National Union of Workers v Linfox Australia Pty Ltd

[2016] FWC 3039

[2016] FWC 3039

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.739—Dispute resolution

National Union of Workers
v
Linfox Australia Pty Ltd
(C2015/7207)

Road transport industry
COMMISSIONER GREGORY	MELBOURNE, 1 JUNE 2016

Alleged dispute about matters arising under the enterprise agreement

Introduction

[1] Linfox Australia Pty Ltd (“Linfox”) operates a large Distribution Centre at Truganina in Victoria which services the Coles Supermarkets. A number of the employees at the Distribution Centre were previously employed by a business known as Westgate Logistics Pty Ltd (“Westgate”) before it was acquired by Linfox. The relevant Agreement that now covers the parties is the Linfox and Transport Workers’ Union Road Transport and Distribution Centres Agreement 2014 1 (“the 2014 Agreement.”) The Agreement was approved on 14 February 2014 and has a nominal expiry date of 31 December 2017.

[2] Linfox wants all employees in the Distribution Centre to be able to perform what it describes as “the core picking function,” when required. However, eight employees at the Distribution Centre, who were previously employed by Westgate Logistics, claim they are not required to perform this work. Five of the employees submit the contract of employment they entered into when employed by Westgate continues to have application, and only requires them to perform certain functions, which do not include picking work. The remaining three employees acknowledge their roles and responsibilities have changed since they were employed by Westgate, but claim they have never been asked to perform picking work. They accordingly submit Clause 5 “Custom and Practice” in the 2014 Agreement means they are also not required to perform picking duties.

[3] The dispute was initiated when Linfox requested that two of the employees attend training in what it describes as “the disputed task,” 2 being the picking function. The employees refused claiming they could not be directed to perform this work. However, Linfox continues to require them to do this work, when necessary.

[4] The NUW has now lodged a dispute under s.739 of the Fair Work Act 2009 (Cth) and the Dispute Resolution Clause in Clause 33 of the Agreement. Clause 33 sets out the steps to be followed when there is “[a]ny dispute or grievance that arises at the workplace between an Employee and Linfox and/or Linfox and the TWU about the Agreement or the employment relationship.” 3 It also states in sub clauses (d) and (e) that when a dispute cannot be resolved by the parties in the workplace, then it is to be dealt with by way of conciliation before the Commission and, if still not resolved, the Commission “may proceed to arbitrate the dispute and/or otherwise determine the rights and/or obligations of the parties to the dispute.”4 There is no dispute between the parties that the Commission has jurisdiction to deal with and determine the application.

[5] The matter was previously dealt with in conciliation but was unable to be resolved. This decision deals with the subsequent request to have the matter arbitrated.

The Evidence and Submissions

[6] The NUW submits that a number of employees at the Distribution Centre have never been required to perform picking work. These employees were previously employed by Westgate, prior to its acquisition by Linfox in 2007.

[7] The NUW now relies on two separate grounds in support of its position. Firstly, it submits in respect of five of the eight employees that any direction by Linfox to pick would be unlawful because those employees are employed under the terms of a contract of employment which states each is employed in specific “positions,” being for example, “forklift driver” or “forklift operator.” 5

[8] It continues to submit these employment contracts provide additional benefits or entitlements for the employees, over and above those in the 2014 Agreement. It also submits these contractual arrangements continue to apply because of the “Transfer of Employment from Westgate to Linfox” 6 letters provided to the employees at the time Linfox acquired the Westgate business, which make clear the employees will continue to be employed by Linfox in their current roles and on the same terms and conditions as they were entitled to with Westgate, immediately prior to the transfer date.

[9] It submits the Westgate contracts also make clear each employee is employed in a specific “position,” 7 and can only be directed to perform work associated with that position. In this context it acknowledges under the classification structure in the 2014 Agreement an employee can be directed to perform tasks of a lower classification, however, it submits the five employees cannot be directed in this way because of the on-going contractual obligations that continue to apply. In this case it submits the limitation precludes them from performing the picking task because it is a wholly different task from those involved in their current positions.

[10] The NUW does acknowledge that the contracts also indicate that an employee’s duties may change from time to time, but submits this involves circumstances where, for example, evolving developments in technology impact on how the duties are performed. However, it submits any changes of this kind are still subject to the employees being employed in a particular “position.” It also acknowledges some manual handling is involved in the employees’ current roles, but picking is an entirely separate function from the positions they have been employed in.

[11] It continues to submit the further reference in the “Duties” term in the Westgate contract to being “required to work…in an alternative warehousing and distribution position” 8 only applies where “fluctuations in operational requirements”9 occur, and this is not applicable in circumstances where employees are being required to perform picking and packing work on a permanent basis.

[12] It also relies on a decision of the Full Court of the Supreme Court of South Australia in Bampton v Viterra Ltd 10 when it concluded at para.13 on page 3:

“The evaluation of whether a particular collection of duties falls within the scope of a contract of employment is not undertaken in abstract. It must be informed by the context of the relevant labour market. The context includes the employment structure of the employer’s enterprise, the worker’s position in that structure, and the evolution of both in response to prevailing economic, technological and industrial conditions. The context also includes the employee’s place in the labour market having regard to his or her profession, vocation, qualifications, skills and work experience (collectively job skills).” 11

[13] It also made reference to the High Court decision in Commissioner for Government Transport v Royall 12 in which it made reference to a proposition from a much earlier English decision13 in the following terms:

“The general rule is that a contract by which a person is employed in a specific character is to be construed as obliging him to render, not indeed all service that may be thought reasonable, but such service only as properly appertains to that character.” 14

[14] The NUW relies on different grounds in respect of the remaining three employees, who have been reclassified since being employed by Linfox. In this case it submits there has been a custom and practice in place, whereby they have not been required to perform the picking function, and therefore Linfox cannot now direct those employees to perform picking work. The NUW presumes this custom and practice derives from the contractual arrangements that previously applied to the employees, but regardless of its derivation, it submits it precludes them from being required to perform the picking function.

[15] In this context it relies on Clause 5 of the 2014 Agreement which states:

“5. CUSTOM AND PRACTICE

5.1 This Agreement is not intended to, nor shall it, alter a custom and practice applicable to the parties.

5.2 It is the intention of the parties to this Agreement to, during the Term, attempt to reduce to writing any custom and practice applicable to Linfox and the Employees.

5.3 The parties will review and where agreed create a local agreement arising from the custom and practice in accordance with Clause 34.

5.4 Any dispute about the operation of this clause is to be dealt with in accordance with the disputes procedure in the Agreement.” 15

[16] It also relies on previous decisions of the Commission in support of its submissions, including those in Transport Workers’ Union of Australia v Linfox Australia Pty Ltd 16, Transport Workers Union of Australia v Linfox Australia Pty Ltd17, and Liquor, Hospitality and Miscellaneous Union v Wattyl Australia Pty Ltd.18

[17] In its submission “custom and practice” is relevant and can be relied upon in various circumstances. However, in this matter the NUW submits it is not being relied upon to incorporate terms into the 2014 Agreement, but is instead relied upon because the 2014 Agreement already contains an express provision dealing with “custom and practice,” and what is to occur if it is found to exist. It submits Clause 5 in the 2014 Agreement makes clear it is not intended, firstly, to alter a custom and practice that applies to the parties. It submits the evidence makes clear in this case that over a period of many years a small group of employees in the Distribution Centre have not been directed to perform the picking task during their ordinary hours of employment. It accordingly submits those employees cannot be directed to perform the picking task.

[18] It also submits Clause 5 should be given its plain and ordinary meaning, and cannot be considered to be ambiguous in terms of its meaning.

[19] It submits, in conclusion, that the present matter can be distinguished from the circumstances in Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd 19, (“Con-Stan”), and the principles established by the High Court in that decision, because it was dealing with circumstances in which custom and practice can be implied into the terms of an agreement, whereas in the present matter custom and practice is already dealt with by the express term in the 2014 Agreement. In its submission Clause 5 prescribes what is to apply in circumstances where a custom and practice is found to exist, and therefore the principles established in the Con-Stan decision have no application.

[20] Linfox submits, in response, the picking and packing functions are within the scope of the duties to be performed by the employees and, even if those tasks have not been performed in the past, the employment contracts and the current 2014 Agreement contemplate such a direction. It also submits the NUW’s submissions about custom and practice are misconceived but, in any case, it has failed to establish a custom and practice exists. It submits in the alternative that even if a custom and practice is found to exist the NUW has not established it should continue and/or that Linfox is prevented from discontinuing it.

[21] It also submits the NUW’s position is not consistent with the authorities that are relevant to the determination of this matter, and refers, in particular, to the Full Bench decision in Transport Workers’ Union of Australia v Linfox Australia Pty Ltd, 20 handed down in February this year.

[22] It continues to submit it expects all distribution facility employees to perform the tasks and duties contained within their specific classification designations, and refers to Clause 22.1(b) in Part B of the 2014 Agreement entitled “Employee’s Duties,” which provides that employees are to “comply with reasonable and lawful instructions of management”. 21 It also makes reference to the classification descriptors which require employees to perform the tasks and duties contained within those particular classification levels. It continues to submit the relevant employees are contractually bound to perform these tasks and duties.

[23] In regard to the employment contracts signed by the employees when they commenced employment with Westgate, Linfox submits they make clear their terms and conditions of employment are governed by the conditions of the relevant industrial instrument, and they are therefore lawfully bound to perform the tasks and duties set out in the relevant classification levels. In this context it relies upon the decision in NUW v Bidvest (Victoria) Pty Ltd. 22

[24] Is also notes the Westgate contracts contain the following term under the heading “DUTIES:”

“Your duties were previously outlined during your interview, however duties and responsibilities of employees are regularly assessed by WL and may change from time to time.” 23

[25] It continues to state:

“With fluctuations in operational requirements you may be required to work at another business site or in an alternative warehousing distribution position. If this occurs you will be given reasonable notice.” 24

[26] It submits these terms make clear that under the Westgate contracts the employer had a right to change the duties performed by employees from time to time, and it has continued to make these changes, when necessary, in response to the changing operational requirements of the business.

[27] It also submits these terms align with the relevant classification level descriptors, which have been developed in response to the operation of the Distribution Centre, which requires a range of tasks and duties be performed at different times. It submits, in conclusion, “[t]he clearly expressed industrial expectation is that DFE’s are expected to and must be competent to perform all traditional warehouse tasks/duties contained within their classification designations.” 25

[28] Linfox continues to submit each of the employees has performed a range of tasks and duties, including the picking task, and has received and undertaken training in regard to this work. It also submits that the evidence indicates most of the employees have performed picking duties during overtime hours, and no distinction should be drawn between work performed in ordinary time and overtime hours.

[29] In dealing with the submissions of the NUW about “custom and practice” Linfox submits, firstly, that the NUW has not made reference to the recent Full Bench decision in its submissions. It submits the Full Bench made findings about the proper interpretation of Clause 5 in the 2014 Agreement, and the decision makes clear the requirement for establishing the existence of custom and practice are consistent with the decision of the High Court in Con-Stan. It refers, in particular, to the following extract from the Full Bench decision:

“[27] …the High Court of Australia provided four propositions to consider when determining whether a “custom and practice” exists:

• The existence of a custom or usage that will justify the implication of a term into a contract is a question of fact;



• There must be evidence that the custom relied on is so well known and acquiesced in that everyone making a contract in that situation can reasonably be presumed to have imported that term into the contract. The customer must be so notorious that everybody in the trade enters into a contract with that usage as an implied term. It must be uniform as well is reasonable, and it must have quite as much certainty as a written contract itself;



• A term will not be implied in or contract on the basis of custom where it is contrary to the express terms of the agreement; and



• A person may be bound by a custom notwithstanding the fact that he or she had no knowledge of it.” 26

[28] This approach has been taken in various other decisions of this Commission and is well-understood as the correct approach for the Full Bench to rely on in determining whether the procedures provided for in the APM’s are a “custom and practice” in the relevant industrial context.” 27

[30] Linfox submits, in response, that the evidence does not establish a custom and practice exists. It submits each employee has performed picking work on occasions and has received training in these tasks. It also notes at least three of the employees have more recently signed position descriptions, which make clear their key accountabilities involve “order picking”. 28 It also submits when the second and third principles in the Con-Stan decision are applied to the circumstances of this matter it is evident the existence of a custom and practice cannot be established.

[31] However, Linfox continues to indicate that even if the Commission finds a custom and practice does exist it is not precluded from changing those arrangements. In this context it submits the NUW has misconstrued the intent of Clause 5 in the 2014 Agreement, and the clause only intends that a custom and practice, if established, be continued with the agreement of the parties. Otherwise, the continuation of a custom and practice is governed by traditional arbitral principles, and if it is found to exist the next enquiry is whether it is to be continued and, if so, on what terms. It again refers to the Full Bench decision in support of this view about the correct interpretation of Clause 5 of the 2014 Agreement.

[32] It also refers to the “Objectives Of This Agreement” set out in Clause 15 of the 2014 Agreement, which make reference to assisting “Linfox to operate its business flexibility,” 29 developing a “multi skilled, flexible and adaptable workforce,”30 and removing “inefficient work practices and processes in all areas of Linfox’s operations to ensure flexible, timely and reliable delivery of services to Linfox and its customers”.31 It submits, in response, that if a custom and practice is found to exist in all the circumstances of this matter, it is not bound to continue that practice because it is at odds with the above provisions in the 2014 Agreement.

Consideration

[33] As indicated, the NUW relies on two separate grounds in support of its application. The first applies in regard to the circumstances of five of the eight employees. It submits the direction to these employees is an “unlawful direction” because they are employed under the ongoing terms of the Westgate contracts, which state each is employed in a specific “position,” and cannot be directed to perform work that involves roles and responsibilities that are not related to that position. It also makes reference to the “Transfer of Employment from Westgate to Linfox” letter, provided to the employees at the time Linfox acquired the Westgate business, in support of its submission that the Westgate contracts continue to have application.

[34] Linfox submits, in response, that the contracts make clear they are to be read subject to the relevant industrial instrument. It also places particular reliance on the term in the Westgate contracts under the heading “Duties.” The relevant extracts have already been set out, but are restated now:

“Your duties were previously outlined during your interview, however duties and responsibilities of employees are regularly assessed by WL and may change from time to time. 32
…
With the fluctuations in operational requirements you may be required to work at another business site or in an alternative warehousing and distribution position. If this occurs, we will give you reasonable notice.” 33

[35] Linfox also submits that many of its employees at the Distribution Centre, who were a party to a Westgate contract, are now performing other duties, including what it describes as “the core picking function.”

[36] I intend to deal with this issue at the outset. The Westgate contracts contain reference to employment in a specific position, although they also make reference to the relevant industrial instrument. However, they also contain the wording set out under the heading “Duties.” The provisions in this Duties term, in turn, appears to foreshadow the circumstances that now exist at the Distribution Centre.

[37] In summary, Linfox now wants all employees in the Distribution Centre to be available, when necessary, to perform what it variously describes as picking and packing work, or the picking function. It submits all employees have been provided with training to support this change. It also submits the classification descriptors in the 2014 Agreement provide that employees can be required to perform roles and responsibilities associated with their particular classification level, but also those associated with lower classification levels.

[38] I am satisfied, in response, that what Linfox now proposes is consistent with the wording contained in the “Duties” term in the so-called Westgate contracts. It is, firstly, consistent with a situation where the “Duties and responsibilities of employees are regularly assessed …. and may change from time to time.” 34 Secondly, I am satisfied it is consistent with the second part in the Duties term when it refers to, “with the fluctuations in operational requirements you may be required to work at another business site or in an alternative warehousing and distribution position.”35

[39] The current changes obviously do not involve a requirement to work “at another business site.” However, I am satisfied they fall within the requirement to work “in an alternative warehousing and distribution position,” and therefore are consistent with what is contemplated in the “Duties” term. The fact that the evidence indicates some, if not all of the employees, have worked in their “positions” for quite some time does not change this situation in terms of how the Westgate contracts are to be interpreted. For example, if the NUW is of the view that the Westgate contracts continue to have ongoing operation in terms of employees being employed in a particular “position,” then I am also satisfied the other provisions in the contracts also have ongoing application.

[40] I am satisfied, in conclusion, that the changes Linfox is now implementing to the operational requirements in the Distribution Centre, and the consequent changes for the employees, are consistent with what is contemplated in the “Duties” term in the Westgate contract. While the employees will presumably continue to be employed primarily in their specific “positions” for the majority of the time, when “fluctuations in operational requirements” occur I am satisfied they can also be directed to carry out picking work. Accordingly, I am not satisfied that this first ground relied upon by the NUW prevents Linfox from implementing what it now intends.

[41] I now turn to consider the submissions and evidence in regard to “custom and practice.”

[42] I turn, firstly, to deal with the evidence about this issue. Each of the employees gave evidence in the proceedings. Without going to that evidence in detail it indicates that while the employees have signed acknowledgements confirming they have received training and instruction in the picking function, they have generally not been required to perform this task in ordinary time hours since being been employed by Linfox. However, most if not all have volunteered to perform this work in the course of additional overtime shifts.

[43] In summary, the NUW concludes from this evidence that, for whatever reason, but presumably because of the existence of the Westgate contracts, these employees have not been required to perform the picking function, and have instead primarily carried out the roles and responsibilities of their specific “position.”

[44] In response, Linfox relies, firstly, on the witness evidence of Mr Brendan Milburn, who is now employed by the business in the position of Project Manager. However, he has been employed by Linfox since March 1999, and prior to his current position held managerial positions with both Westgate Logistics and Linfox at the Distribution Centre.

[45] He said all employees in the Distribution Centre are required from time to time to perform picking work, which he described as “the most critical function” 36 in the Distribution Centre. He said this was required because there is an amount of work to be carried out which is planned for, however, “Over a day for any given reason, volumes will fluctuate. Attendance could be poor, you require to move people around. Some people may start their day in a specific task and throughout the day be changed on to alternative tasks due to the work – the volume of work.”37

[46] He also said he has at various times given directions to pick to each of the named employees, and he could recall observing them performing picking work. This occurred, in particular, when they were picking in the bulk area because he was able to observe this area in the Distribution Centre from his office.

[47] Linfox also relied on evidence of video footage filmed in the Distribution Centre of each of the employees involved in forklift operations. This footage showed, in particular, the employees involved in some manual handling tasks associated with getting down from the forklift and placing cartons from depleted pallets onto full pallets, that were then placed back in the picking face. Linfox provided this evidence primarily to demonstrate that although the employees are working as forklift operators there is an element of manual handling involved in this work. Each of the employees, for example, indicated in cross examination that in the course of a typical day at work they could be required to perform this task up to 60 times, and sometimes more often.

[48] The divergent evidence provided by Mr Milburn and each of the individual employees is difficult to reconcile. As indicated, the employees are firmly of the view they have not been directed to perform the picking task in the past, but Mr Milburn has a different recollection, although he was not necessarily clear on precise dates and times. This is not surprising given the large number of employees who work in the Distribution Centre, including those directly employed by Linfox, and the additional labour hire employees who supplement the directly employed workforce.

[49] However, based on the evidence in the proceedings it is difficult to conclude that each of the employees intended to mislead the Commission when providing evidence on oath. On balance I am satisfied, in conclusion, that the employees were generally only required to perform the roles and responsibilities associated with their “position” during ordinary time hours, and were not required to perform the picking task.

[50] However, it is also acknowledged that the evidence indicates the employees have performed picking work, at least as volunteers during overtime shifts. It is also acknowledged that in the position of forklift operator there is an amount of manual handling work involved, and the employees are required on numerous occasions each day to carry out this work.

[51] Against this background, the NUW submits a custom and practice exists in the Distribution Centre and submits Clause 5 in the 2014 Agreement, and the terms contained in sub Clause 5.1, in particular, prevent that custom and practice from being changed.

[52] Linfox submits, in response, that no custom and practice exists. However, it submits, in the alternative, that if a customer and practice is found to exist Clause 5 should not be interpreted in the way the NUW contends. It also submits it is not bound, in any case, to maintain existing custom and practice, and to do so would be contrary to the Objectives of the Agreement set out in Clause 15.

[53] Both parties made reference to various authorities in support of their submissions. The NUW, firstly, refers to the decision of Commissioner Roberts in Transport Workers’ Union of Australia v Linfox Australia Pty Ltd. 38 The Commissioner in that matter was also dealing with a dispute about Clause 5 in the 2014 Agreement.

[54] He concluded that an interpretation about the application of public holiday entitlements, which had been in place for at least 8 years, and was understood by both management and employees to be applied in that way, “was definitely 'a custom and practice applicable to the parties,” 39 in terms of Clause 5 in the 2014 Agreement. It is further clear that neither side attempted to reduce the arrangement to writing, but that appears to be common practice, despite the aspirations of sub – clause 5.3 of the Agreement.”40

[55] He therefore concluded that an attempt by the business to change these arrangements “was not open to Linfox in the light of the provisions of clause 5 of the Agreement.” 41 It was accordingly required to revert to its previous practice.

[56] The NUW also relies on a further decision of Commissioner Roberts, handed down in May last year, 42 again involving the same parties, in Transport Workers’ Union of Australia v Linfox Australia Pty Ltd. It also concerned Clause 5 in the 2014 Agreement, and involved a dispute notified by the Transport Workers’ Union about the removal of telephone and laundry allowances paid to two employees in their capacities as Union delegates. The TWU again relied on Clause 5 in the Agreement when Linfox sought to stop the payment of these allowances. It argued the inclusion of Clause 5 in the 2014 Agreement demonstrated an intention by the parties to accept existing custom and practice and make them legally binding, without the need for their incorporation through the traditional common law means. Linfox, in response, denied the existence of any custom and practice, but argued in the alternative that if it was found to exist Clause 5 does not impose an obligation on it to retain the custom and practice, but simply intends it is not displaced by the operation of the Agreement.

[57] Commissioner Roberts concluded that the laundry allowance was not required to be retained because it was only an entitlement while the terms of the employee’s employment mandated its payment. When that no longer applied, Linfox was no longer bound to continue to pay the allowance.

[58] However, Commissioner Roberts came to a different conclusion in respect of the telephone allowances. He concluded:

“[74] The Agreement, at clause 5 in particular, acknowledges the existence of instances of ‘custom and practice’ between it and employees covered by the Agreement. This is a quintessential instance of a local ‘custom and practice’ arrangement initiated by a manager with authority to authorise payment of the allowance at a local level. Mr Caunt’s initiative created a local arrangement at Chullora whereby Mr Waltis and Mr Pickering were to receive the phone allowance. Clause 5 makes it clear that such local arrangements cannot be altered unilaterally and this is reinforced by the terms of clause 34 of the Agreement. Disputes about the operation of clause 5 are to be dealt with through the Agreement’s disputes procedure.

[75] I therefore determine that the allowances which were being paid to Mr Waltis and Mr Pickering should not have been removed by Linfox in the way that the Company did. The existence of the allowances may have come as a surprise to senior Linfox management but that does not constitute a reason to remove them unilaterally. The allowances should be restored from the date they were removed. In making this determination, I wish to also make it clear that my decision has no wider application beyond the particular circumstances of Mr Waltis and Mr Pickering and has no precedent value. Should either Mr Waltis or Mr Pickering cease at any time to be TWU delegates then the allowances will automatically cease at the same time. The allowances would not transfer to any new delegates or delegates.” 43

[59] The Union also made reference to the decisions of Commissioner Harrison in Liquor, Hospitality and Miscellaneous Union v Wattyl Australia Pty Ltd, 44 and Commissioner Leary in Construction, Forestry, Mining and Energy Union v Blair Athol Coal,45 as examples of decisions to do with awards/agreements that contain terms dealing with custom and practice, and what should apply as a consequence of those provisions.

[60] In response, Linfox relies, in particular, on the decision of the Full Bench in Transport Workers’ Union of Australia v Linfox Australia Pty Ltd,  46 handed down in February this year. In placing reliance on this decision it criticised the NUW for not referring to it, given it involves consideration of Clause 5 in the 2014 Agreement by a Full Bench on appeal. However, this criticism appears misplaced as the NUW did refer to the decision in its closing submissions, and sought to distinguish the circumstances from those involved in the present matter. I intend to return to these submissions shortly.

[61] The Full Bench in its decision was again dealing with an earlier decision by Commissioner Roberts, handed down at short notice at the insistence of the parties, and as a consequence containing limited reasons for decision. The matter concerned an issue about whether Linfox was required to pay the wage rates prescribed by the 2014 Agreement, or whether it was obliged to continue to pay certain so-called “Alternate Payment Method” rates, which applied under previous Agreements, and which Linfox continued to provide to some of its employees after the relevant expiry dates of those Agreements.

[62] Commissioner Roberts found at first instance the two Agreements providing for the Alternative Payment Methods had both expired, and therefore were not incorporated or otherwise subsumed into the 2014 Agreement, and Linfox had no obligation to continue to apply those rates to its employees.

[63] The TWU appealed the decision on the basis that the Alternative Payment Methods were a custom and practice within the meaning of Clause 5 of the 2014 Agreement.

[64] The Full Bench indicated, in response, “At the heart of the appeal was whether the procedures provided for in the APM Agreements were custom and practice and thus incorporated into the 2014 agreement.” 47 It also decided, given the material before it, that it was able to determine the matter for itself. It is appropriate in the circumstances of the present matter to set out the conclusions of the Full Bench in some detail. It stated as follows (references omitted):

“[27]In relation to the Appellant's contention that the Commissioner erred in finding that the system of work under the APMs did not constitute a "custom and practice" within clause 5 of the 2014 Agreement, the crux of the matter is an issue of construction. That is, whether the APMs are incorporated into the 2014 Agreement through the operation of clause 5 as a "custom and practice." In Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd ("Con-Stan"),the High Court of Australia provided four propositions to consider when determining whether a "custom and practice" exists:

• The existence of a custom or usage that will justify the implication of a term into a contract is a question of fact;



• There must be evidence that the custom relied on is so well known and acquiesced in that everyone making a contract in that situation can reasonably be presumed to have imported that term into the contract. The custom must be so notorious that everybody in the trade enters into a contract with that usage as an implied term. It must be uniform as well as reasonable, and it must have quite as much certainty as the written contract itself;



• A term will not be implied into a contract on the basis of custom where it is contrary to the express terms of the agreement; and



• A person may be bound by a custom notwithstanding the fact that he or she had no knowledge of it.

[28]This approach has been taken in various other decisions of this Commission and is well-understood as the correct approach for the Full Bench to rely on in determining whether the procedures provided for in the APMs are a "custom and practice" in the relevant industrial context.

[29]The second proposition in Con-Stan, that a custom must be so well known and acquiesced in that everyone making a contract in that situation can reasonably be presumed to have imported that term into the contract, is particularly relevant. In the industrial context of the present case it is very common for parties to continue to apply an agreement long after the agreement has expired. It does not follow that the expired agreement becomes part of the new agreement. We therefore find that the APM was not a custom and practice.

[30]Furthermore, the Appellant's argument that the APMs should be incorporated into the contract is contrary to an express term of the 2014 Agreement; clause 45.2 of the 2014 Agreement provides that "Linfox may, at its sole discretion, implement or discontinue any productivity or performance based payment arrangements." Upon an application of the third proposition in Con-Stan to the present matter, we prefer the Respondent's submission that the APMs were not a "custom and practice" per clause 5 of the 2014 Agreement on the basis that the 2014 Agreement, being a fixed term contract, required an express term that incorporated the APMs.

[31] In Golden Cockerel, the Full Bench of the Commission provided ten principles on the interpretation of enterprise agreements. The principles relevant to this appeal have been extracted as follows:

"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.

…

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…"

[32]These principles indicate that in construing an enterprise agreement the meaning of terms is to be determined objectively having regard to the common intentions of the parties. In doing so, the common intentions of the parties are not to be determined by having regard to the subjective intentions of one party. As such, and applying Golden Cockerel, we prefer the Respondent's submission that no weight should be placed on Mr Warnes' evidence as to what the intentions of the parties were. The intention of the parties is to be determined by the language used in the express agreement.

[33]We consider that the language of the 2014 Agreement is unambiguous and has a plain meaning as to the intention of the parties. Clause 45.2 unambiguously entitles the Respondent to discontinue any performance based payment arrangements at its sole discretion. As such, we find that upon reading the language the parties have used in the express agreement, a reasonable person would understand the common intention to be that the Respondent was not bound to the expired APMs and would remunerate employees according to the 2014 Agreement.

[34]In relation to the construction of clause 5 of the 2014 Agreement, the Appellant has urged the Full Bench to read clause 5.1 to mean that the agreement shall not affect custom and practice and not to draw a link between clause 5.1 and clause 5.2 and clause 5.3. In our view, the correct reading of clause 5 is that if there is a custom and practice that's not in writing, the parties will review this and where agreed, they will create a local agreement arising from the custom and practice in accordance with clause 34. In the Appellant's submission, the APMs are not a local agreement and we agree that they are not in circumstances where the process in clause 34 has not taken place to create one.

[35]We note that during the hearing counsel for the Respondent was asked whether any of the monetary benefits available under the APMs increased after their expiry. It was submitted that there was a base amount increase, which in our view indicates a departure from the practice under the fixed terms of the agreement following the expiry of the agreement and this weighs against the existence of a custom and practice. Indeed, counsel for the Appellant was asked during oral submissions if he would be making the submission that the APMs were custom and practice if the payments had stopped altogether, to which he replied in the negative. If the payments had stopped altogether, it would have indicated a departure from the previous practice. Likewise, in circumstances where there has been a change in the rates following the expiry, it cannot be said that the arrangement had continued, making it a custom and practice.

[36]In all of the circumstances, we find that the AMPs were not a "custom and practice" and did not form part of the 2014 Agreement. The Commissioner did not fall into error and was correct in concluding that the Respondent was entitled to pay the rates prescribed by clause 88.2 of the 2014 Agreement.

Conclusion

[37]The appeal is not granted and the matter is dismissed.” 48

[65] It is relevant at this point to return to the submissions of the NUW that deal with the Full Bench decision referred to above, together with the decision in Con-Stan, and the provisions in Clause 5 of the 2014 Agreement. The NUW submits the principles established by the High Court in Con-Stan are not relevant in this matter because of the existence of Clause 5 in the 2014 Agreement. It submits those principles are only relevant when an Agreement is silent as to custom and practice, and consideration is being given to whether claimed custom and practice should be incorporated or implied into those arrangements. In other words Con-Stan has no relevance where an Agreement or Award already provides that custom and practice is to be included, or is not to be altered by the terms of the relevant instrument.

[66] However, I am not satisfied this approach is correct, given the recent decision of the Full Bench. It appears instead to make clear that in considering what is a “custom and practice” under Clause 5 of the 2014 Agreement the principles in Con-Stan are to be applied, and without restating the relevant extracts from the Full Bench decision I refer to [28], in particular, in support of this conclusion. I am also of the view that I am bound to follow the Full Bench decision, given it is dealing with circumstances that are not dissimilar to those in the present matter.

[67] In applying the principles from the decision in Con-Stan to the circumstances of this matter the second and third principles appear to be of particular relevance. In applying the second principle I am not satisfied, in response, that the evidence in the present matter establishes that “the custom relied on is so well known and acquiesced in that everyone making a contract in that situation can reasonably be presumed to have imported that term into the contract. Custom must be so notorious that everybody in the trade enters into a contract with that usage as an implied term. It must be uniform as well is reasonable, and it must have quite as much certainty as the written contract itself; ……” 49

[68] Linfox obviously submits that the evidence does not establish this requirement, although this is not necessarily conclusive of itself. However, the evidence does indicate that only a small proportion of the total number of former Westgate employees seek to rely upon this custom and practice. It also indicates that a significant number of other ex-Westgate employees have, presumably by agreement or otherwise, taken on other roles and responsibilities since being employed by Linfox. No other evidence was provided to demonstrate the existence of what the principal requires.

[69] Linfox also relies on other provisions in the 2014 Agreement to support an argument based on the third principle in the Con-Stan decision. In this case it refers, in particular, to the Objectives set out in Clause 15 of the Agreement. However, the existence in this case of an express term in the 2014 Agreement, which can be said to refute the claimed custom and practice, is by no means as clear as it was in the matter before the Full Bench, and which ultimately led to its decision.

[70] However, leaving aside the application of the principles from Con-Stan I am also satisfied the conclusions of the Full Bench in regard to the construction of Clause 5 are of particular relevance in the circumstances of this matter. As indicated in [34] the Full Bench concluded that “the correct reading of clause 5 is that if there is a custom and practice that’s not in writing, the parties will review this and where agreed, they will create a local agreement arising from the custom and practice in accordance with clause 34.” 50

[71] I am satisfied, in response, that this requires there must first be a custom and practice that is not committed to writing. It next requires the parties to review this situation and, where agreed, create a local agreement arising from the custom and practice in accordance with Clause 34 of the 2014 Agreement.

[72] Clause 34 is headed “Facilitative Clause for Further Agreements and Local Matters,” and deals particularly with the making of agreements about “new local matters,” or new local agreements, or changes to existing local agreements.

[73] As a consequence of this interpretation by the Full Bench of Clause 5 in the 2014 Agreement I am satisfied it is not appropriate to deal further with the present application. I am satisfied instead that if the NUW wants to progress the matter it needs to do so, firstly, by establishing that a custom and practice exists that has not been reduced to writing, having regard to the principles contained in Con-Stan.

[74] If it is able to establish such a custom and practice exists then the parties to the 2014 Agreement are to review that situation and, where agreed, create a local agreement in accordance with Clause 34. Presumably, in the absence of any such agreement the parties could have resort to the Settlement of Disputes Procedure in Clause 33 of the Agreement to deal with that impasse.

Conclusion

[75] In conclusion, I am satisfied, firstly, that I am bound to follow the approach adopted by the Full Bench in regard to the application of Clause 5 in the 2014 Agreement, given it was dealing with matters closely aligned to those in the present application. Secondly, I am not satisfied the NUW has sought to deal with its claim of “custom and practice” on the basis of the principles established by the decision in Con-Stan, as the Full Bench decision requires. Thirdly, I am not satisfied, for the reasons indicated, that the Westgate contracts preclude Linfox from implementing the changes it now proposes. The application is accordingly dismissed.

COMMISSIONER

Appearances:

D Mujkic for the National Union of Workers

D Jones for Linfox Australia Pty Ltd

Hearing details:

2016.

Melbourne:

April 27 and May 12

 1   AE406887.

 2   Respondent’s outline of submissions, dated 21 April 2016, at para 2.

 3   Above n i at cl 33.1.

 4   Above n i at cl 33.1(e).

 5   Applicant’s outline of submissions, dated 31 March 2016, at para 22.

 6   Ibid.

 7   Ibid at para 25-6.

 8   Ibid at para 27.

 9   Ibid at para 27.

 10 (2015) SASCFC 87.

 11   Ibid at p.3, [13].

 12 (1966) 116 CLR 314.

 13   Price v Mouat (1862) 11 CB (NS) 508 at 510.

 14 (1966) 116 CLR 314 at 322.

 15   Above n i at cl 5.

 16   [2016] FWC 908.

 17   [2015] FWC 2768.

 18   [2009] AIRC 25

 19 (1986) 160 CLR 226

 20   [2016] FWCFB 443.

 21   Above n i at cl 22.1(b).

 22   [2010] FWA 8815.

 23   Above n ii at para 25.

 24   Ibid.

 25   Ibid at para 34.

 26   Above n xix at 227.

 27   Above n xx at [27]-[28].

 28   Above n ii at para 38.

 29   Above n i at cl. 15.1(a).

 30   Ibid at cl. 15.1(c).

 31   Above n i at cl. 15.1(e).

 32   Above n ii at para 25.

 33   Above n ii at para 27.

 34   Above n ii at para 25.

 35   Above n ii at para 27.

 36   Transcript at PN2179.

 37   Ibid at PN183.

 38   Above n xvi.

 39 Ibid at [34].

 40   Ibid.

 41 Ibid at [35].

 42   Above n xvii.

 43   Ibid at [74]-[75].

 44   [2009] AIRC 25.

 45   Construction, Forestry, Mining and Energy Union v Blair Athol Coal [1996] AIRC 1778, Print N4979.

 46   Above n xx.

 47 Above n xx at [9].

 48   Above n xx at [27]-[37].

 49   Above n xix at 236.

 50 Above n xx at [34].

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