DECISION

Fair Work Act 2009
s.604—Appeal of decision

DP World (Fremantle) Ltd
v
Construction, Forestry, Maritime, Mining and Energy Union
(C2019/1229)

Appeal against decision [2019] FWC 1211 of Deputy President Booth at Sydney on 25 February 2019 in matter number C2019/971.

DECISION OF VICE PRESIDENT HATCHER AND COMMISSIONER SPENCER

Introduction

[1] DP World (Fremantle) Ltd (DP World) has lodged an appeal, for which permission to appeal is required, against a decision of Deputy President Booth issued on 25 February 2019 1 (Decision). The Decision concerned a dispute about the interpretation of provisions in identical terms concerning income protection insurance contained in four enterprise agreements applying to entities in the DP World group of companies: the DP World Brisbane Enterprise Agreement 2016, the DP World Sydney Enterprise Agreement 2015, the DP World Melbourne Enterprise Agreement 2016 and the DP World Fremantle Enterprise Agreement 2015 (collectively “agreements”). DP World Fremantle is the employer bound by the DP World Fremantle Enterprise Agreement 2015 (Fremantle Agreement), and other entities in the DP World group of companies (DP World) are the employers under the other agreements. The dispute arose after DP World Australia Ltd informed employees covered by the agreements that it would cease to pay for income protection insurance cover for them effective from 28 February 2019 - the nominal expiry date of each of the agreements - and instead pay them a two percent wage increase. The Construction, Forestry, Maritime, Mining and Energy Union (CFMMEU), which is bound by the agreements, took the position that this step contravened the relevant terms of the agreements, and applied for the Commission to resolve the dispute pursuant to the dispute resolution procedures in the agreements. Ultimately it became necessary for the Deputy President to arbitrate the dispute, and the following two questions were posed by the CFMMEU for the Deputy President to answer:

(1) Whether on a proper construction of the Agreements, the respondents are obliged to continue to provide an income protection policy in favour of its employees who are covered by the Agreements after 28 February 2019?

(2) Whether the respondents must engage in a review involving the parties, being the employer company and the CFMMEU in respect of each agreement, and reach agreement between the parties prior to seeking to cease providing an income protection policy in favour of its employees who are covered by the Agreements after 28 February 2019?

[2] The relevant DP World entities contended before the Deputy President that the Commission had no power to determine these questions because, firstly, it would involve an impermissible exercise of judicial power and, secondly, the CFMMEU had not followed the dispute resolution procedure in the agreements before lodging its application. The Deputy President rejected the first contention, but upheld in part the second insofar as she found that she was satisfied that the dispute resolution procedure had been followed only in respect to the Fremantle Agreement. In relation to that agreement, the Deputy President answered “No” to the first question and “Yes” to the second question. In its appeal, DP World Fremantle contends that the Deputy President erred in:

(1) concluding that there was power to arbitrate the dispute in circumstances where the CFMMEU had not complied with the dispute resolution procedure in the Fremantle Agreement prior to lodging its application; and

(2) answering “Yes” to the second question.

Background

[3] The agreements arose out of bargaining involving DP World and the then Maritime Union of Australia (MUA) in 2014-15. The MUA pursued a claim for income protection insurance for employees to be paid for by DP World during this bargaining. The agreements which were eventually made and approved by the Commission each contain a Part A made up of provisions common to all the agreements, and a Part B consisting of provisions discrete to the port to which the particular agreement applied. Clause 18.11 of Part A of each of the agreements, including the Fremantle Agreement, deals with the subject matter of income protection insurance, and provides:

18.11 Income Protection (IP)

18.11.1 The Company will provide an income protection policy in favour of its Employees who are covered by this agreement from the date of implementation and the value will not exceed 2% of Employee earnings. This insurance is available until 28 February 2019 at which time income protection provision will be reviewed. In the event that IP is discontinued during the nominal term of the Agreement, the percentage value for an individual employee will be added to the salary/clause 11 rates.

18.11.2 Income protection insurance is to provide all Employees with a capped replacement wage where an Employee is unable to attend for work because of personal injury or illness.

18.11.3 The Company will pay the insurance premium to the agreed Fund (the Fund). The parties to this Agreement may vary the Fund by agreement, if it is not meeting our joint objectives.

18.11.4 Where a worker is accessing income protection insurance, Personal Leave shall not be debited except by agreement. It is the Employee’s responsibility to notify the Company should they wish to stop receiving paid Personal/Carer’s Leave if they have sought Personal/Carer’s Leave to be granted.

18.11.5 Benefits provided by this insurance will cease when the Employee is determined fit to resume duties by a qualified medical practitioner or upon reaching the maximum limit of the insurance benefits provided by the fund, whichever is sooner.

18.11.6 It is all Parties’ intention that Employees will proactively manage their illness or injury and try to return to work as soon as possible.

18.11.7 Employees on income protection insurance are required to stay in touch with the Company on a regular basis (at least monthly unless otherwise agreed). The Company will continue to monitor the Employee’s long term absence.

18.11.8 The Company shall not terminate an Employee whilst in receipt of Income Protection, whilst there is a reasonable prognosis of their return to work in their pre injury capacity.

[4] Pursuant to the above provision, DP World and the MUA jointly took out income protection insurance with a company called Protect, and DP World paid the premiums. The policy that was current at the time of the CFMMEU’s dispute application had an expiry date of 1 March 2019.

[5] As earlier stated, the nominal expiry date for each agreement including the Fremantle Agreement (as provided for in clause 6.1 of Part A) was 28 February 2019. Clause 6.2 of Part A of each agreement required that “discussions for the renegotiation” of each agreement commence six months prior to this. Pursuant to this provision, bargaining for new agreements commenced in September 2018. The continuation of the provision of income protection insurance became one of a number of contentious issues during bargaining. On 7 February 2019, after the CFMMEU bargaining representatives failed to agree to a DP World proposal for new agreements, DP World sent an email to employees covered by the agreements which relevantly stated (emphasis in original):

“From 1 March 2019 DP World Australia (DPWA) will provide you a two percent pay increase on your base wage and the existing clause 11 rates. This is money which was provided to your Union nominated IP provider for the life of the EA. Once the EA expires, that money needs to be provided direct to you.

It is now your choice to decide whether to keep that money or to continue paying for IP. If you choose to continue IP, you will need to purchase it directly from your chosen provider. If you choose to remain with current IP provider Protect, you need to contact them directly.”

[6] The evidence disclosed that the decision to discontinue the income protection insurance communicated in the above correspondence was taken by a small group of senior employees in DP World Australia Ltd including Paul Scurrah, the then CEO, Maxwell Kruse, the Chief Commercial Officer, and Jessica Blomfield, General Counsel.

[7] The CFMMEU considered this to be a contravention by DP World of the obligation imposed by clause 18.11.1 of Part A of each of the agreements, and took steps to activate the dispute resolution procedures in each agreement. For present purposes it is only necessary to refer to the dispute resolution procedure in clause 29 of Part A of the Fremantle Agreement, which provides:

29.0 DISPUTE RESOLUTION

29.1 In the event of a dispute arising in the workplace in regard to the application of this Agreement or the National Employment Standards (other than under s65(5) and 76(4) of the Act), the procedure to be followed to resolve the matter shall be as follows:

29.2 The parties shall attempt to resolve the matter at the workplace level including but not limited to:

29.2.1 The Employee, the Employee’s delegate (if requested), and his or her supervisor, meeting and conferring on the matter; and

29.2.2 If the matter is not resolved at such meeting, the parties arranging further discussions involving more senior levels of management, Employee Representatives and Union officials (as appropriate).

29.2.3 If the matter is not resolved at such a meeting the parties arranging further discussions involving more senior levels of management (as appropriate). In advance of this meeting the nature of the dispute must be particularised and must contain desired resolution provided in writing.

29.2.4 If the matter cannot be resolved at workplace level, the matter may be referred by either party to National level for discussion between the parties, after which time either party may refer the matter to FWC for conciliation.

29.2.5 If the matter is referred for conciliation, both parties will participate in the process in good faith.

29.2.6 Where the dispute has not been resolved despite the foregoing procedures being followed and subject to there being no stoppage of work in relation to the issue at hand, either party may refer the matter to FWC for arbitration if necessary in which case the decision will be accepted by the parties subject to any appeal rights.

29.3 During the time when the parties attempt to resolve the matter, either at the workplace level, or through conciliation or arbitration, the parties shall continue to work in accordance with their contract of employment.

29.4 The parties must co-operate to ensure that the dispute resolution procedures are carried out as quickly as is reasonably possible.

[8] It is not factually in dispute that the following steps were taken by the CFMMEU pursuant to clause 29 of the Fremantle Agreement:

(1) The CFMMEU delegate at the Fremantle terminal, Edsio Gatti, met with a DP World supervisor, Dean Lorimer, and complained about the intended cessation of the income protection insurance on 28 February 2019.

(2) The matter was then escalated to Adrian Evans, the Divisional Branch Deputy Secretary of the WA Branch of the MUA Division of the CFMMEU, who discussed the issue in a telephone call with Stefan Reynolds, the most senior DP World manager at the Fremantle terminal. Mr Evans followed this up with an email to Mr Reynolds about the issue.

(3) On 11 February 2019 Luke Edmonds, a Legal Officer for the CFMMEU’s National Office (but located in Perth), sent an email to Ms Blomfield and to Tory Kakoschke, an employment and IR advisor for DP World Australia Limited, which outlined the dispute and requested the provision of an undertaking by midday on 12 February 2019 that the income protection insurance policy would not be cancelled until the review contemplated by clause 18.11.1 had taken place and agreement reached on the future of the policy.

(4) After no response to the above email was received by the identified deadline, Mr Edmonds sent an email in similar terms to Mr Kruse. In this email, the same undertaking was requested to be provided by midday 13 February 2019. Mr Kruse replied to this email on 14 February 2019 but sent his response to Warren Smith, Assistant National Secretary of the CFMMEU. In that email Mr Kruse declined to provide the requested undertaking and asserted that the disputes procedures in the agreements had not been followed.

[9] The CFMMEU lodged its application for the Commission to resolve the dispute on 14 February 2019, shortly after the receipt of Mr Kruse’s email.

The Decision

[10] The Deputy President first dealt in the Decision with a submission advanced by DP World that the determination of the dispute concerning the interpretation of clause 18.11 of Part A of the Agreements would involve an impermissible exercise of judicial power. Because this submission was not re-agitated by DP World Fremantle in its appeal, it is not necessary to say anything beyond that the Deputy President rejected the submission. The Deputy President then dealt with the contention that the disputes procedures in the agreements had not been followed. In this respect, the Deputy President:

•  rejected a submission advanced by the CFMMEU that the steps in clauses 29.2.1-29.2.4 were not mandatory but merely exemplary; 2

•  found that clause 29.2.1 of the Fremantle Agreement had been complied with, but was not satisfied that clause 29.2.1 had been engaged under the other agreements; 3

•  found that the telephone conversation between Mr Evans and Mr Reynolds constituted compliance with clause 29.2.2; 4 and

•  found that the exchanges of emails involving Mr Edmonds, Ms Blomfield, Ms Kakoschke, Mr Kruse and Mr Smith satisfied clauses 29.2.3 and 29.2.4.

[11] In the last respect, the Deputy President said:

“[60] DP World submits that emails do not meet the requirements of clauses 29.2.3 and 29.2.4 of the Agreements. I note the language of the clause turns from the word “meeting” to the word “discussion” or “discussions”. In the circumstances I do not think that the failure of the parties to physically converse at these two stages means the interaction falls short of the kind of interaction that discharges the obligations of the parties arising from clauses 29.2 and 29.2.4. It was open to DP World to seek a meeting or telephone conversation in response to Mr Edmond’s email and they did not.

[61] It is apparent that Mr Kruse was aware of the basis upon which the MUA contended that the IP policy could not be ceased by the Company because it was set out in the email from Luke Edmonds and in an email to him from Slater and Gordon acting on behalf of the CFMMEU dated 5 February 2019. It had also been the subject of much discussion between the parties, albeit during enterprise bargaining for new enterprise agreements. It was apparent that DP World was not open to changing its decision (although Mr Kruse said that enterprise bargaining positions were open to change “down the track”) and the date of effect of that decision was approaching.

[62] There is no doubt that exchanging emails is suboptimal in dispute resolution. However the nature of the dispute and the time criticality was such that progressing through the dispute resolution procedure to the point of making an application to the Commission in the way the CFMMEU did was a practical reaction to the stance DP World was taking.”

[12] The Deputy President therefore considered that she had power to arbitrate the dispute arising under the Fremantle Agreement, but not in respect of the other agreements. 5

[13] In relation to the question concerning the construction of clause 18.11 of Part A of the Fremantle Agreement, the Deputy President found that clause 18.11.1 was ambiguous, but that the evidence concerning the negotiations for the agreements which led to the creation of the provision “sheds very little light on what was intended”. 6 Accordingly the Deputy President declared her intention to “rely on the words in the clause in their context to interpret the Fremantle Agreement”.7 In this respect the Deputy President concluded that:

•  because an enterprise agreement continues in force until terminated or replaced, the review contemplated by clause 18.1.1 (which was, as DP World conceded, to be a joint review between it and the CFMMEU) could result in the continuation of income protection insurance whilst the agreement remained in force; 8

•  clause 18.11.1 obliged DP World to provide an income protection policy for its stevedore employees from 14 September 2014; 9

•  the clause also required there to be a review of income protection at 28 February 2019; 10

•  the second sentence of the clause, by identifying a time at which a review was required, did not authorise the unilateral cessation of income protection at 28 February 2019; 11

•  “The whole scheme is consistent with a co-designed, co-owned and co-managed arrangement. It is not available to either party to act unilaterally in relation to the review or its outcome”; 12

•  if the income protection policy was discontinued before 28 February 2019, DP World was obliged to pay employees under the Fremantle Agreement a wage increase of 2%, but because the nominal expiry date of the agreement was 28 February 2018 it was “difficult to see” how the last sentence of clause 18.11.1 had any work to do and its effect and purpose would be taken up after 28 February 2019 by the review; 13

•  the answer to the first question was “no” because an answer in the affirmative would pre-empt the outcome of the review, one possible outcome of which would be the cessation of the policy; 14 and

•  the answer to the second question was “no” because the review was required to be conducted commencing 28 February 2019 and, whilst the review was being conducted, the obligation to retain the policy continued, since to cease providing the policy during the review might likewise pre-empt its outcome. 15

Appeal grounds and submissions

[14] DP World Fremantle’s notice of appeal contained two grounds of appeal as follows:

“1. The Deputy President erred in answering the second question posed by the Respondent in the affirmative in that on a proper construction of the Agreement:

a. the income protection policy required to be maintained by the Appellant only had to be maintained until 28 February 2019; further and alternatively

b. in light of the Deputy President's answer to the first question posed by the Respondent, the answer the second question either did not arise or was "no".

2. The Deputy President erred (at [64]) in determining that the Commission had power to arbitrate the dispute.”

[15] In respect of the first appeal ground, DP World Fremantle submitted that in interpreting clause 18.11.1, the Deputy President failed to properly construe or give effect to the words “is available until” in the first sentence, which on their ordinary meaning time limited the obligation to provide income protection insurance to a period ending on 28 February 2019. That led to a result that was consistent with the Deputy President’s answer to the first question but not the second. The Deputy President’s answer to the second question, it was submitted was inconsistent with the answer to the first question since it was premised upon a continuing obligation to provide the insurance while ever the Fremantle Agreement remained in operation or until an agreement in the review was reached. The Deputy President’s conclusion that the second sentence of clause 18.11.1 did not authorise unilateral cessation of the policy at 28 February 2019 was beside the point, since the obligation on DP World Fremantle ended to pay for the policy on that date and there was no requirement for authorisation after that to end it. The fact that the policy in question had been taken out in the name of both DP World and the MUA could not guide the interpretation of the provision, since this was not required by the clause and was post-agreement conduct which was inadmissible in respect of the construction of the provision. DP World denied that it had conceded that the review had to be conducted jointly, and the fact that clause 18.11.3 expressly required agreement for the provider of the policy demonstrated that, because clause 18.11.1 did not contain any requirement for agreement as to the discontinuance of the policy, no such agreement was required. The word “review” did not infer a need for agreement, and the Deputy President’s answer to the second question ultimately led to a rewriting of the Fremantle Agreement to achieve a perceived just or fair outcome.

[16] As to the second appeal ground, the Deputy President’s power to arbitrate the dispute was dependent on compliance with the mandatory preconditions for the exercise of arbitral power established by the terms of the Fremantle Agreement. In this case, those preconditions had not been established because:

(1) there had been no meetings at stage 3 or 4 of the procedure, as clause 29 required, but merely an exchange of emails;

(2) nor had there been any discussion at stages 3 or 4, but merely the sending of emails to which DP World was not given a proper opportunity to reply.

[17] DP World Fremantle submitted that whether DP World sought a meeting or telephone conversation or was open to changing its position, or whether the CFMMEU was acting practically in response to DP World’s position in a time-critical matter, were irrelevant considerations which the Deputy President erroneously took into account.

[18] It was submitted that permission to appeal should be granted because the Decision was attended by error, resulted in an injustice to DP World Fremantle, and the issue the subject of the Decision might, without a Full Bench decision, be re-litigated under the agreements other than the Fremantle Agreement and result in conflicting single-member decisions. DP World submitted that the appeal should be upheld and on a rehearing of the matter the Full Bench should find that there was no power to arbitrate the dispute or alternatively that the answer to both questions was “no”.

[19] The CFMMEU submitted that permission to appeal should not be granted because the Decision was not attended by error, DP World Fremantle had not suffered any injustice because the cost of maintaining the income protection insurance was approximately the same as the 2% wage increase it would pay employees if the insurance was discontinued, and the Full Bench could not resolve the dispute on appeal if DP World Fremantle was correct in submitting that there was no power for the Commission to arbitrate.

[20] In respect of the first ground of appeal, the CFMMEU submitted that the construction and process of reasoning of the Deputy President were correct. The CFMMEU rejected the proposition that the words “is available until” in the first sentence of clause 18.11.1 demonstrated that the obligation to provide insurance ceased as at 28 February 2019, because this failed to take into account the words at the end of the sentence “at which time income protection insurance will be reviewed”. The review, it was submitted, would have no purpose if the insurance was no longer in place when it was conducted. It could be inferred that the review was a joint review from the requirement in clause 18.11.3 that change to the policy could only occur by joint agreement, and the fact that other provisions in the Fremantle Agreement, such as clause 8.12, required reviews to be conducted jointly. The nature of the benefit provided by clause 18.11, which was for employees absent from work due to long-term illness or injury, suggest that it was intended to be ongoing in nature.

[21] In relation to the second ground of appeal, the CFMMEU firstly submitted that the chapeau in clause 29.2 was to be understood as imposing a requirement to attempt to resolve a dispute at the workplace level, and the steps specified thereafter were indicative and not mandatory. In circumstances where it was apparent that the CFMMEU had made efforts to resolve the matter at the workplace before lodging its application, it was not therefore necessary, it was submitted, for the CFMMEU to demonstrate compliance with each individual step. Secondly, it was submitted that the referral of the matter to the Commission under clause 29.2.4 was only conditioned on the matter not being resolved at the workplace level and discussions having occurred at the national level. The emails of 11, 12 and 14 February 2019 constituted the necessary national “discussions”. The interpretation of “meeting” in the clause as requiring a physical meeting was not in accordance with the purpose and context of the clause read as a whole, and would allow either party to frustrate the process by simply refusing to attend a meeting.

[22] After the hearing of the appeal, the parties were invited on 27 June 2019 to make further submissions concerning a possible alternative interpretation of clause 18.11.1 (discussed later in this decision) which had not earlier been raised by either party. DP World Fremantle and the CFMMEU both filed submissions in which they rejected this possible alternative interpretation and maintained their earlier respective positions.

Consideration

Permission to appeal

[23] We have decided to grant permission to appeal. The issue of the proper interpretation of clause 18.11 of Part A of the Fremantle Agreement is of significance in the current bargaining for new agreements occurring between DP World and the CFMMEU. The question of whether the dispute resolution procedure in clause 29 was complied with goes to the jurisdiction of the Commission to deal with the dispute concerning the interpretation of clause 18.11. These are matters of sufficient significance to justify the grant of permission.

Was the dispute resolution procedure complied with?

[24] We will deal with the second appeal ground first. Under s 739(4) of the FW Act, the Commission may arbitrate a dispute only in accordance with a dispute resolution term in (relevantly) an enterprise agreement empowering it to do so. Under s 739(3), the Commission must not exercise any powers limited by the dispute resolution term. In this case, the Deputy President was empowered to arbitrate the dispute concerning clause 18.11 of Part A of the Fremantle Agreement only if any pre-conditions for the exercise of that power in the dispute resolution procedure in clause 29 were satisfied. There are two pre-conditions stated in clause 29.2.6: first, “[w]here the dispute has not been resolved despite the foregoing procedures being followed” and, second, “subject to there being no stoppage of work in relation to the issue at hand”. The issue raised by DP World Fremantle’s appeal is whether the first condition was satisfied.

[25] The “foregoing procedures” are set out in clause 29.2.1-29.2.5. Three immediate observations may be made about this provision. First, it is defectively drafted, in that the chapeau for the whole of clause 29.2 requires the parties to “attempt to resolve the matter at the workplace level”, but it is apparent that the chapeau only actually applies to clauses 29.2.1, 29.2.2 and 29.2.3. This is made clear by the opening words of clause 29.2.4, “If the matter cannot be resolved at workplace level...”, which indicates that at this point the disputes procedure moves beyond the workplace level (at the Fremantle Terminal) to DP World and the CFMMEU at the national level. Second, the steps specified in clause 29.2.2 and the first sentence of clause 29.2.3 end with “(as appropriate)”. This, we consider, is to be read as meaning that compliance with these workplace-level steps may be subject to adjustment according to what is “appropriate” in the circumstances of the particular dispute, subject to the overriding requirement in the chapeau that the parties attempt to resolve the matter at the workplace level.

[26] The third observation is that the operation of the “foregoing procedures” in clauses 29.2.1-29.2.5 is subject to the requirement in clause 29.4 that the parties co-operate to ensure that the procedures are followed as quickly as possible. The provision does not state in express terms what the consequences are if a party does not provide the requisite degree of co-operation, but we consider that it indicates that the makers of the Fremantle Agreement did not intend that the operation of the disputes procedure might be frustrated by one party’s non-cooperation preventing all or any stages of the procedure being followed to completion. Consistent with this intention, we conclude that the first condition for access to arbitration, namely that the dispute has not been resolved “despite the foregoing procedures being followed”, should be construed as meaning that the procedures have been followed to the extent reasonably possible by the party seeking arbitration.

[27] We have earlier set out the origin and course of the dispute concerning clause 18.11. Two matters are clear: firstly, the decision to discontinue the income protection insurance was taken at the most senior level of DP World’s management in Australia such that there was never any real possibility that the dispute it generated would be resolved pursuant to the dispute resolution procedure at the workplace level and, secondly, because employees were informed on 7 February 2019 that the discontinuance of the insurance would occur on 28 February 2019, there was necessarily an element of urgency in the dispute. These matters must guide any assessment of compliance with the procedures in clause 29.2.

[28] DP World does not dispute that the CFMMEU complied with the first two stages in the procedures - that is, clauses 29.2.1 and 29.2.2. In respect of the third stage in clause 29.2.3, we are not satisfied that this clause had any appropriate work to do in the context of the dispute in question here. Pursuant to clause 29.2.2, a local CFMMEU official had already engaged in telephone and written communications with Mr Reynolds who, as earlier stated, was the most senior DP World manager at the Fremantle terminal. There was no more senior level of management at the workplace level with whom the CFMMEU could confer (and DP World Fremantle was unable to identify any such person at the appeal hearing). In that circumstance, because it was not possible to arrange the further discussions contemplated by clause 29.2.3, the operation of the provision fell away because it became not “appropriate”. The overriding requirement in the chapeau in clause 29.2 for the CFMMEU to attempt to resolve the dispute at the workplace level had been complied with, having regard to the fact that it was never realistically going to be possible to resolve a dispute at the workplace level which was caused by a DP World decision taken at the national level.

[29] Clause 29.2.4 required the CFMMEU to engage in “discussion” with DP World at the national level about the dispute. “Discussion” is a word which has different meanings depending on the context, and may in different contexts mean a face-to-face discussion, a telephone discussion or a written discussion. We see no reason to assign a narrow meaning to “discussion” as submitted by DP World Fremantle; a wider and more flexible meaning is more likely to have been intended since it allows the requirement in clause 29.2.4 of the procedure to be adaptable to the circumstances of particular disputes. The only indispensable element, we consider, for one party to comply with clause 29.2.4 is for it to attempt to engage in mutual communication with the other party in a genuine attempt to resolve the dispute.

[30] In this case, the CFMMEU’s national office, as earlier set out, sent emails to senior employees and managers in DP World on 11 and 12 February 2019 which set out the issue in dispute and requested an undertaking which, from its perspective, would resolve the dispute. There was no response to the first email, and Mr Kruse’s response to the second email did not engage with the merits of the dispute beyond alleging that the dispute resolution procedure had not been followed and refusing to provide the requested undertaking. Mr Kruse did not suggest any alternative resolution of the dispute or request that any further discussion take place at the national level. Mr Kruse was of course completely alive to the issue in dispute, having been party to the decision to discontinue the income protection insurance, and was in a position to communicate whether there was any possibility of an agreed outcome different to that already decided by DP World. Having regard to the urgency of the matter and the lack of any meaningful response from DP World, we consider that the steps taken by the CFMMEU of communicating with DP World at the national level by email and awaiting a response before proceeding to the next step of applying to the Commission constituted sufficient compliance with clause 29.2.4. The CFMMEU was not obliged to continue to engage in fruitless “discussion” with DP World at a physical meeting or by some other means such as to permit DP World to “slow walk” the dispute resolution process and thus deny the CFMMEU a realistic opportunity to obtain a resolution of the dispute from the Commission prior to 28 February 2019. Accordingly we reject the second ground of appeal. We conclude that the Deputy President had power pursuant to clause 29.6 of Part A of the Fremantle Agreement to resolve the dispute.

Interpretation of clause 18.11.1

[31] The first ground of appeal involves a question of law concerning the proper interpretation of clause 18.11.1 of Part A of the Fremantle Agreement. In order to succeed on this ground of appeal, it is necessary for DP World Fremantle as the appellant to demonstrate that the Deputy President’s interpretation of the provision was erroneous. This necessarily requires DP World Fremantle to establish that there is a correct alternative interpretation of clause 18.11.1. In that regard, DP World Fremantle proposes that clause 18.11.1 should be interpreted on the basis that the second sentence obliges it to provide income protection insurance only until 28 February 2019, and the third sentence permits it to discontinue the insurance provided that it pays a two percent wage increase to employees. On this basis, DP World Fremantle contends, it was entitled to discontinue the income protection insurance policy in accordance with the terms of its 7 February 2019 email.

[32] There is an obvious problem with this interpretation which renders it untenable. On DP World Fremantle’s approach, the second sentence of clause 18.11.1 requires it to provide the insurance until 28 February 2019 and not thereafter. However its approach to the third sentence directly contradicts this: the discontinuance of insurance which it contemplates is to occur during the nominal term of the Fremantle Agreement - that is, before 28 February 2019. It cannot be the case that clause 18.11.1 simultaneously requires DP World Fremantle to maintain the insurance until 28 February 2019 and empowers it to discontinue the insurance prior to 28 February 2019.

[33] This apparent contradiction in clause 18.11.1 might be resolved by an alternative interpretation not advanced by either party which focuses upon the words “available” in the second sentence and “individual employee” in the third sentence. The word “available” is inapt to describe something that is simply required to be provided universally to all employees; rather it suggests that DP World is to make the insurance accessible to employees at its expense, which employees may then take advantage of, or not, at their individual election. This may be consistent with the trite proposition that an employee could not become party to an insurance contract without his or her agreement. DP World’s interpretation gives no particular work to do to the reference to an “individual” employee in the third sentence, but we consider that the use of this word must be of some significance. Consistent with the second sentence, it suggests that the discontinuance that is contemplated is one that will apply to an individual employee only. This in turn tends to indicate that the discontinuance occurs at the individual election of the employee, not by DP World Fremantle. In summary therefore, we consider that clause 18.11.1 may sensibly be read on the basis that DP World Fremantle is required to make the income protection insurance available to each individual employee until 28 February 2019, but during that period an individual employee may elect to discontinue the insurance and instead receive a two percent wage increase.

[34] However this alternative interpretation would not resolve the more difficult consideration as to what clause 18.11.1 contemplates will occur on or after the nominal expiry date of 28 February 2019 (at which time the third sentence of clause 18.11.1 ceases to have any work to do). The text of clause 18.11.1 does not provide any detail about the nature of the review that is referred to or its relationship with the continuance or otherwise of the availability of income protection insurance after that date. There was no challenge to the Deputy President’s conclusion that the extrinsic evidence concerning the negotiation of clause 18.11 was of no assistance in interpreting it. Further, while there is some contextual assistance provided by the other terms of the Fremantle Agreement, which is discussed below, this is limited. Ultimately, a preferred construction may only be reached by an assessment of what is more likely to have been intended by those who made the Fremantle Agreement.

[35] The second sentence of clause 18.11.1 at least identifies the subject matter of the review, namely income protection provision. This indicates that the review’s purpose is to consider whether income protection insurance should continue to be provided. The outcome of the review would presumably provide a “yes” or “no” answer to this question, although it may be accepted that the conclusion might be to continue the insurance on a modified basis. That being the case, we agree with the Deputy President’s conclusion that the answer to the first question posed for determination must be “No”, because a possible outcome of the review contemplated by clause 18.11.1 is that the insurance would not continue to be provided. However, we also agree with the Deputy President that it probably would not have been intended that the income protection insurance would cease to be available during the conduct of the review, since this might be regarded as pre-empting the outcome of the review. It would also be an unlikely outcome that DP World Fremantle would cease making the insurance available on 28 February 2019, conduct the review, and then have to recommence the insurance if the outcome of the review was that it should continue to be provided. This leads us to prefer an approach whereby the end date for the obligation to make insurance available specified in the second sentence is treated as modified by the obligation to conduct the review and is subject to its outcome.

[36] No textual description of the nature of the review is to be found in clause 18.11.1 itself. However, consistent with the reasoning of the Deputy President, there are textual indicators in other parts of clause 18.11.1 which suggest that the review is to be a joint one involving the CFMMEU. The first sentence of clause 18.11.3 requires DP World Fremantle to pay the insurance premium to “the agreed Fund”. This constitutes an express requirement that the insurance fund may only be selected by agreement – presumably with the other parties to the Fremantle Agreement. That this is the nature of the agreement required is confirmed by the next sentence, which states that “The parties to this Agreement may vary the Fund by agreement, if it is not meeting our joint objectives”. As clause 7 of Part A makes clear, the CFMMEU is a “party bound” by the Fremantle Agreement, 16 and thus its agreement is required with respect to a variation of the Fund and, we consider, the selection of the Fund in the first place. The reference to “our joint objectives” is significant, since it suggests that the scheme of clause 18.11.1 was regarded by those who made the Fremantle Agreement as a co-operative venture. Harmoniously with this, clause 18.11.6 refers to “all Parties’ intention” for employees to proactively manage their illness or injury and to try to manage their return to work as soon as possible. We therefore agree with the Deputy President’s conclusion that clause 18.11 as a whole constitutes “a co-designed, co-owned and co-managed arrangement”.

[37] It would jar with this if the review contemplated by clause 18.11.1 was a unilateral one to be conducted and determined by DP World Fremantle alone. Indeed, if it was entirely up to DP World to determine whether the availability of income protection insurance should continue beyond 28 February 2019, it is difficult to understand why any reference to a review would be included at all, since it would confer no right or benefit on employees.

[38] These considerations suggest that the answer “Yes” to the second question is to be preferred. We are certainly not persuaded that the answer given by the Deputy President was wrong, and DP World Fremantle has not advanced any viable alternative interpretation of clause 18.11.1 which would sustain a different answer. Given that DP World Fremantle as the appellant bears the burden of persuasion, the first ground of appeal must also rejected. 17

Conclusion

[39] Permission to appeal is granted. The appeal is dismissed.

DECISION OF COMMISSIONER HUNT

[40] I have had the opportunity to read the draft decision of Hatcher VP and Spencer C concerning the appeal. I agree with my colleagues’ reasoning that permission to appeal should be granted for the reasons in the majority decision at [22], and further, I agree that the Deputy President had power pursuant to clause 29.6 of Part A of the Fremantle Agreement to resolve the dispute for the reasons in the majority decision at [23] – [30].

[41] Respectfully, I do not agree with the majority decision as to the interpretation of clause 18.11.

[42] The Deputy President answered in the negative to the first question for arbitration as follows:

(a) Whether on a proper construction of the Agreements, the respondents are obliged to continue to provide an income protection policy in favour of its employees who are covered by the Agreements after 28 February 2019?

[43] The Deputy President answered in the affirmative to the second question for arbitration as follows:

(b) Whether the respondents must engage in a review involving the parties, being the employer company and the CFMMEU in respect of each agreement, and reach agreement between the parties prior to seeking to cease providing an income protection policy in favour of its employees who are covered by the Agreements after 28 February 2019?

[44] Clause 18.11 of the Fremantle Agreement reads as follows:

“18.11 Income Protection (IP)

18.11.1 The Company will provide an income protection policy in favour of its Employees who are covered by this agreement from the date of implementation and the value will not exceed 2% of Employee earnings. This insurance is available until 28 February 2019 at which time income protection provision will be reviewed. In the event that IP is discontinued during the nominal term of the Agreement, the percentage value for an individual employee will be added to the salary/clause 11 rates.

18.11.2 Income protection insurance is to provide all Employees with a capped replacement wage where an Employee is unable to attend for work because of personal injury or illness.

18.11.3 The Company will pay the insurance premium to the agreed Fund (the Fund). The parties to this Agreement may vary the Fund by agreement, if it is not meeting our joint objectives.

18.11.4 Where a worker is accessing income protection insurance, Personal Leave shall not be debited except by agreement. It is the Employee’s responsibility to notify the Company should they wish to stop receiving paid Personal/Carer’s Leave if they have sought Personal/Carer’s Leave to be granted.

18.11.5 Benefits provided by this insurance will cease when the Employee is determined fit to resume duties by a qualified medical practitioner or upon reaching the maximum limit of the insurance benefits provided by the fund, whichever is sooner.

18.11.6 It is all Parties’ intention that Employees will proactively manage their illness or injury and try to return to work as soon as possible.

18.11.7 Employees on income protection insurance are required to stay in touch with the Company on a regular basis (at least monthly unless otherwise agreed). The Company will continue to monitor the Employee’s long term absence.

18.11.8 The Company shall not terminate an Employee whilst in receipt of Income Protection, whilst there is a reasonable prognosis of their return to work in their pre injury capacity.”

[45] To be successful on the first ground of appeal concerning the proper interpretation of all of clause 18.11 of Part A of the Fremantle Agreement, the appellant must demonstrate that the Deputy President’s interpretation of the clause was erroneous.

[46] In my view, where the Deputy President has determined pursuant to the first question for arbitration that the appellant is not obliged to continue to provide an income protection policy in favour of its employees who are covered by the Agreements after 28 February 2019, it acknowledges that the parties to the Agreement intended for the policy to cease at 28 February 2019.

[47] It is incongruous to determine that the appellant is not required to continue to provide an income protection policy in favour of employees after 28 February 2019, but then determine that a joint review between the appellant and the respondent must occur prior to ceasing to provide an income protection policy to employees after 28 February 2019.

[48] The most significant subclauses within clause 18.11 are 18.11.1 and 18.11.3. It is my considered view that the effect of the clauses is that together they cause the following steps to be in place:

(a) The appellant will provide an income protection insurance policy not exceeding 2% of employee earnings;

(b) The insurance premium will be paid to an agreed fund, which may be varied by agreement if it is not meeting the joint objectives (of the company, employees and union);

(c) The insurance is available until 28 February 2019;

(d) If the insurance is discontinued prior to 28 February 2019, an amount up to 2% (the value of the policy) will be added to an employee’s salary;

(e) If the insurance is in place on 28 February 2019, the provision of income protection insurance to employees will be reviewed.

[49] There appears to me to be a unilateral right within clause 18.11.1 for the appellant to discontinue income protection insurance to employees prior to 28 February 2019. It is contemplated that if the policy ceases, the employees will receive an equivalent percentage payment. I expect this provision was agreed to prevent the appellant agreeing to put in place income protection insurance and withdrawing it during the nominal term without adequately compensating employees for the bargain secured during negotiations.

[50] It does not accord that where there appears to be a unilateral right of the appellant to discontinue the policy prior to 28 February 2019, there then becomes a greater onus on the appellant to have a collective review. If the policy was not in place on 28 February 2019 because of discontinuation of the policy beforehand, I do not consider that it would have been necessary for any review to have taken place. In my view, the respondent is not afforded review rights for the policy because of its existence on 28 February 2019 when no review would have been necessary prior to 28 February 2019 on the discontinuance of the policy.

[51] I respectfully disagree with the Deputy President at [77] of the Decision that “the whole scheme is consistent with a co-designed, co-owned and co-managed arrangement.” There is nothing within clause 18.11 to make such a finding, especially so when the policy may be discontinued prior to 28 February 2019 without requiring the agreement of the respondent. Further, the fact that the insurance policy was taken out in the name of both the appellant and the respondent does not alter the terms of clause 18.11.

[52] I determine that the Deputy President erred in answering “yes” to question two when the correct answer is “no”.

Conclusion

[53] For the above reasons I would grant permission to appeal and grant the appeal on the first ground, but dismiss the appeal on the second ground.

VICE PRESIDENT

Appearances:

Mr J Darams of Counsel and Mr S Crilly, solicitor, on behalf of DP World Brisbane Pty Ltd, DP World (Fremantle) Ltd, DP World Melbourne Ltd and DP World Sydney Ltd t/a DP World

Mr A Slevin of Counsel and Mr L Edmonds on behalf of Construction, Forestry, Maritime, Mining and Energy Union

Hearing details:

2019.

Sydney:

21 March.

Printed by authority of the Commonwealth Government Printer

<PR709140>

 1   [2019] FWC 1211

 2   Decision at [40]-[46]

 3   Decision at [47]-[52]

 4   Decision at [53]-[54]

 5   Decision at [63]-[64]

 6   Decision at [70]

 7   Ibid

 8   Decision at [71]-[73]

 9   Decision at [74]

 10   Decision at [75]

 11   Decision at [76]

 12   Decision at [77]

 13   Decision at [78]-[79]

 14   Decision at [80]-[81]

 15   Decision at [82]-[83]

 16   The clause refers to the MUA. This is to now to be read as referring to the CFMMEU by virtue of s 76 of the Fair Work (Registered Organisations) Act 2009.

 17   See AFMEPKIU [2001] FCA 547, 106 IR 307 at [65]-[68] for a somewhat analogous situation.