FEDERAL COURT OF AUSTRALIA

Australian and International Pilots Association v Qantas Airways Limited [2017] FCA 346

ORDERS

THE COURT ORDERS THAT:

1.    The application be dismissed.

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

REASONS FOR JUDGMENT

(REVISED FROM THE TRANSCRIPT)

RARES J:

1    The Australian and International Pilots Association and Qantas Airways Limited negotiated the Qantas Airways Limited Pilots (Long Haul) Enterprise Agreement 2015, that Qantas pilots, who were affected by it, voted subsequently to approve. The Fair Work Commission approved the agreement on 19 August 2015 pursuant to s 186 of the Fair Work Act 2009 (Cth). The agreement governed, as s 172(1)(a) and (b) contemplated, the relationship between Qantas, its long haul flight pilots and the Association. It is the latest in a long series of industrial instruments governing that relationship, but cl 2.1 relevantly provided that, with limited exceptions, the agreement superseded and replaced all previous awards, agreements and determinations.

Introduction

2    This appeal concerns the construction of cl 18.1.12 of the agreement, that I have set out in full at [15] below. That clause dealt with the process by which Qantas could reduce the number of pilots in a location whom it considered to be surplus to its requirements. In general, the agreement operated on the basis, specified in cl 16, that the seniority of a pilot in Qantas’ service is determinative of the order in which, on a change in the status quo occurring, favourable or unfavourable consequences would apply to a particular pilot or pilots. However, the agreement also provided, in cl 16.6.1, that Qantas had discretionary power to select a pilot for a supervisory, check or training appointment and that such an appointment did not depend upon a pilot’s seniority.

3    Shortly after the agreement came into force on 8 September 2015, Qantas issued a notice to flight staff that operated as a promulgation of information under cl 18.1.12(c). The notice, headed “Reduction In Numbers”, stated that there were 16 named A380 first officers or FOs, two of whom were based in Melbourne and the other 14 in Sydney, who were affected as surplus to Qantas’ requirements at those bases. It is common ground that two A380 first officers, being First Officers Taylor and McDonogh (the two TRI-FO pilots), were among the 16 most junior pilots at the two bases affected, but their names were not on the list. That was because Qantas asserted that each of them held an appointment in the supervisory position of a type rated instructor at the level of first officer, known as a “TRI-FO”.

4    The Association contended unsuccessfully before the trial judge that Qantas breached cl 18.1.12 because it had departed from the requirement of the agreement that, when seeking to reduce staff, it had to nominate pilots on the strict basis of the reverse order of their seniority. That is, the Association argued, the 16 most junior first officers in reverse seniority had to include the two TRI-FO pilots when Qantas promulgated the list of names of pilots to whom the notice applied. As events unfolded, Flight Officer Clewett, one of the pilots more senior to Flight Officer Taylor, claimed to be entitled to exercise a right pursuant to cl 18.1.12(e)(iii), based on his seniority, to displace Flight Officer Taylor who was at that time the most junior pilot at Sydney.

The issues

5    The substantive question in the appeal is whether the Association’s construction of cl 18.1.12 is correct. The first issue is whether cl 18.1.12(c)(iii) should be construed as allowing Qantas to identify and name in a promulgation only those pilots whom it had chosen as “affected by the surplus”, as Qantas contended, rather than listing, in strict reverse order of seniority, so many of the pilots in the category as corresponded to the number of the surplus “at the base affected by the surplus”, as the Association argued. The second issue is whether Qantas breached cl 18.1.12(e)(iii) by not permitting Flight Officer Clewett to displace Flight Officer Taylor.

The legislative scheme

6    The agreement came to be made under Pt 2-4 of the Act. Importantly, s 182(1) provided that:

If the employees of the employer … have been asked to approve the agreement under subsection 181(1), the agreement is made when a majority of those employees who cast a valid vote approve the agreement. (emphasis added)

7    Thereafter, the Commission had to approve an agreement under s 186 if satisfied that it met the requisite conditions set out in Subdiv B of Div 4 of Pt 2-4 of the Act.

The agreement

8    Relevantly, the agreement contained the following provisions.

9    Clause 7 provided that, first, when special circumstances existed, Qantas with the agreement of the Association could use a pilot at such times and under such conditions as those circumstances required and, secondly, the provisions of the agreement that would have covered pilots in four specific senior managerial positions (chief operating officer, chief pilot, head of training and checking and head of flight technical) did not apply where those provisions were inconsistent with the terms of those particular pilots’ employment.

10    Clause 15.9 of the agreement gave effect to particular terms of the employment of pilots that applied when Qantas encountered a situation where it had a surplus of pilots. It provided that, in the management of surpluses, Qantas would use its right to make pilots take leave only as a mechanism of last resort, and there was a hierarchy of steps to be followed in relation to the assignment of leave (“assign” being used in the agreement in the sense of Qantas exercising a right to control and direct the pilot to take leave), reduction in numbers and redundancy. The first of the mechanisms in the hierarchy was that Qantas could vary the formula under which pilots bid for the times and routes that they would work in a particular roster. The second and third bases, which could be implemented prior to, or in a slightly different order within, the change in the bid arrangements, was for Qantas to award (“award” being used in the agreement in the sense that pilots could bid or apply for Qantas to exercise a discretionary power in their favour) either long service or annual leave to particular pilots, who had bid for that right, on the basis of their seniority. Next, Qantas had to consult with the Association as to whether it should reduce numbers before, after or at the same time as assigning annual or long service leave to pilots in the order of reverse seniority, and, last, Qantas could make pilots redundant. Clause 15.10 dealt with redundancy and, again, specified that, in the ordinary course, Qantas could only make pilots compulsorily redundant using the reverse order of seniority.

11    Clause 16 dealt with seniority. It had a number of important provisions for the purposes of these proceedings. First, cl 16.1.1 provided that, relevantly, seniority was the length of continuous service as a pilot with Qantas, as recognised in a seniority list that Qantas had to publish each year, pursuant to cl 16.2 of the agreement. Importantly, cl 16.1.4 provided:

A pilot whose name appears on the pilot’s seniority list will continue to accrue seniority during the period of service as a pilot with the Company, including any service as a supervisory pilot and during any period of secondment as a pilot by the Company to another airline operator. (emphasis added)

12    Next, cl 16.4.1(a) provided that, without limiting any other provision of the agreement and provided that the relevant pilot was sufficiently qualified to undertake the training or duty required, seniority would determine the order in which pilots were selected for promotion, transfer to a base or a posting, transfer to, and status on, an aircraft type, and demotion or termination if redundancies occurred.

13    Clause 16.4.5 provided if there were no letters of preferences on file or bids by pilots entitled to bid for vacancies, Qantas would assign the vacancies to sufficiently qualified pilots in reverse order of seniority. The agreement contained specific provisions relating to the general situation applicable if a pilot bid for a lower position, but cl 16.4.10(d) provided that the more general requirements of subcl 16.4.10(c) did not apply in the case of a pilot bidding for a lower category in a reduction in numbers process. Clause 16.6.1 provided:

The selection of a pilot to a supervisory, check or training appointment is at the discretion of the Company and does not depend on seniority. (emphasis added)

14    Clause 17 deal with promotion, demotion and the designation of pilots. Relevantly, a pilot could have one of the ranks which cl 17.3 stated gave him or her a status, namely, captain, F/O (scil: first officer), senior S/O (scil: second officer), S/O or SOT (scil: second officer trainee), the latter of which (SOT) was the initial status of a pilot’s appointment with Qantas (cl 17.1). Next, cl 17.4 provided that the category of a pilot was the pilot’s status on an aircraft type, and that these ranked in a stipulated descending order, commencing with categories of the status of captain of a particular aircraft type, the most senior of which was A380 captain (cl 17.4(a)), followed by four other categories of captain, next was A380 F/O (cl 17.4(f)), followed by four other first officer categories and then four second officer categories. Promotion was defined as a change to a higher status (cl 17.5.1) and demotion as the converse (cl 17.7.1).

15    Clause 18 dealt with allocation to bases, postings and lines or routes. Qantas would allocate each pilot to a base on commencement of his or her employment with it as a pilot and it would determine the number and location of bases that it required (cll 18.1.1 and 18.1.2). The balance of cl 18.1 dealt with allocations of pilots to particular bases, but, critically, cl 18.1.12 provided:

18.1.12    Reduction in numbers at a base

(a)    Prior to a reduction in numbers, the Company, in consultation with the Association, will consider all reasonable alternatives including natural attrition, secondment to other operators, redeployment, LWOP and voluntary redundancies.

(b)    Subject to clause 18.1.12(a), where a reduction in numbers is required at a base and:

(i)    there are vacancies in the same category at another base; and

(ii)     there will be no change in the overall pilot numbers in the category across all bases,

the Company will complete the followings steps:

(iii)    award from letters of preference, in seniority order, a base transfer to pilots in that category; and

(iv)    where the above awards results in residual vacancies in the category at other bases, award from letters of preference, in seniority order, the residual base transfers to pilots in the category until all vacancies or bids by pilots in the category are satisfied.

(c)    Subject to clauses 18.1.12(a) and 18.1.12(b), at least 30 days prior to a reduction in numbers at a base in accordance with clauses 18.1.12(d) and 18.1.12(e), the Company will promulgate the following information:

(i)    the number and category of surplus pilots;

(ii)    the date(s) from which reductions will become effective;

(iii)    the names of pilots in the category at the base affected by the surplus;

(iv)    bases where vacancies in the category are available or will become available; and/or

(v)    if applicable to the circumstances, bases and categories where the Company is proposing to re-deploy surplus pilots.

(d)    The reduction will be effected in reverse order of seniority of pilots in that category at the base except that a more senior pilot in the category may bid for any vacancy in any base or any base and/or category which is notified as available pursuant to clause 18.1.12(c).

(e)    A pilot included in the promulgation issued under 18.1.12(c) may, subject to clause 16:

(i)    bid for any advertised vacancy;

(ii)    if applicable, bid for any notified base and/or category which is promulgated as available for re-deployment pursuant to clause 18.1.12(c)(v); or

(iii)    exercise his or her seniority to displace the most junior pilot in any category and base provided the election to displace is made at or before the promulgated date or dates specified in clause 18.1.12(c) and provided he or she will not displace a pilot in a higher status unless the pilot affected by the reduction would otherwise be demoted to a lower status or have his or her services terminated. (emphasis added)

16    Part 3 of the agreement dealt with training and related matters and commenced with cl 25, that concerned the appointment of supervisory pilots. Clause 25.1 provided:

Supervisory pilots are those pilots who are selected at the Company’s discretion for appointment to a supervisory position and are classified by the Company as either administrative or training supervisories. The various supervisory classifications and the manner in which flying is allocated to them are set out in this clause 25.1. (emphasis added)

17    Relevantly, a supervisory (or training) appointment included an appointment as a TRI-FO (cl 25.1.2(e)). It was common ground that the manner in which supervisory pilots could bid for, and have allocated to them, flying patterns, took account of the fact that they would spend the greater part of their working duties in their supervisory role, and a lesser part performing their flying tasks. There was evidence to suggest that, in practice, persons in the TRI-FO category would spend in the order of two-thirds of their time engaged in training other pilots and one-third in flying airplanes.

18    Moreover, cl 25.1.3 gave priority to the choice of supervisory pilots over their peers in the same category as to when, and on what routes, they would fly. Clause 25.5.1 provided that Qantas could allocate duties to a TRI-FO whom it appointed and who, also, was approved by the Civil Aviation Safety Authority (CASA) for that role, while cll 33.1 and 33.3 provided for special rates of pay for supervisory pilots in excess of the pay for pilots in the same category. Thus cl 33.1.1 provided, relevantly:

The applicable line hourly rates of pay (in clause 32) for pilots holding training appointments are increased by the following percentages, which apply for the duration of the tenure of appointment, regardless of the type of duty undertaken … (emphasis added)

19    In the case of TRI-FOs, the percentage was 8% above the rate of pay of other first officers in their category.

Background

20    On 23 June 2014, Qantas wrote to First Officer Taylor appointing him to be an A380 TRI-FO from 30 June 2014 with a two year tenure.

21    After Qantas promulgated the notice under cl 18.1.12(c) on 8 September 2015, a number of pilots whose names appeared in it took up other positions. That had the effect of reducing from 16, ultimately, to 6, the number of pilots who were not able to choose or find a position either in the same category or in a posting or status of their choice. Qantas refused to allow First Officer Clewett (who was one of the six) to use his seniority to displace First Officer Taylor in the A380 F/O category at Sydney, which he asserted under cl 18.1.12(d) or (e). The six pilots were then assigned by Qantas to a lower category; in other words, they were demoted. Consequently, First Officer Clewett was assigned to being an A330 first officer. That resulted, effectively, in a reduction of his salary of nearly $60,000 from that which he would have earned had he remained in the A380 first officer category. Had he displaced First Officer Taylor, the result would have been a greater reduction in salary for the latter since he was paid, as a TRI-FO, 8% more than First Officer Clewett.

22    The Association relied on two background circumstances that it contended were known to all the parties to the agreement at the time it was made and that affected its construction. First, it relied on evidence of some negotiations for cl 18.1.12, in which Qantas had sought, unsuccessfully, to include an express exemption of supervisory pilots from a situation where it wished to reduce numbers at a base. The Association asserted that this outcome conveyed an agreement that cl 18.1.12 would operate only on the basis of seniority.

23    Secondly, the Association relied on a 2013 workplace determination made by the Commission that governed the relationship, immediately before the agreement came into force in 2015, between Qantas, the Association and its long haul pilots following an industrial dispute: Australian and International Pilots Association v Qantas Airways Limited [2013] FWCFB 317. In that decision, the Full Bench rejected Qantas’ application to include, in the general exemptions in the predecessor to what is now cl 7.2 of the agreement, a clause that stated that the workplace determination provisions would apply to supervisory pilots “except where they are inconsistent with the terms of a separate, current or future arrangement covering them”. The Full Bench said that the inclusion of a clause in that form was inappropriate because it would replace the provisions of the workplace determination with unspecified and inconsistent terms. They found that if such a clause were included, its practical effect would be uncertain. However, the Full Bench considered that the proposed clause should apply to a narrower class of pilots, namely that there should be an exemption of the kind that is now reflected in cl 7.2 of the agreement for the four very senior management positions.

The admissibility of the negotiations for cl 18.1.12

24    The trial judge did not deal separately with objections that Qantas had made to the admission of evidence, including the evidence of the negotiations for what became cl 18.1.12. Counsel informed me that his Honour had said, during the hearing, that he would deal with those matters as questions of weight.

25    In my opinion, that was not appropriate because the evidence of the negotiations for cl 18.1.12 on which the Association relied was not admissible and should have been disregarded. The question of admissibility of evidence must be determined, ordinarily, at the time an objection is taken so that the parties are aware of the evidence upon which the case will be decided. In Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165 at 177-178 [35]-[36], Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ said of such an approach:

Written statements of witnesses, no doubt prepared by lawyers, were received as evidence in chief. Those statements contained a deal of inadmissible material that was received without objection. The uncritical reception of inadmissible evidence, often in written form and prepared in advance of the hearing is to be strongly discouraged. It tends to distract attention from the real issues, give rise to pointless cross-examination and cause problems on appeal where it may be difficult to know the extent to which the inadmissible material influenced the judgment at first instance.

In Codelfa Construction Pty Ltd v State Rail Authority of NSW [(1982) 149 CLR 337 at 352], Mason J observed:

“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.” (emphasis added)

26    They continued (at 179 [40]):

This Court, in Pacific Carriers Ltd v BNP Paribas [(2004) 218 CLR 451], has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction [Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 461-462 [22]]. (emphasis added)

27    All that can be said is that the Association and Qantas did not agree on the inclusion of the proposed words in the then or final version of the agreement. That did not entail that the construction of the agreement as made can be affected by that lack of agreement to include the term in, or a term relating to, Qantas’ proposal. Although the Association argued that this omission reflected the common intention of both parties to the negotiation, that argument is flawed.

28    Often one party to the negotiations for a contract will reject the other’s proposed wording. In my opinion, all that the lack of agreement on Qantas’ proposal signified was that the Association and Qantas did not agree on the inclusion of the proposed wording and, for whatever reason, they settled on the actual words in which the final version of the agreement is expressed. It falls to a Court to determine the meaning which those words convey having regard to the objective circumstances known to all the parties and its role as an agreement made in an industrial context, in which the two parties who negotiated its terms were not the only persons who made the agreement. That is because a majority of the employees bound by the agreement had to vote for its acceptance or otherwise under s 182 of the Act. There was no evidence that any employee, apart from those who were actually negotiating the terms of the agreement, knew of Qantas’ rejected proposal for cl 18.1.12 or anything about what had occurred in the negotiating process.

29    Substantially, the Act provided that the agreement was a tripartite document between a body of employees, a corporation with numerous officers and an industrial association. The involvement of so many individuals in the formation of the agreement re-emphasises the importance of approaching the construction of that document in accordance with the principle of objectivity. It is important, in doing so, to be cautious and bear firmly in mind the fact that the agreement was formed by a diversity of persons who had sought to protect their differing interests by various formulations of words in it. Those disparate intentions cannot be determinative of the proper construction to be given to the words chosen. In Health Services Union v Ballarat Health Services [2011] FCA 1256 at [79], Gray J said:

In the days when an award might be negotiated between a union and an employer, and made by consent, the existence of a common understanding between the union and the employer as to the meaning of terms might have had some role to play in their construction. Whatever were the terms of such an agreement, and whatever was their meaning, those terms were imposed upon the employees who became bound by the award. In the current era, most industrial instruments are required to be put to a vote of the employees whose work will be covered by them, before they can be certified or approved so as to become enforceable by statute. The union and the employer who negotiated the terms might have had a common understanding of the meaning of them, but that understanding might not have been shared by all or some of the employees who voted for the operation of the agreement. They may have been entirely ignorant of the common understanding. In those circumstances, the occasions on which it can be said that a party to an agreement who entered into it on a common understanding should not be allowed to resile from that understanding will be rarer than they have been in the past. (emphasis added)

30    And, in an oft-quoted passage, Madgwick J in Kucks v CSR Limited (1996) 66 IR 182 at 184 emphasised that a Court interpreting an industrial agreement (in that case, an award):

… not free to give effect to some anteriorly derived notion of what would be fair or just, regardless of what has been written into the award. Deciding what an existing award means is a process quite different from deciding, as an arbitral body does, what might fairly be put into an award. So, for example, ordinary or well-understood words are in general to be accorded their ordinary or usual meaning. (emphasis added)

31    I accept the Association’s argument that the history of cl 7 is relevant to the extent that it explains how a provision came to be made in cl 7.2 for the four very senior captains. However, the agreement operated in its terms in respect of other matters, including cl 18.1.12.

The trial judge’s reasons

32    The trial judge rejected the construction of the agreement advanced by the Association. He found that the words “management of surpluses” in cl 15.9 were intended to give industrial flexibility to Qantas in determining whether or not a surplus existed so that it could then address particular difficulties “in respect of maintaining a viable commercial business”. He concluded that the agreement should be construed so as to confer a right on Qantas under cl 18.1.12 to select, from among all of the pilots in a category, those individuals who were surplus to its requirements at a base. His Honour found that, where Qantas wished to do so, it could omit from a surplus pilots who held a supervisory position at that base and who, otherwise, would have been included in the surplus because of the reverse order of seniority. His Honour considered that Qantas had not identified the two TRI-FO pilots to be surplus and, accordingly, it was not necessary to include their names in the notice under cl 18.1.12(c)(iii). For those reasons, he rejected the Association’s contentions on the first and second issues before him (that conflated during the course of argument into the first issue in the appeal: see [5] above), namely that any supervisory pilots at a base had to be included in reverse order of seniority in any surplus identified in a promulgation under cl 18.1.12(c) and that First Officers Taylor and McDonogh should have been included in the notice.

33    His Honour decided what was then the third issue before him (the second issue in the appeal), namely how cl 18.1.12(e)(iii) operated, by holding that Qantas had not contravened that provision by rejecting First Officer Clewett’s bid to displace First Officer Taylor, because it was not obliged to include the two TRI-FOs in the notice.

The first issue – the Association’s submissions

34    The Association argued that cl 18.1.12(c)(iii) should be read as requiring a promulgation to include all of the names of the pilots in the category, in strict reverse order of seniority, who were surplus and “at the base affected by the surplus”. In other words, the Association argued that the words “affected by the surplus” in cl 18.1.12(c)(iii) qualified the base and did not relate to the identification of the particular pilots whom Qantas considered to be surplus to its requirements.

35    The Association’s argument substantively drew on the significance, throughout the agreement, of the seniority of pilots and the rights that attached to seniority in circumstances where changes that might affect a pilot were contemplated. It pointed to the importance of the protection for pilots that its construction would afford. As I have mentioned, the consequence of the reduction in numbers for First Officer Clewett was a significant reduction in his salary, and also, potentially, the need for him to relocate his home. Accordingly, the Association argued that the agreement emphasised the importance of seniority in giving more senior pilots preference in their treatment.

36    The Association also called in aid cl 16.1.4, which provided that a pilot whose name appeared on the seniority list would continue to accrue seniority while that pilot was in a supervisory role. This meant, so the Association submitted, that the agreement should be construed as not permitting Qantas to depart from the order of seniority by omitting particular pilots who otherwise would have been affected by the proposed reduction in numbers under cl 18.1.2. The Association argued that the ordinary and natural meaning of the clause supported its argument. It said that a supervisory appointment did not alter a pilot’s category so that, in any case, Flight Officer Taylor remained an A380 F/O, albeit that he had been appointed to a supervisory role as a TRI-FO. It also contended that the agreement could not support a construction that created a position of a supervisory pilot outside a category in cl 17.4 or a status in cl 17.3 and that accordingly, the seniority rule in cl 16.1.1, which had not been expressly excluded from operating, or cl 18.1.12 had to apply to the two TRI-FOs. The Association argued that nothing in cl 15.9 detracted from that construction of the agreement.

The first issue – consideration

37    In Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45 at 52 [10] Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ drew further on what Mason J had said in Codelfa Construction Pty Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352. They observed that it was appropriate to have regard to more than internal linguistic considerations in an agreement that the Court had to construe, and to consider the circumstances with reference to which the words in question were used and, from those circumstances, to discern the objective which the parties had in view.

38    In my opinion, the agreement reflects a detailed and complex attempt by the parties to it, and the persons bound by it, to balance a variety of interests and concerns. The cases to which I have referred, both those involving industrial agreements and other forms of contract, demonstrate that all such documents should be construed objectively, while having regard to the context in which they were made and the mutually known facts.

39    The provisions of cl 16.6.1 pointed objectively to a recognition that Qantas had to have the power, relevantly, to appoint pilots to a supervisory or training appointment on what it regarded as merit, despite the ordinary rule of seniority. That recognition was also reflected in cl 16.1.4, the differential rates of pay in cl 33 and specific provisions for pilots so appointed, made particularly in cl 25.

40    Moreover, as cl 33.1.1 expressly provided, a person appointed to a supervisory pilot’s role would have “tenure”. In its ordinary and natural meaning, “tenure” conveys or implies that the position to which it relates will have a particular duration, which is a common feature of employment, or tenure, arrangements. What is unusual in the present circumstances is that a pilot appointed to a supervisory role under the agreement, at the end of the period of tenure and without being demoted, will simply resume his or her role in the pilot’s existing category which will then be at a lower rate of pay and in different working conditions from that which applied during the period of tenure. Moreover, the agreement reflected that the period of tenure of a person appointed to a supervisory role would be determined principally by Qantas, as part of a separate side agreement with the relevant pilot. The agreement also provided that such a pilot not only would have to be appointed by Qantas, but also approved by CASA, as statutory regulator, to act in that role.

41    Those factors suggest that a reasonable person in the position of the parties to the agreement would have understood that a pilot would be appointed to a supervisory role under cll 16.6.1, 25 and 33 for a specific period of tenure in accordance with the terms of his or her particular appointment.

42    It would be an odd result if, as a result of other circumstances, a pilot who happened to be more senior than the supervisory pilot, in effect, could cause the termination of the supervisory pilot’s separate contract with Qantas that they had entered into in accordance with cll 16.6.1, 25 and 33 that supplemented that in the agreement: cf Concut Pty Ltd v Worrell (2000) 176 ALR 693 at 698-699 [18]-[22] per Gleeson CJ, Gaudron and Gummow JJ; Commonwealth Bank of Australia v Barker (2014) 253 CLR 169 at 182-183 [16] per French CJ, Bell and Keane JJ; Cohen v iSoft Group Pty Ltd (2013) 298 ALR 516 at 526-527 [35]-[38] per Rares, Cowdroy and Kerr JJ. That separate contract conferred a specific period of tenure in the supervisory role. Moreover, if a more senior pilot could displace a supervisory pilot not included in the list of names in cl 18.1.12(c)(iii) there would be a further consequence that Qantas, as the employer, would have to appoint someone else to the supervisory role that it did not consider to be surplus at the base and then to train or retrain the replacement and to obtain the approval of CASA for that person. It would be even more odd if Qantas had to select the new supervisory pilot from the new pool of pilots at the base, none of whom had the same merit in Qantas’ eyes as the pilot selected on merit under cl 16.1.1 who was displaced.

43    In L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235 at 251, Lord Reid said (see also Zhu v Treasurer of New South Wales (2004) 218 CLR 530 at 559 [82] per Gleeson CJ, Gummow, Kirby, Callinan and Heydon JJ):

The fact that a particular construction leads to a very unreasonable result must be a relevant consideration. The more unreasonable the result the more unlikely it is that the parties could have intended it, and if they do intend it the more necessary it is that they shall make that intention abundantly clear. (emphasis added)

44    The structure of cl 18.1.12 commences with a state of facts that can only arise when Qantas has made a determination that there are too many pilots at a base. That determination generates a process under cl 18.1.12 that a reduction in numbers at the base is required. The number to be reduced is the surplus referred to in the clause. A reasonable person in the position of the parties would have understood that Qantas had to make a determination of the number of pilots who were surplus, based on an assessment of its own commercial and operational requirements and interests. That calculation depended on how many, and which, pilots Qantas decided that it needed to be based at a particular place, performing particular work.

45    Nonetheless, the agreement also recognised that if numbers of pilots had to be reduced, individuals could be affected adversely and that this could occur in a variety of ways, including, if worst came to worst, the creation of redundancies under cl 15.9. Thus, the structure of cl 18.1.12 commenced with the requirement that, before Qantas reduced numbers, it had to consult with the Association and consider all reasonable alternatives. The succeeding subclauses dealt progressively with situations in which the choices available to the persons affected would become more and more limited.

46    Clause 18.1.12(b) provided that, first, it was subject to cl 18.1.12(a) and, secondly, where there were vacancies in the same category at another base and there would be no change in the overall pilot numbers in the category across all bases, then Qantas had to seek letters of preference from its pilots and, following the order of seniority, award a transfer of bases to the most senior pilot in the relevant category and, if that process resulted in residual vacancies at other bases, Qantas had to repeat the steps in cl 18.1.12(b). In effect, the intention of cl 18.1.12(b) was that pilots selected as surplus in the same category, in the order of their seniority, would be able to transfer between bases as they preferred. Clearly enough, a supervisory pilot in a category affected, who was happy in his or her position, would not need to be involved in the movement between bases under cl 18.1.12(b).

47    Clause 18.1.12(c) operated subject to cl 18.1.12(a) and (b), so that it could only be operative when the processes contemplated in subcll (a) and (b) had been exhausted. Importantly, cl 18.1.12(c) was structured to reflect that the process it contemplated had resulted from a management imperative. That is because the subclause commenced by requiring Qantas to promulgate particular items of information at least 30 days prior to a reduction in numbers at a base that would be achieved in accordance with the mechanisms provided in cl 18.1.12(d) and (e). The first step required the promulgation to state the number and category of surplus pilots (cl 18.1.12(c)(i)). If cl 18.1.12(c)(iii) had the meaning that the Association contended for, the persons who comprised the relevant number of most junior pilots in a category would have been obvious to all at the base from the information required to be given by cl 18.1.12(c)(i).

48    I am of opinion that cl 18.1.12(c)(iii) conveyed, in its natural and ordinary meaning, that Qantas had to state the names of the pilots at the base whom it had identified as surplus pilots in the relevant category. The words “affected by the surplus” did not qualify only the base, but referred to the individuals in the category to whom the promulgation applied.

49    It would be an odd result if cl 18.1.12(c)(iii) automatically applied to a supervisory pilot at a base by reason of his or her seniority, even though Qantas had selected that pilot under cl 16.6.1 to fulfil a role for a tenure period, whom it did not regard as surplus to its requirements for that base. I am of opinion, unless Qantas intended that a supervisory pilot was surplus and should be relocated, that the agreement did not require Qantas to disrupt its pilot training operation at the affected base by having to train, retrain or transfer a new supervisory pilot. A reasonable person in the position of the parties at the time that the agreement was made would have known that any replacement supervisory pilot had to qualify for approval by CASA and to be of a standard that met Qantas’ needs in circumstances where it previously had selected the displaced pilot on merit and not by his or her seniority.

50    The Association’s argument, if accepted, would make the seniority tail wag the dog of Qantas’ right to select a supervisory pilot on merit under cl 16.6.1 to fill a tenured position for which the agreement made specific provision in cll 25 and 33. Qantas selected those pilots on merit to train, not just the particular officers who may be at the same base, but also any other pilots Qantas wished to have trained. Moreover, the Association’s argument that the expression “affected by the surplus” qualified only the words “the base” or “the category at the base”, and not the individuals who actually would be affected, in my opinion, is not a natural and ordinary meaning of that expression as used in cl 18.1.12. Indeed, cl 18.1.12(e) commenced with the chapeau, “A pilot included in the promulgation issued under [sic] 18.1.12(c) may, subject to clause 16 …” and then gave that pilot a choice of three options. That chapeau appeared to recognise that an individual would be named as being “affected by the surplus”. Clause 18.1.12 was drafted on the basis that, having exhausted all other alternatives, Qantas had arrived at a decision that it had a surplus number of pilots in a particular category at a particular base and it needed to reduce that surplus.

51    In my opinion, it would be a strained and unrealistic construction to read cl 18.1.12 as requiring the inclusion, in such a surplus in a category, of a supervisory pilot whom Qantas had selected on merit, and retained on a tenure, to fulfil a different role for which the agreement made specific provision in cll 16.6.1, 25 and 33. The agreement provided differently for the tenure of particular classes of supervisory pilots. Clause 25.5.1, itself, did not refer to tenure, whereas cl 25.2.4 did in relation to a fixed tenure of at least two years for, first, the head of training and checking and, secondly, pilots, being captains, who had been appointed as type rated examiners (TRE) A and B. Nonetheless, cl 33.1.1 provided that a TRI-FO pilot would have tenure, the length of which was at the discretion of Qantas and the particular pilot concerned.

52    The purpose of the agreement giving Qantas the right, under cl 16.6.1, to select pilots to fulfil a supervisory role would be defeated if it were not able to segregate, in its promulgation of names under cl 18.1.12(c)(iii), those pilots from others whom it considered to be surplus at a base. I am of opinion that cl 18.1.12 did not subject Qantas’ own internal management structure and its supervisory pilots to a situation in which the seniority system necessitated that a more senior pilot could displace a supervisory pilot with tenure, thereby causing Qantas, first, to be liable for, perhaps, a breach of contract in that situation, and secondly, to reorganise its arrangements in the base or location at which its previously selected, and now displaced, supervisory pilot would need to be replaced. In my opinion, that construction does not make any industrial or commercial sense.

53    For those reasons, I reject the Association’s argument that Qantas breached the terms of cl 18.1.12(c) by nominating 16 pilots without including in the notice issued on 8 September 2015 the two supervisory pilots, being First Officers Taylor and McDonogh.

The second issue – the Association’s submissions

54    The agreed facts recorded that Flight Officer Taylor was the most junior A380 F/O in Sydney and that Flight Officer Clewett was a more senior officer in the same category within the literal words of cl 18.1.12(e)(iii). The Association argued that Qantas should have allowed Flight Officer Clewett to retain his position so as to displace Flight Officer Taylor. The Association, again, contended that the words in the agreement that the parties employed had struck the balance between the commercial convenience of Qantas retaining in position pilots whom it had appointed to supervisory roles and the disruption to the lives of more senior pilots who were entitled to exercise rights of seniority under cl 16 when, by reason of a reduction in numbers under cl 18.1.12, the latter may otherwise be adversely affected or see a better opportunity for their own self-advancement. The Association drew support for that construction from the inclusion in the chapeau of cl 18.1.12(e), the words “subject to clause 16”, in which the seniority principle was reinforced. It also pointed to the fact that each of the three alternatives provided in cl 18.1.12(e) recognised, and gave precedence to, the more senior pilot in the category over the more junior and provided no exception for persons in a supervisory position.

The second issue – consideration

55    In my opinion, the Association’s postulated construction does not read cl 18.1.12(e) in the context of the agreement as a whole. First, cl 18.1.12(d) could operate in its literal terms in the same situation as occurred in this matter. That is, that the reverse seniority principle would have entitled Flight Officer Clewett to bid for his own vacancy by claiming that Flight Officer Taylor’s position was that of a more junior pilot, since the words “any base” could, on one view, apply to Sydney in the circumstances. A construction of cl 18.1.12(d) or (e)(iii) that allowed another pilot’s seniority to displace a supervisory pilot with tenure who had been selected and was intended by Qantas to be retained at a particular base, would render the purpose of the reduction in numbers, if not nugatory, certainly inefficient, in respect of a particular supervisory pilot. Again, such a result, in my opinion, would be unreasonable, and not one that a reasonable person in the position of the parties would have understood cl 18.1.12(e) to entail.

Conclusion

56    No doubt, the construction at which I have arrived operates harshly on a person in Flight Officer Clewett’s position. The operation of the construction for which the Association contended, however, would operate equally harshly on Flight Officer Taylor. What is necessary is the agreement must be construed by the application of an objective understanding of what the words used in it conveyed to a reasonable person.

57    For the reasons I have given, I am of opinion that Qantas did not breach cl 18.1.12 in any of the respects which the Association asserted. Accordingly, the application should be dismissed.

Associate:

Dated:    3 April 2017