, then the only pre-requisite to receive the minimum payment would be to be an employee at June 30.

[38] In such a scenario, the phrase would simply read:

“Employees will receive a minimum of $7,200 annually to be paid in the first full pay period after the conclusion of the financial year”

The eligibility to the minimum bonus of $7200 would be automatic.

[39] It is also worth noting that the bonus is calculated and paid fortnightly based on the criteria. Therefore, the goal of $7,200 is a cumulative total. Employees make incremental steps towards the goal every fortnight. The Top Up Payment is only enlivened if the 26 incremental incentive payments do not add up to $7,200 by 30 June, resulting in the Top Up Payment being paid in the first full pay period in the new financial year. I am satisfied that there is a linkage between the 26 fortnightly payments and the minimum payment. This linkage identifies the eligibility to the minimum payment, ie, year-round employment.

[40] The whole basis of the bonus scheme adopts the principles of equity. Employees are not paid different amounts based on their classification or pay scale. Every fortnight, fulltime employees receive the same bonus payment. If the mine does not achieve the criteria to reach the $7,200 minimum payment in the financial year, then all of the full-time employees who have been employed for the duration of the financial year receive the same Top Up Payment to reach the $7,200 minimum. It would be incongruous for a new employee who may start on 29 June to be paid the $7,200 minimum payment. This means that they would be receiving a higher Top Up Payment figure than their colleagues. Such an outcome would destroy the “equitable for all” principle upon which the scheme is based.

[41] Relevantly, Appendix 1 of the Agreement, which deals with the salary components of employees covered by the Agreement, states:

“Employees classified as Technicians (Trainee), Technicians, Trade Technicians and Senior Technicians will be paid a remuneration package comprised of the following components:

1. Annual Base Salary

2. Work Pattern Allowance (Appendix 2)

3. Incentive Scheme Payment (Appendix 3)” 6

I note the Incentive Scheme Payment is apart of an employee’s renumeration package.

[42] The word “incentive” is defined in the Collins Dictionary as:

1. “A motivating influence; stimulus.

2. An additional payment made to employees as a means of increasing production.

3. Serving to incite action.” 7

(My emphasis)

[43] Clearly. a correlation exists between the incentive scheme payment and the employees’ remuneration. The ordinary meaning of the term incentive is therefore very relevant to the fundamental basis of the scheme. You must read Appendix 3 in its entirety to understand the meaning of the provision. I am in no doubt that the phrase ‘the amount of $7200 incentive’ in the fourth paragraph of Appendix 3 provides an additional link between the $7200 minimum payment and the incentive criteria. Component 1 and Component 2 of the criteria are mutually exclusive i.e. an employee receives a payment based on the higher amount but not both. The incentive payments are paid every fortnight for Component 1 and in the following pay period for Component 2. It is not possible to delineate that the 26 fortnightly incentive payments are not intrinsically connected to the $7,200 minimum incentive payment in the scheme.

[44] I am satisfied that there is a common understanding between the parties. The lack of industrial disputation between the parties in relation to this issue over the last two enterprise agreements is a relevant consideration. The Applicant is a progressive and dynamic industrial organisation with extremely competent leadership and representation. I do not accept that the Applicant’s leadership would not have raised the issue of pro rata payments as a concern during the negotiations for the Agreement if this prorated outcome was not a common understanding between the parties. I note that the Applicant was successful in negotiating amendments to Appendix 3 of the Agreement.

[45] I am satisfied that the objective background facts, identified by the evidence of Ms Grant, in relation to the early negations and the application of the Agreement, are in accordance with principle 12 of Berri.

Conclusion

[46] The first question to be determined is whether any ambiguity exists as a result of giving the words in Appendix 3 their ordinary meaning.

[47] The ambiguity is not self-evident to me at first review. Adopting the definition of incentive above, an incentive scheme is an attempt to have employees achieve greater than normal performance and productivity every fortnight and receive additional remuneration or reward over this period.

[48] If the employees are unable to reach the annual target on budget and performance, the Respondent has agreed to pay a minimum annual incentive payment of $7,200. However, the Applicant argued that there is no link between the incentive criteria, its corresponding fortnightly payments and the minimum Top Up Payment. There is an alternate opinion on the shop floor as to the meaning of the Disputed Passage. The appropriate minimum incentive payment for a New Starter is not mentioned in the Agreement. Therefore, I am prepared to accept that a difference of opinion exists between the parties and that the wording of Annexure 3 is susceptible to more than one meaning.

[49] Following the obiter of Kirby J in Amcor and in accordance with principles 2 and 3 of Berri, I am satisfied that the manner in which the Respondent has applied Appendix 3 over the last 10 years has been appropriate.

[50] Further, if an employee were to resign before June 30 and was replaced immediately by a new employee, then, based on the reasoning of the Applicant, the Respondent would have to pay the incentive scheme twice for the time served by the first employee. The first employee would have received his fortnightly bonus payments and the new employee would receive the minimum Top Up Payment of $7200. Such an outcome would not be fair to the Respondent.

[51] Additionally, I am satisfied that industrial harmony cannot be guaranteed, as identified by Callinan J in Amcor, if New Starters were to receive the same annual incentive scheme payment, ie. $7200, as those employees who have worked in the arduous work environment of a coal mine for the full 12 months. Such an outcome would not be fair to the existing long-term employees.

[52] I am satisfied and find that a reasonable person would understand and agree that an employee who was not employed for the full period applicable to an incentive bonus scheme would only receive a prorated amount of the incentive payment.

[53] I am satisfied and find that, based on the operation and activity of the Applicant, the Respondent and the employees over the preceding two agreements, there exists a common understanding that New Starters receive a prorated Top Up Payment based on their length of employment in the financial year.

[54] For the reasons articulated above, I find that the Respondent has been applying the Top Up Payment in accordance with the provisions of the Agreement.

[55] The Application is dismissed.

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 1   Australian Liquor. Hospitality and Miscellaneous Workers Union v Prestige Property Services Pty Ltd [2006] FCA 11, [44].

 2   Witness statement of John Geoffrey Reynolds, [9]-[11]

 3   Witness statement of Katherine Anne Grant, [11]-[12]

 4   Witness statement of Katherine Anne Grant, [18]

 5   Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Ausgrid[2019] FWC 331, [51]-[60]

 6   Witness statement of Katherine Anne Grant, Annexure 1.

 7   Collins Dictionary, Australian Edition 1991.