The cl 15 issue - consideration
43 I reject Transit Systems' argument that cl 15.2 should be read as in some way affecting the operation of a variation determination made in the exercise of the Commission's discretionary power under s 768AW(c) and item 20. The power to make such a variation to a copied State instrument is expressly conferred on the Commission by force of s 768AW(c) and item 20. That power exists, and can be exercised, despite the Fair Work Act leaving other aspects of a copied State award intact.
44 In Australian Securities and Investments Commission v DB Management Pty Ltd (2000) 199 CLR 321 at 338 [34], Gleeson CJ, Gaudron, Gummow, Hayne and Callinan JJ held:
In Project Blue Sky Inc v Australian Broadcasting Authority ((1998) 194 CLR 355 at 384, per McHugh, Gummow, Kirby and Hayne JJ), after pointing out that the duty of a court is to give the words of a statutory provision the meaning that the legislature is taken to have intended them to have, the majority said:
"Ordinarily, that meaning (the legal meaning) will correspond with the grammatical meaning of the provision. But not always. The context of the words, the consequences of a literal or grammatical construction, the purpose of the statute or the canons of construction may require the words of a legislative provision to be read in a way that does not correspond with the literal or grammatical meaning."
(emphasis added and footnotes omitted)
45 The principles for construing industrial agreements are well settled. In Treasury Wine Estates Vintners Limited v Pearson in (2019) 268 FCR 12 at 29, [73], Rares, Perry and Charlesworth JJ said:
The Employment Court's construction of the agreement was erroneous. That is because it failed to read the agreement as a whole and construe it in accordance with established principle. In Energy Australia Yallourn Pty Ltd v Automotive, Food, Metal, Engineering, Printing and Kindred Industries Union (2018) 264 FCR 342 at [56]-[58], Rares and Barker JJ said (and see also at [133] per Flick J and Qube Ports Pty Ltd v Maritime Union of Australia [2018] FCAFC 72 at [65] per White J, with whom Mortimer and Bromwich JJ agreed):
It is important to have regard to the industrial purpose of the Yallourn agreement and the commercial and legislative context in which it applies whe construing it, including cl 28 itself as a whole: Amcor Ltd v Construction, Forestry, Mining and Energy Union (2005) 222 CLR 241 at 249 [13] per Gleeson CJ and McHugh J, 270-271 [96] per Kirby J, 282-283 [129]-[131] per Callinan J, and see too at 253 [30] per Gummow, Hayne and Heydon JJ. Both Kirby J and Callinan J expressly approved (at [96], [129]-[130]) and Gleeson CJ and McHugh J applied (at [13]), what Madgwick J had said in Kucks v CSR Ltd (1996) 66 IR 182 at 184, namely:
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, 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.
(emphasis added)
Although that decision concerned an award, Madgwick J's observations have equal application to the construction of enterprise agreements made under the Fair Work Act.
An enterprise agreement must be construed in its industrial and legislative context as an agreement made between parties engaged in an employment relationship in which employee organisations, such as the five unions, can, and often will, have a workplace right under ss 341(1) and or 183(1) of the Fair Work Act to play a part, including as a party to it. Those persons may not have been assisted by lawyers in the precise framing and expression of its terms.
46 In approaching the construction of a copied State instrument for the purposes of the Fair Work Act, the Court obviously will be faced with terminology or concepts that are taken from the State's system and legislation whence the instrument came. The Fair Work Act requires the instrument to be read in the context of its history and then be construed and adapted to apply to the employment relationship between the transferring employees, the new employer and any employee organisation in the new context of it now being part of the Commonwealth's legislative scheme governing those relationships. The Parliament intended that a copied State instrument will work, be effective immediately and ordinarily without the need to apply to the Commission under s 768AX to vary its terms so as to ensure that the transferred employment relationships continue to operate harmoniously and in an intelligible way. The duty of the Court is to construe legislation, industrial instruments and contracts in a way that seeks to give effect to, rather than destroy, the intention of the legislature or parties. Thus, in Residual Assco Group Limited v Spalvins (2000) 202 CLR 629 at 644 [28], Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ said:
… legislation ''must not be read in a spirit of mutilating narrowness" (United States v Hutcheson (1941) 312 US 219 at 235, per Frankfurter J). If the choice is between reading a statutory provision in a way that will invalidate it and reading it in a way that will not, a court must always choose the latter course when it is reasonably open. Courts in a federation should approach issues of statutory construction on the basis that it is a fundamental rule of construction that the legislatures of the federation intend to enact legislation that is valid and not legislation that is invalid (Davies and Jones v Western Australia (1904) 2 CLR 29 at 43; Federal Commissioner of' Taxation v Munro; British Imperial Oil Co Ltd; v Federal Commissioner of Taxation (1926) 38 CLR 153 at 180; Attorney-General (Vict) v The Commonwealth (the Pharmaceutical Benefits Case) (1945) 71 CLR 237 at 267; Chu Kheng Lim v Minister for Immigration, Local Government and Ethnic Affairs (1992) 176 CLR I at 14). Here there are two competing constructions - one spells invalidity, one does not. That being so, we should adopt the construction that saves the section and reject the construction upon which the defendants rely.
(emphasis added)
47 Similarly, a contract must be construed as a whole, objectively and from the perspective of what a reasonable person in the position of the parties would have understood its terms to mean. The reasonable person's understanding is arrived at by reference to the text of the document, the surrounding circumstances known to all the parties and the purpose and object of the transaction. Although the Award, as a copied State instrument under the Fair Work Act, is not a commercial contract, its construction should be approached in accordance with the principle that Lord Wilberforce expressed in Reardon-Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 at 995-996 which Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ approved in Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45 at 52-53 [10], namely:
In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.
48 Obviously, the genesis of the Award becoming a copied State instrument and being removed from its previous legislative setting under the Industrial Relations Act is fundamental to understanding how, in its new legislative setting under the Fair Work Act, the Parliament intended that it would continue to regulate the employment relationships of Transit Systems, the transferring employees and the Union. Courts have long applied the principle that contracts should be construed with a view to harmonising and reconciling, if possible, apparent inconsistencies or even absurdities in expression. This means that if words or expressions are used in a contract that are repugnant or have been transposed or omitted, the Court can construe it to give effect to the meaning that, objectively, the parties must have intended: Fitzgerald v Masters (1956) 95 CLR 420 at 436-438 per McTiernan, Webb and Taylor JJ; see too at 426 -427 per Dixon CJ and Fullagar J. In Wilson v Wilson (1854) 5 HL Cas 40 at 69-70 [10 ER 811 at 823], Lord St Leonards (in agreement with Lord Cranworth LC at 52-53 [816-817] and Lord Brougham at 59 [819]) construed the terms of an indemnity expressed as being in favour of John in a separation deed between a husband and wife as meaning that he would indemnify his wife, Mary, because the literal construction would be "irrational and absurd and we know it not to have been the contract". Although his Lordship used the word "rectify" in the following part of his speech, he meant "construe" (as the case was not a rectification case in which different principles apply: cf: Pukallus v Cameron (1982) 180 CLR 447). He said:
Then has the Court a power to rectify the error without doing any violence to the words because I entirely reject any intention of putting violence upon words. We are bound as a Court of Justice to put a rational construction upon words, and to give to every word its proper sense. I do not think that I am breaking in upon any rule in advising your Lordships to consider "John" as erroneously inserted, as it clearly appears by the context to have been, instead of "Mary," and by so considering it to make that part compatible with the rest, and thus give effect to what was the clear intention of the parties.
(emphasis added)
49 Here, cl 15.2 has to be construed in a common-sense way as a provision in a copied State instrument for the purposes of the Fair Work Act, bearing in mind, as the Union put, that the Parliament contemplated that parties could apply to the Commission to vary it under s 768AX where any possible construction was unworkable. The reference in cl 15.2 to "any State wages decisions", clearly enough, in the context of the Industrial Relations Act, would have applied to a State decision the subject of ss 50-52 that gave the State Commission power to apply, wholly or in part, a decision of the Fair Work Commission in an annual wage review. In addition, the Industrial Relations Act and cl 15.2 contemplated that there would be situations in which the parties could arbitrate safety net adjustments that would vary wages payable under cl 15.1.
50 In my opinion, cl 15.2 can be read sensibly, and as the Parliament intended that a copied State instrument would be read, without rendering the expression "any State wages decisions" as unintelligible. Once the Award is read as a copied State instrument, that expression can be understood to refer to an annual wage review (being a National decision as defined in s 49 of the Industrial Relations Act). The Fair Work Act used the legislative device of a copied State instrument as a practical means of giving the persons covered by it sufficient time to work together to create a modern award or enterprise agreement to replace that instrument over a period while there remained in place a legally binding employment relationship with which they were already familiar (being the copied State instrument), subject to any express overrides in the Fair Work Act and the related legislation.
51 Accordingly, cl 15.2 can sensibly be understood as seeking to provide that the parties to the Award intended that wage increases contained in cl 15.1 were to be in substitution for any variation of minimum wages that otherwise would be payable under a National decision, being an annual wage review variation decision that the State Commission might decide to adopt under ss 50 and 52 of the Industrial Relations Act, much like it could make a State decision under s 51 that set principles or provisions for the purposes of State awards or other matters under that Act. Nonetheless, that intention could not have the effect of overriding a variation determination by the Commission that varies the Award as a copied State instrument, pursuant to its powers under item 20 and s 768AW(c), which has the force of law.
52 Here, the Commission's annual wage reviews for 2019-20, 2020-21 and 2021-22 varied every copied State instrument in exercise of its discretionary power to do so under item 20 and s 768AW(c) of the Fair Work Act. The Commission left it to any party that may have been affected to apply to it to vary the impact of any of those determinations, as it explained (at [443]-[452]) when it introduced by the general process of variation to all copied State instruments in its 2018 decision at [443]-[452] (see [25] above).
53 Accordingly, the Commission's 2019-20 and 2020-21 annual wage review variation determinations applied to the Award and, thus, increased the wages payable to the transferring employees in those years by 3% and 1.75% respectively.