University of Western Australia – Law Summer School 2016

Should enterprise agreements1 be interpreted by the application of the

rules that apply to common law contracts of employment or statutory

instruments? – issues for consideration

The Hon Jennifer Smith *

Approaches to interpretation of contracts and statutory instruments

Little has been written about how approaches to the construction of disputed words in a

contract diverge from the interpretation of contested language in statutory text. In one of the

few papers written on this issue, the Hon Justice Michael Kirby speculated in 2002 that:2

The explanation for this dearth of analysis may lie in the fact that the scholars who are

interested in issues of contractual interpretation are likely to be experts in private law. Those

who are interested in developments in statutory construction are likely to be devotees of jurisprudence or public law (Cf J. Hellmer, 'Interpretation of Contracts under the Influence of

Statutory Laws' in Essays in Honour of John Henry Merryman (Duncker Hunbolt,

1990),173). The twain, it seems, rarely meet.

Justice Kirby, in his paper, set out some of the common and different features of interpreting

contractual and statutory text as follows:

(a) Common features

(i) The modern approach to interpretation insists that the context be considered in

the first instance, especially in the case of general words, and not merely when

ambiguity arises.3

(ii) Neither the interpretation of contracts or statutes is concerned with discovering

the subjective intentions of the writers of the words in question.4

(iii) The correct starting point is examination of all relevant parts of the written text.5

(iv) A non-literal meaning is to be preferred to a wholly unreasonable construction

that has only a literal interpretation to commend it.6

1 In this paper, except where the context otherwise provides, I use the term enterprise agreement to mean

agreements approved by the Fair Work Commission as an enterprise agreement and an industrial agreement registered by the Western Australian Industrial Relations Commission. * Acting President, Western Australian Industrial Relations Commission. 2 'Towards a Grand Theory of Interpretation: The Case of Statutes and Contracts' (2003) 24 Statute Law Review

95, 98. See also recent discussion about Justice Kirby’s paper by J Dharmananda and L Firios 'Interpreting statutes and contracts: A distinction without a difference?' (2015) 89 ALJ 580. 3 (98); K & S Lake City Freighters Pty Ltd v Gordon and Gotch Ltd (1985) 157 CLR 309, 315 (Mason J citing Attorney-General v Prince Ernest Augustus of Hanover [1957] AC 436, 461). 4 (98).

5 (99).

2

(v) The proper approach to the task of interpretation is to attempt to read the words

as they would be understood in everyday life. This approach facilitates the use

of plain or ordinary English expression.7

(vi) A search for the 'purpose' of the text enables regard to be had to extrinsic

materials (also referred to as surrounding circumstances when construing a

contract), or the 'matrix of fact' by Lord Wilberforce in Prenn v Simmonds8

where ambiguity cannot otherwise be resolved.9

(b) Differences

(i) A written contract is typically a mutual agreement between a small number of

identified parties. A statute, or a law made under a statute, is not consensual,

except in the broadest political sense, is addressed to the entire community

affected by the law and generally enjoys a longer anticipated duration and more

coercive consequences than a breach of contract.10

(ii) The fact that, normally, a statute will have a broader and more enduring

operation means that words in a statute are usually interpreted by their

contemporary meaning as the provisions 'always speak' (which can over time

change. Thus, words in a statute are not generally regarded as static and should

not be confined to the meaning of the words when the statutory provision was

first enacted).11

(iii) Normally the interpretation of a contract will be controlled by the terms of the

contract and the rules of the common law. The interpretation of a statute and a

statutory instrument is governed by rules of statutory interpretation including

interpretation Acts of Parliament.12

(iv) Contracts are ordinarily drafted with less formality than statutes and statutory

instruments and different extrinsic materials are available to assist

6 (99); CIC Insurance Ltd v Bankstown Football Club Limited (1997) 187 CLR 384, 408; Newcastle City Council v GIO Ltd (1997) 191 CLR 85, 112 - 13; Project Blue Sky Ltd v Australian Broadcasting Corporation (1998) 194 CLR 355 [69], [78]. 7 (99).

8 [1971] 1 WLR 1381; [1971] 3 All ER 237, 239.

9 (100 - 105). In matters before the Western Australian State courts and tribunals whether ambiguity must first

arise in the text or to be evaluated having regard to surrounding circumstances has recently been the subject

of considerable controversy arising out of a consideration of the 'true rule' stated in Codelfa Construction Pty

Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337, 352, very brief

observations made about the true rule in Western Export Services Inc v Jireh International Pty Ltd [2011] HCA

45; (2011) 282 ALR 604; (2011) 86 ALJR 1 and whether what was said in Jireh is inconsistent with observations

in Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640; (2014)

306 ALR 25; (2014) 88 ALJR 447; see the discussion by The Hon Justice Kenneth Martin 'Surrounding

Circumstances Evidence: Construing Contracts and Submissions about Proper Construction: The Return of the

Jedi (sic) JUDII', WA Bar Association 2015 Construing Contracts. 10 (106). 11

(106 - 107). 12

(107 - 108).

3

interpretation. In the case of a written contract, regard can be had to earlier

drafts in some circumstances.13

(v) Regard may be had in some circumstances to subsequent conduct of the parties

when interpreting a contract.14

Enterprise agreements are collective agreements about the terms and conditions of employees

and are made to apply to an enterprise or multiple enterprises, that is, they can apply to more

than one business and/or to more than one employer and the employees of those enterprises.

Once registered under s 41 of the Industrial Relations Act 1979 (WA) or approved by the Fair

Work Commission pursuant to the requirements of s 185 – s 192 of the Fair Work Act 2009

(Cth), an enterprise agreement usually overrides and, in effect, replaces any award terms and

conditions that would otherwise apply to the employees covered by the enterprise agreement.

Importantly, in contrast to a contractual instrument an enterprise agreement binds persons

who are not parties to the enterprise agreement.

Enterprise agreements have for at least the past 20 years dominated the regulation of working

conditions of employees employed in large government and private organisations at a State

and Federal level. These instruments have significant elements of contractual documents

being consensual and having usually been drafted by employers and unions or their

representatives who have no training in legal drafting. Enterprise agreements cannot, like

contracts, be amended by the doctrine of rectification. Industrial agreements, in particular,

cannot be amended once registered, except in limited circumstances.15

Yet, perhaps the only

real elements of an enterprise agreement shared by statutory instruments are the coercive

consequences that flow from a breach of an enterprise agreement and the extent to which

enterprise agreements bind persons and organisations that are not in the contractual sense

parties to the agreement.

When regard is had to the points of difference between the approach of interpretation of

contracts and statutory instruments, it is apparent that enterprise agreements by their nature

have in more recent times been considered as having more of the common features of a

contract than a legislative instrument. Yet enterprise agreements do retain some features of

legislative instruments.

Once registered by the Western Australian Industrial Relations Commission or approved by

the Fair Work Commission, enterprise agreements have statutory force. However, enterprise

agreements like contracts are usually made by agreement between unions and employers

13 (108 - 109). 14 (109). Regard cannot be had to subsequent conduct to interpret an agreement that is wholly in writing:

Hughes v St Barbara Ltd [2011] WASCA 234 [106] (Pullin JA); The Administration of the Territory of Papua

and New Guinea v Daera Guba (1973) 130 CLR 353, 446 (Gibbs J); Brambles Holdings Ltd v Bathurst City

Council (2001) 53 NSWLR 153 [25] - [26] (Heydon JA); Agricultural and Rural Finance Pty Ltd v Gardiner

[2008] HCA 57; (2008) 238 CLR 570 [35] (Gummow, Hayne and Kiefel JJ). However, subsequent conduct may

be examined for the purpose of identifying the entire terms of the contract: County Securities Pty Ltd v

Challenger Group Holdings Pty Ltd [2008] NSWCA 193 [21] - [27] (Spigelman CJ). 15

Section 43(1) of the Industrial Relations Act 1979 (WA) provides an industrial agreement may be varied by a subsequent agreement.

4

whereby they agree that the rights and obligations agreed to will be enforceable by operation

of statute.16

Also, enterprise agreements unlike most statutory instruments are intended to

have effect for a defined period of time. It is also the case that enterprise agreements, like

most contracts, are drafted with little formality when compared to statutory instruments.

In this paper, I will examine some of the rules of interpretation of contract and whether those

rules have been accepted as applying to the construction of enterprise agreements.

Must ambiguity in the text of an enterprise agreement arise before regard can be had to

extrinsic evidence and should the rules of interpretation of statutory instruments be

applied to the interpretation of enterprise agreements?

In a recent article written by Phillip Boncardo in 2011 he argued that, although the common

law of contract has exercised a significant influence on the interpretation of enterprise

agreements, several important differences in interpretative approach exist.17

These, he says,

arise from the public nature of agreements and the fact that they fall to be construed in line

with the Acts of Parliaments as compared to the private and primarily commercial character

of contracts. In his paper he also put forward the view that enterprise agreements should be

interpreted by the application of the rules of statutory interpretation and the interpretation

Acts of Parliament.

The view that the Acts Interpretation Act 1901 (Cth) applies to the interpretation of an

enterprise agreement approved by the Fair Work Commission was recently unanimously

rejected by a Full Bench of the Fair Work Commission in 2014 in The Australasian Meat

Industry Employees Union v Golden Cockerel Pty Ltd.18

In Golden Cockerel the Full Bench 'settled' two important issues for the interpretation of

enterprise agreements approved by the Fair Work Commission. The first, is that it found that

regard can be had to evidence of surrounding circumstances before the existence of

ambiguity in an enterprise agreement is identified, to determine whether an ambiguity arises.

The second is that enterprise agreements are to be construed differently from awards made by

the Fair Work Commission as the Acts Interpretation Act does not apply to enterprise

agreements.

(a) Is ambiguity necessary before regard can be had to extrinsic materials?

The recent divergence in judicial opinion as to when regard can be had to extrinsic materials

and the 'story' of the 'ambiguity' of 'ambiguity'19

in the construction of contracts begins with

the statement of the rule articulated by Mason J in Codelfa Construction Pty Ltd v State Rail

Authority of New South Wales20

when his Honour said:21

16 The Fair Work Commission can also approve an enterprise agreement made between employers and employees: s 172 of the Fair Work Act 2009 (Cth). 17 'Enterprise Agreements and Contracts: Convergent and Divergent Approaches to Interpretation' (2011) 18 James Cook University Law Review 56. 18 [2014] FWCFB 7447. 19 I borrow this phrase from the title of the article by Lindgren K 'The Ambiguity of "Ambiguity" in the Construction of Contracts' (2014) 38 Australian Bar Review 153. 20

[1982] HCA 24; (1982) 149 CLR 337.

5

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.

In 2011, in Western Export Services Inc v Jireh International Pty Ltd22

Gummow, Heydon

and Bell JJ on hearing and dismissing an application for special leave criticised the Courts of

Appeal of New South Wales and Victoria for assuming this rule was no longer applicable.

Their Honours critically said:23

Acceptance of the applicant's submission, clearly would require reconsideration by this Court

of what was said in Codelfa Construction Pty Ltd v State Rail Authority of NSW ((1982)

149 CLR 337 at 352; [1982] HCA 24) by Mason J, with the concurrence of Stephen J and

Wilson J, to be the 'true rule' as to the admission of evidence of surrounding circumstances. Until this Court embarks upon that exercise and disapproves or revises what was said in

Codelfa, intermediate appellate courts are bound to follow that precedent. The same is true of

primary judges, notwithstanding what may appear to have been said by intermediate appellate courts.

The position of Codelfa, as a binding authority, was made clear in the joint reasons of five

Justices in Royal Botanic Gardens and Domain Trust v South Sydney City Council ((2002) 240 CLR 45; [2002] HCA 5 [39]) and it should not have been necessary to reiterate the point

here.

We do not read anything said in this Court in Pacific Carriers Ltd v BNP Paribas ((2004)

218 CLR 451; [2004] HCA 35 [22]); Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd ((2004) 219 CLR 165; [2004] HCA 52 [40]); Wilkie v Gordian Runoff Ltd ((2005) 221 CLR 522;

[2005] HCA 17 [15]) and International Air Transport Association v Ansett Australia Holdings

Ltd ((2008) 234 CLR 151; [2008] HCA 3 [8], [53]) as operating inconsistently with what was said by Mason J in the passage in Codelfa to which we have referred.

In March 2014, the High Court delivered its decision in Electricity Generation Corporation v

Woodside Energy Ltd24

which opened the door to judicial doubt whether this principle in

Codelfa had conclusively been overruled and left some of the State Supreme Courts and the

Federal Court divided on this point. The key passage in Woodside is in the joint judgment of

French CJ, Hayne, Crennan and Kiefel JJ where their Honours observed:25

Both Verve and the Sellers recognised that this Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the

terms of a commercial contract is to be determined by what a reasonable businessperson

would have understood those terms to mean (McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579 at 589 [22] per Gleeson CJ; Pacific Carriers Ltd v BNP Paribas (2004)

218 CLR 451 at 462 [22] per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ;

International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151

at 160 [8] per Gleeson CJ; see further Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181 at 188 [11] per Gleeson CJ, Gummow and Hayne JJ, citing Investors

Compensation Scheme Ltd v West Bromwich Building Society [No 1] [1998] 1 WLR 896 at

21 (352). 22 [2011] HCA 45; (2011) 282 ALR 604; (2011) 86 ALJR 1. 23 [3] - [5]. 24

[2014] HCA 7; (2014) 251 CLR 640; (2014) 306 ALR 25; (2014) 88 ALJR 447. 25

[35].

6

912; [1998] 1 All ER 98 at 114. See also Homburg Houtimport BV v Agrosin Private Ltd (The

Starsin) [2004] 1 AC 715 at 737 [10] per Lord Bingham of Cornhill). That approach is not unfamiliar (See, eg, Hydarnes Steamship Co v Indemnity Mutual Marine Assurance Co

[1895] 1 QB 500 at 504 per Lord Esher MR; Bergl (Australia) Ltd v Moxon Lighterage Co

Ltd (1920) 28 CLR 194 at 199 per Knox CJ, Isaacs and Gavan Duffy JJ; see generally Lord

Bingham of Cornhill, “A New Thing Under the Sun? The Interpretation of Contract and the ICS Decision”, Edinburgh Law Review, vol 12 (2008) 374). As reaffirmed, it will require

consideration of the language used by the parties, the surrounding circumstances known to

them and the commercial purpose or objects to be secured by the contract (Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 461-462 [22] per Gleeson CJ, Gummow, Hayne,

Callinan and Heydon JJ; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at

179 [40] per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ; International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151 at 160 [8] per

Gleeson CJ; at 174 [53] per Gummow, Hayne, Heydon, Crennan and Kiefel JJ; Byrnes v

Kendle (2011) 243 CLR 253 at 284 [98] per Heydon and Crennan JJ. See also Charter

Reinsurance Co Ltd v Fagan [1997] AC 313 at 326, 350; Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900 at 2906-2907 [14]; [2012] 1 All ER 1137 at 1144). Appreciation of the

commercial purpose or objects is facilitated by an understanding 'of the genesis of the

transaction, the background, the context [and] the market in which the parties are operating' (Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 350 per

Mason J, citing Reardon Smith Line v Hansen-Tangen [1976] 1 WLR 989 at 995-996; [1976]

3 All ER 570 at 574. See also Zhu v Treasurer (NSW) (2004) 218 CLR 530 at 559 [82] per Gleeson CJ, Gummow, Kirby, Callinan and Heydon JJ; International Air Transport

Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151 at 160 [8] per Gleeson CJ).

As Arden LJ observed in Re Golden Key Ltd ([2009] EWCA Civ 636 at [28]), unless a

contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption 'that the parties … intended to

produce a commercial result'. A commercial contract is to be construed so as to avoid it

'making commercial nonsense or working commercial inconvenience' (Zhu v Treasurer (NSW) (2004) 218 CLR 530 at 559 [82] per Gleeson CJ, Gummow, Kirby, Callinan and

Heydon JJ. See also Gollin & Co Ltd v Karenlee Nominees Pty Ltd (1983) 153 CLR 455 at

464).

The points made in this passage are as follows:

(a) The meaning of the terms of a commercial contract is to be determined by what

a reasonable business person would have understood these terms to mean.

(b) This approach will require consideration of the language used by the parties, the

surrounding circumstances known to them and the commercial purpose or

objects to be secured by the contract.

(c) Appreciation of the commercial purpose or objects is facilitated by an

understanding of the genesis of the transaction, the background, the context and

the market in which the parties are operating.

(d) A commercial contract is to be construed so as to avoid it making commercial

nonsense or working commercial inconvenience.

The New South Wales Court of Appeal in Mainteck Services Pty Ltd v Stein Heurtey SA26

,

(and applied by the Full Court of the Federal Court in Stratton Finance Pty Ltd v Webb27

),

26

[2014] NSWCA 184; (2014) 310 ALR 113. 27

[2014] FCAFC 110.

7

found that a consequence of these observations in Woodside is that the point in Codelfa had

been overruled. In Mainteck Services Leeming JA who delivered the leading judgment

found that the observations in Jireh are inconsistent with what was said in Woodside and

went on to say:28

The judgment confirms that not only will the language used 'require consideration' but so too

will the surrounding circumstances and the commercial purpose or objects. Although the High

Court in Woodside did not expressly identify a divergence of approach, Jireh was notoriously

controversial in precisely this respect. In Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd (2013) 298 ALR 666; [2013] WASCA 66 at [107] McLure P referred

to the 'heated controversy' created by Jireh; see further Kevin Lindgren's analysis in 'The

ambiguity of "ambiguity" in the construction of contracts' (2014) 38 Aust Bar Rev 153, pp 161-7. It cannot be that the mandatory words 'will require consideration' used by four

Justices of the High Court were chosen lightly, or should be 'understood as being some

incautious or inaccurate use of language': compare Fejo v Northern Territory (1998) 195 CLR

96; 156 ALR 721; [1998] HCA 58 at [45].

His Honour then said:29

What is the legal meaning of a promise to sell 'my Dürer drawing', if the vendor’s wife owns a

Dürer drawing which is on display in their home, and the vendor keeps another secretly in his

study? What is the meaning of a gift 'to my niece Eliza Woodhouse during her life' in a will, if the testator had no such niece, but a grandniece of that name, and another grandniece, who

was illegitimate, who lived with him: compare Re Fish; Ingham v Rayner [1894] 2 Ch 83?

What is the meaning of cl 7 of the Wild Dog Destruction Regulation 1999, which provided

'The Wild Dog Destruction Regulation 1994 is repealed'? Contracts, wills and statutes are very different legal texts, to the process of ascertaining whose legal meaning different rules

apply, yet all are based on language, and language is unavoidably contextual. If I may repeat

what I wrote of the uncertain meaning of the Wild Dog Destruction Regulation in Resolving Conflicts of Laws, Federation Press 2011, p 13, 'The meaning of even the seemingly clearest

legal text can be unclear, hence the importance of attending to context in the first instance'.

For those reasons, to say that a legal text is 'clear' reflects the outcome of that process of interpretation. It means that there is nothing in the context which detracts from the ordinary

literal meaning. It cannot mean that context can be put to one side; otherwise the three legal

texts mentioned in the previous paragraph would be 'clear'.

The Full Court of the Federal Court in Stratton Finance expressly agreed with the approach

of Leeming JA in Mainteck Services.

In Golden Cockerel the Full Bench of the Fair Work Commission applied the approach in

Mainteck Services and said it is now aligned to the approach to the construction of awards

and enterprise agreements espoused by Burchett J in Short v F W Hercus Pty Ltd30

and

confirmed by French J in City of Wanneroo v Australian Municipal, Administrative,

Clerical and Services Union.31

In particular, the Full Bench said:32

Regard may therefore be had to evidence of the surrounding circumstances before the

existence of ambiguity in an agreement is identified as an aide to interpreting the agreement

for the purposes of determining whether an ambiguity exists. If thereafter ambiguity is not

28 [71]. 29 [76] - [77]. 30 [1993] FCA 51; (1993) 40 FCR 511, 518. 31

[2006] FCA 813; (2006) 153 IR 426. 32

[30].

8

identified extrinsic material cannot be used to contradict the language of the instrument. If

ambiguity is identified the material may be used as contextual material to aide in the interpretation of the instrument. In this context we would make the observation that the law in

relation to the interpretation of commercial contracts (Codelfa; Metcash and Stratton) has

now aligned with the approach to the construction of awards and enterprise agreements as

espoused by Burchett J in Short v FW Hercus Pty Ltd ([1993] FCA 51; (1993) 40 FCR 511 at 518 and confirmed by French J, as he then was, in Wanneroo.

In City of Wanneroo v AMACSU French J had observed:33

The attribution of purpose by reference to context in the wide sense does not await the

discovery of an ambiguity in the text. The purpose or object underlying an Act is often determined by consideration of the statutory context — CIC Insurance Ltd v Bankstown

Football Club Ltd (1997) 187 CLR 384 at 408 (Brennan CJ, Dawson, Toohey and Gummow

JJ). Nor does discovery of an ambiguity precede resort to extrinsic material under s 15AB. For

as Dawson J said in Mills v Meeking (1990) 169 CLR 214 at 235 (speaking of s 35 of the Interpretation of Legislation Act 1984 (Vic) in almost identical terms to s 15AA):

The approach required by s 35 needs no ambiguity or inconsistency; it allows a court to

consider the purposes of an Act in determining whether there is more than one possible construction. Reference to the purposes may reveal that the draftsman has inadvertently

overlooked something which he would have dealt with had his attention been drawn to

it and if it is possible as a matter of construction to repair the defect, then this must be done.

Whilst this point of interpretation of enterprise agreements appears to have been settled in the

Federal system, it cannot be said that the controversy has been settled in Western Australia in

respect of the interpretation of contracts and industrial agreements registered by the Industrial

Relations Commission.

In Western Australia the approach in Mainteck Services has not been applied. In Technomin

Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd34 McLure P, with whom

Newnes JA agreed, stated that until further direction from the High Court the guidance in

Jireh should be followed35 and stated:

(a) the 'true rule' in Codelfa was not considered by the High Court in Woodside;36

(b) there could be no doubt the majority in Woodside took into account surrounding

circumstances known to both parties in the construction of the gas supply

agreement. However, there was no express consideration by the majority of

whether, or finding that, the language of the gas supply agreement was

ambiguous;37

and

(c) until the High Court expressly states its position on the subject, she would

continue to apply the 'true rule' which permits regard to be had to some

33 [56]. 34 [2014] WASCA 164. 35 [37]. 36 [39]. In 'Defending orthodoxy: Codelfa and ambiguity' (2015) 89 ALJ 491, T Prince argues that the points made in Technomin by McLure P at [39] - [45] cast doubt on Leeming JA's conclusion in Mainteck Services and should not be followed. 37

[41].

9

surrounding circumstances for construction purposes without having to satisfy

the gateway requirement (a requirement of ambiguity).38

President McLure then found that there were a number of 'background facts' forming part of

the factual matrix that enlivened the issue of contractual construction for determination.

These were the terms of relevant joint venture agreements and a development agreement.39 In

any event, her Honour then went on to find ambiguity in the deed in question so that extrinsic

material could be admitted.40

His Honour Murphy JA made similar points in Technomin Australia. His Honour said:41

As noted earlier, a contextual approach to construction does not always import the reception

of evidence of surrounding circumstances. Also, it might be thought that the 'heated controversy' created by Jireh might cut both ways in this context, in that, at least arguably,

the controversy would not be determined without reference to it.

Also, the following observations might be made about the law post-Codelfa. First, the passage in Codelfa (352) does not appear to have been subject of express consideration in the High

Court since Royal Botanic [39]. Secondly, it might be thought that the authorities up to the

time of Electricity Generation are not necessarily inconsistent with a requirement of

ambiguity. Thirdly, a case as significant as Codelfa in the operation of the commercial law in Australia for over 30 years is unlikely to have been impliedly overruled. Fourthly, in

Electricity Generation, French CJ, Hayne, Crennan and Kiefel JJ 'reaffirmed' the High

Court's earlier decisions. Electricity Generation does not appear to provide a departure from them. Fifthly, the question of whether evidence of surrounding circumstances is inadmissible

in the absence of ambiguity does not appear to have been canvassed in argument in Electricity

Generation, nor isolated for determination.

On the basis of these matters, it could be open to conclude that it is not correct to say that in all cases where there is a contest as to the proper construction of a written contract, any

evidence from the parties of surrounding circumstances is always admissible on the question

of construction, irrespective of ambiguity in the absence of such evidence. Such a conclusion would not require any precedential effect to be assigned to the observations of the court in the

leave application in Jireh.

In Director General, Department of Education v United Voice WA42

Pullin J, sitting as the

Industrial Appeal Court, (with whom Le Miere J agreed) applied the principle that

surrounding circumstances may only be taken into account when construing an industrial

agreement if the ordinary meaning of the words is ambiguous or susceptible to more than one

meaning.43

Justice Kenneth Martin in a comprehensive paper delivered to the Bar Association on

17 March 2015 analysed line by line the decision in Woodside and the approach taken in

Mainteck Services and Technomin Australia and concluded that the surrounding

circumstance admissible evidence saga, remains to be completed.44

38 [45]. 39 [45] - [46]. 40 [86]. 41 [214] - [216]. 42 [2013] WASCA 287; (2013) 94 WAIG 1. 43 [19]. 44

'Surrounding Circumstances Evidence: Construing Contracts and Submissions about Proper Construction: The Return of the Jedi (sic) JUDII', WA Bar Association 2015 Construing Contracts.

10

However, given French J's apparent clear observations in City of Wanneroo v AMACSU, it

perhaps can be said that at least one of the views of the current bench of the High Court (in

respect of this issue), is not in doubt.

(b) Application of the Acts Interpretation Act 1901

In Golden Cockerel the appellant argued that its certified enterprise agreement must be

interpreted in accordance with the Acts Interpretation Act. In support of their argument, it

relied upon the following finding made by French J in City of Wanneroo v AMACSU:45

The interpretation of legislative instruments is dealt with in the Legislative Instruments Act

2003 (Cth). Awards and agreements made under the Act are declared, by s 7(1) of the Legislative Instruments Act, not to be legislative instruments — see Item 18 in the table set

out in s 7(1). This leaves such awards and agreements within s 46 of the Acts Interpretation

Act 1901 (Cth) which provides, inter alia:

(1) If a provision confers on an authority the power to make an instrument that is

neither a legislative instrument within the meaning of the Legislative Instruments

Act 2003 nor a rule of court, then, unless the contrary intention appears:

(a) this Act applies to any instrument so made as if it were an Act and as if

each provision of the instrument were a section of an Act; and

(b) expressions used in any instrument so made have the same meaning as in

the enabling legislation; and

(c) any instrument so made is to be read and construed subject to the enabling

legislation, and so as not to exceed the power of the authority.

An award is an instrument made by an authority, in this case the Australian Industrial Relations Commission, and so attracts the application of the Acts Interpretation Act for the

purposes of its interpretation.

The appellant in Golden Cockerel also relied upon previous decisions of the Full Bench of

the Fair Work Commission in which it had not been in contention that the Acts Interpretation

Act applied to the interpretation of enterprise agreements.46

The Full Bench rejected that approach, firstly pointing out that the decision of French J in

City of Wanneroo v AMACSU was concerned with the construction of an award and not an

enterprise agreement.47

The Full Bench then applied the recent reasoning of the Full Court of

the Federal Court in Toyota Motor Corporation Australia Ltd v Marmara48

and pointed out

that the Commission's role, subject to the satisfaction of statutory criteria, is to approve an

enterprise agreement already made, but there is no power conferred on the Commission by

the Fair Work Act to make an enterprise agreement.49

45 [52]. 46 [33] - [34]. 47 [32]. 48

[2014] FCAFC 84. 49

[37] - [39].

11

(c) Settled principles of interpretation for enterprise agreements approved by the

Fair Work Commission

After rejecting the appellant's argument, the Full Bench in Golden Cockerel set out the

following principles it says should guide the Fair Work Commission in interpreting an

enterprise agreement:50

From the foregoing, the following principles may be distilled:

1. The AI Act does not apply to the construction of an enterprise agreement made under

the Act.

2. In construing an enterprise agreement it is first necessary to determine whether an agreement has a plain meaning or contains an ambiguity.

3. Regard may be had to evidence of surrounding circumstances to assist in determining

whether an ambiguity exists.

4. If the agreement has a plain meaning, evidence of the surrounding circumstances will not be admitted to contradict the plain language of the agreement.

5. If the language of the agreement is ambiguous or susceptible to more than one meaning

then evidence of the surrounding circumstance will be admissible to aide the interpretation of the agreement.

6. Admissible evidence of the surrounding circumstances is evidence of the objective

framework of fact and will include:

(a) evidence of prior negotiations to the extent that the negotiations tend to establish

objective background facts known to all parties and the subject matter of the

agreement;

(b) notorious facts of which knowledge is to be presumed;

(c) evidence of matters in common contemplation and constituting a common

assumption.

7. The resolution of a disputed construction of an agreement will turn on the language of the Agreement understood having regard to its context and purpose.

8. Context might appear from:

(a) the text of the agreement viewed as a whole;

(b) the disputed provision’s place and arrangement in the agreement;

(c) the legislative context under which the agreement was made and in which it

operates.

9. Where the common intention of the parties is sought to be identified, regard is not to be had to the subjective intentions or expectations of the parties. A common intention is

identified objectively, that is by reference to that which a reasonable person would

understand by the language the parties have used to express their agreement.

10. The task of interpreting an agreement does not involve rewriting the agreement to

achieve what might be regarded as a fair or just outcome. The task is always one of

interpreting the agreement produced by parties.

These principles have subsequently been consistently applied by the Fair Work Commission.

50

[41].

12

In Essential Energy v Australian Municipal, Administrative, Clerical and Services Union,51

added to the 10 principles stated in Golden Cockerel, the well-established principle in the law

of contract that it is not permissible to take into account the conduct of parties which occurs

after an industrial instrument is made as an aid to interpret that industrial instrument.52

(d) Principles of interpretation of awards and enterprise agreements now divided

Awards are made by industrial tribunals following a process of conciliation and arbitration.

Some awards apply to whole industries, others apply to parts of industries or to occupational

groups and some apply to specific enterprises. Some of the content of an award can be by

agreement, but usually the terms of an award contain an enforceable arbitrated safety net of

minimum terms and conditions of employment and other rights and obligations regulating the

future conduct of the parties to an award and those bound by the award.

The effect of the reasoning of French J in City of Wanneroo v AMACSU set out above is that

awards made by the Fair Work Commission whilst expressly not declared by s 7(1) of the

Legislative Instruments Act 2003 (Cth) to be legislative instruments, by operation of s 46 of

the Acts Interpretation Act are to be construed as if these were an Act of the Commonwealth

Parliament.

By operation of s 5 of the Interpretation Act 1984 (WA), instruments made under a written

law and having legislative effect are deemed to be subsidiary legislation. Awards made by

the Western Australian Industrial Relations Commission are not subject to any review or

control by the Western Australian Parliament, yet it appears well-established that they have

been regarded as having legislative effect53

as they apply to persons at large. Thus, an award

made by the Western Australian Industrial Relations Commission is to be construed as if

subsidiary legislation.

Enterprise agreements under the State system are made by employers and industrial

organisations and are given force and effect by registration by the Western Australian

Industrial Relations Commission, subject to compliance with pt II, div 2B of the Industrial

Relations Act. Like enterprise agreements approved by the Fair Work Commission it appears

that it would be difficult to argue that an industrial agreement is 'made' under a written law so

as to be deemed to be subsidiary legislation as defined in s 5 of the Interpretation Act.

51 [2015] FWCFB 1981. 52 [23]; applying Seamen’s Union of Australia v Adelaide Steamship Co Ltd (1976) 46 FLR 444, 446; City of Wanneroo v Holmes [1989] FCA 369; (1989) 30 IR 362, 378; AWU v Pasminco Australia Ltd [2003] NSWIRComm 365; (2003) 131 IR 1 [39]. 53

The Queen v Wright; Ex parte Waterside Workers' Federation of Australia (1955) 93 CLR 528, 531; Perth Electrical Tramways Employees' Industrial Union v Commissioner of Railways (1927) 7 WAIG 155.

13

(e) Approaches to the interpretation of enterprise agreements registered as

industrial agreements by the Western Australian Industrial Relations

Commission

Some principles of interpretation of awards are equally applicable and have consistently been

applied to the interpretation of Federal and State enterprise agreements.54

These principles

arise out of the common elements of the nature of awards and enterprise agreements.

In Health Services Union of Western Australia (Union of Workers) v The Director General

of Health55

Beech CC and I observed that:56

Awards and industrial agreements are not legislative instruments. Such instruments are given

legislative effect by enabling legislation and are not to be regarded as drafted by persons skilled in the drafting of legislation or other instruments. Thus, there are subtle but important

considerations when interpreting industrial instruments when compared to the construction of

legislative instruments.

This observation is not inconsistent with the application of the principle that the

Interpretation Act applies to the interpretation of awards, as awards can be regarded as

subsidiary legislation as they have legislative effect. Yet, arbitral bodies are not skilled

parliamentary draftsmen or draftswomen.57

Nor are awards subject to the same scrutiny as

legislative instruments.

In Health Services Union we went on to observe about the construction of enterprise

agreements:58

Firstly, it is clear that the task of construction of industrial instruments is to be approached in

a way that allows for a generous construction. Secondly, part of the context of construction of

an industrial instrument is how it is made. Where an industrial instrument is an award, the principles to be applied were set out by French J in City of Wanneroo v Holmes (378 - 379)

where his Honour said:

The interpretation of an award begins with a consideration of the natural and ordinary

meaning of its words: Re Clothing Trades Award (1950) 68 CAR 597 (Aust Indus Ct, Full Ct). The words are to be read as a whole and in context: Australian Timber

Workers Union v W Angliss & Co Pty Ltd (1924) 19 CAR 172. Ambiguity if any, may

be resolved by a consideration, inter alia, of the history and subject matter of the award: Picard v John Heine & Son Ltd (1924) 35 CLR 1. Resort to such matters as prefatory

statements and negotiations is of dubious assistance if admissible at all: Seymour v

Stawell Timber Industries Pty Ltd (1985) 13 IR 289 at 290; 9 FCR 241 at 244 (Northrop J) (13 IR at 299; 9 FCR at 254) (Keely J) cf 13 IR at 309; 9 FCR at 265

(Gray J). The logs of claim and arbitrator's reasons for decision may be referred to to

determine the ambit of the dispute which led to the making of the award so that where

there are two possible interpretations, one within the ambit and one without, the former may be preferred. Evidence of the conduct of the parties subsequent to the making of

the award however, cannot be relied upon to construe it: Seamen's Union of Australia v

Adelaide Steamship Co Ltd (1976) 46 FLR 444, 446, disapproving Merchant Seamen's Guild of Australia v Sydney Steam Collier Owners and Coal Stevedores Association

(1958) 1 FLR 248. That is not to say the words must be interpreted in a vacuum

54 See, for example, the observations in Golden Cockerel [19] - [22]. 55 [2012] WAIRC 01117; (2012) 93 WAIG 1. 56 [37]. 57

George A Bond & Co Ltd (in liq) v McKenzie [1929] AR (NSW) 498, 503. 58

[38] - [44].

14

divorced from industry realities. As Street J said in Geo A Bond & Co Ltd (in liq) v

McKenzie [1929] AR(NSW) 498 at 503:

'… it must be remembered that awards are made for the various industries in the

light of the customs and working conditions of each industry, and they frequently

result ... from an agreement between the parties, couched in terms intelligible to

themselves but often framed without that careful attention to form and draughtsmanship which one expects to find in an Act of Parliament. I think,

therefore in construing an award, one must always be careful to avoid a too

literal adherence to the strict technical meaning of words, and must view the matter broadly, and after giving consideration and weight to every part of the

award, endeavour to give it a meaning consistent with the general intention of the

parties to be gathered from the whole award.' – See also Re Crown Employees (Overtime) Award [1969] AR(NSW) 60 at 63; Re Hospital Employees

Administrative and Clerical (State) Award (1982) 2 IR 123.

It is of course no part of the court's task to assign a meaning in order that the award

may provide what the Court thinks is appropriate – Australian Workers Union v Graziers Association (NSW) (1939) 40 CAR 494. Indeed it has been said that a tribunal

interpreting an award must attribute to the words used their true meaning even if

satisfied that so construed they would not carry out the intention of the award making authority – Re Health Administration Corporation; Re Public Hospital Nurses (State)

Award (1985) 12 IR 122; Rogers Meat Co Pty Ltd v Howarth [1960] AR(NSW) 291;

Re Government Railways and Tramways (Engineers etc) Award [1928] AR 53 at 58 (Cantor J).

Justice French subsequently reaffirmed what he said in City of Wanneroo v Holmes in City of

Wanneroo v Australian Municipal, Administrative, Clerical and Services Union when he

observed [57]:

It is of course necessary, in the construction of an award, to remember, as a contextual

consideration, that it is an award under consideration. Its words must not be interpreted

in a vacuum divorced from industrial realities — City of Wanneroo v Holmes (1989) 30 IR 362 at 378-379 and cases there cited. There is a long tradition of generous

construction over a strictly literal approach where industrial awards are concerned —

see eg George A Bond & Co Ltd (in liq) v McKenzie [1929] AR (NSW) 498 at 503-504

(Street J). It may be that this means no more than that courts and tribunals will not make too much of infelicitous expression in the drafting of an award nor be astute to

discern absurdity or illogicality or apparent inconsistencies. But while fractured and

illogical prose may be met by a generous and liberal approach to construction, I repeat what I said in City of Wanneroo v Holmes (at 380):

Awards, whether made by consent or otherwise, should make sense according to

the basic conventions of the English language. They bind the parties on pain of pecuniary penalties.

Later, Kirby and Callinan JJ in Amcor Ltd v Construction, Forestry, Mining and Energy

Union [2005] HCA 10; (2005) 222 CLR 241; (2005) 79 ALJR 703; (2005) 138 IR 286 [96]

and [129] favoured an even more generous contextual approach that had been expressed in Kucks by Madgwick J who had said (184):

It is trite that narrow or pedantic approaches to the interpretation of an award are

misplaced. The search is for the meaning intended by the framer(s) of the document, bearing in mind that such framer(s) were likely of a practical bent of mind: they may

well have been more concerned with expressing an intention in ways likely to have

been understood in the context of the relevant industry and industrial relations environment than with legal niceties or jargon. Thus, for example, it is justifiable to

read the award to give effect to its evident purposes, having regard to such context,

15

despite mere inconsistencies or infelicities of expression which might tend to some

other reading. And meanings which avoid inconvenience or injustice may reasonably be strained for. For reasons such as these, expressions which have been held in the case

of other instruments to have been used to mean particular things may sensibly and

properly be held to mean something else in the document at hand.

In Amcor the industrial instrument in question was an industrial agreement. Callinan J went on to observe that [131]:

An industrial agreement has a number of purposes, to settle disputes, to anticipate and

make provision for the resolution of future disputes, to ensure fair and just treatment of both employer and employees, and generally to promote harmony in the workplace.

It is also relevant to consider what Madgwick J said in Kucks (184) in the following passage

that immediately followed the passage considered by Kirby and Callinan JJ in Amcor:

[T]he task remains one of interpreting a document produced by another or others. A

court is not free to give effect to some anteriorly derived notion of what would be fair

or just, regardless of what has been written into the award. Deciding what an existing

award means is a process quite different from deciding, as an arbitral body does, what might fairly be put into an award. So, for example, ordinary or well-understood words

are in general to be accorded their ordinary or usual meaning.

Counsel for the appellant, Mr Hooker, made a submission that the observation of Callinan J in Amcor about the purposes of industrial agreements should be treated with circumspection as

these observations were not representative of the majority in Amcor. It is our view, however,

that whilst it can be acknowledged that his Honour's observations were obiter, the observations have a sound foundation. Industrial agreements, unlike awards and some award

amendments, can only be consensual, yet award provisions can be made by consent or are

arbitrated. Part of the context of industrial agreements is the statutory framework that enables

parties to enter into industrial agreements: United Voice WA v The Minister for Health [2012] WAIRC 00319; (2012) 92 WAIG 585.

We agree that the terms of an industrial instrument must be read within the historical context

of an operative award and past industrial instruments that apply to the class of employees whose terms and conditions of employment are covered by the industrial instrument in

question. However, added to that context should be a consideration of any relevant statutory

scheme.

These observations were applied by the majority of the Full Bench in United Voice WA v

Director General, Department of Education59

. In that matter, Beech CC and I also observed

that:60

To construct the intention of the parties, regard must be had to the principles that apply to the

construction of contracts: Short v F W Hercus Pty Ltd [1993] FCA 51; (1993) 40 FCR 511, 518 - 519 (Burchett J); Construction, Forestry, Mining and Energy Union v John Holland

Pty Ltd [2010] FCAFC 90; (2010) 186 FCR 88 [90] - [96] (Logan J). Importantly, regard

cannot be had to the actual intention of parties or their expectations. Evidence of such matters is usually inadmissible: Codelfa Construction Pty Ltd v State Rail Authority of New South

Wales (1981-1982) 149 CLR 337, 352 (Mason J). Ascertaining the presumed intention of the

parties requires the objective determination of what a reasonable person would have

understood the contract (in this matter the 2010 agreement) to mean, as at the date that it was made, taking into account the object of the contract and the surrounding circumstances known

to the parties: Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001)

59

[2013] WAIRC 00053; (2013) 93 WAIG 80 [53]. 60

[52].

16

210 CLR 181 [11]. In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004)

219 CLR 165 the Full Court of the High Court said [40]:

This Court, in Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451, has recently

reaffirmed the principle of objectivity by which the rights and liabilities of the parties to

a contract are determined. 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 (Pacific Carriers Ltd v BNP

Paribas at 461-462 [22]).

In an appeal to the Industrial Appeal Court, the majority of the Industrial Appeal Court found

the majority of the Full Bench had erred in construing the provision of the industrial

agreement in question.61

Justice Pullin, with whom Le Miere J agreed, did not however

consider the general principles of construction other than to:

(a) affirm the application of the principle in Toll (FGCT) Pty Ltd v Alphapharm

Pty Ltd62

and Pacific Carriers Ltd v BNP Paribas;63

(b) apply the principle in Codelfa requiring ambiguity before regard could be had to

surrounding circumstances;64

(c) have regard to the principle in Australian Broadcasting Commission v

Australasian Performing Right Association Ltd65

that a phase must be

considered in context of the agreement read as a whole;66

and

(d) have regard to the principle that industrial agreements are not always framed

with that careful attention to form and draftsmanship which one expects to find

in an Act of Parliament.67

Thus, it appears clear that, in interpreting industrial agreements, the principles that apply to

the interpretation of an award that arise out of contextual matters also apply to the

interpretation of enterprise agreements. These are that both awards and industrial agreements

are:

(a) to be interpreted generously;

(b) drafted without the careful attention given to the form of a statutory instrument;

61 Director General, Department of Education v United Voice WA [2013] WASCA 287; (2013) 94 WAIG 1. 62 [2004] HCA 52; (2004) 219 CLR 165 [40]. 63 [2004] HCA 35; (2004) 218 CLR 451 [22] (applied by Pullin J [18]). 64 [19]. 65 [1973] HCA 36; (1973) 129 CLR 99, 109. 66 [20]. 67

George A Bond & Co Ltd (in liq) v McKenzie (503).

17

(c) enforceable at law within a statutory context and a person bound by either

cannot be freed or discharged from any liability or penalty or from the

obligation by reasons of any contractual provision;68

and

(d) made for industries in light of customs and working conditions in the industry or

industries to which they extend.

Where the interpretation of awards and industrial agreements substantially depart ways, is

that:

(a) in construing an industrial agreement it is permissible to construct the intention

of the parties to the agreement and in doing so, to apply the principles to the

construction of contractual text; and

(b) it is doubtful that the Interpretation Act has any application to the interpretation

of an industrial agreement.

(f) Can enterprise agreements have effect in the law of contract as well as having

statutory force?

Whilst it is clear that enterprise agreements that are approved by the Fair Work Commission

or industrial agreements that are registered by the Western Australian Industrial Relations

Commission operate with statutory force, it does not necessarily follow that such an

agreement cannot also have force as a contract. This issue is different to the issues raised in

considering whether the terms of an enterprise agreement can be said to have been

incorporated into an employee’s contract of employment.69

In Construction, Forestry, Mining and Energy Union v The Australian Industrial

Relations Commission70

the High Court found that to an extent that agreement certified by

the Australian Industrial Relations Commission pursuant to s 170MC of the Industrial

Relations Act 1988 (Cth) exceeded what was permitted by the Constitution or by the

legislation that the agreement effect as an award, it could not operate with that effect, but the

underlying agreement remained and its validity depended on the general law. The court

concluded:71

The parties to an industrial situation are free to agree between themselves as to the terms on

which they will conduct their affairs. Their agreement has effect according to the general law.

If their agreement is certified, it also has effect as an award. To the extent that an agreement provides in a manner that exceeds what is permitted either by the Constitution or by the

legislation which gives the agreement effect as an award, it cannot operate with that effect.

But the underlying agreement remains and the validity of that agreement depends on the general law, not the legislative provisions which give it effect as an award.

The law on this point has to some extent not been pursued by unions, employers or

employees. When regard is had to these observations in Construction, Forestry, Mining and

Energy Union v The Australian Industrial Relations Commission, it appears there may be

68 Section 114(1) of the Industrial Relations Act 1979 (WA). 69 See the discussion in Byrne v Australian Airlines Ltd (1995) 185 CLR 410 which established the principle that the provisions of an award are not implied, or imported, into contracts of employment. 70

[2001] HCA 16; (2001) 203 CLR 645; (2001) 103 IR 473. 71

[34].

18

difficulties in pursuing an argument that an enterprise agreement may also be characterised as

a common law contract made between an employer and a union so long as the agreement

meets the usual requirements for validity of a common law contract.

The most comprehensive consideration of the law on this issue is to be found in the decision

of Ryan v Textile Clothing & Footwear Union of Australia72

a decision made 20 years ago.

In that matter, the Court of Appeal of Victoria considered whether an unregistered collective

agreement was enforceable by a union on behalf of employees, in the law of contract. It was

argued on behalf of the union that the employer and either the individual employees by their

agents (the union or its representatives), or the union as a principal, had made a contract that

provided for the terms and conditions of redundancy for the employees. Justice Hayne, with

whom Tadgell JA agreed, observed that three elements must be met for an agreement to be

enforceable as a contract. These are:73

(a) the parties to the agreement must be identified;

(b) the parties must be found to have formed the intention to enter into a legally

binding agreement; and

(c) consideration for the agreement must be identified.

Justice Hayne also observed, that whilst it was clear unions in Australia as corporate bodies

have capacity to make contracts,74

answering the question whether the parties intended to be

legally bound by the arrangement that they made could not be answered without identifying

the parties and identifying the arrangement.75

Identifying parties to an enterprise agreement is difficult where it is contended that individual

employees are parties. Justice Hayne made this point very clear. He said:76

It is convenient then to consider the question of parties. The learned trial judge found that 'each union officer who signed the document did so as agent for the union employees he

represented who had approved the agreement at a meeting and did not do so as principal on

behalf of the union'. I do not agree.

Any conclusion that the union (or its officers) was acting as agent rather than as principal

confronts a number of difficulties which I consider are insuperable obstacles in the way of

accepting the proposition. The arrangement was one that would operate in the future; it was

not an arrangement dealing with an existing problem. Although there had been some redundancies which had provoked the negotiations, the arrangement that was reached was one

that would govern redundancies in the future and the parties negotiated the arrangement

without confining their attention to any identified employees or classes of employee who were about to be made redundant. Further, it is clear that one of the so-called 'offsets' which

Homfray wanted (about payment of wages by electronic funds transfer) extended not only to

present employees but to future employees. …

If the union was acting as agent, for which employees at Homfray did it act as agent? The

learned trial judge concluded that the union was acting on behalf of those members who voted

72 (1996) 130 FLR 313. 73 (343 - 349). 74 (344). 75

(345). 76

(346 - 347).

19

in favour of the proposal put to the general meeting of union members on 16 September 1991.

…

A conclusion that the union was acting only for those employees who voted in favour of the

proposal leads to strange and difficult results. The agreements which the unions and the

employer executed were cast in general terms. There was nothing in them to suggest that only

some employees were to benefit. No record was made at the meeting of who voted in favour of the proposal and thus there was no record of who, on this analysis of the matter, was to

benefit from the arrangement. (Indeed, no record was made at the meeting of who attended it.

All that the evidence shows is that some employees were absent from work on the day the meeting was held and it was suggested in argument that even that may not represent a

sufficient basis for concluding that they did not attend the meeting, it being submitted that

they might have come to the meeting but not attended work that day.)

Of course the fact that there may be difficulties in proving who did or did not vote in favour,

and thus, on this analysis, difficulties in proving who is or who is not a party to the agreement,

is not determinative of the legal issue which is raised but I mention these difficulties to

demonstrate the improbability that when they signed an agreement cast in terms apparently applicable to all employees at Homfray, the union and the employer are to be taken to have

made an arrangement benefiting some but by no means all of the then employees of Homfray.

Justice Hayne found that if individual employees could be said to be parties, then

consideration would not be an issue. However, if the union itself was the sole party to the

agreement, then it was difficult to find consideration. He found that there must be a

sufficiently certain promise by the union and not by some third party,77

(presumably he was

referring to the employees as a third party). When the facts were considered, settlement of a

dispute was not sufficient to constitute consideration in the absence of any undertaking given

by the union that the members would not take industrial action. In these circumstances, his

Honour was unable to identify any detriment suffered, undertaken or forbearance by the

union.78

His Honour was also not satisfied that the union and the employer intended to enter into a

legally binding agreement. In particular, he found that:

(a) a legitimate expectation of the parties that the employer would in the future

provide redundancy benefits and the employees would permit payment of wages

by electronic transfer among other matters was not sufficient and if the parties

wished to ensure the agreements were enforceable at law, they could have

registered them under appropriate industrial legislation.79

; and

(b) the settlement of the dispute and the provision of the offsets was consistent with

the making of an arrangement that was to have industrial rather than legal

consequences of an agreement the parties intended to be binding at law.80

In my research, I have been unable to identify a decision where a court or tribunal has on

consideration of the facts of a particular matter found an enterprise agreement enforceable in

the law of contract. The reasoning of Hayne JA in Ryan has been applied by the Full Court

of the Industrial Relations Court of South Australia in Commissioner for Public

77 (349). 78 (350 - 351). 79

(351 - 352). 80

(351).

20

Employment v Public Service Association of South Australia81

and Goldberg J of the

Federal Court in United Firefighters’ Union of Australia v Metropolitan Fire and

Emergency Services Board82

. In both matters, when the relevant facts going to the making

of the agreements were considered, the same difficulties that arose in Ryan in identifying the

parties and identifying consideration given on behalf of a union resulted in the claims failing.

Subsequent to Ryan, observations made by Whitlam and Gyles JJ in ACTEW Corporation

Ltd v Pangallo83

led to speculation that enterprise agreements registered, approved or

certified under Federal or State legislation cannot have effect as a contract.

In Pangallo the Full Court of the Federal Court was called upon to determine whether the

Supreme Court of the Australian Capital Territory had jurisdiction to make declarations of

right in relation to a certified agreement within the meaning of the Workplace Relations Act

1996 (Cth). The Full Court concluded that the Supreme Court did not have jurisdiction. In

this matter Whitlam and Gyles JJ said:84

Counsel for the respondent is correct in submitting that there are substantial differences between the current regime for certified agreements and that which applied pursuant to the

1988 Act. There is less discretion reposed in the Commission so far as certification is

concerned; the emphasis is upon single businesses rather than industry or other groupings; there is the opportunity for those affected to vote; and agreements are not necessarily made in

settlement of an industrial dispute. At the same time, there has been a significant change in

the scope of awards, particularly as a result of s 89A of the Act, so that awards are likely to be less comprehensive and less prescriptive than previously. These developments, and the

introduction of Australian workplace agreements (Pt VID), reflect a movement to more

consensual industrial arrangements. It is likely that matters which may formerly have been

dealt with by an award may now be dealt with either in a certified agreement or an Australian workplace agreement. That trend does not assist the respondent's argument in endeavouring to

distinguish the decision in Byrne. A certified agreement now may be rather more like an

award was at the time of that decision than it might be now. However, the trend towards consensual arrangements has not resulted in any fundamental change to the nature and effect

of a certified agreement. The submission for the appellant that a certified agreement is solely

a creature of statute having force by virtue of the statute remains correct. In a sense, the term

'agreement' is a misnomer because it will bind individuals whether or not they authorise it or are in favour of it. There is no scope for private law concepts of contract or equity in such

circumstances. (See, in a different setting, McHugh J in I & L Securities Pty Ltd v HTW

Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 at 135-136 [84]). We do not see that the circumstance that a certified agreement can now be made without settling an industrial dispute

has any significance in this context. Once the process has been gone through, and the

agreement is certified, it has force in precisely the same way as a certified agreement which settles an industrial dispute. The application of administrative law remedies does not arise in

considering the question of law at issue in this appeal.

However, where Whitlam and Gyles JJ said that there is no scope or equity to bind

individuals in circumstances of contract, whether or not the individuals authorise or are in

favour of a registered agreement, their Honours may simply have been alluding to the point

81 [2001] SAIRC 12; (2001) 122 IR 161. 82 [2003] FCA 480; (2003) 123 IR 86; (2003) 198 ALR 466. 83

[2002] FCAFC 325; (2002) 127 FCR 1. 84

[33].

21

that following compliance with the requirements of registration or approval under relevant

law enterprise agreements will bind individual employers and employees by statutory force.

As Goldberg J in United Firefighters’ Union of Australia v Metropolitan Fire and

Emergency Services Board said when hearing an application for an interlocutory injunction

that he doubted whether Whitlam and Gyles JJ in Pangallo were addressing the issue whether

a certified agreement may also be characterised as an enforceable common law agreement.85

Goldberg J also had regard to the opinion expressed by Merkel J in Electrolux Home

Products Pty Ltd v Australian Workers Union86

that where a matter in a certified agreement

is not strictly about requisite matters, it may have effect according to the general law.87

More recently, in Communications, Electrical, Electronic, Energy, Information, Postal,

Plumbing and Allied Services Union of Australia re Manfield Colair and CEPU Electrical

Division Northern Territory Enterprise Agreement Gove Alumina Refinery and Mine Site

– 2010/201288

Lawler VP, without considering any authorities, in an application to approve

an enterprise agreement under the Fair Work Act, rejected an argument that the employer was

entitled to rescind the agreement on grounds of unilateral mistake. In the matter Lawler VP

found:89

An enterprise agreement is not a common law contract. It is a species of agreement that is a

creature of statute. An enterprise agreement comes into operation under the FW Act upon its approval by FWA, not upon its making by the parties in accordance with the process specified

in the FW Act. There are important differences between enterprise agreements made under

the FW Act and common law contracts. Perhaps the most important is that an enterprise agreement can come into existence notwithstanding that some employees covered by the

agreement did not vote to approve it or otherwise agree to it. That feature alone is inconsistent

with such an agreement being a common law contract. The scope for multiple employee

bargaining agents for a single enterprise agreement, together with the fact than an enterprise agreement may by “made” with the meaning of the FW Act notwithstanding that a particular

bargaining agent does not agree with it underscore the difficulty of importing common law

contractual notions around the creation and termination of contracts as applicable to enterprise agreements.

Whilst this decision went on appeal this point was not directly considered by the Full Bench

of Fair Work Australia.90

In any event, the observations of Lawler VP were made in the

context of considering whether to approve an enterprise agreement and it appears that his

honour was not called upon to consider whether the enterprise agreement in question was a

document that had effect in common law.

The reason why this issue has some importance is that if it is doubtful that a provision in an

enterprise agreement can as a matter of fact have effect at common law as a contractual

provision, a related question has to be asked whether the principles in law of contract that

85 [484]. 86 [2001] FCA 1600. 87 [50]. 88 [2011] FWAA 9129. 89 [39]. 90

CJ Manfield Pty Ltd v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia [2012] FWAFB 3534.

22

provide for the implication of terms be applied to enterprise agreements, or as a matter of

public policy should enterprise agreements be confined to express terms.

(g) Should it be open at law to imply terms in enterprise agreements?

The implication of terms in fact are based on the presumed intentions of the parties to the

contract, in respect of a matter that they have not mentioned but presumably they would have

agreed should be part of the contract.91

In Codelfa the High Court set out the well-established conditions for implying a term in fact

into a contract that appears complete on its face. These are:92

(1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to

the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that 'it goes without saying'; (4) it must be capable of clear expression; (5) it

must not contradict any express term of the contract.

In Director General, Department of Education v United Voice WA Buss J (who was in the

minority on this point) found a term could be implied into an industrial agreement.93

In that

matter, the union filed an originating claim in the Industrial Magistrates Court alleging that

the Director General had contravened cl 10 of a registered industrial agreement which was

entered into by the Director General and the union. The union claimed a penalty pursuant to

s 83(4)(a)(ii) of the Industrial Relations Act. Clause 10 of the agreement required the

Director General through the Department of Education to provide inductions to employees at

each district office. The district offices were abolished and replaced with regional offices and

the Director General delegated the responsibility to conduct inductions to schools. The

Industrial Magistrate dismissed the union’s claim and found that cl 10 was incapable of

enforcement.

Justice Pullin, with whom Le Miere J agreed, did not refer to, or consider, whether a term

could be implied into the industrial agreement. It is apparent from his reasons that such

analysis was unnecessary. His Honour found that there was a statutory obligation on the

Director General to comply with the agreement and it was no answer to a complaint about

contravention to say the ‘government’ had adopted a policy which made it impossible to

comply. Justice Pullin also found that the Director General’s functions authorised her to

make arrangements so that suitably qualified staff could conduct the inductions.94

Justice Buss approached the matter differently. Without any consideration of whether the

industrial agreement was a contractual agreement or the nature of the civil enforcement

proceedings which empowered the Industrial Magistrate to enforce the terms of the

91 Breen v Williams (1995) 186 CLR 71, 102 (Gaudron and McHugh JJ). 92 [1982] HCA 24; (1982) 149 CLR 337, 347 their Honours referred to the majority judgment in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266; (1977) 52 ALJR 20 adopted by Mason J with the concurrence of the other members of the court in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596. 93

[101] - [108]. 94

[32] - [33].

23

agreement by the imposition of a fine, Buss J applied the conditions for the implication of a

term in Codelfa and found that it was an implied term that:95

(a) the Department, through its employees, will arrange for inductions of new

education assistants to be held twice each term at the buildings previously

occupied by each district office, unless there are no new education assistants

requiring induction; and

(b) the inductions will be conducted by suitably qualified employees of the

Department.

No consideration was given by Buss J whether the requirement in s 83 of the Industrial

Relations Act, which requires a person to comply with a provision in an industrial agreement,

could extend to an implied provision in an agreement. Also no consideration was given to

the requirement in s 83 that a claim for enforcement of a provision in an industrial agreement

can be brought by a person who is not a party to the agreement, such as an employee or an

industrial inspector.

Section 41(4) and s 83 of the Industrial Relations Act binds and extends the terms of an

industrial agreement to persons who would not necessarily be regarded at law as parties to the

agreement. Section 41 provides that an industrial agreement extends to and binds existing

and future employees covered by the agreement and employers who are parties or who are

members of an association of employers that is a party to the agreement. A party or a person

bound by an industrial agreement has an obligation imported by statute to comply with the

terms of the agreement and that pursuant to s 114 of the Industrial Relations Act, a person

cannot be freed from this obligation. Given that if a breach of the agreement is proven, civil

penalties can be imposed on the person who is in breach, it could be argued that as a matter of

public policy, parties and other persons bound by the terms of an industrial agreement should

only be subject to compliance with express provisions of a registered agreement. When

regard is had to these provisions it may be arguable that the conditions for implication of a

term in Codelfa are not capable of being applied, or should not be applied, as the obligation

to comply arises not out of a contractual obligation but by statute.

Conclusion

Consideration of some of these points and arguments will have to wait for another day.

Perhaps, in time, specialist principles of interpretation will emerge that recognise the quasi

contractual nature of enterprise agreements that takes account of the statutory context that

extends the application of terms of enterprise agreements beyond the unions and employers

who negotiate and sign the agreements and has regard to the civil penalty regime that

operates by statutory force and not by agreement.

95

[102] - [103].