FEDERAL COURT OF AUSTRALIA

Linfox Australia Pty Ltd v Transport Workers Union of Australia [2013] FCA 659

THE COURT ORDERS THAT:

1.    The application be dismissed.

2.    The name of the second respondent in the Originating Application filed on 26 November 2012 be changed to Fair Work Commission.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(REVISED FROM THE TRANSCRIPT)

1    Linfox Australia Pty Ltd (Linfox) has applied under s 39B of the Judiciary Act 1903 (Cth), ss 21, 22 and 23 of the Federal Court of Australia Act 1976 (Cth) and ss 562 and 563 of the Fair Work Act 2009 (Cth) (the Act) for declarations as to the proper construction of certain clauses in fair work instruments within the meaning of the Act, and for an order in the nature of certiorari to quash a decision of a Full Bench of the Fair Work Commission (the Commission) made on 26 October 2012.

2    The Commission upheld an appeal made by the first respondent, the Transport Workers’ Union of Australia (the Union). It found that a Commissioner had erred in exercising private arbitral functions imposed on the Commission under an agreement between Linfox and the Union, made as a national enterprise agreement, and known as the Linfox Road Transport and Distribution Centres National Enterprise Agreement 2011 (the enterprise agreement). The enterprise agreement incorporated two other fair work instruments, namely, the Federal Road Transport and Distribution Award 2010 made by the Commission (the Federal Award) and the New South Wales Transport Industry (State) Award as at 27 March 2006 (the State Award).

3    The dispute centred around what were called “crib breaks”. That description was used in cl 8.2 of the State Award. The same type of break was called a “paid break” in cl 26.2 of the Federal Award. These breaks are taken after ordinary hours, when overtime must be performed by an employee. The issue was whether crib breaks should be remunerated at either ordinary rates or, as the Full Bench held, overtime rates. The Full Bench expressed its decision as follows:

“[27]     We are satisfied and find that breaks occurring outside ordinary hours should be paid at overtime rates for the reasons we have provided. The appeal is allowed. The decision of Commissioner Harrison is quashed.”

The statutory scheme

4    Relevantly, the enterprise agreement between Linfox and the Union contained cl 22, which I will set out later in these reasons. That provided for the Commission to exercise private arbitral functions in resolving disputes arising under the enterprise agreement. The enterprise agreement was made and approved by the Commission pursuant to ss 185-187 of the Act. The source of that power was s 186(6), which provides:

“Requirement for a term about settling disputes

(6)    The FWC must be satisfied that the agreement includes a term:

(a)    that provides a procedure that requires or allows the FWC, or another person who is independent of the employers, employees or employee organisations covered by the agreement, to settle disputes:

(i)    about any matters arising under the agreement; and

(ii)    in relation to the National Employment Standards; and

(b)    that allows for the representation of employees covered by the agreement for the purposes of that procedure.

Note 1:    The FWC or a person must not settle a dispute about whether an employer had reasonable business grounds under subsection 65(5) or 76(4) (see subsections 739(2) and 740(2)).

Note 2:    However, this does not prevent the FWC from dealing with a dispute relating to a term of an enterprise agreement that has the same (or substantially the same) effect as subsection 65(5) or 76(4).” (emphasis added)

Next, s 595, relevantly, provides:

“595    FWC’s power to deal with disputes

(1)    The FWC may deal with a dispute only if the FWC is expressly authorised to do so under or in accordance with another provision of this Act.

…

(3)    The FWC may deal with a dispute by arbitration (including by making any orders it considers appropriate) only if the FWC is expressly authorised to do so under or in accordance with another provision of this Act.

Example: Parties may consent to the FWC arbitrating a bargaining dispute (see subsection 240(4)).

(4)    In dealing with a dispute, the FWC may exercise any powers it has under this Subdivision.

Example: The FWC could direct a person to attend a conference under section 592.

(5)    To avoid doubt, the FWC must not exercise any of the powers referred to in subsection (2) or (3) in relation to a matter before the FWC except as authorised by this section.” (emphasis added)

5    When an appeal is taken to a Full Bench of the Commission, ordinarily, the provisions of Subdiv E of Div 3 of Pt 5.1 of the Act apply. The Full Bench can admit further evidence, take into account any other information or evidence, allow the appeal or review, confirm, quash or vary a decision of a Commissioner and it can make a further decision in relation to the matter that is the subject of the appeal or review (s 607).

6    Next, Pt 6.2 of the Act deals with disputes. First, the regulations must prescribe, for enterprise agreements, a model term for dealing with disputes (s 737). Secondly, by force of s 738(b), Subdiv B of Div 2 of Pt 6.2 applies to an enterprise agreement that includes a term that provides for a procedure for dealing with disputes, including a term referred to in s 186(6). Critically, ss 739 and 740 relevantly provide:

“739    Disputes dealt with by the FWC

(1)    This section applies if a term referred to in section 738 requires or allows the FWC to deal with a dispute.

…    

(3)    In dealing with a dispute, the FWC must not exercise any powers limited by the term.

(4)    If, in accordance with the term, the parties have agreed that the FWC may arbitrate (however described) the dispute, the FWC may do so.

Note:    The FWC may also deal with a dispute by mediation or conciliation, or by making a recommendation or expressing an opinion (see subsection 595(2)).

(5)    Despite subsection (4), the FWC must not make a decision that is inconsistent with this Act, or a fair work instrument that applies to the parties.

(6)    The FWC may deal with a dispute only on application by a party to the dispute.

740    Dispute dealt with by persons other than the FWC

(1)    This section applies if a term referred to in section 738 requires or allows a person other than the FWC to deal with a dispute.

…    

(3)    If, in accordance with the term, the parties have agreed that the person may arbitrate (however described) the dispute, the person may do so.

(4)    Despite subsection (3), the person must not make a decision that is inconsistent with this Act, or a fair work instrument that applies to the parties.” (emphasis added)

Issues

7    There are two critical issues that arise in this application and they are interrelated. Linfox contended that the Full Bench made an error in its construction of the provisions of cl 26.2 of the Federal Award and cl 8.2.1 of the State Award that were incorporated into the enterprise agreement. Linfox submitted that the Full Bench had erred as to the true construction of the two fair work instruments which, according to Linfox, provided for ordinary time pay for crib breaks. Because of that error of construction, so Linfox submitted, the Full Bench made a decision contrary to s 739(5) in that its decision was “inconsistent with … a fair work instrument that applies to the parties”, namely the Federal Award and/or the State Award. Linfox contended that, accordingly, this Court has jurisdiction, first, to make a declaration as to the true construction of all three fair work instruments and, secondly, to grant relief in the nature of an order of certiorari to quash the decision of the Full Bench. That was because all of the fair work instruments were binding on the parties and thereby governed the resolution of the dispute that had been arbitrated by the Commission.

The background

8    The context in which the dispute arises is narrow. After the enterprise agreement was made, a dispute arose between Linfox and the Union as to the appropriate rate at which the crib breaks should be paid. Linfox applied to the Commission under s 739(6) in accordance with the dispute settlement procedure in the enterprise agreement. It sought a determination from the Commission that the enterprise agreement provided that scheduled overtime meal breaks be paid for at the ordinary rate of pay.

9    The contractual relationship between the parties is a little complex. It begins with the enterprise agreement. That was expressed to bind Linfox, each of its relevant employees and the Union (cl 2.1). The terms of the enterprise agreement incorporated certain terms from other defined enterprise agreements, memoranda of understanding, common law agreements and State Awards which it provided were to prevail over the terms of the enterprise agreement if there were any inconsistency (cl 4.4). It is common ground that, for present purposes, the terms of the enterprise agreement applied in respect of Linfox’s relevant employees other than those who were covered by the State Award.

10    The enterprise agreement provided:

“6.    This Agreement operates in place of any other award (including a modern award) or agreement (whether certified, or approved, or not).”

Clause 18 provided that:

“18.    This Agreement is in full and final settlement of all TWU and Employee claims relating to Employee rights and entitlements. Accordingly, the TWU or Employees shall not pursue any extra claims, nor take any illegal industrial action or protest action concerning any matter dealt with in this Agreement.”

Clause 22 provided a dispute resolution procedure as contemplated by s 186(6) of the Act. It referred to the Commission under the acronym “FWA”, being the Commission’s previous name of “Fair Work Australia”. Relevantly cl 22 stated:

“22.1    Any dispute or grievance that arises at the workplace between an Employee and Linfox and/or Linfox and the TWU about the Agreement or the employment relationship (including, for the avoidance of doubt, in relation to the NES) shall be dealt with in the following manner:

    …

(e)    If the matter is not resolved in conciliation conducted by FWA, the parties agree that FWA may proceed to arbitrate the dispute and/or otherwise determine the rights and/or obligations of the parties to the dispute. In relation to such arbitration, the parties agree that:

(i)    FWA may give all such directions and do all such things as are necessary for the just resolution of the dispute, including but not limited to those things set out in section 595 of the Act;

(ii)    before making a determination FWA will give the parties an opportunity to be heard formally on the matter(s) in dispute;

(iii)    in making its determination FWA will only have regard to the materials, including witness evidence, and submissions put before it at the hearing and will disregard any admissions, concessions, offers or claims made in conciliation.

(f)    The decision of FWA will be binding on the parties subject to the following agreed matters:

(i)    There shall be a right of appeal to a Full Bench of FWA against the decision, which must be exercised within 21 days of the decision being issued or within such further time as the Full Bench may allow;

(ii)    The appeal will be conducted in accordance with the legal principles applying to an appeal;

(iii)    The Full Bench shall have the power to stay the decision pending the hearing and determination of the appeal.

22.2    The decision of the Full Bench in the appeal will be binding upon the parties.” (emphasis added)

11    Although the enterprise agreement dealt in a number of places with rates of pay and payment of wages, no express attention was paid to how employees were to be remunerated while having crib breaks. Nonetheless, cl 50 of the enterprise agreement expressly incorporated cl 22 of the Federal Award, cl 80.2(k)(i) incorporated cl 8.2.1 of the State Award and cl 80.2(l) incorporated most of the other terms of the Federal Award.

12    The Federal Award was a modern award, within the meaning of the Act. It had been made on 3 April 2009. Earlier, on 3 September 2008, the predecessor of the Commission, the Australian Industrial Relations Commission, issued a formal statement that the Federal Award, when made, would replace about 90 previous awards that had applied both federally and in respect of State jurisdictions. The Federal Award covered employers throughout Australia in the road transport distribution industry and their employees in the relevant classifications (cl 6). Clause 7 dealt with the rights of employers and employees to agree to variations of the application of the Federal Award for certain matters including overtime rates, arrangements for when work was performed, allowances and leave loadings. But, it provided that any such variation must result in the employee being better off overall than the employee would have been if no individual flexibility agreement had been agreed (see cll 7.1 and 7.3). A full time employee was defined as an employee engaged to work an average of 38 ordinary hours per week (cl 12.3). Clause 15.2 identified minimum weekly rates of pay for full time adult employees. Clause 22 dealt with ordinary hours of work. Under cl 22.1(a) the ordinary hours of work were an average of 38 hours per week to be worked on a number of identified bases. Those hours were calculated in accordance with cl 22.5 and this involved ordinary working hours of not more than seven hours 36 minutes continuously over five days, Monday to Friday inclusive, except for meal breaks.

13    The parties agreed that the 38 hours a week of ordinary time referred to in cl 22 of the Federal Award thus excluded all allowances for meal breaks. So much was clear from the following provisions of cll 26 and 27:

“26.    Breaks

26.1    Regular meal break

(a)    An employee must be allowed a regular meal break during the ordinary hours of work except where unforeseen extraordinary circumstances arise.

(b)    The meal break must:

(i)    be of a regular duration of not more than one hour or less than 30 minutes; and

(ii)    commence no earlier than three and a half hours and no later than five and a half hours after an employee’s fixed starting time of the ordinary hours of work.

(c)    If the meal break is not allowed, all time worked after the commencement time of the regular meal break until a break without pay for a meal time is allowed must be paid for at the rate of ordinary time, the payment to be in addition to any payment due in respect of a weekly or casual wage.

26.2    Overtime rest break

An employee required to work overtime for two hours or more after working ordinary hours must be allowed a paid break of 20 minutes before commencing overtime work and thereafter upon completing each four hour period until the overtime work is finished.

…

27.    Overtime

27.1    For all work done outside ordinary hours the rate of pay will be time and a half for the first two hours and double time thereafter, such double time to continue until the completion of the overtime work.

27.2    In computing overtime each day’s work will stand alone.” (emphasis added)

14    Other parts of cl 27 specifically provided for payment of particular rates of pay for identified types of work done at varying hours, for example, if an employee was required to be available to be called back to work and to standby, he or she was entitled to be paid at ordinary rates from the time of being told to be available (cl 27.5).

15    The State Award provided for overtime to paid at the rate of time and a half for the first two hours and double time thereafter “for all time worked outside the spread of ordinary hours referred to in clause 3.3” (cl 5.1.3). The ordinary hours of work would not exceed eight hours per day exclusive of meal breaks and had to be worked between 5 am and 6 pm (cl 3.3). Critically cl 8.2.1 provided:

“8.2    Crib Breaks

8.2.1    An employee who is required to work overtime on any week day for a period of two hours or more after the employee’s normal finishing time shall be allowed a paid crib break of 20 minutes not later than 5 hours after the end of the lunch break and, shall, unless notified the previous day or earlier that the employee would be required to work such overtime, be paid a meal allowance of the amount specified in Table 9 of Part B. Where notification to work overtime has been given on the preceding day or earlier and such overtime is then cancelled on the day such overtime was to be worked, an employee shall be paid a meal allowance of the same amount.” (emphasis added)

The Union’s jurisdictional argument

16    The Union took a jurisdictional point that, by reason of the Commission having undertaken a private arbitral function pursuant to cl 22 of the enterprise agreement, the decision that the Full Bench arrived at was the completion of the dispute resolution process provided for in the enterprise agreement. The Union contended that this arbitral decision of the Full Bench was binding, as cl 22.2 said, and was not susceptible to the attack made by Linfox in this Court. Unfortunately the Union did not seek to have the proceedings dismissed for want of jurisdiction and took the point only when it filed its written submissions. Its point was expanded during the course of oral argument today.

17    Linfox argued to the effect that any decision in such a private arbitration, that was arrived at as a consequence of reasoning inconsistent with the Act or a fair work instrument that applied to the parties, was susceptible of challenge or collateral attack in court proceedings that sought a declaration or constitutional writ, or related relief. That was because, it contended, s 739(4) limited the arbitral powers of the Commission in all respects, including private arbitrations. Linfox contended that, in consequence, the Commission could not make a private arbitral award that was inconsistent with the true construction, as found by a court, of a fair work instrument, here the provisions of the Federal and State Awards relating to crib breaks. Linfox also argued that the omission of the words “final and” before the word “binding” in cl 22.2 of the enterprise agreement had some significance. It contended that this omission indicated that the parties had intended that the “binding” decision of the Full Bench was not “final” and could be made the subject of judicial review.

Consideration

18    There is an inter-relationship between this point and the construction of s 739(5), which is substantively replicated in s 740(4) for a private arbitration by a person other than the Commission. The mechanism contemplated by the Act for private arbitration by the Commission was authoritatively discussed in Construction, Forestry, Mining and Energy Union v Australian Industrial Relations Commission (2001) 203 CLR 645 by Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ (the Gordonstone case), in relation to a statutory predecessor of the Act, being the Workplace Relations Act 1996 (Cth). That decision was followed in Construction, Forestry, Mining and Energy Union v Wagstaff Piling Pty Ltd (2012) 203 FCR 371 by a Full Court of this Court consisting of Buchanan, Flick and Katzmann JJ.

19    In the Gordonstone case 203 CLR at 657 [29] the Court held that it was incidental to the power of the Parliament under s 51(xxxv) of the Constitution to make laws with respect to conciliation and arbitration for the prevention and settlement of industrial disputes extending beyond the limits of any one State, to permit parties to an industrial situation to agree on the terms on which they would settle matters in issue between them conditional upon their agreement having the same legal effect as an award in a private arbitration. Their Honours continued (203 CLR at 657-658 [30]-[32], [34]):

“30.    There is, however, a significant difference between agreed and arbitrated dispute settlement procedures. As already indicated, the Commission cannot, by arbitrated award, require the parties to submit to binding procedures for the determination of legal rights and liabilities under an award because Ch III of the Constitution commits power to make determinations of that kind exclusively to the courts. However, different considerations apply if the parties have agreed to submit disputes as to their legal rights and liabilities for resolution by a particular person or body and to accept the decision of that person as binding on them.

31.    Where parties agree to submit their differences for decision by a third party, the decision maker does not exercise judicial power, but a power of private arbitration. Of its nature, judicial power is a power that is exercised independently of the consent of the person against whom the proceedings are brought and results in a judgment or order that is binding of its own force. In the case of private arbitration, however, the arbitrator's powers depend on the agreement of the parties, usually embodied in a contract, and the arbitrator's award is not binding of its own force. Rather, its effect, if any, depends on the law which operates with respect to it.

32.    To the extent that s 170MH of the IR Act operates in conjunction with an agreed dispute resolution procedure to authorise the Commission to make decisions as to the legal rights and liabilities of the parties to the Agreement, it merely authorises the Commission to exercise a power of private arbitration. And procedures for the resolution of disputes over the application of an agreement made by parties to an industrial situation to prevent that situation from developing into an industrial dispute are clearly procedures for maintaining that agreement. Parliament may legislate to authorise the Commission to participate in procedures of that kind. Accordingly, s 170MH of the IR Act is valid.

…

34.    The parties to an industrial situation are free to agree between themselves as to the terms on which they will conduct their affairs. Their agreement has effect according to the general law. If their agreement is certified, it also has effect as an award. To the extent that an agreement provides in a manner that exceeds what is permitted either by the Constitution or by the legislation which gives the agreement effect as an award, it cannot operate with that effect. But the underlying agreement remains and the validity of that agreement depends on the general law, not the legislative provisions which give it effect as an award.” (emphasis added)

20    In Wagstaff Piling (203 FCR at 379 [31]), Buchanan and Katzmann JJ said, after referring to what the Court had said in the Gordonstone case (203 CLR at 658 [31] and [34]):

“Parties to an industrial arrangement of the kind represented by the agreement could not make it a condition of the valid participation of FWA (or the AIRC before it) in a dispute settling mechanism that any opinion reached or stated be a legally correct opinion.”

21    However it is fair to say that that observation was an obiter dictum, because Buchanan and Katzmann JJ then considered the parties’ arguments and came to the conclusion that the reasons given by the Full Bench of the Commission in that case were correct.

22    In TCL Air Conditioner (Zhongshan) Co Ltd v Judges of the Federal Court of Australia (2013) 295 ALR 596 at 609 [45], Hayne, Crennan, Kiefel and Bell JJ discussed the role of private arbitration. Their Honours approved what Lord Bingham of Cornhill said in his book, The Rule of Law (2010) at 86 in describing arbitration as involving:

“the appointment of an independent arbitrator, often chosen by the parties, to rule on their dispute according to the terms of reference they give him. This can only be done by agreement, before or after the dispute arises, but where it is done the arbitrator has authority to make an award which is binding on the parties and enforceable by the process of the courts.”

23    It is important to note that their Honours referred expressly to that description as being apt for Australia by reference to, among others, the Gordonstone case 203 CLR 645. They discussed the relationship between judicial power and arbitration in their reasons (see 295 ALR at 616-617 [75]-[80]). In particular, their Honours said (295 ALR at 616 [77]-[78]):

“… if parties do go to arbitration and the arbitrator makes an award, the making of the award has legal significance in respect of the parties’ dispute and their rights and liabilities. As the plurality in Dobbs [v National Bank of Australasia Ltd (1935) 53 CLR 643 at 653] said: “if, before the institution of an action, an award was made, it [the award] governed the rights of the parties and precluded them from asserting in the courts the claims which the award determined”. [Emphasis in original] In such a case, the arbitrator’s award governs the rights of the parties because “[b]y submitting the claims to arbitration, the parties confer upon the arbitrator an authority conclusively to determine them” [Dobbs 53 CLR at 653].

This gives rise to the general rule that an award made by an arbitrator pursuant to such authority is final and conclusive. Further, the arbitrator’s making of an award in exercise of such authority both extinguishes the original cause of action and imposes new obligations on the parties in substitution for the rights and liabilities which were the subject of the dispute referred to arbitration.” (bold emphasis added)

24    They also held that no delegation of judicial power occurred as a consequence of legislation that allowed arbitral awards to be given final and conclusive effect: TCL 295 ALR at 622-623 [106]-[110], citing what the Court had said in Gordonstone at 203 CLR [31] as authority for the proposition (295 ALR at 622 [108]):

“To conclude that a particular arbitral award is final and conclusive does no more than reflect the consequences of the parties having agreed to submit a dispute of the relevant kind to arbitration. As has already been noted, one of those consequences is that the parties’ rights and liabilities under an agreement which gives rise to an arbitration can be, and are, discharged and replaced by the new obligations that are created by an arbitral award.” (emphasis added)

25    It is important to appreciate that the statutory scheme under the Act has, as its central foundation, the premise that an enterprise agreement must include a term that establishes a procedure that allows either the Commission, or another person independent of the parties covered by that agreement, to settle disputes about any matters arising under it. The Act made detailed provisions for those disputes to be settled in a private arbitration either by the Commission or a third party. However, the Act also created limitations and consequences in respect of such settlements of disputes.

26    Thus, the Parliament gave effect to a well recognised function of private arbitration when it authorised parties to enterprise agreements to appoint the Commission to act as a private arbitrator as well as providing for others to act in that capacity. The High Court had found previously that function was capable of being conferred on the Commission in statutory predecessors of the Act. Indeed, s 186(6) of the Act required that an enterprise agreement must have a dispute resolution procedure that allowed the Commission, or someone else independent of the parties, to resolve disputes. This demonstrated that the intention of the Parliament was that such dispute resolution be effective and operate with the incidents of a private arbitration.

27    The function that the Full Bench of the Commission exercised was the agreed appellate mechanism under cl 22.1(f) of the enterprise agreement. That function of the Commission was not an exercise of its public law functions under the Act. Rather the Full Bench performed a function in which it acted as a private arbitrator, appointed by consent of Linfox and the Union, as parties to the enterprise agreement, in the manner provided under the Act for the conduct of appeals within their agreed private arbitral process and the making of a final decision in consequence.

28    Critically, cl 22.2 of the enterprise agreement provided that the decision of the Full Bench on the appeal would be binding upon the parties. Both parties referred to the explanatory memorandum for the Bill that became the Act for the purposes of assisting their arguments as to the proper construction of s 739 and, in particular, s 759(5). However, in construing the Act, one must begin with a consideration of the text of the relevant provisions in the Act, having regard to their context and the purpose of the Act as a whole: Commissioner of Taxation v Unit Trend Services Pty Ltd (2013) 297 ALR 190 at 200-21 [47] per French CJ, Crennan, Kiefel, Gageler and Keane JJ.

29    In this case, the decision of the Full Bench necessarily involved the construction of the enterprise agreement and so much of the fair work instruments (being the Federal Award and the State Award) that it incorporated expressly by reference. The Commission’s private arbitral function was to resolve the dispute that had arisen between the parties. Linfox initiated the proceedings by its application to the Commission for the purpose of arriving at a binding resolution of that dispute. Such a resolution was consistent with both the fair work instruments that applied to the parties (i.e. the Federal and State Awards) and the Act. Indeed, it was the very thing the Act contemplated would occur in the rÉgime of dispute resolution that s 186(6) of the Act required the parties to include in their enterprise agreement. Each of s 739(4) and its cognate provision, s 740(3), contemplated that the Commission or a third person could arbitrate a dispute as a private arbitrator if the parties had agreed to confer such arbitral functions on the Commission or that person. Nonetheless, such a private arbitrator was not capable of making a decision that was inconsistent with the Act, or a fair work instrument that applied to the parties.

30    In my opinion, there was no inconsistency with the Act (or the two Awards) in the Full Bench’s decision. Such an inconsistency might arise if a private arbitration arrived at an outcome in which one or more employees was worse off overall (see e.g. cl 7.3 of the Federal Award). However, that was not an issue in the present case. The construction of the fair work instruments by a private arbitrator in arriving at an award is as much a part of what the parties agreed that person could resolve in a binding manner as any other aspect of their dispute. In Goode v Bechtel (1904) 2 CLR 121 at 126 Griffith CJ giving the judgment of the Court said, in a passage cited with approval by Hayne, Crennan, Kiefel and Bell JJ in TCL 295 ALR at 619 [92]:

“The law is clearly settled, as stated by Williams J. in Hodgkinson v Fernie [3 CB(NS) 189 at 202], that when a cause or matters in difference are referred to an arbitrator, whether a lawyer or a layman, he is constituted the sole and final judge of all questions both of law or of fact.” (emphasis added)

31    Thus, the Full Bench of the Commission when acting as a private arbitrator under the enterprise agreement had the power, given to it by the parties as a part of their agreement, to decide a question of law, such as the construction of the fair work instruments, in a way that bound the parties in the resolution of that dispute.

32    These parties were well resourced when they negotiated the terms of the enterprise agreement. They intended it to deal with the complex industrial relationships that they have with one another throughout Australia. Those were regulated in a number of fair work instruments made at various times by Federal and State industrial bodies. They provided in cl 22 of the enterprise agreement for a resolution procedure that would ensure that they had a mechanism to achieve binding resolutions of their disputes.

33    In my opinion, Linfox’s argument that an arbitrator could not construe a fair work instrument in a way that was inconsistent with the construction that a court might give it, would render illusory the concept of dispute resolution intended to be achieved by s 186(6) and the mechanism it required every enterprise agreement to contain. If Linfox’s contention were correct, every decision by a private arbitrator, or the Commission, would be subjected to intense scrutiny for any error of law in the construction of the subject matter of the parties’ dispute, so as to give the losing party a gateway to the jurisdiction of the Court. In effect the private arbitration would be reduced to nothing more than a dry run of the parties’ arguments that would resolve nothing if one of them, as might be expected, was disaffected by a result of the arbitration. Rather than being a dispute resolution procedure, the procedure would be a dispute protraction procedure. The Full Bench had authority, by force of the provisions of cl 22 of the enterprise agreement to resolve all matters of fact and law, including the construction of the Federal and State Award provisions incorporated by reference: Goode 2 CLR at 126, TCL 295 ALR at 619 [92].

34    I am of opinion that Linfox’s argument for the construction of s 739(5) must be rejected by reason of the natural and ordinary meaning of the words of the Act.

The explanatory memorandum

35    Like the curate’s egg, the explanatory memorandum was good in parts to support the arguments of both parties. It asserted that, under what became s 739(4), the Commission could make a binding decision in relation to a dispute if the parties agreed to it doing so. Then, paraphrasing what became s 739(5), it stated in [2739] that, despite anything to the contrary in the relevant enterprise agreement, the Commission could not make a binding decision that was inconsistent with the parties’ rights or obligations under what became the Act, including the Regulations, or a fair work instrument, such as an enterprise agreement, that applied to them. That was because, the explanatory memorandum continued, those matters could only be finally determined by a court. The explanatory memorandum went on to give an example that the Commission could not make a binding decision that would:

“… modify the way ... the NES [national employment standards] or a modern award apply in a particular workplace or to determine that the requirements of the … [Act] do not apply.”

36    In my opinion, the Full Bench did not modify the way that the enterprise agreement applied in a particular workplace, or determine that any requirements of the Act did not apply. Rather it did what it was obliged to do in the private arbitration it undertook pursuant to its function under cl 22 of the enterprise agreement and s 739(4) of the Act. In that arbitration, it resolved the parties’ dispute as to the rate of pay for crib breaks that had arisen under the agreements.

The binding nature of the Full Bench decision

37    I also reject Linfox’s argument that the omission of the words “final and” before binding in cl 22.2 of the enterprise agreement indicated the parties agreed that the Full Bench decision was susceptible to judicial review. The whole purpose of the dispute resolution procedure that s 186(6) required to be provided under the Act was to resolve disputes. For a resolution of a dispute to be binding upon the parties consistently with the purposes of the Act, in my opinion, it must create a final determination of the parties’ dispute. Such a decision cannot conclusively determine the proper construction of the parties’ agreements because such a decision can only be performed conclusively by a Chapter III court.

38    But the parties consensually agreed that the private arbitrator, in the position of the Commission, or the Full Bench on appeal, had power to resolve their dispute by making a decision under cl 22.2. Such a decision was to have, in effect, the attributes of a private arbitral award. A long established incident of that process is that the arbitrator has power to decide finally all disputed questions of fact and law: Goode 2 CLR at 126; TCL 295 ALR at 619 [92]. The arbitration would assist the parties to continue their relationship under their enterprise agreement with an outcome arrived at by the method of dispute resolution that they both had adopted, and which the Act contemplated they would have. The parties, for example, could have adopted a dispute resolution mechanism of simply allowing the Commission to resolve their disputes in accordance with its statutory functions, that is, not as a private arbitrator. But, the parties having chosen a method of resolution by private arbitration, the Court should be astute to uphold that bargain.

Conclusion

39    For those reasons, I am of opinion that Linfox has not identified any relevant jurisdiction that the Court can exercise in relation to the decision of the Full Bench. The proceedings must be dismissed.

40    Nonetheless, because the matter was fully argued, I should express the views that I have formed as to the proper construction of the crib break provisions.

The Union’s construction of the crib break rate

41    The Union argued that the Federal Award should be construed so as to provide that, once an employee had worked the full complement of ordinary hours during the course of a day, he or she should be remunerated at overtime rates for the paid break of 20 minutes required by cl 26.2 before he or she commenced overtime work, and similarly for any subsequent paid 20 minute break. It argued that this was the natural consequence of the structure of cl 27.1. It contended that, once an employee was required to work overtime, he or she should be treated as being entitled to remuneration under the rates of pay applicable under cl 27.1. The Union argued that that was different to the way in which cll 15 and 22 specifically dealt with payment for other breaks. The Union contended that when it made the Federal Award the predecessor of the Commission must have intended that award to operate in this way.

Consideration

42    I would not have so construed cl 26.2. In my opinion, the Federal Award indicates that the paid break in cl 26.2 is not overtime. First, the employee is not entitled to any remuneration for meal breaks during ordinary time. Secondly, the fact that cl 26.2 expressly provided for a paid break of 20 minutes “before commencing overtime work”, suggests that the break is paid at ordinary time rates. Next, cl 27.1 commences with the expression “for all work done outside ordinary hours”. That is a description inapt for a paid break because work is not ordinarily done in a break from work.

43    In Duncans Holdings Limited v Cross (1997) 76 IR 261 at 263-264, Wilcox J construed the Timber Industry Consolidated Award 1990. That instrument used the expression “crib break”, whereas the Federal Award used the expression “a paid break”, although the heading of cl 26.2 is “overtime rest break”. The parties proceeded upon the basis that these were similar expressions to “crib break” as used by Wilcox J and the State Award. His Honour pointed out that there was a difference between a mere lunch break, for which one was not entitled to be paid, and a 20 minute crib break. His Honour observed that, in the lunch break, an employee was free to not only eat a meal, but to leave the workplace, as well as to socialise with workers elsewhere in the establishment. He said that in contrast, during a crib break, an employee could down tools and eat, but had to remain in the immediate workplace and be available in case of any emergency. Based on this reasoning, a decision that had construed an earlier version of the Timber Industry Award, Wilcox J found that in that case the crib break provided for in the award was paid time, because the employee remained on duty throughout.

44    In my opinion it is important to read the text of the Federal Award in its own context. It was intended to replace over 90 Federal and State awards that covered a variety of different occupations and industrial circumstances and these were not limited to the Union, Linfox or its employees. I am of opinion that the Union’s construction should be rejected. If any employee were disadvantaged by the construction that under cl 26.2 a crib break should be paid at ordinary rates, the enterprise agreement itself provided in cl 7.3 that that employee would not be bound by the result of that construction. That is because he or she could not be placed in a position where he or she was worse off overall. In other words, the result of that construction would automatically not operate in respect of the particular employee because he or she could not be worse off overall. Such a result would be inconsistent with cl 7.3 and, as I have said above, s 739(5) of the Act.

45    Here, the Australian Industrial Relations Commission, as predecessor of the Commission, made the Federal Award as a modern award that would cover a variety of disparate possibilities. Linfox argued, without any particular evidence, that in none of the 90 awards that the Federal Award replaced was there a provision for overtime rates being paid during the crib break. Whether that is so or not, the Federal Award was intended to operate across a variety of previously diverse situations. It expressly provided a safety net in cl 7.3 because it could not operate to make an employee worse off overall than he or she had been before the decision. But if other employees were not worse off overall because the provision had been construed in the way I have said, it would bind them.

46    Clause 26.2 contemplated that the employee would remain at work, and be paid for the “crib” break, after the ordinary hours had expired but “before commencing overtime work”. The ordinary and natural meaning of those latter words, read in their context in cll 26.2 and 27.1 of the Federal Award, is that the period in which no ordinary activity would be required of the employee should be remunerated at a rate different to the lunch break, that is the unpaid lunch break, but not as if it were a period in which actual work was being performed by the employee.

47    In my opinion, the Federal Award contemplated that an employee would be paid ordinary rates in the crib breaks and would be otherwise adequately rewarded by the increased overtime rates for the actual periods in which he or she worked overtime. There is nothing in the State Award to compel a different construction of it provisions.

Conclusion

48    The application should be dismissed for the reasons above.

Associate:

Dated:    22 July 2013