AFMEPKIU & Ors v Qantas Airways Limited

Federal Court of Australia|2001-05-11|Before: North J

REASONS FOR JUDGMENT 1 Before the Court is an application by three unions, the Automotive, Food, Metals Engineering, Printing and Kindred Industries Union (AFMEPKIU), the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (CEPU), and the Australian Workers' Union (AWU) (the applicants) for the imposition of penalties under s 178 of the Workplace Relations Act 1996 (Cth) (the Act) on Qantas Airways Limited (Qantas), the respondent, because of alleged breaches of two Certified Agreements, namely, Qantas Airways Limited Enterprise Agreement III (EBA III) and ACTU/SBU (Qantas Airways Limited) Enterprise Agreement IV (EBA IV). 2 It is accepted by the parties that the applicants are entitled to bring the application. It is also accepted by the parties that Qantas is bound by both agreements.

Background 3 The aircraft operated by Qantas require heavy maintenance, which involves major structural inspections and systems checks at periodic intervals by reference to flying hours completed, effluxion of time, or cycles (take offs and landings) completed. This maintenance is distinguished from base maintenance which is concerned with minor checks and rectification of minor engineering problems. 4 Prior to June 1999 heavy maintenance on Boeing 747 and 767 aircraft was done at the Qantas Sydney Jetbase at Sydney airport. To do this work Qantas employed about 583 heavy maintenance engineers on two lines and approximately another 482 people in support workshops. A third line at the Sydney Jetbase provided heavy maintenance for outside contracts performed by Qantas, for instance, for the Royal Australian Air Force. This proceeding is concerned with the heavy maintenance work done on Qantas aircraft. 5 In early 1998, it became clear to Qantas that further provision had to be made for completing heavy maintenance in the future. This arose because, as a result of market developments, Qantas purchased three new Boeing 747 aircraft, and two Boeing 767 aircraft in 1998, and, contrary to earlier plans, determined to retain a number of older aircraft. It was also clear to Qantas that the additional capacity could not be provided at the Sydney Jetbase facility because of the shortage of hangar space. Mr Keith Clark, General Manager, Heavy Maintenance, described the then future requirements of Qantas as follows: "…it was projected that in the financial year ending 30 June 2000, Qantas would need approximately 1054 check days of capacity to carry out the heavy maintenance requirements for its fleet of Boeing 747 and 767 aircraft. Operating on a 7 day, 2 shift roster, maintenance lines one and two provide only 730 check days of capacity, so that there was a projected shortfall of 324 days of capacity. This is roughly equivalent to an additional heavy maintenance line. To put this another way, Qantas' Sydney facility would only be able to provide about 69% of Qantas' required heavy maintenance capacity." 6 The solution adopted by Qantas was to establish what it referred to as "an overflow" facility at Avalon in Victoria. There was hangar space available which had already been leased by Qantas at Avalon. Most of the labour for the heavy maintenance work to be undertaken at Avalon was to be supplied to Qantas by a labour hire company, Forstaff Pty Ltd (Forstaff). By March 2000 there were 420 employees of Forstaff working on heavy maintenance at the facility at Avalon, together with 35 heavy maintenance staff employed directly by Qantas. 7 In evidence which I accept, Mr Clark described the effect of the Avalon facility on existing employees performing heavy maintenance directly for Qantas as follows: "41. The Avalon facility is essentially used by Qantas for the performance of heavy maintenance checks which cannot be performed at Qantas Jet Base at Sydney Airport because there is no capacity to do so. 42. Heavy maintenance check work commenced being done at Avalon on 22 June 1999. To date, the Avalon facility has been used to perform C and Super A checks on 747 aircraft. It is planned that it will also be used in the future to perform D and Section 41 checks on 747 aircraft. All of these types of checks also have and will continue to be performed at Qantas' heavy maintenance facilities in Sydney. 43. The Avalon facility is intended to do work which cannot be done at the Sydney Jet Base because of capacity constraints and the performance of heavy maintenance check work at Avalon has had no effect on the overall nature or quantum of the work being carried out by E & M [engineering and maintenance] employees in Sydney. In particular: (a) There has been no decrease in the number of aircraft maintenance engineers employed by Qantas in Sydney as a result of work being performed at Avalon. The actual and budgeted number of heavy maintenance employees in Sydney at the dates shown is as follows: Date Lines 1 & 2 Support workshops Total 30 June 00 (Budget) 573 491 1064 23 Feb 00 (Actual) 555 457 1012 30 Jun 99 (Actual) 583 482 1065 The difference between actual numbers at 23 February 2000 and the budgeted figure for 30 June 2000 is due largely to timing differences in the creation of vacancies and recruiting to fill them. The department is presently recruiting to fill these vacancies. I have also applied for budget approval to recruit a further 135 heavy maintenance employees for lines one and two and support workshop in Sydney in the financial year to 30 June 2001. (b) There has been no decrease in the number of hours being worked by E & M employees in Sydney. The number of overtime hours worked by heavy maintenance employees in Sydney in the last two years is as follows: Date Lines 1 & 2 Support workshops Total 30 June 00* 81,423 81,937 163,360 29 Feb 00 54,282 54,625 108,907 30 Jun 99 80,895 59,380 140,275 * Annualised figure based on figure to 29 February 2000. (c) There has been no overall change in the functions being performed by Qantas E & M employees in Sydney since the 1998 enterprise bargaining agreement (EBA IV) was made in November 1998. 44. Qantas presently has no plans for any change in the nature and quantum of work being performed by E & M employees in Sydney. The heavy maintenance department schedules the heavy maintenance of its fleet of Boeing 747 and 767 aircraft up to 3 years in advance. These schedules are continuously updated and revised to take into account unforseen developments. The present schedule for lines one and two for the next 3 years is annexed hereto and marked 'KC-4'. The schedule shows lines one and two in Sydney being fully utilised throughout that 3 year period in performing a full range of heavy maintenance checks on the 747 and 767 aircraft of Qantas' international fleet. 45. There is in my view no basis to suggest any likely downturn in the quantum of the heavy maintenance work required to be performed on the Qantas 747 and 767 fleet or any likely development which would affect the nature of that work. The factors which might materially affect the quantum of heavy maintenance work required to be done on the Qantas international fleet would be a material increase or decrease in the size of the fleet or in flying hours or a material change in the composition of the fleet. I know of no plans on the part of Qantas to decrease the size of flying hours or the composition of the Qantas fleet in this way. On the contrary, Qantas has recently taken delivery of a new 747-400 aircraft, with another due for delivery shortly. A new 767 is also due in the next couple of months and, starting in May, Qantas will progressively be taking delivery of 7 British Airways 767 aircraft for use in the domestic fleet." 8 It is now convenient to set out the relevant terms of EBA III which the applicants allege have been breached by Qantas. EBA III was certified and came into effect on 16 October 1996. It was accepted by the parties for the purpose of this application that the relevant provisions of EBA III were in effect at the time of the commencement of the heavy maintenance operation at Avalon.

EBA III 9 Clause 15 and attachment A of EBA III provide: "15. CONTRACTING OUT/COMPETIVE TENDERING Contracting out/Competitive tendering will be in accordance with terms of Attachment A. ATTACHMENT A PROTOCOL FOR CONTRACTING OUT AND OUTSOURCING QANTAS AIRWAYS LTD AND SUBSIDIARIES AND ACTU 1. Where Qantas management wishes to make arrangements to 'contract out' services in particular business and financial circumstances it should only do so: · after weighing up all alternative options; · with a comprehensive consultation process and a reasonable time frame for consideration with all Qantas employees affected by such an option; · ensuring the provision of offset work of quality where possible practical/viable in any contracting out option; 2. The unions will have access to all necessary company information about any contracting-out proposal which impacts or may impact on staffing. This includes the provision of copies of all contracting-out proposals under serious consideration to unions and union representatives affected by a contracting - out proposal. 3. Qantas shall resource training necessary for union representatives to deal with Contracting-out. This shall include paid time off for union representatives under the auspices of trade union training leave provisions and payment where required for travelling, accommodation and incidental expenses. 4. Qantas will provide reasonable paid time for union nominees to attend joint reviews and address union members at meetings to respond to the business case of a contracting out proposal and prepare specific in-house bids. The members and nominees shall not lose pay as a result of this involvement. If requested by the unions, Qantas will give nominees access to internal departmental expertise where such a request may assist in the process. If it is mutually agreed to be necessary Qantas will provide external expertise and meet associated costs. 5. The Company in contracting out will be conscious of promoting Australian products/services."

the construction of clause 15 of eba III 10 The first issue for determination is whether clause 15 of EBA III (clause 15) applied to the factual situation which I have found existed at the establishment of the heavy maintenance work at Avalon. 11 Mr R Buchanan QC, who appeared with Mr Steele of counsel for Qantas, contended that clause 15 does not apply where no work is taken away from existing employees of Qantas, there is no question of an in-house bid or competitive tender arising, and no change has occurred to the nature or extent of the work being performed by those employees. In other words the provision is concerned with protecting the jobs of existing employees. It is not concerned with establishing a consultative procedure in respect of new work, that is to say, work not presently being done by existing employees - even if the work is of the same nature as work being done by existing employees. 12 The consequence of adopting this construction would be that clause 15 and the protocol contained in attachment A (the protocol) did not apply to the circumstances of the present case, because in the present case there was no displacement of existing employees. The work in question was work additional to the work being done by existing employees and that work could not be accommodated by the available facilities in Sydney. It was new work resulting from the unexpected retention of older aircraft and the purchase of new aircraft in response to unpredicted market circumstances. 13 Mr Rothman SC, who appeared for the applicants, argued that clause 15 applied whenever Qantas entered into a contract for services whether the contract was for work being done by existing employees or for additional work. The purpose of the clause was to provide a mechanism designed to promote the outcome that work done for the purpose of the business of Qantas would be done by its own employees. At one point Mr Rothman accepted some narrowing of the scope of clause 15, namely, that it was restricted to contracts relating to functions performed by existing employees of Qantas, and did not apply to new work of a nature not presently performed by direct employees of Qantas. 14 On these formulations clause 15 applied to the present circumstances because Qantas intended to contract out to Forstaff the provision of labour for heavy maintenance on Boeing 747 aircraft which was work of a nature then being performed by employees of Qantas at the Sydney Jetbase. 15 The starting point for the determination of the meaning of clause 15 is the text of the agreement itself. 16 The subject matter of clause 15 is described in the heading and the opening sentence as "Contracting out / Competitive tendering". The protocol is headed "Protocol for Contracting Out and Outsourcing". Qantas argued that these references were to a composite concept so that the clause was concerned with contracting-out only in circumstances where existing employees were involved in formulating an in-house bid. This factor, Qantas submitted, pointed to the protocol being directed to contracting-out existing jobs rather than new work. Existing employees who were fully engaged on existing work would not be in a position to bid for additional work. 17 In my view this argument does not establish that clause 15 was concerned only with existing work of existing employees. First, the description of the subject matter as involving both contracting-out (or out-sourcing) and competitive tendering does not in itself denote a necessary link between the two in all circumstances. Second, the protocol deals separately with contracting-out and with in-house bids in a way which does not suggest any necessary linkage. For instance, pars 1-3 of the protocol make no mention of in-house bids at all. As a result, the consultation provided for in par 1 is required in respect of a contracting-out proposal whether existing employees intend to put together an in-house bid or not. Finally, even if the linkage were accepted there is no reason to conclude that in-house bids are limited to bids in respect of existing work. Existing employees could determine to bid for other work of a like nature which Qantas put out to competitive tender. 18 The protocol requires consultation with "all Qantas employees affected by" the contracting-out option. Qantas argued that this obligation also pointed to the protocol being limited to proposed contracts in respect of existing work. Qantas employees would not be affected by a proposal to contract out work not presently being done by those employees. A Qantas employee would only be affected, on this view, where the proposed contract could lead to the redundancy of the particular employee. But the notion of affectation may be much broader. If a proposed contract to undertake additional work of the same nature as is presently being done by Qantas employees is entered into on terms and conditions inferior to those enjoyed by existing employees, the existing employees maybe affected even though the proposed contract does not result in loss of employment. The terms and conditions of Qantas employees are governed by agreements negotiated for specific periods. For instance, EBA III has a nominal expiry date of 1 July 1998 and EBA IV has a nominal expiry date of 1 July 2001. At the end of each period the agreement is re-negotiated. The existence of new contracts at the end of the period of the agreement providing for less advantageous terms and conditions of employment for employees undertaking the same functions are likely to influence the negotiations for the next agreement. Further, contracting-out of additional work of a similar nature may affect the future training, accumulation of experience and progression prospects of existing employees. Thus, for instance, if heavy maintenance on a new generation aircraft-type was contracted out, the opportunity to develop trade competence in respect of the aircraft-type, and consequent career advancement which would otherwise have existed within Qantas, would be lost. 19 In the end, the concept of "employees affected" has a flexible meaning. A narrow view would confine the group to employees who could lose employment by the proposed contracting-out; a wider view would include in the group existing employees who could suffer some disadvantage by the allocation of new work to others. Hence, the use of this expression does not fix the meaning of the protocol. 20 Then par 2 of the protocol obliges Qantas to provide unions with access to all necessary company information about any contracting-out proposal which "impacts or may impact on staffing". Again, Qantas contended that this form of expression showed that the protocol was concerned with contracting-out proposals which caused or would be likely to cause the loss of jobs of existing employees. Such an approach would read the paragraph as relating to proposals which impact or may impact on existing members of staff only. While such a construction is open, it is not the only construction available. The paragraph can equally be seen to refer to a contracting-out proposal which impacts or may impact on the way in which the Qantas workforce is staffed or made up in the future. The second sentence of the paragraph appears to relate to the separate interest of the unions - presumably their interest in preserving and increasing staff numbers, particularly, numbers of members of the particular unions. Thus, again, the text of the paragraph does not have a clear meaning. It is possible to gain support from the text for the meaning proposed by the applicants or for the meaning proposed for by Qantas.

reference to THE Background facts 21 The parties agreed that if the protocol was susceptible of a number of meanings, the Court could have recourse to the circumstances surrounding the making of the agreement in order to ascertain the presumed intention of the parties. The proper approach was outlined by Mason J (Stephen, Aickin and Wilson JJ concurring on this question) in Codelfa Construction Proprietary Limited v State Rail Authorities of New South Wales (1982) 149 CLR 337 at 352 as follows: "The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed. It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification. Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties' presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract." 22 Each of the parties put forward an analysis of the objective framework of facts within which the agreement came into existence and which they contended supported the construction proposed by that party.

The landing gear dispute - early 1995 23 The applicants placed particular emphasis on the circumstances surrounding the initial adoption of a consultative process in relation to contracting-out. The idea of a formalised process of consultation arose out of a proposal made by Qantas in the first half of 1995 to contract out the overhaul of aircraft undercarriages or landing gear. 24 In this context the Australian Council of Trade Unions (ACTU) acting on behalf of the applicants sent a draft agreement to Qantas. The draft was as follows: "DRAFT CONTRACTING OUT ‑ AGREEMENT QANTAS AIRWAYS LTD AND SUBSIDIARIES AND ACTU 1 Preamble 1.1 Qantas recognises that its main assets are its employees ‑ its workforce has built an airline with a reputation for world class performance in quality and safety over 75 years. 1.2 Accordingly, Qantas will always strive to perform its business functions using its own workforce ‑ its own people ‑ as it is the only way to maintain the Qantas reputation for excellence in quality and safety. 1.3 In turn Qantas employee representatives will assist the company in maintaining the Qantas' reputation for excellence in quality and safety. 1.4 Where Qantas management wishes to make arrangements to 'contract out' services in particular business and financial circumstances it should only do so: · as a last resort after weighing up all alternative in‑house options within Qantas; · with a fully comprehensive consultation process with all Qantas employees affected by such an option (section 2 ‑ consultative process); · with a commitment that Qantas will not substantially extend the current percentage of work that is 'contracted‑out' (this is especially so in core functions such as Engineering and Maintenance (E&M) that may impact on the Qantas' reputation for excellence in safety); · whilst recognising the need for strategic capitalisation within the airline's core functions such as the Engineering and Maintenance (E&M) division and in any area that would affect Qantas' reputation for excellence in safety). · ensuring the provision - offset [sic] work of quality in any contracting out option; · with a commitment to Qantas staff that there be no adverse effect of the contracting out arrangements on employment, remuneration and the quality of working life on any Qantas employees; · with a commitment to Qantas staff that the company be responsible for any adverse effects of contracting out (if any) on Qantas reputation or overall business operations. 2 Consultative Process 2.1 The unions will have access to all necessary company information about any contracting‑out proposal which impacts or may impact on staffing, including the provision of copies of all contracting‑out proposals to unions at the contemplative stage, and the provision to union representatives affected by a contracting‑out proposal witha copy of all documentation specifically related to that proposal as soon as being considered by management. 2.2 Contracting‑out will not be used as a means of delaying, downgrading, or otherwise injuring in their employment, departmental employees' promotions, leave or access to higher duties. Specifically Contracting‑out will not be used to place employees on fixed‑term contracts or on higher duties rather than promoting them to a substantive position. Where a permanent position is required for at least 12 months or more this position should, wherever practicable, be filled on a permanent basis. 2.3 Qantas management shall give comprehensive briefings about Contracting‑out proposals to union representatives at all stages of the process. Union representatives should not be provided with delayed briefings so that the company can present a 'fait accompli' to staff. All in‑house options should be comprehensively and rigorously compared to the contracting‑out proposal. The Contracting‑out should be considered as a last resort only. Should involve union nominees in the internal scrutiny process i.e. Joint Review Analysis [sic]. 2.4 Qantas shall fund training necessary for union representatives to deal with Contracting‑out, such training to be undertaken by a union approved training provider. This shall include paid time off for union representatives under the auspices of trade union training leave provisions and payment where required for travelling, accommodation and incidental expenses. 2.5 The Joint Review Analysis must include union nominees. Any member nominated to the joint review will have all expenses paid for his or her attendance at meetings of the joint review plus necessary preparation time; such a nominee shall not suffer any injury in his or her employment, and shall be considered to be on duty during such times. 2.6 Qantas shall provide paid time for union nominees to joint reviews to attend and address union members at meetings about the preparation of specific in-house bids. The members and nominees shall also be considered to be on duty for the time of attendance at the meeting plus travelling. If requested by the unions, Qantas will give union nominees access to internal departmental expertise. If it is mutually agreed to be necessary Qantas will provide external expertise and meet associated costs. Qantas will not be under any obligation to meet any costs relating to obtaining such expertise. 2.7 All proposed Contracting‑out activities must allow for an in‑house bid to be made; all necessary time will be given to union nominees to participate in the creation of an in‑house bid. 2.8 If required Qantas shall fund a project to be undertaken by an agreed external consultant to verify that in‑house bids and commercial bids are being dealt with equitably. 3 Consultative Committee 3.1 All contracting‑out proposals should be dealt with by Consultative Committees of the division affected (eg. contacting out [sic] proposals for Landing Gear should be dealt with by the Engineering and Maintenance (E&M) Consultative Committee). 3.2 Where a division has no consultative committee, or the contracting‑out proposal effects [sic] more than one division (or potentially affecting more than one division) any proposal should be dealt with by a Qantas contracting‑out Consultative Committee made up of membership of Qantas management, Industrial Relations, and representatives of all unions at Qantas. The committee would work to given objectives and terms of reference. 3.3 No contract should be signed by the company until all consultative requirements have been satisfied." 25 On 4 July 1995 Qantas replied as follows: "Contracting Out of Work 1 refer to your recent proposal regarding procedures for considering the contracting out of work. Our view is that the terms of the proposal are not necessary in many respects or in the best interest of the company and its employees, particularly in today's environment where business flexibility is a key ingredient for success. Engineering and Maintenance has a long standing practice of consulting with staff and unions regarding this issue. In the context of our current proposal regarding overhaul of the B747‑400 and B767‑300 undercarriages I believe it may be of assistance to clearly outline the procedures Engineering and Maintenance follows. Currently there are considerable maintenance activities undertaken externally, these range from polishing aircraft windows to overhaul of the undercarriage of many of the aircraft within our fleet. Such contracts have been in place for many years and are generally uncontentious. Engineering and Maintenance recognises that new contracting proposals can create uncertainty and speculation within our workforce, and agrees that these proposals require careful consultation with staff and unions. If contracting work out appears to be the best business decision in terms of our criteria of quality, turntime and cost, a meeting of relevant unions will be held to discuss this position. Engineering and Maintenance will provide all relevant material and information to nominated union representatives, subject to commercial confidentiality. Adequate time will be provided to union representatives to consider the information and discuss with the Company any options that may be developed by the Unions including: · capability to perform the work in‑house; · availability of any offset work associated with the contract. I would like to assure you that Qantas remains committed to maintaining its excellence in Engineering and Maintenance and will continue to substantially invest in its future where it is business efficient and sensible to do so. In this respect it is important that we continue to concentrate on our areas of excellence to contract work into Engineering and Maintenance. Recent examples of profitable work won by Qantas Engineering & Maintenance include: · RAAF Avionic Contract · Air New Zealand B767 Aircraft 'C' Check · Asiana B767 Aircraft 'C' checks/ These contracts alone total 56,581 manhours in 1995. Work contracted in by Engineering and Maintenance currently represents approximately 11 % of the operational work load. Last year total work contracted in represented 428,776 manhours or the equivalent of 291 full time positions." 26 The parties addressed some argument concerning the positions of Qantas and the applicants in the landing gear dispute as disclosed by this exchange. Their purpose was to seek to identify the presumed intentions of the parties concerning contracting-out which were ultimately embodied in the protocol. 27 There are a number of limitations on the use of the landing gear dispute to assist in resolving the ambiguity contained in the text of EBA III. 28 First, the landing gear dispute arose 12 months before the negotiations for EBA III commenced. The positions taken by the parties on the landing gear dispute, without more, do not say anything about their agreement made 18 months later. Not only are the two events separated in time, but further, there is nothing in the narrative of events which demonstrates that the positions taken on the landing gear dispute remained the same in the different context of negotiations for a certified agreement covering a large number of terms and conditions of employment. It is therefore doubtful that the landing gear dispute qualifies as part of the relevant objective framework of facts within which the making of EBA III occurred. 29 But, in any event, the exchange between Qantas and the ACTU does not reveal the positions of the parties on the question now before the Court. It is true that the landing gear dispute itself involved contracting-out work not then being done by Qantas employees. But the exchange related to formalising an agreement on contracting-out. The ACTU draft proposed a written agreement containing detailed terms and exhibited a fair degree a formality. The Qantas reply rejected these elements in favour of an indication of its willingness to engage in "careful consultation" by meeting with unions and providing relevant material and information. The exchange, therefore, was concerned about whether there should be a formalised agreement to consult and with the content of any obligation to consult. There was no focus on the question which is to be resolved by the Court, namely, what were the precise circumstances in which the obligation arose. 30 Further, to the extent that the exchange does disclose the claims of the parties in the landing gear dispute there is doubt whether they conform with the asserted position in relation to the protocol. For instance, clause 1.2 of the draft relevantly stated "… Qantas will always strive to perform its business functions using its own workforce". The applicants argued that this clause reflected the meaning of the protocol proposed by them. However, clause 1.2 is not expressed as a commitment, rather it is expressed as an aspiration. Further, clause 2.7 of the draft provided that "All proposed contracting-out activities must allow for an in-house bid to be made …". It thereby reflected the linkage between contracting-out and the making of in-house bids which Qantas argued underlay the protocol. Thus, the ambiguity identified in the protocol can also be seen in the draft originally proposed on behalf of the applicants in the landing gear dispute. In the result, even if it were open to utilise the exchange between the parties in the landing gear dispute in an effort to illuminate the meaning of the protocol, the exercise must fail because the position of the parties on the question now before the Court was not clear on the material tendered in this proceeding. 31 Finally, if the exchange between the parties in the landing gear dispute was put forward to demonstrate the actual intentions of the parties to the protocol, then such a use of background facts was expressly rejected by Mason J in Codelfa. In any event, the approach is unrewarding here because, whilst the ACTU proposed a draft which bore some resemblance to the protocol, Qantas rejected the whole idea of a detailed agreement. No actual mutual intention is revealed. 32 Mr Rothman argued that the exchange of correspondence on the landing gear dispute could help resolve the ambiguity in the protocol because it explained the mischief which the protocol was meant to address. Put another way, it demonstrated the purpose which the parties had in mind in agreeing to the consultative procedure. If the landing gear dispute formed part of the objective framework of relevant facts at all, which is doubtful, the exchange does not throw light on whether the Court can presume that the parties intended to address the issue whether there should be consultation in relation to all new work or only in relation to existing work. As explained earlier, that question was not the focus of the parties' attention at the time of the landing gear dispute. 33 Mr Rothman relied heavily on the circumstances that as a matter of fact the landing gear dispute involved a proposal by Qantas to contract out work not then being done by Qantas employees. At the time of the controversy the overhaul of landing gear on Boeing 747-400 and Boeing 767 aircraft was contracted out to a third party. The process of consultation was therefore devised, so it was submitted, to address a situation in which work was not then being done by existing employees and, hence, no existing employee would lose employment if the contracting-out proposal succeeded. It was therefore implicit in the later adoption of the model in EBA III that it applied to work not then being done by existing employees. 34 Mr Buchanan submitted that the adoption in EBA III of the procedure devised in the landing gear dispute did not carry with it the conclusion that the procedure was to be applicable to the contracting-out of all new work in the future. The factual context of the landing gear dispute, and the acceptance of a general process of consultation were separate matters. I accept this argument. As explained earlier in these reasons, the focus of the attention of the parties in the landing gear dispute was on the debate as to whether there should be a formalised consultation process, and if so, what should be the extent of the obligations of the parties to that process. The circumstances in which the process was to apply were not in issue. That is the question which arises in this case. The answer is not assisted by the fact that the model happened to be discussed at first in the context of a proposal to contract out new work.

The use of the landing gear model: June 1995 to early 1996 35 After the landing gear dispute and before the commencement of the negotiations for EBA III there were several occasions on which Qantas proposed the contracting-out of work previously done by existing employees. In two instances the landing gear model was used. Mr Buchanan relied on these examples to argue that the objective background facts pointed to the use of the landing gear model in cases where existing employees faced redundancy as a result of the contracting-out. 36 The first situation related to the proposal to contract out the work of the printing division then being done by Qantas employees. In November 1995 the ACTU proposed a committee to formulate a proposal for the printing operations to be retained in-house. In a letter to Qantas dated 13 November 1995 the ACTU wrote: "The unions also seek a commitment that no contract will be signed by the Company until the process is complete. This is in keeping with the commitment that the Company made not to sign any contracts in landing gear until the in-house process was complete and will apply elsewhere in other proposed business sales by the Company." The proposal was developed by the committee but rejected by Qantas in March 1996. As a result the print shop was closed, the employees were made redundant, and the printing work was let out to a printing contractor. 37 Then in January 1996 Qantas developed a proposal to cease using uniformed security staff and to contract out the function to Wackenhut, a security services contractor. After discussion with the unions, Qantas wrote on 23 January 1996: "We agree that the procedures used in the Engineering landing gear issue would be an appropriate model to be followed." The unions responded to the proposal, but Qantas rejected the response, let the contract to Wackenhut, and made the Qantas security employees redundant. 38 Again in early 1996 Qantas called for tenders from contractors for the maintenance of meal carts and freight containers. This matter, however, had not been finalised when negotiations for EBA III commenced. 39 The fact that the consultative process devised for the landing gear dispute was used in the following 12 months in two instances which involved the threat of redundancy to existing employees does not mean that the process was restricted to use in such circumstances. All the parties agreed that the protocol had to be used in those circumstances. The issue now before the Court is whether the protocol applied in other circumstances. On that point, these examples do not advance the resolution either way. The ambiguity in the text of the protocol remains unilluminated by these particular background facts.

Statements made by the unions prior to the negotiations for EBA III 40 Mr Buchanan also relied on a number of statements made by the applicants prior to the negotiations for EBA III. These statements, it was contended, indicated that the basis of the objection to contracting-out was the threat to jobs of existing employees. The views of the applicants provided the background against which the agreement should be construed. 41 Most of these statements were made to members by the applicants in the context of individual issues such as the contracting-out of the printing or security services. As the statements were directed to the particular situations they do not throw light on any wider or more general issues. The most cogent evidence of this type capable of assisting Qantas' argument was a special newsletter produced by the AFMEPKIU which was headed "Contracting Out in the Manufacturing and Engineering Industry" and which included the following: "The concern of the membership in the companies that have decided to contract out is the security of employment. We have seen many thousands of full time jobs disappear, only to reappear as part time or casual jobs despite the efforts of our members in a number of disputes." 42 This newsletter was published on about 31 March 1995. Whilst it does address the general question of contracting-out, it does so in the context of three specific disputes - Boral, South Pacific Tyres, and Kraft - which all involved proposed contracting-out which threatened the jobs of existing employees. It was published more than 12 months before the EBA III negotiations started. It does not have sufficient temporal and factual connection with the negotiation of EBA III to assist in resolving the ambiguity which resides in the text of the agreement.

Background presentation by Qantas to employees prior to EBA III negotiations 43 Mr Buchanan then referred to the EBA background information presentation made by the management of Qantas to employees in March and April 1996 in preparation for the commencement of the EBA III negotiations. This presentation provided a comprehensive analysis of the financial position and future path of Qantas. It forcefully emphasised the need for Qantas to continue to cut costs, particularly labour costs, to remain competitive. Various means for cutting labour costs were suggested including the use of part-time work, more efficient rostering, and reduction of sick leave. Section 4 of the presentation detailed the cost control program in relation to the process of negotiation of EBA III. Mr Buchanan placed particular reliance on the reference to out-sourcing in this section. That reference was as follows: "•THE SUBJECT OF OURSOURCING [SIC] IS AN EMOTIONAL TOPIC AND UNDERSTANDABLY SO - SECURITY OF EMPLOYMENT IS PERHAPS THE BIGGEST ISSUE FOR EVERYONE. •HOWEVER WE NEED TO REALISE THAT IF QANTAS FOR HISTORICAL REASONS IS DOING SOME WORK INTERNALLY AT HIGHER COSTS THAN COULD BE DONE OUTSIDE, THOSE HIGHER COSTS ARE A REAL PENALTY ON THE REST OF THE BUSINESS AND ENDANGER THE AIRLINE'S ABILITY TO COMPETE AND SURVIVE. •OUR GENERAL APPROACH IS CLEAR: •(1) OVER A PERIOD OF TIME WE NEED TO EXAMINE EVERY AREA OF QANTAS TO MEASURE ITS COST COMPETITIVENESS COMPARED TO OTHER WAYS OF DOING THAT WORK •(2) IF OUR EXISTING COSTS ARE EXCESSIVE, WE WILL CONSULT ON THE SITUATION AND SEEK IMPROVEMENTS TO REMOVE OUR COST DISADVANTAGE. •(3) IF NO ACCEPTABLE SOLUTION CAN BE AGREED INTERNALLY, THE COMPANY WILL EXAMINE OUTSOURCING •(4) IF THIS IS TO PROCEED, THE IMPLEMENTATION WILL BE NEGOTIATED TO TRY TO SECURE ALTERNATIVE EMPLOYMENT OPPORTUNITIES AND TO GENERALLY MANAGE THE IMPACT ON PEOPLE •(5) THIS MUST BE DONE IN A REASONABLE TIME" 44 The immediate issue addressed in this section of the presentation was the contracting-out of existing work which would impact on the security of employment of existing employees. To this extent the presentation addressed the situation which Qantas contended is addressed by the protocol. 45 There are, however, indications in the presentation that the issue was wider. Section 4 of the presentation commenced with a section entitled "Credibility Challenges" which stated: "•1. WE REALISE THAT GETTING PEOPLE TO TAKE NOTICE OF THE SITUATION WE FACE IS NOT EASY. •2. FACING UP TO THE REALITY OF COMPETITIVE AND COST THREATS TO THE FUTURE OF QANTAS IS VITAL. •3. BUT THERE HAS BEEN A LOT OF CYNICISM AND LACK OF TRUST. THERE HAS BEEN NO REAL SHARING OF RESPONSIBILITY FOR OUTCOMES IN THE PAST. •4. WE MUST IMPROVE THE LEVEL OF UNDERSTANDING OF OUR BUSINESS THROUGHOUT QANTAS SO THAT THE CHOICES AND CONSEQUENCES ARE CLEAR TO EVERYBODY." The presentation as a whole conveys the impression that Qantas regarded consultation with employees as an important issue in the effort to contain costs. If the presentation does form part of the relevant surrounding circumstances, it suggests that Qantas was concerned to engage the workforce in relation to change generally. Whilst the question of contracting-out work done by Qantas employees where that contracting-out threatened job security was addressed as a specific instance, the full context of the presentation does not suggest any rigid limitation on the need to consult in relation to change. For instance, in section 5 entitled "The Enterprise Bargaining Process" the presentation contained the following: "We can manage change properly by consultation and understanding the realities, or it will be forced by a 'chainsaw approach', possibly by a different management with that different approach." 46 Thus, there are several conclusions open as to the issue to which the presentation was directed. The question of contracting-out work done by Qantas employees which threatened job security was addressed as a specific matter. The presentation may have been intended to be limited to that situation. The more general references to consultation were not limited. They are capable of being read to include consultation over contracting-out of additional work. On the other hand, the general references may have been intended to refer to the specific matter otherwise referred to. In other words, the ambiguity inherent in the protocol is also evident in the presentation itself. It is therefore of no particular assistance in resolving the ambiguity in the protocol. 47 There is, however, a more fundamental reason why the presentation is not useful in construing the protocol. It did not form part of the process of negotiation of EBA III. It did not necessarily represent a position put in those negotiations. As background to the making of the agreement it is still rather remote from the objective background facts which might be able to throw light on the meaning of the agreement.

The course of negotiations 48 The evidence relating to the course of negotiations of EBA III is similarly unenlightening. There are references in material sent to members by the unions explaining the progress of the negotiations that focus on job losses associated with contracting-out. For example, in a message to Qantas employees from the ACTU dated 26 June 1996 the following report appeared: "The Company has insisted that it intends out-sourcing its non core functions with or without union agreement. That means less jobs but more profits for Qantas." 49 Equally there is reference in the minutes of the negotiating committee of a wider claim by the union side. The minutes of the meeting held on 3 July 1996 record that: "TWU members want opportunity for 'contracting in' ie. bringing in outside business" 50 It emerges from the evidence of the negotiations as a whole that the question of contracting-out was not the primary focus of the discussions. It was one of a fairly substantial number of issues. Questions of wage rates seem to have been a more direct concern than other matters including the issue of contracting-out. 51 Certain other material was relied on by Qantas, including a document entitled "EBA III Discussions: Message from James Strong" and a document entitled "Engineering & Maintenance Improvement Package - The Way Forward". The former was circulated by the Employee Relations Manager for Engineering and Maintenance to all staff. It contained a statement concerning the progress of discussions for EBA III from Qantas' perspective. The latter contained Qantas' proposals for efficiency improvements in the Engineering and Maintenance division to be incorporated in EBA III. Both documents thus cast some light on Qantas' negotiating position during the drafting of EBA III. Both of these documents were concerned primarily with improving workplace efficiency and mentioned contracting-out only briefly. Again, little attention was directed to the scope of the obligation to consult in cases of contracting-out. 52 Qantas, however, pointed to the fact that an early draft of the protocol proffered by the ACTU included the same form of clause 1.2 as the June 1995 draft referred to in par 24 of these reasons. The clause did not appear in the final form of the protocol. This, it was submitted, showed that the parties agreed on a more limited scope of the duty to consult. However, the argument assumes that the ACTU version was rejected because the parties regarded it as wider than the ultimate agreement. This assumption is not the only one available. The adoption of the final form of the protocol is consistent with a view that the ACTU draft was not necessary because its meaning was contained in the version adopted. The affidavit sworn on 31 March 2000 by Mr Peter Marsh, General Manager, Industrial Relations for Qantas, was carefully drawn on this question. It stated: "45. Subsequently, there was a discussion at a negotiating meeting in which it was agreed that the part of the agreement which dealt with Contracting Out / Competitive Tendering would be contained in an attachment. A draft of such an attachment was then proffered by the union representatives at a subsequent negotiating meeting. Exhibited to me at the time of swearing this affidavit and marked 'PM-36' is a copy of the draft. 46. On around 2 September 1996, after further negotiation, another draft of that protocol was agreed between Qantas representatives and the union representatives. Exhibited to me at the time of swearing this affidavit and marked 'PM-37' is a copy of the agreed draft." 53 The affidavit does not say that clause 1.2 was rejected, but rather that the agreed form was adopted. It is silent on the basis for acceptance of the agreed form.

Developments between EBA III and EBA IV 54 EBA III came into effect on 16 October 1996. EBA IV was certified and came into effect on 11 November 1998. In the intervening period, and while the negotiation of EBA IV was conducted, Qantas had some heavy maintenance work and repainting work on 747 and 767 aircraft conducted overseas. It was common ground that the protocol was not applied to this heavy maintenance work sent overseas. In 1997 and early 1998, Qantas sent reconfiguration work on its Boeing 747 fleet to Avalon. This work was not heavy maintenance work, but it was work previously being done by persons employed directly by Qantas. At Avalon the reconfiguration work was done mainly by Forstaff employees. The protocol was not applied to the decision to relocate this work either. In his affidavit affirmed on 22 March 2000, Mr David O'Sullivan, a National Industrial Officer of the CEPU, stated: "22. Later, on or about 27 November 1997, a meeting was convened by Qantas management. This meeting was attended by Peter Marsh, Dennis Ratcliffe, John Scott, Keith Clark and Trevor Crabtree for Qantas, myself and Aravind Viswanath for the CEPU, Adam Kerslake and a delegate for the AMWU and Robert Domm for the ALAEA. 23. At the meeting, Keith Clark announced that a corporate decision had been made to perform this work outside Qantas at Avalon with Forstaff employees. It was described as a 'once off' contract for that limited event. Qantas management stated that they had leased two hangars at Avalon, and they planned to use externally sourced Australian labour. It was also stated that a small group of Qantas people would be involved in the work as managers and senior LAMES. The work was planned to commence at Avalon in April 1998. 24. Someone at the meeting, asked the Qantas representatives when the project or contract would be finished, and they replied February 2000. 25. I expressed the view at the meeting that this announcement constituted a breach of the EBA III contracting out provision. But the Qantas representative Peter Marsh replied that what had occurred was a corporate decision, not a decision by Engineering and Maintenance. It was expressly stated by Qantas that it was a 'corporate decision' to have work performed in relation to the physical lay out of the 747 fleet, and no more. In short, it was a once off short term contract pursuant to which this work would be performed off-site." 55 In his affidavit, Mr Marsh swore that he did not recall this conversation, but that it had always been his belief that the protocol did not apply to circumstances where "no business function is being closed down within Qantas, and consequently, no employees are to be made redundant or lose their jobs." 56 It is not necessary to resolve the differences in the evidence of Mr Marsh and Mr O'Sullivan. In each case it reflects a belief or actual intention of an agent of a party, a part of the background which may not be taken into account in seeking to resolve an ambiguity in the agreement: Codelfa, per Mason J at 352. Further, the reconfiguration work was sent to Avalon after EBA III was concluded. Subsequent conduct is generally inadmissible for the purpose of construing a term of an award: Seamen's Union of Australia v Adelaide Steamship Co Ltd (1976) 46 FLR 444, 445; Printing & Kindred Industries Union & Anor v Davies (1986) 18 IR 444, 452. In this case, the events which occurred between the conclusion of EBA III and the negotiation of EBA IV do not evidence the prior objective intention of the parties when they agreed upon clause 15 of EBA III.

Conclusion concerning the use of background facts to construe Clause 15 57 The applicants have adduced evidence of background facts in order to resolve the ambiguity of clause 15. That is, they have contended that the background facts establish an objective intention of the parties to EBA III that clause 15 is to be applied in the circumstances submitted by the applicants. 58 Whether or not the parties had the objective intention contended for is thus a question of fact, to be proved in accordance with the civil standard of proof in proceedings such as these: Gapes v Commercial Bank of Australia Ltd (1979) 38 FLR 431; Harris v Ansett Transport Industries (Operations) Pty Ltd (1975) 45 FLR 469. As is clear from the preceding reasons, the evidence of background facts is equivocal as to the objective intention of the parties at the time of the agreement. The evidence does not establish, on the balance of probabilities, that the parties had the objective intention that clause 15 was to apply in the manner contended for by the applicants. 59 I now turn to consider the allegation that the respondent has acted in breach clause 3 of Part B of EBA IV (Clause 3).

EBA IV 60 Clause 3 provides: "3. JOB SECURITY The parties to this agreement recognise that the major factor influencing job security for Qantas employees are forces external to Qantas. The parties therefore recognize that some factors which affect the Company's business performance are beyond the control of Qantas or are factors over which Qantas has little control. Subject to these factors, Qantas commits to retain the existing engineering and maintenance functions of employees covered by this agreement. For its part, Qantas shall seek to remain competitive and seek to ensure that job security for employees covered by this agreement shall be maintained for the duration of the agreement, and the Unions in turn commit to continue to cooperate on issues which improve the Company's productivity, efficiency and overall profitability."

The construction of clause 3 61 Mr Rothman explained the applicants' case under clause 3 as follows: "… Qantas has committed, in return for a commitment by the unions, to retain the existing engineering and maintenance function of employees covered by this agreement. These employees are covered by the agreement, that's admitted. The function of the employees includes the check work. Therefore there's a commitment to retain that function. It's an engineering and maintenance function of the employees and therefore there's a commitment to retain that engineering and maintenance function of the employees. That commitment has not been carried out." This argument thus focused on the sentence in clause 3 which stated "subject to these factors, Qantas commits to retain the existing engineering and maintenance functions of employees covered by this agreement". 62 Whilst Mr Buchanan argued that parts of clause 3 were not contractual in nature, he accepted that the commitment in the sentence referred to was contractual in nature. The response of Qantas was twofold. It submitted that the decision to contract out the work now performed at Avalon was the result of factors beyond the control of Qantas or over which it had little control, and hence the situation fell within the proviso. It also submitted that the clause related to the security of jobs of existing employees and did not apply to additional work. 63 This latter issue is a question of construction which raised issues similar to those which have been addressed in respect of clause 15 of EBA III. The applicants emphasised that the commitment of Qantas was to retain the existing engineering and maintenance functions. That is to say, the promise was not limited to the retention of existing jobs. Qantas on the other hand pointed to the fact that the clause is headed "Job Security" and that subject matter was mentioned several times throughout the clause. Further, the functions which were to be retained were expressed as "functions of employees". This form of expression suggested that the clause was concerned not with engineering and maintenance functions as such, but those functions as performed by existing Qantas employees. 64 As with the protocol to clause 15 in EBA III, the text of clause 3 is capable of bearing each of the meanings contended for by the parties. The extrinsic evidence adduced in relation to the construction of EBA III was also relied upon in relation to EBA IV. As concluded in pars 54-56 of these reasons, that evidence failed to establish the objective intentions of the parties, and is thus also of little assistance in understanding the scope of clause 3 of EBA IV.

Conclusion 65 It follows from the foregoing analysis that each of the clauses relied upon by the applicants is ambiguous. There are cogent arguments in favour of the constructions proposed by each of the parties. 66 In this proceeding, the applicants bear the onus of showing that the construction for which they contend is correct. They have failed to establish that either of clause 15 of EBA III or clause 3 of EBA IV has a "plain meaning" which conforms to the interpretation they advance. Rather, the language and structure of both clauses is ambiguous and susceptible of multiple interpretations. In order to resolve the ambiguity, the parties have adduced evidence of background facts. However, the evidence of background facts does not resolve the inherent ambiguity of clause 15 of EBA III or clause 3 of EBA IV. It does not, on the balance of probabilities, establish as a matter of fact that the parties to EBA III or EBA IV intended the relevant clauses to operate in the way contended for by the applicants. It follows that the application must be dismissed. 67 At the same time, the construction advanced by Qantas is not established by the evidence of background facts. 68 This proceeding is resolved by an order that the application is dismissed. It may seem curious that the Court has not come to a definite view as to the meaning of the clauses, contained as they are in enterprise agreements certified by the Australian Industrial Relations Commission (the Commission) pursuant to the Act. The Court is dependent upon the evidence led by the parties and submissions made. If that evidence does not allow the Court to find in favour of the construction urged by the applicants, it is bound to reject the application. 69 Certified agreements are subject to the special statutory regime of the Act. It allows the Commission to impose terms on the parties in limited circumstances. In this respect certified agreements differ from other contracts governed by the general law. In the case of a certified agreement which has a provision which is ambiguous, the Commission has power to vary the agreement "for the purpose of removing ambiguity or uncertainty": S170MD(6)(a). In a case such as the present an application to the Commission is likely to provide a more constructive resolution to the problem of ambiguity. While the Court can identify the ambiguity, it cannot remove it. The Commission is empowered to remove the ambiguity. 70 Nevertheless, the applicants have chosen to frame the dispute in terms of an action under s 178 of the Act, and in so doing, have taken upon themselves the burden of establishing the correctness of the construction for which they have contended. In this, they have failed. I certify that the preceding seventy (70) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice North.

Associate: Dated: 11 May 2001 Counsel for the Applicants: Mr S Rothman SC

Solicitor for the Applicants: Maurice Blackburn Cashman

Counsel for the Respondent: Mr R J Buchanan QC and Mr M J Steele

Solicitor for the Respondent: Blake Dawson Waldron

Workplace Relations Act 1996(Cth)s 178.

At a glance

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Judgment (19 paragraphs)

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Cases Cited (5)