In the absence of re-negotiation
13 That which divides the parties to the present dispute is the correct construction and application of the phrase "[i]n the absence of re-negotiation…" as that phrase appeared in cl 5 of the Railways Agreement.
14 In very summary form, negotiations for the terms of a replacement agreement had commenced prior to the expiration of the Railways Agreement and concluded some two years after the "nominal expiry date".
15 Obviously enough, cl 5 contemplates the potential continuation of an entitlement to increased remuneration after the Railways Agreement had come to an end. Equally obvious is the fact that the Railways Agreement did not contemplate the continuation of that entitlement indefinitely. The entitlement would only continue "[i]n the absence of re-negotiation…".
16 On the approach of Qube Rail, the trigger for any entitlement to future increases was not enlivened - on its approach, negotiations had already commenced about a year prior to the "nominal expiry date". If the Union be correct, cl 5 conferred an entitlement to an "increase of pay" until that point of time when the Qube Agreement came into effect. That increase was to occur on "each anniversary date" after 1 April.
17 Although cl 5 and the phrase "[i]n the absence of re-negotiation…" are to be construed in the context of the Railways Agreement as a whole and, more specifically, the phrase is to be construed within the context of cl 5 itself, any process of construction starts with the ordinary meaning of the words employed: City of Wanneroo at [53] per French J.
18 Divorced from its context, a starting point is the following definition of the solitary word "negotiation" as set forth in the New Shorter Oxford English Dictionary (4th ed., 1993):
Negotiation n.
1 An act of dealing with another person;
a private or business transaction.
b trading, commerce.
2 A process or act of conferring with another or others to arrange some matter by mutual agreement, a discussion with a view to some compromise or settlement, orig. esp. in an affair of State.
3 The action or process of negotiating with another or others, discussion with a view to settlement or compromise.
4 The action of crossing or getting over, round, or through some obstacle.
19 The Macquarie Dictionary ( 3rd ed., 2002) offers the following definition:
Negotiated verb (negotiated, negotiating)
-verb (i)
1. to treat with another or others, as in the preparation of a treaty, or in preliminaries to a business deal.
-verb (t)
2. to arrange for or bring about by discussion and settlement of terms: to negotiate a loan.
3. to conduct (an affair, etc.).
4. to clear or pass (an obstacle, etc.): …
5. to transfer (a bill of exchange, etc.) by assignment, endorsement, or delivery.
6. to dispose of by sale or transfer: to negotiate securities.
Emphasis, not surprisingly, is placed by the Union upon the definition that "to negotiate" means the "bringing about by discussion and settlement of terms". If that be correct, the employees are entitled to the pay increase until a new agreement is negotiated. Qube Rail emphasises the definition which simply calls for "preparation of" or "preliminaries to a business deal", thereby bringing to an end the entitlement to the pay increase upon the commencement of bona fide negotiations.
20 Although neither party places exclusive reliance upon potentially competing dictionary definitions, it would be - with respect - a mistake to try and construe cl 5 simply by reference to any one particular definition.
21 It is the context in which cl 5 appears which fixes its meaning. That context is simply one in which the parties to the Railway Agreement had agreed upon the "term" during which it was to operate, and the potential continuation of an entitlement to a "remuneration increase" after the nominal expiry date of the Agreement. The term "re-negotiated" being, on this approach, simply a recognition of an agreement that the Railways Agreement may come to an end and an agreement of the parties that until a new and replacement enterprise agreement was agreed upon, the employees were to receive a "remuneration increase". Such a construction promotes at least some degree certainty of entitlement which, it may safely be assumed, was a matter of importance to both parties. Certainty as to any "remuneration increase" would be denied if, as Qube Rail would have it, the employees were not entitled to any "remuneration increase" whilst negotiations were ongoing, and potentially ongoing for some period of time. The "re-negotiation", it is respectfully concluded, thus refers to the completion of the "negotiation" process and the successful "re-negotiation" of an agreement replacing the existing Railways Agreement.
22 Such a construction may confer what has been characterised by Counsel for the Union in oral submissions as a "good deal for employees". Even if that be so, that is the agreement reached and as recorded in cl 5. It is a "deal" which proceeds from an assumption that there would be ongoing bona fide negotiations.
23 In opposing this construction, Qube Rail rely upon four propositions. But none of these propositions, with respect, should prevail.
24 First, rejected is Qube Rail's proposition that the construction advanced on behalf of the Union departs from the ordinary meaning of the word "re-negotiate". The proposition advanced by Qube Rail is that "the words 'In the absence of renegotiation' in clause 5 of the IRA Agreement mean in the absence of the parties to that agreement negotiating with each other…". On this approach, the "remuneration increase" ceases upon the parties entering into the process of negotiation - that being a process obviously in advance of a successful negotiation and a new agreement being entered into.
25 The difficulty with this proposition is that the dictionary definitions of the term "negotiate" themselves contemplate that the term may have different meanings dependent upon the context in which the word is used. That context in respect to cl 5 being the contemplation of the parties to the Railway Agreement that there may be an interim period between the expiry of one agreement and the coming into operation of a new agreement, during which the "remuneration increase" is to continue to apply. Rejected is any construction of cl 5 which denies to the employees an entitlement to the "remuneration increase" during that period of time, be it a short or long period, when negotiations may be proceeding. The object and purpose of cl 5, it is thus concluded, was to guarantee to the employees an increase in remuneration during that interim period.
26 Second, rejected is Qube Rail's proposition that the construction advanced on behalf of the Union involves reading into cl 5 additional words such that on the Union's approach it reads: "In the absence of a new or replacement Agreement being finalised or approved…". If the term "negotiate" - or "re-negotiate" - has the ordinary meaning of "preliminaries to a business deal" or preliminary discussions with a view to entering into a deal, on the approach of Qube Rail, there are no cl 5 words which are not there. Expressed differently, Qube Rail contends that the approach of the Union involves construing the term "renegotiation" as meaning "replacement".
27 This second proposition is, in substance, but a variant of the first - both propositions depending upon the natural and ordinary meaning of the term "re-negotiate" or the phrase "[i]n the absence of re-negotiation" having the meaning ascribed by Qube Rail. But that interpretation has been rejected by reason, primarily, of the context in which cl 5 appears. In any event, and as submitted on behalf of the Union, even the approach of Qube Rail itself potentially involves "reading into" cl 5 words such as "[i]n the absence of the parties beginning the process of bargaining for a replacement enterprise agreement…".
28 Third, Qube Rail contends that the "context is more consistent with the fact that Qube Rail was agreeing by the clause to be committed to a process of re-negotiating the IRA Agreement and that if it did not attend to the task of re-negotiation, it would be met with the obligation to provide increased rates of pay". The contrary approach, so Qube Rail contends, would lead to a "series of unreasonable or clearly obviously unintended outcomes", including (by way of example):
(a) irrespective of economic conditions or the state of business, employees could simply refuse to enter negotiations or simply not agree to Qube Rail's offers and be guaranteed wage increases of 3% (and, on the Union's case, superannuation increases) in perpetuity …; and
(b) it could potentially leave Qube Rail exposed to cost increases totally beyond its control if there were delays in the Fair Work Commission in approving the agreement…
It is this proposition, with respect, which is most persuasive in favour of the construction being advanced by Qube Rail.
29 But the proposition is rejected. Whatever may be the construction of the term "re-negotiation", be that construction the one advanced by the Union or by Qube Rail, cl 5 proceeds on an assumption that the parties will "negotiate" in good faith and that negotiation will be on-going. The entitlement to the increase in remuneration, upon such an approach, would only continue so long as there were on-going negotiations in good faith. The entitlement conferred, upon such an approach, expresses an agreement that employees would receive an increase in pay in the interim between the end of the existing Railways Agreement and a new agreement. No construction of the clause would be open, with respect, which would confer any entitlement in "perpetuity" or any obligation on the part of Qube Rail to pay if (in the example provided) the Union ceased to negotiate in good faith. If negotiations were to break down and a conclusion reached that there was no prospect of any future "replacement" agreement, the entitlement to the "remuneration increase" in cl 5 would come to an end. Clause 5 does not confer any entitlement to any "increase of pay" in the absence of negotiation in good faith. Irrespective of when "re-negotiation" may start, be it either before or after the "nominal expiry date" of the Railways Agreement, the "re-negotiation" being referred to is bona fide negotiation or re-negotiation being carried on in good faith. Clause 5 is thus silent, does not address and certainly confers no entitlement to any "increase of pay" in the absence of bona fide negotiation or re-negotiation. Time taken on the part of the Commission to approve any new agreement, it may be further assumed, was envisaged by the parties when the terms of cl 5 were agreed.
30 Fourth, it is contended that "the evidence of how the parties to this litigation have historically conducted themselves also supports the interpretation advanced by Qube Rail". According to Qube Rail, that "history" includes the following:
(a) that the Union initially agitated for back-pay to be included in the Qube Rail Agreement and, in lieu of this, Qube Rail agreed to provide a one-off cash payment to employees in recognition of that claim. The Union's claim for back-pay could not seriously arise if the Union's position was that the employees were already entitled to assured pay increases under clause 5 until a new agreement was made;
(b) that the Union, despite being well aware of clause 5 (and indeed being the party who sought its inclusion in the IRA Agreement), did not at any point during the relevant period make claims on behalf of employees for Qube Rail to pass on increases to wages or superannuation;
(c) that the Union agitated for superannuation to be included in the Qube Rail Agreement at the level it reached on 1 April 2013 (and not higher amount that would have applied had the clause operated as they contend following further increases of 1 percent on each of 1 April 2014 and 1 April 2015). At no point during the bargaining to replace the IRA Agreement did the Union agitate that the superannuation position should be increased to 15 or 16 percent, in accordance with the claim they now make; and
(d) that a representative of the Union, Kevin Pryor, who was also the long-standing union representative representing the Employees, expressly agreed that the interpretation adopted by Qube Rail was consistent with his views.
An initial difficulty confronting this final basis upon which Qube Rail relies is a question as to the admissibility of the evidence sought to be relied upon. Both Qube Rail and the Union accepted that in general "it is not legitimate to use as an aid in the construction of [a] contract anything which the parties said or did after it was made": cf. Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57 at [35], (2008) 238 CLR 570 at 582 per Gummow, Hayne and Kiefel JJ. There remain, however, some "recognised exceptions to that general rule": Spunwill Pty Ltd v BAB Pty Ltd (1994) 36 NSWLR 290 at 312 per Santow J ("Spunwill").
31 One source of evidence relied upon by Qube Rail can be raised at the outset - only to be rejected. According to Mr Daniel Coulton, Qube Rail's General Manager of Industrial Relations, he had a conversation with an Organiser of the Union, Mr Kevin Pryor in mid-2014 to the following effect:
Mr Pryor: Some of the ex-IRA crew have raised whether they get a pay increase under clause 5.
[Mr Coulton]: That's not my interpretation. The clause talks about pay rises in the absence of re-negotiation. We're re-negotiating.
Mr Pryor: Some of the men think it guarantees an increase till replaced.
[Mr Coulton]: That's not what it says and that can't be right. That would blow up the negotiations - we'd be negotiating for nothing because they just wouldn't agree. You surely can't be saying it means that.
Mr Pryor: I am not saying it. I think it means what you think. While we're negotiating it doesn't apply.
If accepted, the conversation would go some way towards establishing the fact that the Union itself embraced the construction of cl 5 now being advanced on behalf of Qube Rail. But the conversation was denied by Mr Pryor and it cannot be concluded with any degree of confidence that the conversation in fact took place or was to the effect as asserted by Mr Coulton. The evidence of Mr Pryor's understanding of the clause is, in any event, of questionable value.
32 Similarly, there is disagreement as to the circumstances in which a one-off payment of $2,000 was made by Qube Rail to employees in February 2016. On Mr Coulton's account, the one-off payment occurred in circumstances where there were negotiations on foot for remuneration increases and back pay. On the case for Qube Rail, the "Union's claim for back-pay could not seriously arise if the Union's position was that the employees were already entitled to assured pay increases under clause 5 until a new agreement was made". But again, this account was denied by Mr Pryor. He maintained that the one-off payment was simply "an incentive to employees" put forward by Qube Rail "in an effort to get the agreement across the line". An earlier vote on a proposed agreement in August 2015, it may be noted, was unsuccessful. No finding can be made that the one-off payment was made for the reasons advanced by Mr Coulton.
33 Evidence of a more objective nature, and evidence not the subject of any dispute, however, was also relied upon by Qube Rail. Albeit subsequent to the 2011 Agreement having been made, but during the course of negotiations for the new Agreement, those further events include:
the fact that Qube Rail did not pass on any wage or superannuation increase on 1 April 2014 or (more importantly) 1 April 2015 and the Union did not make any demand for payment; and
the fact that the Union did not, during negotiations, make any demands for pay increases or superannuation increases under cl 5 of the 2011 Agreement.
Whilst accepting the generally expressed rule as to post-contractual conduct not being admissible, Qube Rail nevertheless contends that these two events are admissible by reason of "exceptions to that general rule": Spunwill (1994) 36 NSWLR at 312. When addressing these "exceptions", Santow J had earlier observed (at 310):
Thus evidence of a mutual subjective intention is admissible as part of the surrounding circumstances, as an objective fact that illuminates the meaning a reasonable person in the position of the parties would attach to a provision. Mutual subjective intention is a factor to be taken into account in determining presumed intention, without necessarily being determinative. …
If extrinsic evidence of common intention is admissible as part of the factual matrix where that evidence arises prior to the contract, should subsequent evidence of a common intention as to what the contract originally meant also be admissible? Where the parties, in the words of Kirby P in Hide & Skin Trading, by clear and mutual conduct evidence what they originally intended, and thus clothe ambiguous words with a sensible operation by the way they behave in apparent pursuit of their agreement, admission of such extrinsic evidence will be of equal or greater assistance in the process of determining presumed intention than is evidence of a common intention arising from pre-contractual conduct. It should be clear that what both the prior and subsequent evidence is seeking to illuminate is a common intention held at the time of contracting. The question thus arises as to whether a distinction should be drawn between pre-contractual and post-contractual evidence of a common intention. It is thus worth briefly considering the concerns which have been raised in relation to a general admission of subsequent conduct, to determine if such a distinction is required.
His Honour addressed these "concerns" and concluded as follows (at 312):
… Though the relevance of subsequent conduct as an aid to construction is as evidence of a party's subjective belief as to what the contract meant when it was made, use of such conduct will be legitimate under the objective theory of the contract in the limited circumstances where conduct evidences a clear and mutual subjective intention as to what the contract originally meant. There appears to be no justification in principle for excluding such evidence of a mutual subjective intention at the time of contracting merely because the evidence itself arises subsequent to the making of the contract.
One exception to the general rule is thus where the post-contractual "conduct evidences a clear and mutual subjective intention as to what the contract originally meant"; another exception is that post-agreement conduct may be admissible "as part of the surrounding circumstances" if it provides evidence of "mutual subjective intention".
34 But neither of the two more objective events relied upon by Qube Rail, with respect, fall within either exception - neither the failure to pass on any wage or superannuation increase, nor the absence of any demand by the Union that Qube Rail should do so necessarily evidence any "mutual subjective intention" or evidence "the surrounding circumstances". The most that may be concluded is that both matters are consistent with the construction of cl 5 being urged on behalf of Qube Rail. But that does not necessarily dictate that that construction of cl 5 was one being adopted by the Union during negotiations.
35 Viewed more generally, cl 5 evidences the contemplation of the parties that they would each sit down at some stage and "re-negotiate" a further agreement to replace the existing Railways Agreement. That process could start before or after the expiry date of that Agreement. And any replacement agreement could potentially itself commence immediately upon the expiration of the Railways Agreement, or at some future point of time. Within that factual context, that which can be discounted as a possible interpretation of cl 5 is that the employees should be entitled to "the agreed increase of pay" in perpetuity, in the event that there were to be no replacement agreement. Such an interpretation would be neither commercially nor industrially sensible nor an interpretation which would sit comfortably with the qualification that the increase was subject to the condition as to the absence of re-negotiation. Leaving aside what is embraced by the phrase "[i]n the absence of re-negotiation", cl 5 at its very minimum contemplates an "agreed increase of pay" after the expiry of the Railways Agreement. Irrespective of any possible future agreed clause specifically addressing any such increase that may be included in any replacement agreement, it is respectfully concluded that the construction of cl 5 which has been settled upon best ensures that employees are to receive an "increase of pay".
36 The second sentence to cl 5, being that provision directed to the "agreed increase of pay", evidences an agreement. Whether that contemplation could be elevated to an implied obligation to commence the process of "re-negotiation" may, perhaps, be left to one side.