[2015] FWC 910

FAIR WORK COMMISSION

DECISION

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

Health Services Union
v
St John's Village
(C2014/1016)

COMMISSIONER JOHNS

MELBOURNE, 6 FEBRUARY 2015

Interpretation of an enterprise agreement - dispute regarding the application of annual leave loading to the additional week of annual leave provided for shift workers.

[1] This decision concerns a dispute about whether the annual leave loading applies to the additional week of annual leave provided to seven day shift workers. The dispute requires the Fair Work Commission (Commission) to interpret clause 33 (specifically 33.2.2 and 33.3) of the Health and Allied Services - Private Sector - Victoria Consolidated Award 1998 (Award) as incorporated into the St Johns Village ANF and HSU Enterprise Agreement 2009 (Agreement).

[2] The Health Services Union (HSU/Applicant) submits that annual leave loading applies to the additional week of annual leave provided to seven day shift workers. St John’s Village (Respondent) disagrees. It says annual leave loading only applies to the four weeks of annual leave provided for under clause 33.1.1 of the Award.

The proceedings

[3] On 11 June 2014 the HSU filed a Form 10 - Dispute Notification in the Commission. Ms Jean Gray was listed as the Applicant to that application. The relief sought by Ms Gray was “backpay ... for the period in which, either the penalties, or the 17.5% leave loading ... was not applied to the extra week of annual leave earned as a seven day shift worker”.

[4] On 19 June 2014 the Commission, as presently constituted, conducted a telephone conference in the matter. The dispute remained unresolved.

[5] Following the conference, the Commission issued directions which noted that the relief sought by the HSU “included “backpay”. The Commission further observed,

“That is to say, the Applicant wants the Commission to interpret and enforce the Award. That would require the exercise of judicial power. The Commission is not vested with such a power. The Commission is only vested with arbitral power that will result in the settlement of the dispute.”

[6] Consequently, the HSU was directed to consider whether it could properly bring the dispute, and remedy sought, within the power of the Commission’s arbitral functions.

[7] On 24 June 2014, the HSU advised of its intention to amend its application and proceed to arbitration. It filed an amended Form 10 which named the Health Services Union as the Applicant to the matter and removed Ms Gray from the matter. The relief sought in the amended Form 10 was described as,

“The HSU requests that the substantive argument with respect to the dispute ... be heard at arbitration, so that clarification as to the interpretation of the clause brings about a prospective benefit to St John’s Village employees via the agency of the Commission’s arbitral power.”

[8] On 26 June 2014 the Commission issued directions for the filing of submissions, witness statements and documents.

[9] On 21 July 2014 the HSU indicated it did not intend to file any submissions or witness statements. It sought to rely solely on the amended Form 10 it filed on 24 June 2014.

[10] On 11 August 2014, the Respondent filed its submission. It also chose not to file any witness evidence.

[11] On 21 August 2014 the HSU filed a submission in reply.

[12] Noting that neither party intended to lead any witness evidence, on 20 August 2014 the Commission asked the parties whether the dispute could be dealt with on the papers. On 21 August 2014, Mr Rahilly (representative for the Respondent) confirmed it had no objection, however, made the following observation:

“... it appears that the HSU made the current claim which is a broadly based request for a declaration as to the application of the award provisions in respect of the payment to be made for the additional week of leave for shift workers. It is submitted that this claim is no different to the original claim and the Commission is again being asked to perform a judicial function which is beyond its power. In essence, what the Commission is being asked to do is to interpret existing award provisions and make a declaration as to the existing rights and obligations of the parties and that is a judicial function.”

[13] In light of the above submission, the Commission as presently constituted, decided to conduct a hearing. That occurred on 4 September 2014. At the hearing the HSU was represented by its Industrial Officer Mr Steven Tsitas. The Respondent was granted permission to be represented by Mr Michael Rahilly pursuant to section 596(2)(a) on the basis that the matter was vested with sufficient complexity such that allowing the Respondent to be represented would assist in the efficient conduct of the matter.

[14] Although neither side filed any witness material, during the hearing the following witnesses were called:

for the Respondent - Mr Peter Hill, its Chief Executive Officer; and

for the Applicant - Mr Steven Mitchell, one of its organisers.

Further submissions

[15] In October 2014 a Full Bench of the Commission heard an appeal in The Australian Meat Industry Employees Union v Golden Cockerel Pty Limited (Golden Cockerel). 1 In short summary the appeal concerned the principles relevant to the interpretation of an agreement. Consequently, a decision in this matter was held over pending the handing down of the decision in Golden Cockerel; that occurred on 27 November 2014. In the interests of ensuring that the parties were afforded procedural fairness, the Commission then invited the parties to make further submissions concerning the application of Golden Cockerel. The Respondent filed a submission on 11 December 2014. The Applicant did not make any further submissions.

Jurisdictional objection

[16] Despite the HSU amending its Form 10 to seek a “prospective benefit”, the Respondent maintains its position that the Commission, as presently constituted, does not have jurisdiction to deal with this dispute. It argues that what is sought by the Applicant is a declaration by way of interpretation of an award. 2 In doing so it says that the HSU is still asking the Commission to exercise judicial power.

[17] However, despite being invited to do so, the Respondent was not able to cite any authorities in support of its position that, in deciding how the Respondent should apply the relevant clauses in the Award (as incorporated into the Agreement), the Commission is exercising judicial power. 3

[18] Section 595 of the Fair Work Act 2009 (FW Act) invests the Commission with the power to “deal with a dispute only if [the Commission] is expressly authorised to do so under or in accordance with another provision of the [FW Act].”

[19] The present application has been made under section 739.

[20] However, section 739 only “applies if a term referred to in section 738 requires or allows [the Commission] to deal with the dispute”. Relevantly for present purposes, section 738 states that the “Division applies if ... (b) an enterprise agreement includes a term that provides a procedure for dealing with disputes, including a term referred to in subsection 186(6).”

[21] Clause 42.1 of the Agreement provides for a procedure for dealing with disputes. It states:

In the event of a dispute in relation to a matter arising under this Agreement or the National Employment Standards … [thereafter a step procedure applies].

[22] The substantive issue before the Commission does not arise under the National Employment Standards (NES). Therefore, the Applicant necessarily relies entirely on the dispute being “about a matter arising under [the] Agreement.”

[23] Clause 6.1 of the Agreement provides that,

This Agreement incorporates the allowable and preserved Award entitlements and protected Award conditions of the Awards (as appropriate to each Employee) as in operation immediately prior to the Agreement that preceded this Agreement, and which are set out in Appendix D of this Agreement and form part of this Agreement subject to any limitations specified ('Incorporated Terms').

[24] Clause 8.3.2 of the Agreement provides that, to the extent that the Agreement (which incorporates the Award) contains provisions about annual leave that are more favourable than the NES, those provisions prevail.

[25] Appendix D of the Agreement provides that,

The following clauses of the [Award] as in operation just before making this Agreement are incorporated into this Agreement and operate in accordance with clause 6 of this Agreement - excluding prohibited content.

[26] The table in Appendix D then expressly refers to clause 33 in the Award, “Annual Leave”.

[27] Noting the interrelationship between the Agreement and the Award the jurisdiction issue to be determined is whether a necessary nexus has been established between the dispute notified by the HSU and the Agreement. If the necessary nexus is established then the Commission is invested with jurisdiction to deal with the substantive issue under clause 42 of the Agreement.

[28] Under the provisions of sections 738 and 739 of the FW Act the powers of arbitration exercised by the Commission depend on the powers conferred on it by the agreement of the parties. Under the scheme of the FW Act there is no broad unfettered power of private arbitration that otherwise exists to resolve disputes between parties. Those arbitral powers instead depend on the agreement of the parties and any decision made by the Commission is not binding of its own force but derives from that agreement, which effectively authorises that exercise of power. The exercise of that arbitral power, and what it involves, has been considered in a number of decisions of this Commission and its predecessors.

[29] In considering this matter the Commission has had regard to the decision of Commissioner Lewin in Skurnik v Australian Broadcasting Commission. 4 In that decision, the Commissioner usefully set out the principles of statutory construction relating to the exercise of dispute resolution procedures, and draws upon the authority in the Construction, Forestry, Mining and Energy Union v Australian Industrial Relations Commission (Gordonstone) matter.5 Although Gordonstone concerned the operation of the predecessor provisions of section 739 of the FW Act (which were contained in the Workplace Relations Act 1996) I accept and agree with Lewin C that there is no reason to believe that the conceptual basis of private arbitration pursuant to the provision of a dispute settlement procedure proscribed in an enterprise agreement made under the FW Act is any different than that determined by the High Court in Gordonstone. The Commissioner went on to say:

“Therefore the nature of the jurisdiction and power to determine a dispute by arbitration, where performed by the tribunal, is derived from the terms of the dispute settlement procedure agreed between the parties to the enterprise agreement.” 6

[30] In the Skurnik decision the Commissioner then quoted an extract from the Full Bench in Shop, Distributive and Allied Employees Association v Big W Discount Department Stores 7 where it was said:

“...what comprises a dispute over the application of the agreement should not be narrowly construed; to do so would be contrary to the notion that certified agreements are intended to facilitate the harmonious working relationship of the parties during the operation of the agreement.”

[31] I adopt this approach.

[32] In the present matter the issue in dispute squarely falls within the terms of clause 33 of the Award which is incorporated into the Agreement. The nexus between the dispute and Agreement is clear. Consequently, I find that the Commission is invested with jurisdiction to deal with this dispute.

[33] The exercise to be performed by the Commission is then to make a finding as to how the relevant clauses in the Award are to be applied in the future. The Commission is not making a declaration about past rights. Nor is the Commission making any finding that the Respondent has or has not been complying with its obligations in the past. A finding by this Commission about how the clauses are to be applied in the future has no bearing on past rights and entitlements. This decision cannot lead to an award of back-pay. To the extent that employees want to pursue past entitlements they should do so in a court of competent jurisdiction. In its submissions in relation to the jurisdictional objection the Applicant confirmed that, through these proceedings, it was “not seeking a retrospective benefit”. 8

Substantive dispute

[34] The parties are covered by the Agreement. As stated above, Appendix D to the Agreement incorporates provisions of the Award. Clause 33 of the Award is the relevant clause dealing with annual leave. It provides:

“33.1 Period of leave

33.1.1 Employees other than casual employees shall be entitled to four weeks annual leave on ordinary pay after twelve months of continuous service. The annual leave prescribed shall be exclusive of any holidays prescribed in clause 40 - Public Holidays.

33.1.2 When the system of working provides for the taking of accrued days off the maximum number of accrued days off shall be thirteen in any calendar year, provided that at least one of those accrued days will be taken in conjunction with a period of annual leave for which no additional payment is to be made.

33.2 Provided that ordinary pay for the purposes of this clause shall mean remuneration for the employee's weekly number of hours calculated at the ordinary time rate of pay and in addition shall include:

33.2.1 the cash value of any board or lodging provided for in clause 23; and either

33.2.1(a) overaward payments for ordinary hours of work;

33.2.1(b) shift work premiums, according to roster or projected roster;

33.2.1(c) Saturday and Sunday premiums, according to roster or projected roster;

33.2.1(d) in-charge allowances; or

33.2.2 a loading equal to 17-1/2% of his or her wage pursuant to clause 19 – Rates of pay for his or her normal weekly number of hours calculated at the ordinary time rate of pay - whichever is the higher.

33.3 Seven day shift workers
A shift worker who during the year in which his or her annual leave accrues is rostered to work for four hours or more on 10 or more weekends in that year, shall be entitled to one week's (seven consecutive days) annual leave in addition to the leave prescribed in 33.1.”

[35] The Commission notes that while clause 33.3 provides for “one week’s ... annual leave in addition to the leave prescribed in 33.1” it does not expressly state the basis upon which the additional weeks leave is to be paid.

[36] During the course of the hearing the parties agreed 9 that the question the Commission is to determine is:

In respect of clause 33.2 of the Award, does the reference to “this clause” refer:

● to clause 33 as a whole (as the Applicant contends); or
● only to clause 33.1.1 (as the Respondent contends)?

(Agreed Question)

Evidence

[37] In this decision the Commission does not seek to set out in detail all of the evidence presented in the proceedings. In brief terms, the evidence was to the following effect.

[38] It was the evidence of Mr Hill that:

(a) He is the Chief Executive Officer of the Respondent 10 and has been in that position for 18 months;11

(b) He was not CEO of the Respondent when the Agreement was negotiated in April 2010; 12

(c) His understanding of the custom and practice in relation to the loading on the fifth week of annual leave for shift workers is:

“the interpretation of St John's Village ... has always been to read the award that is set before us - 33, that runs through to the section of 33.2.2 for loading - as being completely separate and that 33.3 that is coming after that section of the award, has been read and interpreted separately and paid accordingly. That is, the amount of remuneration or allocation of leave has just been the one additional week without any loading paid on it. That is historically the interpretation of the award at St John's” 13

(d) He saw support in the respondent’s interpretation of the award provision as it is consistent with how other individuals who worked in similar areas of the organisation were paid; 14

(e) “On my reading, Commissioner ... it states that there will be one additional week's leave, so it will be calculated on the basis of how all other leave is to be calculated. That is, based on their rostered hours, and I would treat it that same way. The four weeks' annual leave that they accrued and how their remuneration would be calculated would be consistent - this one week would be consistent with those four other weeks.” 15

[39] Following the evidence of Mr Hill, the HSU sought to call Mr Steven Mitchell (Organiser) to give evidence. The Respondent did not object.

[40] In summary it was the evidence of Mr Mitchell that:

(a) He has been an Organiser for the last two years. He was also an organiser from 2000 to 2004; 16

(b) “(B)oth the public sector and private sector EBA awards are very, very similar, and it has always been taken that that fifth week of annual leave is paid based on the projected rosters or the 17 and a half per cent loading” 17

(c) “I'm a regional organiser ... I do basically north-eastern Victoria, so I deal with all the private sector aged sites, private hospitals and public hospitals. Over the period of time, we deal with all facets of those areas and this particular situation has not come up before. The only reason it came up was a reference to counter-leave, which we've never heard of before because it hadn't been mentioned. There were no issues in regard to this coming out of St John's at that particular time. It was just this reference to counter-leave and when we queried it, St John's said, "Well, that's basically - it has been that way for years." However, later on when we had a meeting, it was discussed that it may have been as a result of a computer pay program, as it was.” 18

(d) “Since [the dispute] has come up ... in early to mid-December ... (s)ince that period of time, everywhere I've gone in the aged care sector and private sector, I've made a point of raising the issue; is there a thing called counter-leave? Do the members get paid based on a fifth week of annual leave being paid with either 17 and a half per cent or projected roster? At this point in time, St John's Village is the only one where the staff have turned around and said, no, otherwise - they get paid their projected roster or the 17 and a half per cent.” 19

Principles of construction of agreements

[41] A recent Full Bench of the Commission has gone to great lengths to set out the relevant principles. In Golden Cockeral, the Full Bench set out the relevant authorities,

General approach
[19] The general approach to the construction of instruments of the kind at issue here is set out in the judgment of French J, as he then was, in City of Wanneroo v Australian Municipal, Administrative, Clerical and Services Union 20 (Wanneroo):

“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) 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).” 21

[20] To this we add the oft-quoted observations of Madgwick J in Kucks v CSR Limited 22 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:

“. . . the task remains one of interpreting a document produced by another or others. A court is not free to give effect to some interiorly 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.” 23

[21] Although their Honours were each dealing with the proper interpretation of an award, the same principles are apt to apply to the interpretation of enterprise agreements 24. For example, similar observations were made in Amcor Limited v CFMEU25 (Amcor):

“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.” 26

[22] The fact that the instrument being construed is an enterprise agreement is itself an important contextual consideration. As French J observed in Wanneroo:

“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) 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 George A Bond and Co Ltd (in liq) v McKenzie [1929] AR (NSW) 498 at 503-504 (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.” 27

Use of extrinsic material as an aide to interpretation
[23] As is often the case in disputes that involve the construction of an enterprise agreement, parties will seek to place reliance of a variety of extrinsic material as an aide to interpreting the provisions of an agreement in issue. The use to which extrinsic material of the surrounding circumstances may be put to assist in the interpretation of an instrument is set out in the judgement of Mason J in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales 28 (Codelfa). In Codelfa his Honour 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 the contract 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.” 29

[24] Although Justice Mason’s reasoning in Codelfa has commonly been applied as meaning that ambiguity in an instrument must first be identified before extrinsic material may be admitted as an aide to interpretation, this has not been universally accepted. So much is apparent from the following discussion of Codelfa by Nicholson J in BP Australia Pty Limited v Nyran Pty Limited: 30

“In Ray Brooks Pty Ltd v NSW Grains Board [2002] NSWSC 1049 Palmer J said the effect of dicta from the majority in Royal Botanic is to leave it to inferior Courts to puzzle out whether the decision in Codelfa is consistent or inconsistent with the contextual approach adopted in West Bromwich. Palmer J had earlier drawn a distinction between `the two competing schools of thought’ as to the point in time at which the Court may look at extrinsic evidence in order to construe a contract. One, `the literal approach’, gives primacy to the words of the document so that the starting point in the task of construction is always the text. The competing approach he described as `the contextual approach’ which holds that the words of a document, being no more than symbols of language, can never be reliably understood in isolation from the context in which the words were used. After analysing the reasoning of Mason J in Codelfa , Palmer J concluded that the approach of Mason J would be in complete sympathy with the contextual approach promoted by Lord Hoffman in West Bromwich. He said at par [59]:

`His Honour is not saying: evidence of surrounding circumstances is admissible only if it first appears that the language of the contract is ambiguous. His Honour is saying: evidence of surrounding circumstances is admissible only for the purpose of explaining ambiguous language in the contract and not for the purpose of changing the meaning of clear words.’

On the issue of the point of time in the exercise of construction at which reference to extrinsic evidence is permissible, Palmer J was of the view that Mason J agreed with Lord Wilberforce’s approach in Prenn v Simmonds [1971] 1 WLR 1381 and in Reardon Smith Line Ltd v Yngvar Hansen-Tangen (The Diana Prosperity) [1976] 1 WLR 51, the pith of which he considered was that the time has passed when contracts are isolated from the matrix of facts in which they were set and interpreted purely on internal linguistic considerations. Palmer J also referred to the trend of authority on the issue in New Zealand which he considered showed an endorsement and application of the approach in West Bromwich: cf. DW McLauchlan, `A contract contradiction’, Victoria University of Wellington Law Review, vol 30, 1999, p 175.
I am unable to agree with Palmer J that Codelfa and the passages in West Bromwich can be viewed as entirely consistent. That is not the way in which I understand the relevant portions of Codelfa have been understood and applied in relation to the issue of whether ambiguity is not to be found until the contract in issue has been considered in the matrix of facts in which it is set. In LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd [2003] NSWCA 74 the New South Wales Court of Appeal accepted that Australia had kept while England had discarded the concept that ambiguity is necessary to be shown before one looks at the surrounding circumstances: per Young CJ in Eq, Meagher JA and Hodgson JA agreeing. Academic writing has regarded Codelfa as falling far short of Lord Wilberforce’s apparent position in Prenn on the issue of admission of surrounding circumstances to determine ambiguity: H King, `The admissibility of extrinsic evidence as an aid to contract interpretation: pushing objectivity to absurd limits’, Corporate and Business Law Journal, vol. 6(2), 1994, p 187. Yet the law on this is arguably not clear-cut given that in Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 185 ALR 152 at 155 at par [11] Gleeson CJ, Gummow and Hayne JJ relied upon the statement by Lord Hoffman in Investors Compensation at 912 that the interpretation of a written contract involves `the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract’ and referring by footnote in that context to the reasons of Mason J in Codelfa at 350-352 and Lord Bingham in Bank Credit at 739. Furthermore, it has been said by one Australian text author that `the practice of the courts is to have regard to surrounding circumstances in the form of the factual matrix in virtually all cases’ on the ground that most English words are susceptible of more than one meaning so that difficulty of interpretation is sufficient for that reference to be made: JW Carter, Carter on Contract, Butterworths looseleaf, 2002 at p 28,096 at 12-050.
In LMI the Court of Appeal accepted, however, that the Codelfa doctrine appeared `to be not only that a court uses the surrounding circumstances to aid its interpretation and to put itself in the armchair of the parties to look to see what each knew when it was making the contract, but also that inferences can be drawn from the surrounding circumstances virtually to add terms’: at par [45] citing Codelfa at 353. Of such circumstances the Court of Appeal stated at [44] that `the approach in the Royal Botanic Gardens case itself shows that there is, in fact, a tendency to glean much more from negotiations as surrounding circumstances in Australia than would be permitted in England.’ It may be that there is good reason for the approach in Codelfa to be re-examined both in terms of the appropriateness of the approach and in the light of developments in other common law jurisdictions on the issue. However, given the unequivocal statement by the majority in the High Court in Royal Botanic and the factors I have just referred to, I consider I should proceed on the basis there is not consistency between Codelfa and West Bromwich.” 31

[25] His Honour then summed up the relevant principles to be distilled from Codelfa as follows:

“At the risk of repeating what is said in Codelfa, it follows that the issues arising in this matter should be approached in the following manner. It is necessary firstly to determine whether the contract has a plain meaning or contains an ambiguity. If the contract has a plain meaning, evidence of `surrounding circumstances’ will not be admissible to contradict the language of the contract. If the language of the contract is `ambiguous or susceptible of more than one meaning’ evidence of `surrounding circumstances’ is admissible to assist in the interpretation of the contract. The concept of `surrounding circumstances’ is to be understood to be a reference to `the objective framework of facts’. It will include evidence of prior negotiations so far as they tend to establish objective background facts known to both parties and the subject matter of the contract. It will also include facts so notorious that knowledge of them is to be presumed. Additionally it will include evidence of a matter in common contemplation and constituting a common assumption. From the evidence of that setting the parties’ presumed intention may be taken into account in determining which of two or more possible meanings is to be given to a contractual provision. What cannot be taken into account is evidence of statements and actions of the parties which are reflective of their actual intentions and expectations. Objective background facts can include statements and actions of the parties which reflect their mutual actual intentions. That is, evidence of the mutual subjective intention of the parties to a contract may be part of the objective framework of facts within which the contract came into existence. It is the mutuality which makes the evidence admissible.” 32

[26] That the view of Nicholson J about the proper application of Codelfa and its binding of authority was correct seemed to be confirmed by the High Court of Australia in its refusal to grant special leave to appeal in Western Export Services Inc v Jireh International Pty Ltd 33 (Jireh). The decision in Jireh concerned an application for special leave to appeal. In refusing special leave the High Court said:

“The primary judge had referred to what he described as "the summary of principles" in Franklins Pty Ltd v Metcash Trading Ltd. The applicant in this Court refers to that decision and to MBF Investments Pty Ltd v Nolan as authority rejecting the requirement that it is essential to identify ambiguity in the language of the contract before the court may have regard to the surrounding circumstances and object of the transaction. The applicant also refers to statements in England said to be to the same effect, including that by Lord Steyn in R (Westminster City Council) v National Asylum Support Service.
Acceptance of the applicant's submission, clearly would require reconsideration by this Court of what was said in Codelfa Construction Pty Ltd v State Rail Authority of NSW by Mason J, with the concurrence of Stephen J and Wilson J, to be the "true rule" as to the admission of evidence of surrounding circumstances. Until this Court embarks upon that exercise and disapproves or revises what was said in Codelfa, intermediate appellate courts are bound to follow that precedent. The same is true of primary judges, notwithstanding what may appear to have been said by intermediate appellate courts.
The position of Codelfa, as a binding authority, was made clear in the joint reasons of five Justices in Royal Botanic Gardens and Domain Trust v South Sydney City Council and it should not have been necessary to reiterate the point here.” [Endnotes omitted] 34

[27] However, more recently in Electricity Generation Corporation (trading as Verve Energy) v Woodside Energy Ltd 35 (Woodside) the High Court made the following observation in relation to the construction issue before the Court:

“Both Verve and the Sellers recognised that this Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable business person would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding ‘of the genesis of the transaction, the background, the context [and] the market in which the parties are operating’. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption ‘that the parties ... intended to produce a commercial result’. A commercial contract is to be construed so as to avoid it ‘making commercial nonsense or working commercial inconvenience’.” 36 [Endnotes omitted]

[28] A Full Court of the Federal Court of Australia in Stratton Finance Pty Limited v Webb 37 (Stratton) very recently considered whether there was any inconsistency between Jireh and Woodside. In so doing the Full Court said:

“The above reasons are presupposed upon legitimate contextual surrounding circumstances being available for consideration in the process of contractual construction and interpretation before ambiguity is demonstrated from the words of the agreement alone. That proposition was denied as legally permissible by three justices of the High Court in remarks in the disposition of an application for special leave in Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; 86 ALJR 1. In those remarks, criticism was made of the reasons in Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; 76 NSWLR 603, and in particular the reasons at [14]-[18] concerning the lack of need for ambiguity before resort to legitimate surrounding circumstances in the above-mentioned task. The articulated criticism was that the Court in Franklins (and the courts in the other intermediate appellate decisions referred to at [16] in Franklins) had failed to follow the judgment of Mason J in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; 149 CLR 337, especially at 352.

As the reasons in Franklins stated, the conclusion that ambiguity need not be discovered before any resort to legitimate surrounding circumstances in the relevant task was drawn only from existing High Court authority: Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; 210 CLR 181 at 188 [11]; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; 218 CLR 451 at 461 [22]; Zhu v Treasurer of the State of New South Wales [2004] HCA 56; 218 CLR 530 at 559 [82]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165 at 179 [40] and International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; 234 CLR 151 at 160 [8] and 174 [53]. The Court’s view was reached in the light of the totality of Sir Anthony Mason’s judgment in Codelfa, and considering the clear words of those later binding High Court authorities. After Jireh, and until this year and the publishing by the High Court of reasons in Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 306 ALR 25; 88 ALJR 447, there was a degree of uncertainty as to whether courts (trial courts and intermediate appellate courts) should follow a clearly articulated position expressed by a number of intermediate courts of appeal around the country as to the proper content and significance of binding High Court authorities, or the view of three justices of the High Court in remarks on a special leave application. In 2013, McLure P called it a “heated controversy” in Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66; 298 ALR 666 at [107]; and see also the remarks of Pullin JA in McCourt v Cranston [2012] WASCA 60 at [14]- [22], and the article by the Hon K Lindgren: ‘The ambiguity of “ambiguity” in the construction of contracts’ (2014) 38 Australian Bar Review 153. In the notice of appeal, Stratton relied, in effect, on the essential proposition from Jireh: see para 3. This was confirmed at a directions hearing. Jireh however, played no substantive part of the argument, because the question, by the time of submissions being filed, had been settled by the High Court in Woodside. This most recent statement by French CJ, Hayne, Crennan and Kiefel JJ of the principles of contractual construction and interpretation was as follows at [35]:

Both Verve and the Sellers recognised that this Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding ‘of the genesis of the transaction, the background, the context [and] the market in which the parties are operating’. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption “that the parties ... intended to produce a commercial result’. A commercial contract is to be construed so as to avoid it ‘making commercial nonsense or working commercial inconvenience’. (Footnotes omitted)
Recently, in Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184, the New South Wales Court of Appeal (Leeming JA, with whom Ward JA and Emmett JA agreed) expressed the view (at [71]) that [35] of Woodside was inconsistent with Jireh. We agree with that conclusion, and with the reasons in elaboration at [72]-[86], and in particular with the comments concerning Codelfa at [78]-[80]. The resolution of this issue, in the terms of [35] of Woodside, may not, however, resolve all issues as to what are legitimate surrounding circumstances: see, for example, the argument dealt with in QBE Insurance Australia Ltd v Vasic [2010] NSWCA 166 at [20]- [35]; and the comments in Kimberley Securities Ltd v Esber [2008] NSWCA 301 at [4]- [5].” 38

[29] As is apparent from the above, the Full Court in Stratton concluded that Woodside was inconsistent with Jireh at least to the extent that Jirah supports the proposition that ambiguity can be evaluated without regard to the surrounding circumstances and the commercial purpose or objects of the instrument being constructed. In doing so, the Full Court expressly endorsed the explanation of Codelfa by the NSW Court of Appeal in Mainteck Services Pty Ltd v Stein Heurtey SA. 39 It is worthwhile therefore to set out that explanation below:

“To the extent that what was said in Jireh supports a proposition that ‘ambiguity’ can be evaluated without regard to surrounding circumstances and commercial purpose or objects, it is clear that it is inconsistent with what was said in Woodside at [35]. The judgment confirms that not only will the language used “require consideration” but so too will the surrounding circumstances and the commercial purpose or objects. Although the High Court in Woodside did not expressly identify a divergence of approach, Jireh was notoriously controversial in precisely this respect. In Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66; 298 ALR 666 at [107] McLure P referred to the “heated controversy” created by Jireh; see further Kevin Lindgren’s analysis in ‘The ambiguity of “ambiguity” in the construction of contracts’ (2014) 38 Aust Bar Rev 153 at 161-167. It cannot be that the mandatory words ‘will require consideration’ used by four Justices of the High Court were chosen lightly, or should be ‘understood as being some incautious or inaccurate use of language’: cf Fejo v Northern Territory [1998] HCA 58; 195 CLR 96 at [45].

The general issue is important, such that it may be useful to state the position in some little detail. First, in principle, every legal text requires legal interpretation, in order to ascertain its legal meaning, although there is no real scope for dispute about the interpretation of many legal texts. Professor Wigmore long ago wrote that ‘the process of interpretation, then, though it is commonly simple and often unobserved, is always present, being inherently indispensable’: JH Wigmore, A Treatise on the Anglo-American System of Evidence in Trials at Common Law (3rd ed 1940, Little Brown & Co, Boston), Vol 9 p 180; see now §2459 Chardourne Revision, 1981. Lord Steyn said, in the first John Lehane Memorial Lecture, that ‘it is a universal truth that words can only be understood in relation to the circumstances in which they are used’: J Steyn, ‘The Intractable Problem of The Interpretation of Legal Texts’ [2003] SydLawRw 1; (2003) 25 Syd L Rev 5 at 5. His Lordship regarded this as a ‘fundamental principle of linguistic jurisprudence and legal logic’. I do not think there is any understatement in that statement. McHugh J made substantially the same point in Manufacturers’ Mutual Insurance Ltd v Withers (1988) 5 ANZ Ins Cas 60-853 at 75-343: ‘Until a word, phrase or sentence is understood in the light of the surrounding circumstances, it is rarely possible to know what it means.’

Lord Hoffmann, in a passage adopted by the joint judgment in Marley v Rawlings [2014] UKSC 2; [2014] 2 WLR 213 at [20], had said in Kirin-Amgen Inc v Hoechst Marion Roussel Ltd [2004] UKPC 6; [2005] 1 All ER 667 at [64] that:

‘No one has ever made an acontextual statement. There is always some context to any utterance, however meagre.’ Secondly, very often, language when considered in its context will have a single, clear meaning. Very often, there is no dispute as to the ordinary grammatical or literal meaning of a sentence, and no dispute that that is the legal meaning. Very often, nothing in the context will come close to displacing the ordinary grammatical meaning of the legal text. ‘But not always’: Project Blue Sky v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355 at [78]; Taylor v Owners - Strata Plan No 11564 [2014] HCA 9 at [65]. The legal meaning may diverge from its literal or grammatical meaning, especially in the (self-selectingly contestable) cases that reach courts. Words do not have a ‘natural’ meaning that can be determined in isolation. As Lord Hoffmann said in Charter Reinsurance Co Ltd v Fagan [1997] AC 313 at 391, approved in Campbell v R [2008] NSWCCA 214; 73 NSWLR 272 at [48] (Spigelman CJ, Weinberg AJA and Simpson J agreeing) and Dale v The Queen [2012] VSCA 324 at [73] (Weinberg, Harper and Whelan JJA): ‘[I]n some cases the notion of words having a natural meaning is not a very helpful one. Because the meaning of words is so sensitive to syntax and context, the natural meaning of words in one sentence may be quite unnatural in another. Thus a statement that words have a particular natural meaning may mean no more than that in many contexts they will have that meaning. In other contexts, their meaning will be different but no less natural.’ What is the legal meaning of a promise to sell ‘my Dürer drawing’, if the vendor’s wife owns a Dürer drawing which is on display in their home, and the vendor keeps another secretly in his study? What is the meaning of a gift ‘to my niece Eliza Woodhouse during her life’ in a will, if the testator had no such niece, but a grandniece of that name, and another grandniece, who was illegitimate, who lived with him: cf In re Fish; Ingham v Rayner [1894] 2 Ch 83? What is the meaning of cl 7 of the Wild Dog Destruction Regulation 1999, which provided ‘The Wild Dog Destruction Regulation 1994 is repealed’? Contracts, wills and statutes are very different legal texts, to the process of ascertaining whose legal meaning different rules apply, yet all are based on language, and language is unavoidably contextual. If I may repeat what I wrote of the uncertain meaning of the Wild Dog Destruction Regulation in Resolving Conflicts of Laws (Federation Press 2011), p 13, ‘The meaning of even the seemingly clearest legal text can be unclear, hence the importance of attending to context in the first instance.’ For those reasons, to say that a legal text is “clear” reflects the outcome of that process of interpretation. It means that there is nothing in the context which detracts from the ordinary literal meaning. It cannot mean that context can be put to one side; otherwise the three legal texts mentioned in the previous paragraph would be “clear”. Thirdly, I would not regard anything in the foregoing as inconsistent with the passage in Mason J’s reasons in Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337 at 352 (which was the focus of Jireh):‘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.’ There is no inconsistency because whether contractual language has a ‘plain meaning’ is (a) a conclusion and (b) a conclusion which cannot be reached until one has had regard to the context. That accords with what was said by Allsop P in Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; 76 NSWLR 603 at [17]: ‘the phrase used by Mason J in Codelfa Construction (at 352) ‘if the language is ambiguous or susceptible of more than one meaning’ does not mean that the susceptibility of the language to more than one meaning must be assessed without reference to the surrounding circumstances ...’ Mason J was indicating that there are very real limits to the extent to which grammatical meaning can be displaced by contextual considerations. However, in order to determine whether more than one meaning is available, it may be necessary first to turn to the context. Fourthly, what I have called “context” was formerly described as the ‘surrounding circumstances’, and then, influenced by Lord Wilberforce in decisions such as Prenn v Simmonds [1971] 1 WLR 1381 at 1384 and Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989 at 997, as the ‘matrix of facts’. See Byrnes v Kendle [2011] HCA 26; 243 CLR 253 at [98]- [100] (Heydon and Crennan JJ) and J Carter, The Construction of Commercial Contracts (Hart Publishing, 2013), pp 8-9. Although Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28; [1998] 1 All ER 98 at 114 referred to a ‘fundamental change’ in the approach espoused by Lord Wilberforce, the “modern” contextual approach had nineteenth century precursors, at least in relation to commercial contracts. Without seeking to be exhaustive, the Earl of Selborne had deprecated and rejected the ‘extreme literalism’ in the mercantile contract construed in McGowan v Baine [1891] AC 401 at 403 (contrast the (dissenting) speech of Lord Bramwell, who had required ‘necessity, or [something] approaching to it’ in order to displace the ‘primary and natural meaning of the words’: see at 409). To the same effect was Lord Herschell’s rejection of a process of construction by reference to dictionary meaning, and insistence that contractual language must be ‘construed in a business fashion’ and “interpreted in the way in which business men would interpret them” in Southland Frozen Meat and Produce Export Company Ltd v Nelson Brothers Ltd [1898] AC 442 at 444. The approach adopted by Lords Selborne and Herschell anticipated what was popularised by Lord Wilberforce in the following century. Professor Carter has examined the evolutionary process at pp 17-20 of his book referred to in the previous paragraph.  Fifthly, the approach endorsed in Woodside avoids the difficulty of identifying what is meant by ‘ambiguity’, itself an ambiguous term, whose perception ‘differs from one judicial eye to the other’: B & B Constructions (Aust) Pty Ltd v Brian A Cheeseman & Associates Pty Ltd (1994) 35 NSWLR 227 at 234. The various meanings of ‘ambiguity’ in this context are described by M Walton, ‘Where now ambiguity?’ (2011) 35 Aust Bar Rev 176 and D Wong and B Michael, ‘Western Export Services v Jireh International: Ambiguity as the gateway to surrounding circumstances?’ (2012) 86 ALJ 57 at 67-69. Sixthly, the approach to construction of written commercial contracts reflected in Woodside at [35] accords with what had been said in familiar passages in Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; 218 CLR 451 at [22] (construction “requires consideration, not only of the text of the documents, but also the surrounding circumstances known to Pacific and BNP, and the purpose and object of the transaction”); Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165 at [40] (‘The meaning of the terms ... normally requires consideration not only of the text but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction’); and the endorsement in Wilkie v Gordian Runoff Ltd [2005] HCA 17; 221 CLR 522 at [15] of the proposition that ‘Interpreting a commercial document requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure’. It means also that the Australian approach mirrors that adopted in England, New Zealand, Singapore and Hong Kong: Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38; [2009] 1 AC 1101; Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5; [2010] 2 NZLR 444; Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] SGCA 27; 3 SLR(R) 1029 (where the Court’s reasons delivered by V K Rajah JA for the Court survey much of the English decisions and academic literature); Fully Profit (Asia) Ltd v Secretary for Justice [2013] HKCFA 40; 6 HKC 374. Seventhly, although evidence of context and purpose expands the scope of the litigation, none of the foregoing should be seen as opening the door to lengthy litigation in commercial causes. As will be seen below, the evidence of ‘surrounding circumstances’ sought to be relied on by Mainteck was lengthy, contested, vague, and divorced - by many months in time, and a markedly different commercial position - from the execution of the Second Consortial Agreement. This makes it quite distinct from evidence which is apt to assist the process of construction. Indeed, I would infer that the primary reason for adducing the evidence was to support Mainteck’s (now abandoned) misrepresentation case, rather than so as to assist in construction. 40

[30] Regard may therefore be had to evidence of the surrounding circumstances before the existence of ambiguity in an agreement is identified as an aide to interpreting the agreement for the purposes of determining whether an ambiguity exists. If thereafter ambiguity is not identified extrinsic material cannot be used to contradict the language of the instrument. If ambiguity is identified the material may be used as contextual material to aide in the interpretation of the instrument. In this context we would make the observation that the law in relation to the interpretation of commercial contracts (Codelfa; Metcash and Stratton) has now aligned with the approach to the construction of awards and enterprise agreements as espoused by Burchett J in Short v FW Hercus Pty Ltd 41 and confirmed by French J, as he then was, in Wanneroo.
Application of the Acts Interpretation Act 1901 to enterprise agreements approved under the Act
[31] Both at first instance and before us the Appellant maintained that the Agreement must be interpreted in accordance with the Acts Interpretation Act 1901 (AI Act). That proposition is made on the basis that an enterprise agreement is an agreement that is made by the Commission pursuant to a power conferred by the Act to make the agreement. 42 To make good the proposition the Appellant at first instance relied on the following passage from the judgement of French J in Wanneroo:

“The interpretation of legislative instruments is dealt with in the Legislative Instruments Act 2003 (Cth). Awards and agreements made under the Act are declared, by s 7(1) of the Legislative Instruments Act, not to be legislative instruments – see Item 18 in the table set out in s 7(1). This leaves such awards and agreements within s 46 of the Acts Interpretation Act 1901 (Cth) which provides, inter alia:

‘(1) If a provision confers on an authority the power to make an instrument that is neither a legislative instrument within the meaning of the Legislative Instruments Act 2003 nor a rule of court, then, unless the contrary intention appears:
(a) this Act applies to any instrument so made as if it were an Act and as if each provision of the instrument were a section of an Act; and
(b) expressions used in any instrument so made have the same meaning as in the enabling legislation; and
(c) any instrument so made is to be read and construed subject to the enabling legislation, and so as not to exceed the power of the authority.

An award is an instrument made by an authority, in this case the Australian Industrial Relations Commission, and so attracts the application of the Acts Interpretation Act for the purposes of its interpretation.” 43
[32] The decision in Wanneroo does not support the proposition contended by the Appellant. In Wanneroo Justice French was concerned with the construction of an award under the Workplace Relations Act 1996 (WR Act) and not an enterprise agreement made under the Act. Relevantly, the award in question was an instrument that was not a legislative instrument but was an instrument made by the Australian Industrial Relations Commission pursuant to a power under the WR Act to make the instrument. Consequently French J concluded that the award was “an instrument made by an authority, in this case the Australian Industrial Relations Commission, and so attracts the application of the Acts Interpretation Act (AI Act) for the purposes of its interpretation”. 44
[33] The Appellant also relied on a decision in Cape Australia Holdings Pty Ltd v Construction, Forestry, Mining and Energy Union 45 (Cape Australia). In Cape Australia the issue whether the AI Act applied was not in contention and the parties proceeded on the basis that the AI Act applied.46
[34] Similarly in DP World Brisbane Pty Ltd v Maritime Union of Australia 47 a Full Bench of the Commission made obiter observations based on the parties’ acceptance that the AI Act applied to the relevant agreement. The Full bench observed that if the AI Act applied it would allow the consideration of particular extrinsic material, but ultimately proceeded to decide the construction question without regard to the AI Act as no relevant extrinsic material had been identified.48
[35] It follows that the question of whether the AI Act applies to the interpretation of enterprise agreements has not been the subject of a previous Full Bench decision in which the issue has been contested and determined. It is also relevant to observe that the two Full Bench decisions to which we have referred were decided prior to the recent decision of the Full Court of the Federal Court in Toyota Motor Corporation Australia Limited v Marmara 49. We refer to that decision later.
[36] It seems to us that the Act does not confer a power on the Commission to make an enterprise agreement. An enterprise agreement is made in the circumstances described in sections 172 and 182, which are reproduced below;

172 Making an enterprise agreement
Enterprise agreements may be made about permitted matters
(1) An agreement (an enterprise agreement) that is about one or more of the following matters (the permitted matters) may be made in accordance with this Part:

(a) matters pertaining to the relationship between an employer that will be covered by the agreement and that employer’s employees who will be covered by the agreement;
(b) matters pertaining to the relationship between the employer or employers, and the employee organisation or employee organisations, that will be covered by the agreement;
(c) deductions from wages for any purpose authorised by an employee who will be covered by the agreement;

(d) how the agreement will operate.
Note 1: For when an enterprise agreement covers an employer, employee or employee organisation, see section 53.
Note 2: An employee organisation that was a bargaining representative for a proposed enterprise agreement will be covered by the agreement if the organisation notifies the FWC under section 183 that it wants to be covered.

Single-enterprise agreements
(2) An employer, or 2 or more employers that are single interest employers, may make an enterprise agreement (a single-enterprise agreement):

(a) with the employees who are employed at the time the agreement is made and who will be covered by the agreement; or
(b) with one or more relevant employee organisations if:
(i) the agreement relates to a genuine new enterprise that the employer or employers are establishing or propose to establish; and
(ii) the employer or employers have not employed any of the persons who will be necessary for the normal conduct of that enterprise and will be covered by the agreement.

Note: The expression genuine new enterprise includes a genuine new business, activity, project or undertaking (see the definition of enterprise in section 12).
Multi-enterprise agreements
(3) Two or more employers that are not all single interest employers may make an enterprise agreement (a multi-enterprise agreement):

(a) with the employees who are employed at the time the agreement is made and who will be covered by the agreement; or
(b) with one or more relevant employee organisations if:
(i) the agreement relates to a genuine new enterprise that the employers are establishing or propose to establish; and
(ii) the employers have not employed any of the persons who will be necessary for the normal conduct of that enterprise and will be covered by the agreement.

Note: The expression genuine new enterprise includes a genuine new business, activity, project or undertaking (see the definition of enterprise in section 12).
Greenfields agreements
(4) A single-enterprise agreement made as referred to in paragraph (2)(b), or a multi-enterprise agreement made as referred to in paragraph (3)(b), is a greenfields agreement.
Single interest employers
(5) Two or more employers are single interest employers if:

(a) the employers are engaged in a joint venture or common enterprise;
or
(b) the employers are related bodies corporate; or
(c) the employers are specified in a single interest employer authorisation that is in operation in relation to the proposed enterprise agreement concerned.

Requirement that there be at least 2 employees
(6) An enterprise agreement cannot be made with a single employee.
182 When an enterprise agreement is made
Single-enterprise agreement that is not a greenfields agreement

(1) If the employees of the employer, or each employer, that will be covered by a proposed single-enterprise agreement that is not a greenfields agreement have been asked to approve the agreement under subsection 181(1), the agreement is made when a majority of those employees who cast a valid vote approve the agreement.

Multi-enterprise agreement that is not a greenfields agreement

(2) If:
(a) a proposed enterprise agreement is a multi-enterprise agreement; and
(b) the employees of each of the employers that will be covered by the agreement have been asked to approve the agreement under subsection 181(1); and
(c) those employees have voted on whether or not to approve the agreement; and
(d) a majority of the employees of at least one of those employers who cast a valid vote have approved the agreement;
the agreement is made immediately after the end of the voting process referred to in subsection 181(1).
Greenfields agreement
(3) A greenfields agreement is made when it has been signed by each employer and each relevant employee organisation that the agreement is expressed to cover (which need not be all of the relevant employee organisations for the agreement).

[37] An application to the Commission for the approval of an enterprise agreement must be made within the period specified in section 185(3) or (4) of the Act. The period within which an application is made is reckoned only after the agreement is made. The Commission’s role is in approving, subject to satisfaction of the statutory criteria, the enterprise agreement already made but there is no power conferred on the Commission by the Act to make an enterprise agreement.
[38] Where the statute intends to confer power on Commission to make an instrument it expressly so provides. 50 The power conferred on the Commission by the Act is limited to approval of agreements that have already been made. Although enterprise agreements made under the Act rely for their legal enforceability on the Commission’s approval, this is not the same as the Commission having power to make the enterprise agreement. An enterprise agreement is therefore not an instrument of a kind described in s.46 of the AI Act.
[39] As mentioned earlier this issue was recently considered by a Full Court in Toyota. Relevantly the Full Court said the following:

“Toyota’s final argument on the construction of cl 4 of the Agreement (ie aside from those that were interwoven with its case on the repugnancy point) was based on the provision of the Agreement that made it an objective to attain cost structures similar to those of other members of the Toyota group worldwide. It was contended that, pursuant to ss 46 and 15AA of the Acts Interpretation Act 1901 (Cth) (“the AI Act”), an interpretation of the Agreement which would best achieve that objective is to be preferred to each other interpretation. We do not, however, accept the premise from which this argument proceeds. Section 46 of the AI Act applies where ‘a provision confers on an authority the power to make an instrument’. There is no provision of the FW Act which confers on the Commission the power to make an enterprise agreement. Such an agreement is made by the employer and the relevant employees under ss 172(2) and 182(1). We consider, therefore, that the constructional questions which arise for resolution in this appeal must be addressed without assistance from the AI Act.” 51

[40] It follows that an enterprise agreement approved by the Commission must be interpreted without recourse to the AI Act.
Summary
[41] From the foregoing, the following principles may be distilled:
1. The AI Act 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.

[42] The Commission, as presently constituted, adopts the reasoning of the Full Bench in Golden Cockerel and the authorities it refers to.

Submissions

[43] In the present matter there is a dispute between the parties as to the operation of clause 33 (specifically 33.2.2 and 33.3) of the Award (as incorporated into the Agreement).

Applicant

[44] The Applicant submitted that in deciding how the Award is to be applied the Commission should have regard to the Modern Award which succeeded the Award. In this regard the Applicant drew the Commission’s attention to the Aged Care Award 2010. 52 The Applicant pointed to the fact that clause 28.3(b) of the Aged Care Award 2010 provides that shift workers are paid annual leave loading or the relevant weekend and shift penalties, whichever are the higher.

[45] The authority for the proposition that the Commission should or can interpret one industrial instrument by reference to a subsequent industrial instrument was not explained by the Applicant. It is an approach to construction that the Commission, as presently constituted, rejects. It is not an approach consistent with the Full Bench decision in Golden Cockerel (in respect of which the Applicant decided to make no submissions).

[46] The Applicant also submitted that the Commission should have regard to supporting material, namely information published by Workplaceinfo.com.au about annual leave loading and modern awards. 53 The Commission, as presently constituted, also rejects this submission because it too is inconsistent with the decision in Golden Cockerel.

[47] The submissions made by the Applicant were of little assistance to the Commission.

Respondent

[48] The Respondent submitted that,

(a) “clause 33.3 of the [Award] is a stand alone clause and does not relate to clause 33.2.2”;
(b) “This is supported by the Nurses (Victorian Health Services) Award 2000, also used at St John’s Village, specifically stating that loading is only to be paid on 152 hours of annual leave.” 54

[49] The authority for the proposition that the Commission should or can interpret one industrial instrument by reference to another unrelated industrial instrument that also applies to the employer was not explained by the Respondent. It is an approach to construction that the Commission, as presently constituted, rejects. It is not an approach consistent with the Full Bench decision in Golden Cockerel.

[50] Following the decision in Golden Cockerel the Respondent submitted that:

(a) Clause 33 of the Award deals with entitlement to annual leave. Clause 33.1 provides that all employees, other than casuals, are entitled to four weeks annual leave on ordinary pay after twelve months continuous service. Clause 33.2 provides that the term “ordinary pay”, when used in the clause, shall be the employee’s ordinary time rate of pay and shall include certain other payments or 17.5% loading, whichever is the higher. Clause 33.3 is a separate and distinct provision which relates only to seven day shift workers and provides that such employees, as defined, will be entitled to one week’s annual leave in addition to the leave prescribed in Clause 33.1. Clause 33.3 does not contain the term “ordinary pay”. 55

(b) The submission of the Respondent is that the provisions of Clauses 33.1, 33.2 and 33.3 are not ambiguous or susceptible to more than one meaning. It is submitted that, if the Applicant’s contention is to be applied, at the time of Clause 33.3 being inserted into the Award it would have included the words “on ordinary pay” so that it read:

“A shift worker who during the year in which his or her annual leave accrues is rostered to work for four hours or more on 10 or more weekends in that year, shall be entitled to one week’s (seven consecutive days) annual leave on ordinary pay in addition to the leave prescribed in 33.1.” (emphasis added). 56

(c) As Clause 33.3 does not specify that the additional leave is to be payable at ordinary pay then it follows, from the definition of ordinary pay contained in Clause 33.2, that the payment for the additional week is at “the ordinary time rate of pay” and that the additions prescribed in Clause 33.2.1 or 33.2.2 have no application under Clause 33.3. 57

(d) However, the issue is complicated when regard is had to the provisions of Clause 33.5.3 which deals with payment to shift workers on termination of employment. This subclause provides that a shift worker shall be paid 1/48th of their ordinary pay for the period of employment which is less than a year. This is a somewhat confusing provision. The confusion arises from the 1/48th factor. It would appear that this involves a discounting of a week as 1/48th of a year is equal to 0.932 of a week and when that is applied to a period of seven days it results in 6.5 days. Accordingly, whilst the subclause uses the term “ordinary pay”, for some reason, the drafters of the provision have applied a discounted formula. Why this was done could only possibly be discovered by a considerable amount of research being undertaken to go back through archives to the time the additional week’s leave for shift workers was inserted into the Award. The Respondent is unaware of when this occurred, however, it is suggested that it may go as far back to the predecessor of the Award, namely, the Hospitals and Benevolent Homes Award made by the former Victorian Industrial Relations Commission. 58

(e) Subject to the research being conducted, the Respondent submits that it is clear that the 1/48th factor being applied to the ordinary pay of a shift worker under Clause 33.5.3 of the Award was designed to provide a discount to that ordinary pay. This is, it is submitted, consistent with the submission that Clause 33.3 intentionally omitted the term “ordinary pay” and only intended payment for the additional week’s leave for shift workers to be paid at the ordinary time rate of pay. 59

Consideration

[51] The Commission, as presently constituted, notes that:

(a) the Applicant decided not to make any submissions about the proper approach to the construction of the Agreement; and

(b) the Respondent, in responding to the Golden Cockeral decision, says the clauses “are not ambiguous or susceptible to more than one meaning.” 60

[52] The Commission now applies the Golden Cockerel principles.

1. The AI Act does not apply to the construction of an enterprise agreement made under the Act.
[53] The AI Act is not to be and has not been applied to the Commission’s interpretation of the Agreement.

2. In construing an enterprise agreement it is first necessary to determine whether an agreement has a plain meaning or contains an ambiguity.
[54] I agree with the Respondent that the clauses “are not ambiguous or susceptible to more than one meaning”. 61 However, I disagree with the Respondent about the conclusion that follows.

[55] As observed while clause 33.3 provides for “one week’s ... annual leave in addition to the leave prescribed in 33.1” it does not expressly state the basis upon which the additional weeks leave is to be paid. Therefore it is necessary to look elsewhere in the Award (as incorporated into the Agreement) to determine the basis upon which the additional weeks leave is to be paid.

[56] The only part of the Award which deals with the subject matter is clause 33.1.1; specifically in relation to the standard “four week’s annual leave”. It is to be paid “on ordinary pay”.

[57] The definition of “ordinary pay” is then to be found in clause 33.2.

[58] Clause 33.3 expressly references clause 33.1 which includes 33.1.1. Clause 33.1.1 is then given meaning by the definition of “ordinary pay” in clause 33.2.

[59] Accordingly, it necessarily follows that the additional weeks leave provided for in clause 33.3 is to be treated as the same as the leave in clause 33.1. To conclude otherwise gives no meaning to the operation of clause 33.3. It would render clause 33.3 a hollow entitlement because the employer is left with no guide as to the basis upon which it is to be paid.

3. Regard may be had to evidence of surrounding circumstances to assist in determining whether an ambiguity exists.
[60] No evidence of surrounding circumstances was lead by either party.

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.
[61] The relevant annual leave clauses from the Award (as incorporated into the Agreement) have a plain meaning (see above).

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.
[62] This principle is not relevant because the Commission, as presently constituted, has found that agreement is not ambiguous or susceptible to more than one meaning.

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.

[63] This principle is not relevant because the Commission, as presently constituted, has found that agreement is not ambiguous or susceptible to more than one meaning.

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.
[64] The context and purpose of the annual leave clauses lends support to the conclusion that the fifth week of annual leave should be treated the same as the first four weeks of annual leave that the shift workers enjoy.

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.

[65] Considering clause 33 as a whole is the only way to give meaning to the basis upon which the extra week of annual leave under clause 33.3 is to be paid.

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.
[66] The Commission, as presently constituted, has not had regard to the subjective intentions or expectations of the parties. The evidence of both Mr Hill and Mr Mitchell was not relevant and the Commission has not had regard to it.

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.
[67] No rewriting of the Agreement has been undertaken in coming to the decision in this matter. The Commission, as presently constituted, has interpreted the agreement produced by the parties.

Conclusion

[68] Having considered all that has been submitted in these proceedings and the relevant authorities, for the reasons set out above, the Commission, as presently constituted, has determined that the answer to the Agreed Question is that, in respect of clause 33.2 of the Award, the reference to “this clause” refers to clause 33 as a whole (as the Applicant contended).

[69] Therefore, annual leave loading is payable on the fifth week of annual leave enjoyed by shift workers if higher than the penalties that would otherwise apply.

COMMISSIONER

Appearances:

Mr S Tsitas for the Health Services Union.

Mr M Rahilly for St John’s Village.

Hearing details:

4 September 2014.

Melbourne.

Final submissions:

By the Respondent, 11 December 2014.

1 [2014] FWCFB 7447.

2 PN23.

3 PN30.

4 [2011] FWA 8069.

5 [2001] HCA 16.

6 [2011] FWA 8069 at [9].

7 [2002] AIRC 1376 at [23].

8 Applicant’s Submissions on Jurisdiction, 29 August 2014, page 3 of attachment 1.

9 PN122-126.

10 PN84.

11 PN85.

12 PN86.

13 PN87.

14 PN90.

15 PN106.

16 PN150.

17 PN149.

18 PN152.

19 PN154.

20 (2006) 153 IR 426.

21 Ibid at 438.

22 (1966) 66 IR 182.

23 Ibid at 184.

24 See Swire Cold Storage Pty Ltd v TWU [2008] AIRCFB 397 at [29] and AMWU v Silcar Pty Ltd [2011] FWAFB 2555 at [11].

25 (2005) 222 CLR 241.

26 Ibid at 253 per Gummow, Hayne and Heydon JJ.

27 (2006) 153 IR 426 at 440.

28 (1982) 149 CLR 337.

29 Ibid at 352.

30 [2003] FCA 520.

31 Ibid at [28]-[31].

32 Ibid at [32]-[34].

33 [2011] HCA 45 per Gummow, Heydon and Bell JJ.

34 Ibid at [2]-[4].

35 [2014] HCA 7.

36 Ibid at [35].

37 [2014] FCAFC 110.

38 Ibid at [36]-[41].

39 [2014] NSWCA 184.

40 Ibid at [71]-[85].

41 (1993) 40 FCR 511 at 518.

42 See section 46 of the AI Act.

43 (2006) 153 IR 426 at 438 [52].

44 Ibid.

45 [2012] FWAFB 3994.

46 [2012] FWAFB 3994 at [10].

47 (2013) 237 IR 180.

48 Ibid at 191.

49 [2014] FCAFC 84.

50 See for example 157(1)(b) which provides that the Commission may make a modern award, s.243 which provides that the Commission must make a low-paid authorisation in particular circumstances and s.269(1) which provides that the Commission must make a bargaining related workplace determination in particular circumstances.

51 [2014] FCAFC 84 at [58].

52 Applicant’s Submissions, 21 August 2014, page 2 of attachment 1.

53 Applicant’s Submissions, 21 August 2014, page 3 of attachment 1.

54 Respondent’s Submissions, 11 August 2014, page 1.

55 Respondent’s Final Submissions, 11 December 2014, para 4.

56 Respondent’s Final Submissions, 11 December 2014, para 5.

57 Respondent’s Final Submissions, 11 December 2014, para 6.

58 Respondent’s Final Submissions, 11 December 2014, para 7.

59 Respondent’s Final Submissions, 11 December 2014, para 8.

60 Above n 56.

61 Ibid.

Printed by authority of the Commonwealth Government Printer

Health Services Union v St John's Village

[2015] FWC 910

6 FEBRUARY 2015

DECISION