Fair Work Act 2009
s.604—Appeal of decision

Appeal against decision [[2016] FWC 5650]] of Commissioner Gregory at Melbourne on 27 September 2016 – Dispute under the CFMEU MSS Enterprise Agreement 2012 – Interpretation of enterprise agreements – Meaning of “pursue” – Fair Work Act 2009 ss. 604, 739.

Introduction

[1] This decision concerns an application for permission to appeal and an appeal against the decision of Commissioner Gregory handed down on 27 September 2016. The decision of the Commissioner arose from a dispute notified by the Construction, Forestry, Mining and Energy Union – Victorian District Branch (CFMEU) relating to employees employed by MSS Security Pty Ltd & MSS Strategic Medical Pty Ltd T/A MSS Security & MSS Strategic Medical (MSS) involved in providing emergency services at the Loy Yang Power Station and Mine in the Latrobe Valley in Victoria and covered by the CFMEU MSS Enterprise Agreement 2012 (the Agreement).

[2] The dispute determined by the Commissioner concerned the meaning and intent of clause 14 of the Agreement which deals with long service leave. The parties were in dispute as to whether MSS was required by the Agreement to search for and find an approved portable long service leave fund, or whether it was obliged to go further and pay into such a fund once an approved fund was found. The Commissioner found that sub clause 14.3 did impose the additional obligation on MSS. MSS made an application to appeal against this decision.

[3] In the hearing of the appeal Mr R Dalton of counsel appeared with Mr J Nguyen for MSS. Mr A Walkaden appeared on behalf of the CFMEU.

Background

[4] The Agreement was approved by the Commission on 7 August 2012 and passed its nominal expiry date on 30 June 2016.

[5] Sub clause 14.3 of the Agreement deals with long service leave. It provides:

“14.3 Long Service Leave

Long Service Leave entitlements shall be in accordance with the Long Service Leave Act 1992 (Victoria) except that the rate of accumulation shall be 1.3 weeks per year of service.

Employees may access long service leave after seven years of service.

Long service leave may accrue without limit.

The relevant parties will pursue an approved provider for the provision of portable long service leave.”

[6] The parties engaged in correspondence regarding portable long service leave between September 2015 and January 2016 prior to and during bargaining for a replacement enterprise agreement. The CFMEU identified the National Employment Security Trust (NEST) as an appropriate fund. Prior to this, MSS were not aware of any other provider that would accept contributions outside of the construction industry. MSS ultimately decided to explore alternate options as it was not satisfied by certain information provided by NEST.

[7] The CFMEU’s position was that given MSS’s lack of legitimate objection or alternatives to NEST, the Commissioner should determine the dispute by holding NEST to be the approved portable long service leave fund in accordance with sub clause 14.3. MSS argued that the proper construction of the word “pursue” necessitated a finding that MSS had adhered to its obligations under the Agreement. MSS relied upon the decisions in AMIEU v Golden Cockerel Pty Ltd 1 (Golden Cockerel) and Kucks v CSR Limited2 (Kucks) as authority for their proposition that the words in the sub clause should be given their plain and ordinary meaning.

The Decision under Appeal

[8] Considering the principles summarised in Golden Cockerel, the Commissioner was satisfied that the words in sub clause 14.3 have plain meanings. 3 Relevantly, the dictionary definitions relied on by MSS concerning the word “pursue” necessarily supported its submissions. On his analysis, these definitions contemplated not only the “thrill of the chase” but also the “intention to achieve the desired outcome”.4

[9] The Commissioner then adopted the approach in Kucks which discourages a pedantic reliance on dictionary definitions. He said that ultimately, it could be reasonably concluded that inherent in the reference in the Agreement to the pursuit of a provider of portable long service leave was the intention to obtain such a provider. As such, there was found to be an obligation on MSS to establish and pay into a fund administered by an approved provider. 5

[10] Further, the Commissioner held that the Dispute Resolution clause in the Agreement (clause 24) was broad and far reaching. He found that it empowers the Commission to deal with a dispute about who such a provider of portable long service leave should be. 6 The determination of this issue was deferred pending submissions of the parties concerning the appropriateness of NEST as such a provider.

Grounds of Appeal

[11] MSS lodged an appeal against the Commissioner’s decision on the basis that he erred in law by misconstruing sub clause 14.3 of the Agreement to determine that it intended to impose the obligation on MSS to establish and pay into an approved portable long service leave fund.

[12] MSS alleged that the Commissioner failed to give effect to the plain and ordinary meaning of the word “pursue”, which it argued does not impose such an obligation. In particular, it alleged that the Commissioner’s interpretation failed to recognise the role of both parties to the Agreement in identifying an appropriate provider, that the interpretation inappropriately implied the obligation of MSS in the absence of clear words to that effect, and failed to take into account the broader context of clause 14 in its entirety. It argued that the ultimate effect of these alleged failures was that the Commission acted outside its power under s.739(5) of the Act.

Permission to Appeal

[13] MSS seeks permission to appeal the Commissioner’s decision on the basis that the errors alleged were jurisdictional errors and a clear error of law, and that there is a public interest in ensuring the decisions of the Commission are within and in accordance with its jurisdiction.

[14] It also relies upon the Commission’s general discretion to grant permission to appeal under s.604(1) where a decision of the Commission is attended with sufficient doubt as to warrant its consideration by a Full Bench. It submits that MSS would suffer substantial prejudice if permission were not to be granted as it would be required to submit to the private arbitration of this issue based on an error of law.

[15] We are satisfied that the dispute concerns a determination of the nature of obligations under the Agreement and has important implications for MSS and its employees. The interpretation of clauses of this nature involves the careful application of principles of construction relevant to enterprise agreements. In our view the decision is attended by doubt, and could result in an obligation to retrospectively pay into a fund when the parties do not agree that the Agreement established such an obligation. We are satisfied that permission to appeal should be granted.

Construction of Clause 14

[16] Long Service leave is obliged to be granted to employees in Victoria under the Long Serve Leave Act 1992. Leave accrues at the rate of 13 weeks after 15 years’ service and can be accessed after ten years’ service. A pro rata entitlement exists on termination of employment for employees with at least 7 years’ service. Clause 14 of the Agreement contains an enhanced accrual rate and a right to access the leave earlier than provided in the Victorian Act. The obligation to make a payment on termination of accrued untaken leave is not affected by the Agreement.

[17] Sub clause 14.3 needs to be construed in this context. The principles of interpretation are not in dispute.

[18] The task of interpreting a disputed clause of an agreement is an objective one. Subjective beliefs or understandings do not guide the interpretation. 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 common intention of the parties are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. 7

[19] The starting point must be the words of the Agreement. The Agreement does not contain words that expressly introduce an obligation to make payment into a portable long service leave fund. The words oblige the parties to pursue an approved provider for portable long service leave. The ordinary and natural meaning of these words requires the parties to investigate the existence of an approved provider with a view to locating one. The clause does not say what arises from a successful pursuit. As the obligation to provide long service leave and payment in lieu on termination exists by virtue of the earlier part of clause 14, it is reasonable to expect that clear words would be required to displace these obligations in favour of an alternative long service leave regime. No such clear words are contained in the clause.

[20] It is well established that terms are not easily implied into enterprise agreements. 8 Implied terms must satisfy a number of prerequisites.9 Several are absent in this case including the requirement that the implied term is reasonable and necessary for the effective operation of the clause and the requirement that it is so obvious that it goes without saying.

[21] The CFMEU contended that unless an obligation to make payment is read into the clause, the clause has no work to do. The Commissioner accepted this submission. He said that the “emphasis” on finding an approved provider also means that it is reasonable to conclude that the parties have already reached agreement about establishing a portable long service leave entitlement. He said that if agreement did not exist in the first place there would be no requirement to “pursue an approved provider.” With respect, we do not agree that such a conclusion follows. If there is some doubt as to whether an approved provider exists, and the terms of the provider are unknown, it is quite logical that the parties would ascertain the availability, cost and other circumstances prior to making such a commitment.

[22] Nevertheless, the words of the Agreement provide the answer to the dispute. They do not establish an obligation to make a payment into a portable long service leave scheme and cannot reasonably be held to do so expressly or by implication. We conclude that the interpretation adopted by the Commissioner was erroneous. The dispute should have been determined by finding that the Agreement does not create an obligation for MSS to make contributions into an approved long service leave fund.

Conclusions

[23] Because of the important interpretative task involved in determining this dispute we grant permission to appeal.

[24] As we have found that the Agreement does not expressly or impliedly create an obligation to pay into a portable long service leave fund, we find that the interpretation adopted by the Commissioner was erroneous. We allow the appeal, quash the Commissioner’s determination, and substitute our determination that the Agreement does not create an obligation for MSS to make contributions into an approved long service leave fund.

VICE PRESIDENT

Appearances:

Mr R Dalton of counsel with Mr J Nguyen on behalf of MSS.

Mr A Walkaden of counsel with Mr G Dyke on behalf of the CFMEU.

Hearing details:

2016.

Melbourne.

30 November.

Final written submissions:

MSS on 15 November 2016.

CFMEU on 28 November 2016.

 1   [2014] FWCFB 7447.

 2   (1996) 66 IR 182.

 3   [2016] FWC 5650, [25]-[26].

 4   Ibid [29].

 5   Ibid [38].

 6   Ibid [37].

 7   Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, [40].

 8   “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU) v Skilled Engineering Ltd [2003] FCA 260, [18].

 9   BP (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, 283.

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