Construction, Forestry, Mining and Energy Union

[2017] FWCA 4055

[2017] FWCA 4055

FAIR WORK COMMISSION

REASONS FOR DECISION

Fair Work Act 2009
s.217—Enterprise agreement

Construction, Forestry, Mining and Energy Union
(AG2017/2973)

CC PTY LTD ENTERPRISE AGREEMENT 2012

Coal industry
DEPUTY PRESIDENT ASBURY	BRISBANE, 3 AUGUST 2017

Application for variation of the CC Pty Ltd Enterprise Agreement 2012 – Finding that Agreement is ambiguous or uncertain – Finding that Agreement should be varied – Variation appropriate to give effect to objectively ascertained mutual intention of the parties.

1. OVERVIEW

[1] On 20 July 2017, the Construction, Forestry, Mining and Energy Union (CFMEU) applied under s. 217 of the Fair Work Act 2009 (the Act) for a variation to the CC Pty Ltd Agreement 2012 (the Agreement) to remove an ambiguity or uncertainty with respect to the definition of redundancy in the Agreement. The application was listed for hearing on 26 July 2017 and in a Decision issued on that date, I varied the Agreement. My reasons for varying the Agreement and for the urgency with which this application has been dealt with are set out below.

[2] The Agreement applies to CC Pty Ltd and its employees working in production, processing, engineering, technical and supervision functions within the classifications in the Agreement. On 7 March 2017, the underground operations of the mine became inundated with water. Employees were stood down without pay for a considerable period. On 12 May 2017, the Board of CC Pty Ltd formed a view that the Company was insolvent and appointed Mr Grant Sparks, Mr Stephen Longley and Mr Martin Ford, PPB Advisory, as Administrators to the Company and to a number of related entities. The Administrators have responded to the Application to vary the Agreement.

[3] On and from 16 May 2017 some 220 employees were made redundant on the basis of the insolvency of CC Pty Ltd including many employees who had been stood down without pay since February 2017. 150 of these employees are covered by the Agreement subject of the variation application. A number of these employees are members of the CFMEU, the “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU), the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (CEPU) and the Association of Professionals Engineers, Scientists and Managers, Australia (APESMA). Those Unions were bargaining representatives for the Agreement and are covered by it. 1

[4] Since the redundancies were implemented, an issue with the wording of the provisions in the Agreement dealing with redundancy has come to light. Essentially, the definition of redundancy in clause 27 of the Agreement excludes circumstances where an employee’s employment is terminated because of insolvency or bankruptcy of CC Pty Ltd. The definition of redundancy in the Agreement is not consistent with the definition of redundancy in s. 119(1) of the Act or clause 14.2 of the Black Coal Award 2010 (the Award) which covered the redundant employees while they were employed by CC Pty Ltd. Both definitions specifically provide that an employee is made redundant in circumstances which include the termination of the employee’s employment, at the employer’s initiative, because of the insolvency or bankruptcy of the employer.

[5] The effect of the definition of redundancy in clause 27 of the Agreement is that employees made redundant because of insolvency or bankruptcy of CC Pty Ltd are not entitled to redundancy payments prescribed by the Agreement. There are additional issues associated with the fact that the Agreement excludes the Award and operates in conjunction with the NES in a way that arguably renders the entitlements of employees to redundancy payments in circumstances where CC Pty Ltd is insolvent or bankrupt, ambiguous or uncertain.

[6] The CFMEU asserts that when the terms of the Agreement are considered in the context of the Act and the Award; the history of redundancy provisions generally; and the negotiations for the Agreement; an uncertainty or ambiguity must arise in relation to whether or not the definition of redundancy in the Agreement was intended by the parties to alter the standard definition of redundancy as provided for in the Award and the NES. The CFMEU submits that the Commission should exercise discretion under s. 217 of the Act to vary the Agreement so that it reflects the mutual agreement of the parties at the time the Agreement was made, by clarifying that insolvency and bankruptcy is a ground for termination that would entitle an employee to redundancy payments under the Agreement. The CFMEU seeks that the Agreement be varied with effect from the date it was approved by the Commission or the date it came into effect – 20 July 2012 or 27 July 2012 respectively.

[7] Evidence in support of the variation was given by Mr Glenn Power, District Vice President of the CFMEU. 2 Mr Power’s evidence was uncontested.

[8] The CFMEU’s application is supported by the AMWU, CEPU and APESMA. The Administrators have also indicated support for the variation provided that it operates from the date that they were appointed and that the variation exactly reflects the NES provision in s. 119 of the Act.

2. APPROACH TO VARIATION OF AN ENTERPRISE AGREEMENT TO REMOVE AMBIGUITY OR    UNCERTAINTY

[9] By virtue of s.217 of the Act, the Commission may vary an enterprise agreement to remove an ambiguity or uncertainty. An application for a variation on that basis may be made by an employer, employee or employee organisation covered by the Agreement. A provision in an enterprise agreement is ambiguous if it is susceptible of more than one meaning 3 and may be ambiguous notwithstanding that the provision is capable of interpretation. If it is not possible to put any definite meaning on a provision, it is uncertain.4

[10] The approach to determining an application under s.217 of the Act is for the Commission to identify whether there is ambiguity or uncertainty in an enterprise agreement and then decide whether the discretion should be exercised to vary the agreement. The first part of the process involves the identification of a jurisdictional fact which enlivens the power of the Commission to exercise the discretion to resolve the ambiguity or uncertainty by varying the agreement. 5 A positive finding of ambiguity or uncertainty must be made before the power to vary an agreement can be exercised.6

[11] Identification of ambiguity or uncertainty involves an objective assessment of the words used in the provision under examination, having regard to their context, 7 in order to determine whether, on its proper construction, the wording of the provision is susceptible of more than one meaning.8 The Commission will generally err on the side of finding an ambiguity or uncertainty where there are rival contentions advanced and an arguable case is made out for more than one contention.9 The threshold for finding ambiguity or uncertainty is not a high one.10 However, a disagreement between parties to an agreement about how it applies in certain factual circumstances does not of itself found an application to vary the agreement on the grounds of ambiguity or uncertainty11 and rival claims or contentions may well be self-serving12.

[12] The approach to construing industrial instruments such as enterprise agreements was most recently set out in a Decision of a Full Bench of the Commission in “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU) v Berri Pty Ltd 13as 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.

[13] If the Commission is satisfied that there is an ambiguity or uncertainty in a provision of an agreement that is sought to be varied, the Commission must then decide whether to exercise the discretion in s.217 to vary the provision. In Re Australian and International Pilots Association 14 Vice President Watson stated in relation to an earlier version of s.217 of the Act:

“The discretion of the Commission in the case of an ambiguity or uncertainty involves two questions. First, is it appropriate to vary the agreement? If so then secondly, what variations are appropriate? Similar considerations will often be relevant to both questions and hence the two questions frequently overlap. It is well established that a significant factor is the objectively ascertained mutual intention of the parties at the time the agreement was made. It is not appropriate to rewrite an agreement to install something that was not inherent to the agreement when it was made. These principles reflect the notion that an agreement is made by the parties usually without any arbitrated content or independently determined standards of industrial fairness. The exercise of the discretion conferred on the Commission in relation to an ambiguity or uncertainty does not give rise to a general discretion to determine a matter based on industrial fairness. The task is to place the parties in the position they intended by their agreement – insofar as the wording of the agreement does not reflect that intention. Although a significant factor, the objectively ascertained mutual intention of the parties is not the only consideration. However, it would be unusual for other considerations to weigh in favour of a variation that was inconsistent with the intention of the parties.” 15

[14] It has also been held that objectively ascertained mutual intention of the parties evinced by their conduct after an agreement is made is relevant to the exercise of the discretion of the Commission to vary the agreement to resolve ambiguity or uncertainty 16 although as previously noted, that conduct is not relevant as an aid to the interpretation of the agreement. However, there are also cases where the parties have different intentions and no mutual intention can be ascertained. In United Voice v MSS Security Pty Ltd t/as MSS Security17a Full Bench of the Commission was considering an appeal against a Decision to vary an agreement to remove ambiguity or uncertainty, in circumstances where it had been found that there was ambiguity in relation to the term “all purpose”, and observed:

“It is possible in this case that that parties had different intentions as to the use of the words ‘all purpose’. The resolution of the matter requires the application of the following logic. If an ambiguity exists in relation to the payment of an additional amount, as in this case, and the evidence establishes that there is no mutual intention to pay the additional amount, then it would normally follow that the Commission should not vary the agreement to create an entitlement that is consistent with the intention of only one of the parties. Even if there is no clear mutual intention to not pay the additional amount, it would normally be desirable to resolve an ambiguity to make it clear that the amount is not payable when there is an insufficient basis to find that the parties agreed to pay the additional amount. Therefore if there was no mutual intention to apply penalty calculations to the allowance, then absent any other compelling circumstances, the company’s application was likely to succeed.” 18

3. CONSIDERATION

[15] The terms of the Agreement in the present case, appear on their face, to be unambiguous. However, that is not the end of the matter. When the context in which the Agreement was made and the purpose of the Agreement are considered, it is apparent that there is ambiguity or uncertainty in relation to the definition of redundancy in clause 27 of the Agreement. That definition found in the first paragraph of clause 27 is in the following terms:

“Definition of redundancy

An employee is made redundant where an employee’s employment is terminated at Cook Colliery’s initiative because it no longer requires the job done by the employee to be done by anyone except where this is due to the ordinary and customary turnover of labour or because of insolvency or bankruptcy of Cook Colliery.”

[16] Other relevant provisions of the Agreement in clause 27 are the table setting out redundancy payments which are in excess of those in the Award. Further, the redundancy clause in the Agreement provides that any payments made under the clause are in satisfaction of redundancy entitlements that might otherwise arise under the Act. It is also the case that clause 6 of the Agreement, while excluding the terms of awards which might otherwise apply, provides that the National Employment Standards are incorporated into the Agreement provided that where the Agreement provides for a higher benefit, the Agreement will apply.

[17] Redundancy entitlements are included in the National Employment Standards and dealt with in Division 11 of Part 2 – 2 of the Act. Section 119(1) of the Act is found in Sub-division B of Division 11 and provides as follows in relation to entitlement to redundancy pay:

“119 Redundancy pay

Entitlement to redundancy pay

(1) An employee is entitled to be paid redundancy pay by the employer if the employee’s employment is terminated:

(a) at the employer’s initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour; or

(b) because of the insolvency or bankruptcy of the employer.

Note: Sections 121, 122 and 123 describe situations in which the employee does not have this entitlement.”

[18] Sub-division C of Division 11 sets out limits on the scope of the Division and provides that redundancy pay provisions do not apply to employees to whom an industry-specific redundancy scheme in a modern award applies.

[19] The Black Coal Mining Industry Award 2010 at clause 14, sets out industry specific entitlements and provides at clause 14.1 that the redundancy entitlements in the Award are an industry-specific redundancy scheme and, as such, Sub-division B of Division 11 of the NES does not apply. The definition of redundancy in clause 14.2 of the Award is in the following terms:

“14.2 Definition of redundancy

(a) An employee is made redundant where an employee’s employment is terminated at the employer’s initiative:

(i) because the employer no longer requires the job done by the employee to be done by anyone except where this is due to the ordinary and customary turnover of labour; or

(ii) because of insolvency or bankruptcy of the employer.

(b) This clause does not apply to employees engaged for a fixed term or a specified task.”

[20] Section 55 of the Act provides that a modern award or enterprise agreement must not exclude the National Employment Standards (NES) or any provision of the National Employment Standards. Section 55(4) of the Act provides that a modern award may include terms that supplement the NES and s. 55(6) provides that to the extent a modern award or enterprise agreement gives employees an entitlement that is the same as the NES entitlement, then the NES entitlement operates in parallel with the award or agreement entitlement but not so as to give employees a double benefit, and that the provisions of the NES apply as a minimum standard to the award. The effect is that the NES definition of redundancy is the minimum standard and operates in parallel with the definition in the Black Coal Mining Industry Award 2010 notwithstanding that the Award provides for a higher level of redundancy payments than is provided for in the NES.

[21] The provisions of the Agreement, the Award and the Act support a conclusion that the Agreement is ambiguous on the basis that under the Act and the Award, employees are entitled to redundancy payments when their employment is terminated due to insolvency or bankruptcy of the employer and that the definition in the Act which provides an entitlement to redundancy payments in these circumstances is a provision of the National Employment Standards.

[22] Further, the surrounding circumstances and the context in which the Agreement was made, include the terms of the Black Coal Mining Industry Award 2010 and the Act, including the NES and provisions in relation to interaction between the NES and the Award. In order for the Agreement to be approved, the Commission was required to be satisfied, among other matters, that it passed the better off overall test (BOOT) when compared to the Award 19 which, as stated in the Form F17 Employer declaration in support of the approval of the Agreement, was the relevant reference instrument for that purpose. The Commission was also required to be satisfied that the Agreement did not exclude or purport to exclude the NES or any NES provisions.

[23] These contextual considerations support a conclusion that there is an ambiguity or uncertainty in clause 27 of the Agreement with respect to the definition of redundancy. To interpret the Agreement literally would deprive employees of an entitlement to redundancy payments to which they would be entitled under the Award and the NES provision which operates parallel to the Award and the Agreement. If clause 27 of the Agreement was interpreted literally it would have been an impediment to approval of the Agreement on the basis that it would have caused concern in relation to whether the Agreement passed the BOOT or that the Agreement excluded a provision of the NES.

[24] Mr Power’s evidence also supports a finding that the relevant provision is ambiguous or uncertain and does not reflect the common intention of the parties. Mr Power was involved in the negotiations for the Agreement and tendered drafts of the Agreement and his contemporaneous notes from negotiations on 31 January, 28 February and 27 March 2012. According to Mr Power, the CFMEU sought to have the Agreement operate in conjunction with the Black Coal Mining Industry Award 2010 and that the Award underpinned the Agreement. The Company sought a comprehensive or “stand alone” Agreement.

[25] Mr Power points to the provisions in clause 6 of the Agreement that provide for the incorporation of the NES. Mr Power also stated that the CFMEU sought that the Agreement provision defining redundancy be identical to the provision in the Black Coal Mining Industry Award 2010 and tendered a draft of the Agreement dated 27 March 2012, which contains a text box under the definition of redundancy, containing the words “Definition from award”. 20 Mr Power states that at no time during the bargaining meetings did Mr Power, the CFMEU bargaining representatives or the bargaining representatives for CC Pty Ltd have any discussion or consideration that the redundancy clause in the Agreement would remove the entitlements of employees to redundancy payments under the Agreement if their employment was terminated due to insolvency or bankruptcy.

[26] Mr Power also tendered the statutory declarations filed by the CFMEU and CC Pty Ltd as part of the application for approval of the Agreement. Those statutory declarations do not identify the difference in the definition of redundancy under the Agreement compared to the definition in the Award or that the difference is a detriment under the Agreement. Mr Power said that when the Agreement was approved on 20 July 2012, unbeknownst to those who negotiated it, the definition of redundancy included in the Agreement left out punctuation and subparagraphs that are in the Award definition, so that the Agreement now provides a differing and reduced entitlement to redundancy when compared to the Award.

[27] Mr Power states that the Administrator’s position and that under Federal Entitlement Guarantee Scheme is that employees are not entitled to redundancy payments under the Agreement because their employment was terminated due to the insolvency of CC Pty Ltd.

[28] In its submission to the Commission, the Administrator states that the context, surrounding circumstances and purpose of the Agreement evidences ambiguity and uncertainty in terms of the definition of redundancy in the Agreement. The Administrator also submits that the objective intention of the parties as evidenced by the Form F17 and Form F18 filed in the Commission as part of the application for approval of the Agreement, indicate that the objective mutual intention of the parties at the time the Agreement was made, was to adopt in clause 27 of the Agreement, the definition of redundancy as found in both the Act and the Black Coal Mining Industry Award 2010.

4. CONCLUSION

[29] For the reasons set out above, I am satisfied and find that the wording in clause 27 of the Agreement which defines redundancy, is susceptible of more than one meaning and is ambiguous. I am also satisfied that the mutual intention of the parties to include the definition of redundancy in the Black Coal Mining Industry Award 2010 can be objectively ascertained from the background facts and the context in which the Agreement was negotiated and made.

[30] In circumstances where employees have been made redundant will be deprived of any form of redundancy payments which they would have been entitled to under the Award and the NES, and where the Administrator (on behalf of the employer) agrees with the variation and the basis upon which it is sought, I am satisfied that it is appropriate to vary the Agreement.

[31] I am also satisfied that a variation to insert into the Agreement a definition of redundancy identical to that found in the NES and the Black Coal Mining Industry Award 2010 is appropriate to give effect to the objectively ascertained mutual intention of the parties who negotiated the Agreement. Further, I am satisfied, in circumstances where redundancies were effected from 12 May 2017, and the Administrator was appointed from that date, that it is appropriate that the variation operate from 12 May 2017.

[32] For these reasons, on 26 July 2017, I varied the Agreement with effect from 12 May 2017 and issued a Decision to that effect.

DEPUTY PRESIDENT

Printed by authority of the Commonwealth Government Printer

<Price code C, AE895409  PR595058>

 1   [2012] FWAA 6025 at [2].

 2   Exhibit 1 – Witness Statement of Glenn William Power.

 3   Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1981-1982) 149 CLR 337 at 350 per Mason J.

 4   Meehan v Jones (1981-1982) 149 CLR 571 at 578 per Gibbs CJ.

 5   Re: Tenix Defence Systems Enterprise Agreement PR917548 at [33] – [35] per Ross VP, O’Callaghan SDP and Foggo C.

 6   CoInvest v Visionstream (2004) 134 IR 43 at 55 per Ross VP, Ives DP and Blair C.

 7   Grocon Constructors Pty Ltd v Construction, Forestry, Mining and Energy Union AG812496 PR924146 at [18] per Ross VP.

 8   Re Linfox - CFMEU (CSR Timber) Enterprise Agreement 1997 Print Q2603, 30 June 1998, per Munro J.

 9   Grocon Constructors Pty Ltd v Construction, Forestry, Mining and Energy Union AG812496 PR924146 at [20] per Ross VP citing Re: Victorian Public Transport Enterprise Agreement 1994, Print M2454, 7 June 1995 per Ross VP, Polites SDP and Grimshaw C at p. 4; Re CFMEU Appeal, Print R2431, 25 February 1999 per Harrison SDP, Drake DP and Larkin C at para 13; Re Tenix Defence Systems Pty Limited Certified Agreement 2001-2004, Print PR917548, 9 May 2002 per Ross VP, O'Callaghan SDP and Foggo C.

 10   United Voice v MSS Security Pty Ltd T/A MSS Security [2016] FWCFB 4979 at [19].

 11   Construction, Forestry, Mining and Energy Union 175/99 N Print R2431 per Harrison SDP, Drake SDP and Larkin C.

 12   SJ Higgins and Others v CFMEU PR903843 at [7].

 13   [2017] FWCFB 3005 at [14].

 14 (2007) 162 IR 121.

 15   Ibid at [16] – [17].

 16   Telstra Corporate Group Enterprise Agreement PR954989 14 January 2005 at [47] per Ross VP, Lacy SDP and Smith C; Tenix Defence Pty Limited Certified Agreement 2001-2004 PR917548 9 May 2002 at [28], [32] and [54] per Ross VP, O’Callaghan SDP and Foggo C.

 17   [2016] FWCFB 4979.

 18 Ibid at [23].

 19   Fair Work Act 2009 s. 186(d) and 193.

 20   Exhibit 1 – Statement of Glenn William Power Annexure “GWP3”.