1 Fair Work Act 2009 s.604 - Appeal of decisions Australian Rail, Tram and Bus Industry Union v Laing O’Rourke Australia Construction Pty Ltd (C2018/5372) VICE PRESIDENT CATANZARITI DEPUTY PRESIDENT HAMILTON COMMISSIONER BISSETT SYDNEY, 18 JANUARY 2019 Appeal against decision [2018] FWC 5596 of Deputy President Dean at Sydney on 5 September 2018 in matter number C2017/6629. [1] On 30 November 2017, the Australian Rail, Tram and Bus Industry Union (Appellant) filed an application pursuant to s.739 of the Fair Work Act 2009 (Cth) (Act) for the Fair Work Commission (Commission) to deal with a dispute with Laing O’Rourke Australia Construction Pty Ltd (Respondent) under the Laing O’Rourke Australia Construction Pty Ltd Rail Infrastructure – Rail Track & Associated Works Enterprise Agreement 2016-2019 New South Wales (Agreement). The dispute related to the payment of a Productivity/Site Allowance (Allowance) prescribed under clause 4.1 of Appendix C to the Agreement:1 “4 Productivity/Site Allowance Payment 4.1 A Productivity/Site Allowance will be paid only for an awarded contract package with a build cost, as defined below in Table 1. The relevant Productivity/Site Allowances: shall be payable from the commencement of the first full pay period after the Agreement is approved by the Fair Work Commission. The ‘Productivity Incentive Payment’ as shown in Table 1 shall be paid to Employees for each hour worked on the project, as flat rate attracting no premium or penalty. Such an Allowance is in recognition of improved productivity performance arising from the successful operation of this Agreement and meeting a project’s milestones. This payment will also be in lieu of and any other Special Rates or allowances included in any award other than those provided for in this Agreement and in lieu of any site or project allowance other than a site or project allowance prescribed in a specific project Agreement or project award (which is contractually applicable and/or formally approved under the relevant Government Building Codes and guidelines (as 1 Herewith referred to as (clause 4.1). [2019] FWCFB 33 DECISION [2019] FWCFB 33 2 amended) and certified by the relevant industrial tribunal) where the higher shall be paid. Project Incentive Productivity Allowance payments will not be made when an Employee(s) fail to comply with the prescribed procedures within this Agreement for ‘Inclement Weather’, the ‘Safety Dispute Procedures’ and the ‘Industrial Relations Dispute Procedures’ of this Agreement. Table 1 ” [2] Specifically, the issues in dispute at first instance were: 1. In relation to the ‘Main North and North Shore Corridor Works’, was the Respondent required to pay the Allowance pursuant to clause 4.1 of Appendix C extracted above; 2. If yes, to/for which employees and from what date must those payments be made? [3] On 5 September 2018, Deputy President Dean decided that the first question was to be answered in the negative, and that as a consequence question two was therefore irrelevant. [4] On 27 November 2018, the Appellant appealed the Decision of the Deputy President.2 Ms L Saunders, of counsel, for the Appellant and Mr P Ludeke for the Respondent appeared with permission at the hearing.3 2 [2018] FWC 5596 (Decision). 3 Granted pursuant to s.596(2)(a) of the Act. Awarded Contract Package Build Cost Value – County of Cumberland, Northumberland or Camden Allowance $Amount Per Hour Worked $30M - <$400M $3.54 Greater $400M $4.05 Awarded Contract Package Build Cost Value – Outside the County of Cumberland, Northumberland or Camden Allowance $Amount Per Hour Worked $30M - <$400M $3.04 Greater $400M $3.54 [2019] FWCFB 33 3 Decision at first instance [5] At paragraphs [6]-[11] of the Decision, the Deputy President sets out the surrounding circumstances of the dispute. For the purposes of this appeal, we need not repeat those matters but we note that: In 2015, the Managing Contractor Contract (Contract) was made between Transport for New South Wales (TfNSW) and the Respondent. The Contract divided the scope of work performed into Portions 1 to 6. In August 2017, a Deed of Variation was made between TfNSW and the Respondent to include a new Portion 7A to the Contract. [6] As the total ‘build cost’ for Portions 1 to 6 did not exceed $30 million, the primary point of contention was whether the build cost of Portion 7A ought to be added to the ‘awarded contract package’ referred to in clause 4.1. Should this be the case, the resulting build cost would exceed $30 million and thereby the Allowance would be payable by the Respondent. [7] Having considered the principles applicable to agreement interpretation,4 the Deputy President found that; The words of the Agreement are plain and that no more than one arguable interpretation arises from the Agreement.5 What needs to be determined is the build cost for an awarded contract package. The relevant provision of the Agreement is clear, in that the first sentence of clause 4.1 provides “a Productivity/Site Allowance will be paid only for an awarded contract package with a build cost, as defined below in Table 1”.6 While the purpose of the Allowance is to recognise “improved productivity performance arising from the successful operation of this Agreement and meeting a project’s milestones”, the criteria is nevertheless one of determining: is the awarded contract package with a build cost at or above $30 million. This is regardless of what “project” it is related to.7 Whilst the Respondent did not dispute that the Contract was varied by the Deed of Variation, the issue for determination is whether the awarded contract package had a build cost of $30 million or more, not whether the Deed of Variation varied the Contract.8 4 Australasian Meat Industry Employees Union v Golden Cockerel Pty Ltd [2014] FWCFB 7447 (Golden Cockerel); Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v Berri Limited [2017] FWCFB 3005 (Berri). 5 Decision at [53]-[54]. 6 Decision at [57]. 7 Decision at [58]-[60]. 8 Decision at [62]. [2019] FWCFB 33 4 It is clear that neither clause 4.1 nor the definition of project in clause 1.2 of the Agreement specifically contemplates a variation to the awarded contract package, and the word “only” should be given some work to do.9 The Contract was a package of works (ie. a Project, as defined). The variation (ie. portion 7A) was a separate package of works awarded to the Respondent, and therefore a separate Project as defined in the Agreement.10 Evidence concerning the makeup of the Respondent’s project team, whether employees work on one or multiple projects, how site inductions are conducted, who attends toolbox meetings, or the like are not matters relevant for determining the build cost for an awarded contract package.11 [8] In conclusion, the Deputy President considered that on the proper construction of the Agreement, portion 7A does not cause the Allowance under clause 4.1 to be payable by the Respondent. The Appeal Ground One [9] The Appellant submits that in construing "awarded contract package" as being fixed in time and not encompassing later variations as contemplated within the relevant contract, was an error. In focusing on the word “only”, the word “package” was neglected. The word “only” conditions the first not the second, part of the phrase: that is, it is an adverb governing when the Allowance will be paid. It is significant in light of clause 1.7 of the Agreement (No Extra Claims), and reiterates that the intent of the parties under clause 4.1 is to exhaustively determine when the Allowance is paid. There is no textual basis to conclude that it limits the meaning of “awarded contract package” to a single document. [10] To have construed clause 4.1 in such way, the word “package”, is given no work to do. The word “package”, given its ordinary meaning, refers to a group of things that are related and offered as a single unit. It should also be read in the broader textual context of the Agreement, namely the definition of “project” under clause 1.2 is: “a package of works awarded to [the Respondent]”, emphasising that the terms “project” and “package” are interlinked. [11] Awarded contract package encompasses a range of different contractual documents, entered into at a variety of different times, relating to the same overarching project. This interpretation is consistent with the surrounding textual context, as clause 4.1 contemplates the payment of allowances in respect of specific projects, stating that the Allowance, where payable, is paid for “each hour worked on the project”; in recognition of “meeting a project’s milestones”; and in lieu of any other allowances except those in “a specific project agreement or project award”. 9 Decision at [63]. 10 Decision at [64]; the Deputy President also accepted Mr Taylor’s (Project Director of the Respondent) evidence in this regard. 11 Decision at [65]. [2019] FWCFB 33 5 [12] In these respects, the work awarded under the initial Contract and that awarded by the Deed of Variation were part of the same overarching project: the Main North and North Shore Corridor Works. [13] The Respondent asserts that the Deputy President did make findings as to what were a “package of works” and a “project” consistent with the definition of “project” in the Agreement. The Deputy President considered the use of the word “only”, and gave the word no more nor less “work to do” than the other relevant words in the clause. The Deputy President did not “neglect” the word package. The Respondent also contends that no submission as to the significance of the word “package” within its broader term was put by the Appellant at first instance. The Deputy President could not have been in error in respect of an argument that had not been put to her. [14] The Respondent contends that it is not apparent as to why the Agreement’s No Extra Claims provision is relevant. Clause 4.1 stands on its own, and is not conditioned by the intended prohibitions in clause 1.7. There is no evidence that the “intent of the parties” was to “exhaustively determine” when the relevant allowance is paid. The reference to the use of the description “same overarching project” also does not assist in interpretation as it does not form part of the Agreement. [15] The Respondent submits that the Deputy President did not determine that “two contracts existed”. The Deputy President acknowledged that the Deed of Variation varied the Contract because that was the parties’ position. The Deputy President further acknowledged that the Contract and the Deed of Variation were separate “agreements” and did so on the basis of the uncontroverted evidence. [16] The Respondent submits that there is comity between the use of “awarded contract package” in Clause 4.1 and the definition of “project” in clause 1.2 of the Agreement of a “package of works awarded to” the Respondent. The Contract and the Deed of Variation both set out a “package of works”, described as scopes of work in the evidence. Both packages were “awarded to” the Respondent, on the ordinary understanding of that expression. The Appellant’s approach on the other hand seeks to narrow the meaning of the term “awarded contract package” away from the natural meaning of the separately awarded contract packages to accept that the two separate agreements made are the one “package”. Ground two [17] Secondly, and in the alternative, even if the Decision correctly concludes that the only relevant consideration is the Contract for the purposes of determining whether the Allowance is payable under clause 4.1, the build cost is nevertheless in excess of $30 million. The Deputy President was in error by concluding that the Contract and the Deed of Variation were “separate” and that this did not increase the build cost as a result. This is so because while a deed of variation may itself be an independent contractual arrangement, it nevertheless has effect by either changing the terms of the contract, or ending it.12 Determining which is so is a question of fact in each matter. In this case, the manifest intention of the Deed of Variation was that the Contract would remain on foot, subject to the variation. Accordingly, the effect of the variation was that the Contract’s build cost was over $30 million. 12 Federal Commissioner of Taxation v Sara Lee Household and Body Care [2000] 201 CLR 520 (FCT v Sara Lee); Tallermans & Co Pty Ltd v Nathan’s Merchandise (Victoria) Pty Ltd [1956] 98 CLR 93 at 144, 147 (Tallermans). [2019] FWCFB 33 6 [18] The Respondent submits that nowhere in the Decision does the Deputy President conclude that the only relevant consideration is the Contract. Moreover, the Deputy President did not conclude that the Contract and the Deed of Variation were “separate”, but rather she accepted the evidence of Mr Taylor that the Contract and Deed of Variation were separate packages of work. [19] The Respondent asserts that the law of contract and variation of contract does not assist the Appellant’s case when the parties at first instance accepted that the Contract was varied consistently with its terms by the Deed of Variation, as the Deputy President recorded. Whether a new contract was formed by the variation, or the Contract subsisted but in varied form, does not affect the Deputy President’s findings that the Contract was one package of works and the Deed of Variation was a separate package of works for the purposes of interpretation. The Deputy President’s findings are consistent with the terms used in the Agreement regardless of whether a new contract was formed by the variation or if the Contract subsisted. [20] The Respondent contends that the task confronting the Deputy President was not to determine whether “the Contract’s build cost was over $30 million”. The Deputy President’s task was to interpret the words used in the Agreement, that being whether the Allowance would “be paid only for an awarded contract package” of $30 million or more. On the basis of words used in the Agreement and the evidence of Mr Taylor, it was open to the Deputy President to conclude that the Contract and the Deed of Variation were separate packages of works, with the result that the allowance was not payable. This approach is consistent with the principles in Berri. Appellant in reply [21] In reply, the Appellant submits that the Respondent misunderstands the task of the Full Bench, namely that this is an appeal of a non-discretionary decision13 and because the error of fact arose from a misapplication of legal principles: that is, the settled effect of a variation of contract, as a thing in fact. The Respondent also misunderstands the Appellant’s submission, that is, clause 4.1 read as a whole and construed objectively indicates an intention to provide exhaustively, when the allowance will be paid. This is not a matter of subjective intention, concerning evidence as to the intention of the parties to the Agreement. Thus, evidence was not led because it would be impermissible for the Commission to have had regard to it. [22] Moreover, the Respondent’s suggestion that the Appellant did not make submissions about the significance of the word “package” at first instance is incorrect. The Appellant raised this repeatedly in both written and oral submissions.14 The real criticism appears to be that the Appellant’s submissions are not cast in precisely the same terms and order as at first instance. This is unsurprising: these are appeal proceedings, with a focus on error that is not present at first instance. It would be improper for the Appellant to simply re-run its case at first instance. Consideration 13 Golden Cockerel at [7]. 14 Appeal Book Tab 4, p 74; Tab 6, p 88; Tab 2, p.28. [2019] FWCFB 33 7 [23] Foremost, we note that by reason of clause l.7(d) of the Agreement which reads: “either party may exercise a right of appeal against any decision by FWC to a Full Bench”, permission to appeal is not required in this matter. We also note that the Decision under appeal is not a discretionary decision. The Deputy President at first instance was resolving a dispute by arbitration, namely, by answering questions that involved the interpretation of the Agreement. There is no discretion involved in such a task. Accordingly, the task that is before us is to determine whether the interpretation adopted by the Deputy President is correct.15 Relevantly, did the Deputy President err in concluding that the term “awarded contract package” in clause 4.1 of the Agreement is limited to the work set out in the Contract, and not inclusive of the work provided for under the Deed of Variation. For the reasons which follow we have determined that the Deputy President did fall into such error. [24] Firstly, the Deputy President found that the relevant provisions of the Agreement were not ambiguous or susceptible to more than one meaning. We do not agree. We are of the view that clause 4.1 is ambiguous as the term “awarded contract package” has at least more than one reasonably arguable interpretation. This is especially the case given that the term is not defined in the Agreement and because it is unclear as to whether a reasonable person would, based on the language expressed in the Agreement find that clause 4.1 is unambiguous. [25] In approaching the construction of clause 4.1, the Deputy President focused on the word “only” and the fact that neither clause 4.1 nor the definition of “project” in clause 1.2 specifically contemplated a variation to the “awarded contract package”. With this and the evidence of Mr Taylor, the Deputy President found that the Contract was a package of works, and that the Deed of Variation was a separate package of works awarded to the Respondent. Therefore, the Deed of Variation was not caught by the term “awarded contract package” for the purposes of determining whether the Allowance was payable under clause 4.1. In our view, this construction is incorrect. [26] Following Berri, the construction of an enterprise agreement, like that of a statute or contract, begins with a consideration of the ordinary meaning of the relevant words.16 In giving the term “awarded contract package” its ordinary meaning, we find that the word “awarded” is a verb conditioning the word “contract” (that is a legal contract) and “package” (that is a group of things that are related and offered as a single unit).17 Having considered the ordinary meaning of the relevant words, Berri provides that: “The resolution of a disputed construction of an agreement will turn on the language of the agreement having regard to its context and purpose.”18 [27] The word “package” read in context with the definition of “project” under clause 1.2, indicates that terms “project” and “package” are interlinked, as project is defined as: “a package of works awarded to [the Respondent]”. This construction is supported by clause 4.1 itself as the clause notes the payment of allowances in respect of specific projects, for example, the Allowance is paid for “each hour worked on the project”; in recognition of “meeting a project’s milestones”; and in lieu of any other allowances except those in “a 15 Golden Cockerel at [7]; Australian Municipal, Administrative, Clerical and Services Union & Another v Australian Tax Office [2013] FWCFB 4752 at [11] – [13], RACV Road Service Pty Ltd [2014] FWCFB 1629 at [4] – [6]. 16 Berri at [114] point 1. 17 Macquarie dictionary. 18 Berri at [114] point 1. [2019] FWCFB 33 8 specific project agreement or project award”. Further, the word “only” in clause 4.1 does not condition the words “awarded contract package”. We agree with the Appellant that the word “only” operates to govern when the Allowance will be paid, that is, the Allowance will be paid only when the build cost of the awarded contract package exceeds $30 million as per Table 1 of Appendix C. This construction is supported by the context in which clause 4.1 appears in the Agreement, namely that it is consistent with the No Extra Claims clause (clause 1.7), and the objective intention of clause 4.1 to exhaustively determine when the Allowance is to be paid. To the extent that the Deputy President relied on the word “only” in finding that the “awarded contract package” is limited to the Contract, we find error. [28] Having considered the language of the Agreement with regard to context and purpose, we find that there is no textual basis to conclude that the term “awarded contract package” is limited to the scope of works (that is, portions 1-6) in the Contract. The term “awarded contract package”, when given its ordinary meaning and read in context, indicates that both the scope of works in the Contract and the Deed of Variation form part of the same package of works. This is so because the scope of works relate to the same “project” or package of works (as defined in the Agreement): the Main North and North Shore Corridor Works. This construction is consistent with the language used in the Contract and Deed of Variation (see below), as well as the objective intention of clause 4.1; that is, to recognise improvements in productivity performance and the meeting of project milestones. This construction also avoids the possibility that the clause could be frustrated by forming six $5 million contracts for the same scope of works. In that regard, the Deputy President erred in concluding that the term “awarded contract package” in clause 4.1 of the Agreement is limited to the package of works in the Contract only. [29] Secondly, the Deputy President found that “the issue for determination is whether the awarded contract package had a build cost of $30 million or more, not whether the Deed of Variation varied the Contract.”19 In our view, this finding is erroneous. While the Respondent in this appeal contends that the law of contract does not assist the Appellant’s case, we do not agree. As the Deputy President correctly noted, there was no dispute that the Contract was varied consistently with its terms by the Deed of Variation. The legal effect of the Deed of Variation on the Contract cannot be overlooked. It is a relevant consideration in determining a fact in issue, that is, whether the Allowance under clause 4.1 is payable by reason of the works provided for in the Deed of Variation. This is particularly the case in circumstances where the Deputy President has found that the package of works in the Deed of Variation is separate to the package of works in the Contract and is not part of the contract package awarded to the Respondent: “[62] [The Respondent] does not dispute that the Contract was varied by the Deed of Variation. Mr Taylor’s evidence, which I accept, is that the Contract and the Deed of Variation are separate agreements between [The Respondent] and it client. However the issue for determination is whether the awarded contract package had a build cost of $30 million or more, not whether the Deed of Variation varied the Contract.” … [64] I accept Mr Taylor’s evidence and find that the Contract was a package of works (ie. a Project, as defined). The variation (ie. portion 7A) was a separate package of 19 Decision at [62]. [2019] FWCFB 33 9 works awarded to [the Respondent], and therefore a separate Project as defined in the Agreement.” (Emphasis added). [30] It is clear from these passages that the Deputy President did make a finding, and did not (as the Respondent seeks to put) simply “accept” Mr Taylor’s evidence that the Contract and Deed of Variation were separate agreements. On this we would note that the subjective views of Mr Taylor as to whether the Contract and Deed of Variation were “separate” is, in any event, an irrelevant consideration. [31] Moreover, while the dispute that was before the Deputy President was framed as a s.739 dispute, that is an arbitral dispute under the Agreement, the underlying controversy was that of contract. Following the High Court in FCT v Sara Lee and Tallermans, it is clear that while an agreement to vary a contract may itself be an independent contractual arrangement or in other words “separate”, it nevertheless has effect by either changing the terms of the original contract or ending it. Given that the Contract and the Deed of Variation are subject to a Confidentiality Order made by the Commission on 17 May 2018, we do not consider it appropriate to extract any particulars from the two documents. We do note however that we have examined the two documents and we consider that the Deed of Variation varied the package of works under the Contract. The Deed of Variation did not create two separate packages of works. The Deed of Variation deemed work done on the new section by the Respondent before the execution of the Deed to be governed by and to be work under the Contract. The Deed of Variation also annexed a document identifying itself as the amended form of the Contract, including the same contract number. [32] Furthermore, the definitions of “project” and “variation” provided under the Contract demonstrate that the Deed of Variation has the legal effect of varying the package of works in the Contract. For these reasons, the Deed of Variation does not have the legal effect of providing for an additional and separate package of works nor can it be considered as a “separate agreement”. [33] Accordingly, even if the Deputy President’s construction of clause 4.1 was correct, that is limited to the package of works in the Contract, the legal effect of the Deed of Variation on the Contract means that the package of works and the consequent build cost of portions 1-6 and 7A (as varied) is part of the same “awarded contract package”. [34] For these reasons, we have determined to uphold the appeal in respect of both grounds one and two. The Deputy President erred in concluding that “portion 7A does not cause [the Respondent] to be required to pay the Allowance pursuant to clause 4.1 of Appendix C”. In our view, Portion 7A does cause the Respondent to be liable for the payment of the Allowance under clause 4.1, as the build cost of both portions 1-6 (in the Contract) and 7A (in the Deed of Variation) form part of the contract package awarded to the Respondent. [35] As mentioned in the hearing20 given that we have decided to uphold the appeal, the most appropriate course going forward is to refer the matter to Deputy President Dean to deal with issues relating to quantum. Conclusion 20 Transcript of Proceedings dated 27 November 2018 at PN 42-43; 100-105. [2019] FWCFB 33 10 [36] We order that: (1) The appeal is upheld in respect of grounds one and two. (2) Decision [2018] FWC 5596 is quashed. (3) The matter is referred to Deputy President Dean to deal with issues relating to quantum in accordance with this decision. VICE PRESIDENT Appearances: Ms L. Saunders, of counsel, instructed by Ms I. Szumer for the Appellant Mr P. Ludeke, solicitor (Mills Oakley) for the Respondent Hearing details: 2018 Melbourne with video-link to Sydney 27 November Final written submissions: Appellant’s submission in reply dated 26 November 2018 Printed by authority of the Commonwealth Government Printer <PR703587>