Pacific National Coal, NSW v Australian Rail, Tram and Bus Industry Union-New South Wales Branch
[2011] FWA 5457
•25 AUGUST 2011
[2011] FWA 5457 |
|
DECISION |
Fair Work Act 2009
s.217 - Application to vary an agreement to remove an ambiguity or uncertainty
Pacific National Coal, NSW
v
Australian Rail, Tram and Bus Industry Union-New South Wales Branch
(AG2011/7035)
Rail industry | |
SENIOR DEPUTY PRESIDENT HAMBERGER | SYDNEY, 25 AUGUST 2011 |
Proper construction of enterprise agreement; identification of ambiguity or uncertainty; mutual intention of the parties.
Introduction
[1] On 1 March 2011, Pacific National Coal, NSW (PN, the applicant) applied under s.217 of the Fair Work Act 2009 (the Act) to vary clause 48.2 of the Pacific National Coal, NSW Enterprise Agreement 2009 (the 2009 EA). Directions were issued for the lodgement of written outlines of submission and witness statements. A hearing was conducted in Sydney on 16 August 2011. The applicant was represented by Mr Arthur Moses SC and the Rail Tram and Bus Industry Union (RTBU, the respondent) by Mr Jim Nolan, of counsel.
[2] Clause 48.2 of the 2009 EA reads as follows:
‘48.2 Aggregate Allowance
(a) The following allowances will apply:
(i) Locomotive Driver Stream - 9.5%
(ii) Terminal Operators Stream - 2.75%’
[3] The application seeks the variation of the 2009 EA by the insertion of the following sub clause (b) into Clause 48.2:
‘(b) Aggregate Allowances are calculated as a percentage of the rate $45,051, as is adjusted by remuneration increases in this Agreement and future Agreements.’
[4] The applicant’s primary submissions in support of its application are:
‘(a) that the 2009 EA is ambiguous and/or uncertain in its operation as its present drafting is susceptible to more than one meaning;
(b) that, in these circumstances, FWA should exercise its discretion to vary the agreement to rectify the ambiguity and give effect to the mutual intention of the parties at the time of the formation of the 2009 EA;
(c) that the mutual intention of the parties at the time of making the 2009 EA was that clause 48.2 should have included the Proposed Sub-Clause (b), because:
(i) a clause similar to the Proposed Sub-Clause (b) was included in the predecessor agreements to the 2009 EA;
(ii) a clause similar to the Proposed Sub-Clause (b) was included in the original draft agreement prepared by PN before bargaining commenced for the 2009 EA;
(iii) a clause similar to the Proposed Sub-Clause (b) was included in other 2009 Pacific National Enterprise Agreements which were negotiated in or around the same period as the 2009 EA;
(iv) the Proposed Sub-Clause (b) was inadvertently removed from the draft 2009 EA at some stage during the bargaining process;
(v) no negotiation took place between the parties regarding altering the method of calculating aggregate allowance: and
(vi) no analysis or costing took place within PN regarding payment of aggregate allowances by reference to anything other than the notional salary as set out in the Proposed Sub-Clause (b). This reinforces the fact that it was not an issue which was being contemplated by PN.’ 1
[5] The respondent contends that Clause 48.2 as it stands is quite clear. ‘Taking the elements of clause 48, employees covered by the agreement are entitled to, in the case of locomotive drivers stream, an allowance of 9.5% and in the case of the terminal operators stream an allowance of 2.75%. A reader of the agreement with some familiarity with ordinary industrial parlance would understand those allowances to apply to the relevant weekly pay of the employees concerned.’ 2 As there is no relevant ambiguity, the tribunal lacks jurisdiction to make any variation to the Clause.
[6] Section 217 states:
‘(1) FWA may vary an enterprise agreement to remove an ambiguity or uncertainty on application by any of the following:
(a) one or more of the employers covered by the agreement;
(b) an employee covered by the agreement;
(c) an employee organisation covered by the agreement.
(2) If FWA varies the enterprise agreement, the variation operates from the day specified in the decision to vary the agreement.’
[7] In Re Tenix Defence Systems Pty Limited 3(Tenix) the Full Bench of the Australian Industrial Relations Commission outlined what was considered to be the proper approach to be taken when determining an application pursuant to s. 170MD(6) of the Workplace Relations Act 1996, a provision whose terms were similar to s.217 of the 2009 Act. The Full Bench held that:
‘[28] Before the Commission exercises its discretion to vary an agreement pursuant to s.170MD(6)(a) it must first identify an ambiguity or uncertainty. It may then exercise the discretion to remove that ambiguity or uncertainty by varying the agreement.
[29] The first part of the process - identifying an ambiguity or uncertainty - involves an objective assessment of the words used in the provision under examination. The words used are construed having regard to their context, including where appropriate the relevant parts of a related award. As Munro J observed in Re Linfox - CFMEU (CSR Timber) Enterprise Agreement 1997:
"The identification of whether or not a provision in an instrument can be said to contain an `ambiguity' requires a judgment to be made of whether, on its proper construction, the wording of the relevant provision is susceptible to more than one meaning. Essentially the task requires that the words used in the provision be construed in their context, including where appropriate the relevant parts of the `parent' award with which a complimentary provision is to be read."
[30] We agree that context is important. Section 170MD(6)(a) is not confined to the identification of a word or words of a clause which give rise to an ambiguity or uncertainty. A combination of clauses may have that effect.
[31] The Commission will generally err on the side of finding an ambiguity or uncertainty where there are rival contentions advanced and an arguable case is made out for more than one contention.
[32] Once an ambiguity or uncertainty has been identified it is a matter of discretion as to whether or not the agreement should be varied to remove the ambiguity or uncertainty. In exercising such a discretion the Commission is to have regard to the mutual intention of the parties at the time the agreement was made.’ (References removed.)
[8] I consider that the approach taken by the Full Bench in this decision remains relevant to the way in which the tribunal should undertake its role in relation to s.217 of the Act.
[9] Mr Nolan drew on the observations made by Justice Mason in Codelfa 4as limiting the relevance of evidence of prior negotiations when considering the interpretation of agreements. In particular he referred to the following observations at 352:
‘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.’
[10] Codelfa must however be seen in the light of a series of more recent High Court decisions which have stressed the need to have regard to context in the proper construction of a contract, without referring to the prior need to find ambiguity. For example, the joint judgment of Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ in Toll 5included the following:
‘It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, 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.’
[11] In summary, in accordance with the approach in Tenix, the task before the tribunal has two stages. First I must ascertain whether Clause 48.2 is ambiguous. In seeking properly to construe the clause I can have regard not only to the text, but also the surrounding context. Secondly, If I determine that the clause is ambiguous (that is, susceptible to more than one meaning) it is then a matter of discretion as to whether or not the agreement should be varied to remove the ambiguity or uncertainty. In exercising such a discretion I am to have regard to the mutual intention of the parties at the time the agreement was made.
The Facts
[12] Witness statements were presented on behalf of the applicant by:
- Ms Nadia Giblin (formerly Human Resources Manager for the applicant’s Coal Division);
- Mr David Mayo (General Manager of the applicant’s coal operations);
- Mr Darren Ball (Superintendent of Rostering for the applicant’s Coal Division); and
- Mr Luis Izzo (Senior Associate, Clayton Utz, solicitors for the applicant).
[13] Witness statements were tendered on behalf of the respondent by:
- Mr Alex Claassens (NSW Branch Secretary, RTBU);
- Mr Robert Hayden (Secretary, RTBU Locomotive Division);
- Mr Peter O’Connor (Industrial Officer, RTBU); and
- Mr Bruce Wyllie (formerly RTBU Depot Organiser for Port Kembla Coal Depot).
[14] There is little contention between the parties as to the factual circumstances in this matter. I summarise them as follows.
[15] Negotiations for the 2009 EA began around the middle of 2009. Prior to that, Ms Giblin had prepared a draft agreement which was to be used by the applicant as the starting point for negotiations for the 2009 EA. 6 This draft agreement substantially replicated the provisions concerning aggregate allowances from the precursor agreements to the 2009 EA (the Pacific National Northern Coal Union Collective Agreement 2006 and the Pacific National Southern Coal Union Collective Agreement 2006). It provided that aggregate allowances would be calculated as a percentage of the rate $39,291, ‘which will be adjusted by this and future Agreement remuneration increases.’ This document was not sent to the RTBU7. Rather it was sent to Clayton Utz ‘to check over from a legal perspective’.8 The document was then sent back by Clayton Utz to Ms Giblin in a revised form9. While this version10 contained an aggregate allowance clause, it did not include any reference to a notional salary of $39,291. This change was not the result of any drafting instruction given by PN to Clayton Utz. The deletion of the reference to a notional salary was not noticed at the time by Ms Giblin or anyone else.
[16] The version of the proposed agreement that was tabled at the first negotiating meeting with the RTBU (which was held in about September or October 2009) was the one received back from Clayton Utz. It then became the document that was used as the basis for the negotiations 11. The exclusion of the reference to the notional salary had not been sought either by PN or the RTBU12. While during the subsequent negotiations there were some limited discussions about ‘rolling up’ the aggregate allowance, for example into an annualised salary, these discussions did not progress very far13. However, at no time were there any discussions about deleting the reference to notional salary in clause 48.214.
[17] The agreement was approved by FWA and came into operation on 21 September 2010.
[18] On or about 8 or 9 November 2010, PN received a series of notifications of dispute from a number of its employees alleging an underpayment of their aggregate allowance on the basis that the calculation of the relevant aggregate allowance was incorrect. On or about 18 or 19 November 2010 PN sent letters back to these employees rejecting their claims. There was then further correspondence between PN and the RTBU about the matter. 15 This led to the application currently being considered.
Consideration
[19] The current Clause 48 provides that employees covered by the agreement are entitled to:
i. The Base Rate as set out in Clause 45 of the agreement for the applicable classification;
ii. The Aggregate allowance as set out in sub clause 48.2; and the
iii. Aggregate Penalties as set out in sub clause 48.3.
[20] As previously noted, clause 48.2 states that the following allowances will apply:
i. Locomotive Driver Stream - 9.5%
ii. Terminal Operators Stream 2.75%.
[21] The difficulty arises because the clause does not indicate to what rate or amount the 9.5% or 2.75% is to be applied. Mr Nolan submitted that the text has a plain meaning - the percentage figure should simply be applied to the base rate of pay. As there is no ambiguity or uncertainty, that is the end of the matter. However, in the absence of anything in the text to the contrary, it could also be argued that the percentage should be applied to the rate of pay after the addition of Aggregate Penalty Multiplier calculated in accordance with sub clause 48.3. Thus there is some uncertainty about the meaning of the clause, even without regard to the surrounding factual circumstances.
[22] In any case I am satisfied on the basis of the most recent High Court authorities such as Toll, that it is appropriate not only to have regard to the text of the agreement, but also to the surrounding circumstances known to the parties and the purpose and object of the agreement. Under the precursor agreements, the aggregate allowance was calculated on the basis of a notional salary. In the absence of either party proposing during the negotiations that this should be altered, it is at least arguable that the percentage amounts in Clause 48.2 should continue to be applied to a notional salary.
[23] Mr Moses asked Mr Claassens during his cross examination to compare Sub clause 48.2 with the equivalent provision in the precursor agreement.
‘Do you know what the material difference is, just reading the two, to the best of your recollection?---Look, I certainly understand that this particular agreement spells out what the aggregate allowance is based on.
Yes?---Whereas the other agreement, the most recent agreement, doesn’t.
Yes, and do you agree in that respect that in respect of the current form of the agreement there is some uncertainty about what it’s referring to?---I certainly understand that, yes.
Yes, thank you, and you agree that it is uncertain? ---Yes’
[24] I agree with Mr Claassens that the meaning of Sub Clause 48.2 as it currently stands is uncertain. This uncertainty has led to disputes between the applicant and some of its employees. It is appropriate that I exercise my discretion and amend the agreement. The evidence is clear that objectively considered the mutual intention of the parties was that the aggregate allowance should be calculated on the basis of a notional salary in the same manner as had been provided in the precursor agreements. I am satisfied that the amendment to the agreement sought in the application gives effect to the mutual intention of the parties. Accordingly I will issue an order varying the agreement. The order will have the same date of effect as the 2009 EA.
SENIOR DEPUTY PRESIDENT
Appearances:
A. Moses for Pacific National Coal, NSW
J. Nolan for the Rail, Tram and Bus Industry Union
Hearing details:
2011
Sydney
16 August
1 Applicant’s outline of submissions pages 2-3
2 Respondent’s outline of submissions page 5
3 PR917548 (per Ross VP, O’Callaghan SDP and Foggo C) 9 May 2002
4 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
5 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 218 CLR 165 at 179
6 Tab 4 of Exhibit PN6
7 PN205
8 PN269
9 PN270
10 Tab 8 of Exhibit PN6
11 Exhibit PN2, paragraph 8
12 Exhibit PN 5, paragraph 15.
13 , Exhibit PN1 paragraphs 9-12; Exhibit RTBU 3, paragraph 12; PN338-342
14 Exhibit PN1, paragraphs 13-15, Exhibit PN2, paragraph 10; PN337 & 388
15 Exhibit PN 4, paragraphs 3-6
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