Federal Court of Australia

Commissioner of the Australian Federal Police (on behalf of the Commonwealth) v Police Federation of Australia (Australian Federal Police Association Branch) [2022] FCA 272

ORDERS

THE COURT ORDERS THAT:

1.    Leave to appeal be granted.

2.    The typographical error in the question asked and answered by the primary judge be rectified by substituting “ineligible” for “eligible”.

3.    The appeal otherwise be dismissed.

4.    The matter be remitted to the Federal Circuit and Family Court of Australia (Division 2) to enable the remaining issues to be determined or otherwise resolved.

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

REASONS FOR JUDGMENT

KATZMANN J

Introduction

1    This is a dispute about the construction of a term in an enterprise agreement.

2    In proceedings filed in the Federal Circuit Court of Australia, the Police Federation of Australia (Federation) and six members of the Australian Federal Police (AFP) alleged that the AFP Commissioner failed to pay the six AFP members in accordance with the Base Salary applicable to the Salary Band and Increment Point of each of them as required by the Australian Federal Police Enterprise Agreement 2017–2020 (EA or current EA) and that by his conduct the Commissioner had contravened ss 50 and 323 of the Fair Work Act 2009 (Cth) (FW Act). They also alleged that the Commissioner made false and/or misleading representations to the employees about their rights to benefit from the EA in contravention of s 345 of the FW Act but that allegation was abandoned.

3    It was common ground that the applicants’ case turned on the proper construction of section 63 of the EA and could be resolved by the answer to a single question. The primary judge dealt with the matter as a preliminary question and answered it in favour of the applicants (the present respondents), holding that their construction of the EA was the correct one. His Honour ordered the parties to inform the Court of “the preferred procedural course” in light of the reasons and indicated that, failing agreement, he would refer the matter to mediation.

4    The Commissioner is dissatisfied with the outcome and seeks to disturb the orders. But since the orders and judgment are interlocutory, leave to appeal is required. By consent, leave to appeal should be granted. For the following reasons, however, the appeal should be dismissed.

The relevant provisions of the EA

5    The EA is a single enterprise agreement made in accordance with s 172 of the FW Act. The parties are the Commissioner (on behalf of the Commonwealth) and, with certain exceptions which are not presently relevant, AFP employees engaged under s 24 of the Australian Federal Police Act 1979 (Cth). It was approved by the Fair Work Commission on 17 May 2018 with a nominal expiry date of 24 May 2021: Application for approval of the Australian Federal Police Enterprise Agreement 2017 – 2020 [2018] FWCA 2776.

6    The EA is divided in parts and within each part into sections, which both the parties and the primary judge referred to as “clauses”.

7    Part I contains an introduction which includes sections 7 and 8.

8    Section 7 provides:

Salary Increases

(1)    There will be a Base Salary increase of:

(a)    3% effective from the Commencement Date.

(b)    2% effective 12 months from the Commencement Date.

(c)    1% effective 24 months from the Commencement Date.

9    Definitions for many of the terms used in the EA are set out in section 8. “Salary increases” is not one of them.

10     “Base Salary” is defined to mean “the Salary Band and Increment Point against which an Employee is remunerated and, except for the calculation of higher duties allowance, does not include any allowances in Part VI of [the] Agreement”. “Salary Band” is defined to mean “the range of Increment Points within the AFP’s Classification Structure”. “Increment Point” is defined to mean the point within a Salary Band that an Employee is paid”. “Commencement Date” is defined to mean the date the EA comes into operation in accordance with section 4. Section 4(1) provided that the EA comes into operation and commences seven days after it is approved by the Fair Work Commission.

11    Part II is entitled “Remuneration and Classification Structure”. It relevantly includes sections 9, 10 and 11.

12    Section 9 deals with remuneration structure. Subsections (1)–(4) deal with salary on commencement in a new Salary Band and sections 9(5) and 9(6) with salary increments. Those provisions read as follows:

(5)    Progression within a Salary Band will occur annually on the anniversary date of the Employee's previous advancement, engagement at, or assignment to, the relevant Salary Band. For the purposes of this sub-section the current Performance Development Agreement will need to be at the “agreement signed” stage and the previous Performance Development Agreement will need to have a minimum rating of ‘fulfilled’.

(6)    Incremental advancement will be delayed where:

(a)    an Employee has not participated in the AFP's Performance Development Agreement process as outlined in section 63 of this Agreement;

(b)    an Employee has a Performance Development Agreement rated as ‘underperforming’, until such time as the Employee’s performance is rated as ‘fulfilled’; or

(c)    an adverse Professional Standards finding under Part V of the AFP Act, in relation to a category three conduct issue or a corruption issue has been made and the Commissioner has made a determination that the appropriate action in relation to the finding is to defer the incremental advancement for a period of time not exceeding 12 months.

(Emphasis added.)

13    “Performance Development Agreement” (PDA) is defined in section 8 to mean “an agreement made under the AFP’s performance development and performance appraisal system”.

14    Section 10 provides for two classification structures set out in Attachment A to the EA. One is the Band 1–8 Classification Structure. The other is the Technical Specialist Framework Classification Structure. The former comprises eight Salary Bands including associated broadbands specific to the functional areas defined in the EA. The latter comprises levels 1–4. Attachment A delineates the base Salary Rates for each Salary Band and Increment Point.

15    Section 11 relevantly provides:

Broadband and Advancement Arrangements

Broadbands

(1)    A broadband is the combination of two or more Salary Bands into a single, broader designation. Broadbands are either:

(a)    specified in Attachment B; or

(b)    created by the Commissioner after the commencement of this Agreement, subject to the requirements in sub-section 11(6) below.

 (2)    An Employee can only access one broadband arrangement at any one time.

(3)    In accordance with section 63, movement through any broadband is subject to an Employee participating in the AFP's Performance Development Agreement process and achieving a rating of ‘fulfilled’ or higher in an Employee’s Performance Development Agreement in the preceding 12 months.

(4)    There is no ability for an Employee who is assigned to a position within a broadband to perform higher duties or gain a promotion or advancement within the broadband they are assigned.

(5)    Entry into a broadband will be at the minimum Salary Band and Increment Point of the relevant broadband. An Employee may be eligible to commence at a higher Increment Point within the broadband if determined appropriate by the Commissioner.

…

(Emphasis added.)

16    Section 63 appears in Pt IX, entitled “Miscellaneous”. It reads as follows:

Performance Development Agreement Process

(1)    The AFP Performance Development Agreement (PDA) aims to facilitate effective performance management, in order to support the delivery of AFP objectives and outcomes. Effective performance management is achieved through building a workplace culture based on ongoing feedback between the Supervisor and the Employee and the clarification of performance expectations and objectives.

 (2)    The PDA is mandatory and must be completed every 12-month period.

(3)    An Employee will be ineligible to receive salary increases, incremental progression and progression through a broadband, if they have not participated in the PDA process and have not attained the minimum rating of PDA “fulfilled”.

(4)    Where an Employee goes on long term leave (e.g. maternity leave, long service leave), the Employee and their Supervisor must ensure the PDA cycle is completed prior to the leave commencing, unless exceptional circumstances exist.

(5)    Non-compliance will result in a delay in any incremental progression or progression through a broadband, until the PDA is at the ‘agreement signed’ stage.

(6)    Subject to sub-section 63(7), salary increases will be delayed until such time as a PDA exchange has occurred and a rating of ‘PDA fulfilled’ has been achieved. There is no ability to back date salary increases due to non-compliance.

(7)    Both Supervisors and Employees have a responsibility to actively participate in the PDA. Employees who can demonstrate that they have taken all reasonable steps to complete the PDA will receive their salary increase.

(8)    The AFP may review the performance management framework throughout the life of this Agreement. The AFP may implement an alternative model and system.

(Emphasis added.)

17    Classification structure Base Salary rates are set out in Attachment A to the EA. Broadband and advancement arrangements are described in Attachment B.

The facts

18    The facts were agreed. Insofar as they are relevant to the issues on the appeal, they are set out below.

19    The Commissioner is the employer of members of the AFP. The second to seventh respondents to the appeal are, or were at relevant times, AFP employees and police officers (officers) and members of the first respondent, the Federation. From here on, for ease of reference and to avoid any confusion, when I refer to the respondents collectively I will call them simply the Federation.

20    The terms and conditions of employment of AFP employees have been governed by a series of enterprise agreements made under the FW Act. The current EA was approved by the Fair Work Commission on 17 May 2018 and commenced seven days later. The PDA process was introduced by its predecessor, the Australian Federal Police Enterprise Agreement 2012–2016 (former EA). Like section 63 of the current EA, the former EA contained a provision (then section 60(3)) stipulating that “[a]n employee will be ineligible to receive salary increases, incremental progression and progression through a broadband if they have not participated in the PDA process and have not attained the minimum rating of PDA fulfilled”.

21    Before the current EA was approved, none of the six officers had completed the PDA process and achieved a minimum “fulfilled” rating. On the commencement date, 24 May 2018, none of the officers received a salary increase (including a Base Salary increase), incremental progression or progression through a broadband. One of the officers participated in the PDA process, completed it by 18 April 2019, and his performance was rated as “fulfilled”. Two of the officers completed the PDA process by 24 May 2019 and were rated as “fulfilled. Two others participated in the PDA process but did not achieve a minimum “fulfilled” rating. One officer did not participate in the PDA process.

22    The Federation and the six officers instituted proceedings in the court below alleging that, by failing to pay the six officers the Base Salary applicable to their respective Salary Bands and Increment Points in accordance with section 7 of the EA, the Commissioner had contravened the EA and therefore s 50 of the FW Act and had failed to pay the officers in full in contravention of s 323 of the Act. They sought declaratory relief, orders for compensation (with interest), pecuniary penalties, and a mandatory injunction requiring the Commissioner to make commensurate adjustments to the officers’ superannuation entitlements.

23    The Commissioner denied liability on the ground that his obligation to pay the Base Salary was to be determined by reference to sections 7 and 63(3), not just section 7 and, since none of the six officers had attained the minimum “fulfilled” rating in the PDA process, none of them was eligible for the annual salary increases for which section 7 provides.

The arguments in the court below

24    In the court below the Federation contended that section 7 was a stand-alone provision, unaffected by section 63. In its written submissions it argued that, properly construed, in accordance with the established principles, section 63 is only concerned with salary increases consequent upon incremental and broadband progression. It contended that, if the implications arising from the PDA process were intended to affect the Base Salary increases, one would expect to see in section 7 (scil.) provisions similar to sections 9(5), 9(6) and 11(3), especially since satisfaction of the minimum “fulfilled” rating restricts the benefits payable to employees. In the absence of “clear and unambiguous language” to that effect in section 7, it argued, the section should not be interpreted in such a way. It submitted that its construction “has the sensible industrial outcome of enabling all employees covered by the [EA] to identify what their base salaries are within the provisions of the [EA]”.

25    The Commissioner submitted that the Federation’s approach would involve reading words into section 63(3) so as to exclude the salary increases provided for by section 7. He argued that “salary increases” necessarily captured all salary increases. He contended that such an interpretation was supported by evidence of the supporting circumstances known to the makers of the EA which he had adduced.

The primary judge’s reasons

26    In short, the primary judge accepted the Federation’s argument, holding that section 7 was a stand-alone provision, unaffected in any way by section 63, and there was no ambiguity about its terms and operation. He did so for the following reasons:

(a)    Clause 7 refers specifically and solely to “Base Salary” (notably in upper case), not more generally or simply to “salary” or to “increases in salary” (notably in lower case) set out in Clause 63;

(b)    It is in the language of obligation (“there will be a Base Salary increase” – emphasis added) and is relevantly “declaratory”; it is not in the language of “aspiration”, “comfort or reassurance” or of “philosophy”;

(c)    Other clauses (e.g. Clauses (9 and 11) in close proximity to Clause 7 refer to the PDA process. There is no reference to the PDA in Clause 7, nor is there any cross reference to Clause 63 and or to the PDA process. Likewise, Clause 63 makes no reference to Clause 7 or to “Base Salary”;

(d)    Presumably because those responsible for drafting the EA clearly, and one might assume, deliberately, chose to insert a clear and specific reference to the PDA process in other clauses (e.g. Clauses 9 and 11), it was also a deliberate choice (rather than inadvertence) not to insert any reference in Clause 7 to the PDA process. A fortiori must this be the case given how central the PDA process is to the EA, according to the [Commissioner]. Being so central to the EA, the Court may reasonably assume that those drafting the EA would have ensured that there was specific reference to the PDA in those Clauses to which it was intended to apply. Similarly, it was also the case that it was not a relatively simple “cut and paste” from the previous or earlier EA, which also had no reference to the PDA in relation to “Base Salary”;

(e)    Clause 63 is in the last section of the EA (Miscellaneous”), and is thereby significantly removed from Clause 7. In my view, such drafting of the EA, as an expression of the common agreement of the parties to it, rather poses the following somewhat rhetorical questions: (i) if it was the common understanding of the parties that Clause 7 was to be subject to the terms of Clause 63, why is there no reference to that Clause and the PDA process contained in it? And (ii) if, as the [Commissioner] contended, Clause 7 is to be understood as being subject to Clause 63 and the PDA process, why is there reference to the PDA process in Clauses 9 and 11 but no such reference in Clause 7?

(f)    Finally, if the PDA was so central to Clause 7, one might reasonably expect there to be specific reference in Clause 7 to the PDA, and or that the singular PDA process would not be removed to the general “catch-all” section of the EA under “Miscellaneous.” One might have reasonably expected such a purportedly crucial plank of the EA to be given a more prominent or central place in it, and linked expressly to those Clauses in the EA that were, or were intended to be, subject to that process.

(g)    None of this occurred in relation to Clause 7.

The issues on the appeal

27    Broadly speaking, the appeal raises the following issues:

(1)    whether the primary judge misdirected himself by misstating the question of construction and determining a question not raised by either party on the pleadings (ground 1);

(2)    whether the primary judge erred in determining the question of construction in the Federation’s favour (grounds 2 to 4);

(3)    whether the primary judge should have had regard to the extrinsic evidence to interpret the EA (ground 5).

Did the primary judge misdirect himself?

28    The question posed by the Commissioner in his submissions was this:

Do employees who are “ineligible to receive salary increases” under clause 63 of the EA, nevertheless receive the 3% increase on the commencement date of the EA?

(Emphasis added.)

29    The Commissioner went on to observe, “[t]he Applicants assert, and the [Commissioner] denies, such an entitlement”.

30    At [3] of his reasons for judgment, however, the primary judge misquoted the question posed by the Commissioner, substituting “eligible” for “ineligible”. At [4] his Honour said he would adapt the Commissioner’s question so as to identify the question to be resolved as:

Do employees who are “eligible to receive salary increases” under clause 63 of the EA, nevertheless receive the 3% increase on the commencement date of the EA, and other increases, pursuant to clause 7 of the EA?

(Emphasis added.)

31    His Honour answered that question in the following way:

As asserted by the Applicants — yes. Clause 7 in the current Enterprise Agreement is unaffected by the terms of Clause 63 in the current Enterprise Agreement.

32    The Federation submitted that the use of the quotation marks in [3] and [4] indicates that his Honour intended to cite the words used in section 63 of the EA, as the Commissioner had done in his submissions, but mistakenly transcribed “eligible” instead of “ineligible”.

33    That submission must be accepted.

34    It is obvious that the primary judge made a typographical error. Put another way he made a clerical mistake or accidental slip. In [3] of his reasons he plainly intended to reproduce what appeared in the Commissioner’s written submissions. Instead of “ineligible”, however, he wrote “eligible” and carried the error over to his paraphrase of the Commissioner’s question in [4] of his reasons. If that were not the case, the use in both paragraphs of the adverb “nevertheless” makes no sense at all.

35    There was no misdirection. Despite the typographical error, it is clear from his Honour’s reasons (particularly at [9], [51] and [53]) that his Honour understood the question he was called upon to determine. At [9] and [51] his Honour said that the Federation’s construction of section 7 should be preferred. At [53] his Honour said that he had determined the single question before the Court in favour of the Federation. It follows that, notwithstanding what his Honour said at [4] of his reasons, the question he in fact asked and answered was whether employees who are ineligible to receive salary increases under section 63 of the EA still receive the increases in Base Salary provided for in section 7.

36    It is regrettable that the error was not drawn to his Honour’s attention. If it had been, it could have been promptly rectified, thereby avoiding potential embarrassment for the judge and additional costs for the parties. The court below had the power to vary the judgment, even after it had been entered. Once a judgment has been entered, it can be varied for any one of a number of reasons including where the party in whose favour the judgment was made consents; where there is a clerical mistake in the judgment; or where there is an error arising in the judgment from an accidental slip: Federal Circuit Court Rules 2001 (Cth), r 16.05 (see now Federal Circuit and Family Court of Australia (Division 2)(General Federal Law) Rules 2021 (Cth), r 17.05.

37    The second aspect of this ground of appeal had no merit and was not pressed.

38    The Commissioner alleged that, by referring in the preliminary question to the entitlement of employees to “other increases”, the primary judge erroneously included in the preliminary question an issue not raised on the pleadings. The only other increases to which the question was addressed, however, were the Base Salary increases specified in section 7 payable on the first and second anniversary of the commencement of the EA. As the Federation submitted, this was not a different issue from the one raised by the parties. The entitlement of the officers to Base Salary increases at the first and second anniversary of the commencement date was squarely raised by the pleadings. Paragraph 15 of the amended statement of claim alleged that:

The Respondent is now, and has been since 24 May 2018, obliged to pay the Applicant Employees in accordance with the Base Salary applicable to the employee’s Salary Band and Increment Point, as contained in Attachment A to the Current EA.

39    Apart from correcting the typographical error in the preliminary question asked and answered by the primary judge, the first ground of appeal must be dismissed.

Was the primary judge’s construction erroneous?

The Commissioner’s contentions

40    The Commissioner contended that the primary judge erred in a number of respects:

(1)    by failing to give any, or sufficient, operation to the expression “ineligible to receive salary increases” in section 63(3) (ground 2(a));

(2)    by failing to give effect to the meaning of the term “salary increases” in section 63(3) (ground 2(b) and (c)), although it was “a clear reference” to the same term used in the heading to section 7;

(3)    by giving “undue significance” to the absence of explicit cross-referencing in sections 7 and 63; the structure of the EA; and the use of the lower case in section 63 rather than the upper case in the heading to section 7 when, on a proper construction of the EA, these matters are of no significance (ground 2(d));

(4)    by finding (at [26] of his reasons) that “there is nothing formally to bind” the officers to any agreement or understanding that may have preceded the EA, since they were “not formally” party to the discussions during the negotiations (ground 3);

(5)    by holding (at [49]) that section 7 should be understood as “a stand-alone provision”, thereby failing to read sections 7 and 63 together (ground 4);

(6)    alternatively, if there is ambiguity when those sections are read together, by “disallowing” the Commissioner to rely on the extrinsic material (ground 5).

41    The Commissioner submitted that it is plain that the expression “salary increases” in section 63 is a reference to section 7, which is entitled “Salary Increases”, and that a reasonable person would understand from its terms that employees needed to meet the PDA requirements in order to receive the annual Base Salary increase, increment progression or progression through a broadband. The Commissioner argued that it is difficult to understand to what salary increases section 63 was referring if it was not a direct reference to section 7. He submitted that this construction is consistent with the statutory presumption that words used consistently in a document are intended to have the same meaning (Clyne v Deputy Federal Commissioner of Taxation (1981) 150 CLR 1 at 10). He argued that the construction for which the Federation argued, and which the primary judge accepted, was not only contrary to the clear terms of the EA but was also “a bizarre outcome”. The Commissioner insisted there was no ambiguity but claimed that, if there were, the extrinsic material would demonstrate that the meaning for which he contended was the intended meaning.

The principles of construction

42    The relevant principles are well-established. They were recently summarised in Bianco Walling Pty Ltd v Construction, Forestry, Maritime, Mining and Energy Union (2020) 275 FCR 385 (Flick, White and Perry JJ); Qube Logistics (Rail) Pty Ltd v Australian Rail, Tram and Bus Industry Union [2021] FCAFC 83; 308 IR 39 at [31]–[32] (Bromberg, Katzmann and O’Callaghan JJ). In the latter case, the Full Court observed:

First, the task of interpreting the agreement turns on the language it uses “understood in the light of its industrial context and purpose”: Amcor Ltd v Construction, Forestry, Mining and Energy Union (2005) 222 CLR 241 at [2] (Gleeson CJ and McHugh J).

Second, while one starts with the ordinary meaning of the words, the words are not to be interpreted in a vacuum divorced from industrial realities: City of Wanneroo v Holmes (1989) 30 IR 362 at 378 (French J). Rather, as the Full Court put it in Workpac Pty Ltd v Skene (2018) 264 FCR 536 (Tracey, Bromberg and Rangiah JJ) at [197]:

[I]ndustrial agreements are made for various industries in the light of the customs and working conditions of each, and they are frequently couched in terms intelligible to the parties but without the careful attention to form and draftsmanship that one expects to find in an Act of Parliament (Holmes at 378-379, citing George A Bond & Company Ltd (in liq) v McKenzie [1929] AR (NSW) 498 at 503 (Street J)). To similar effect, it has been said that the framers of such documents were likely of a “practical bent of mind” and may well have been more concerned with expressing an intention in a way likely to be understood in the relevant industry rather than with legal niceties and jargon, so that a purposive approach to interpretation is appropriate and a narrow or pedantic approach is misplaced: see Kucks v CSR Ltd (1996) 66 IR 182 at 184 (Madgwick J); Shop, Distributive and Allied Employees’ Association v Woolworths SA Pty Ltd [2011] FCAFC 67 at [16] (Marshall, Tracey and Flick JJ); Amcor at [96] (Kirby J).

43    As is the case with a statute or an ordinary contract, the interpretation of an enterprise agreement is directed to the ascertainment of the true meaning and there is only one true meaning: Bianco Walling at [66]. That meaning is determined objectively: Bianco Walling at [70]. That is to say “by reference to that which a reasonable person would understand by the language the parties have used to express their agreement, without regard to the subjective intentions or expectations of the parties”: Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v Berri Pty Ltd [2017] FWCFB 3005; 268 IR 285 at [114] (Ross J, Gooley DP and Hunt C) (Berri).

44    Further, as “industrial agreements are not always drafted carefully by lawyers or professional drafters, the literal words of a provision [in an enterprise agreement] might more readily be understood to have a meaning other than their ordinary meaning if the context so suggests”: Ridd v James Cook University [2021] HCA 32; 95 ALJR 878; 394 ALR 12; 310 IR 109 at [17], citing City of Wanneroo v Australian Municipal, Administrative, Clerical and Services Union [2006] FCA 813; 153 IR 426 at [57].

What is the meaning of “salary increases” in section 63 of the EA?

45    It is convenient to deal with the Commissioner’s contentions 1–3 and 5 together. Each of them must be rejected and, with them, grounds 2 and 4 of the notice of appeal.

46    First, “salary increases” in section 63(3) is not a reference to the same term in the heading to section 7. At best for the Commissioner, “salary increases” in section 63 includes the salary increases provided for in section 7. While the heading to section 7 is “Salary Increases”, the section only deals with “Base Salary increase[s]”.

47    The presumption upon which the Commissioner relied, said to be drawn from Clyne, is “never strong”: Pearce D, Statutory Interpretation in Australia (9th ed, Lexis Nexis Butterworths, 2019) at [9.52]. That is the presumption that in a statute the same word is always used with the same meaning, especially when it is used more than once in the same section. Indeed, in Clyne itself at 15, Mason J said that “it is now settled that [that] presumption readily yields to the context”. Moreover, his Honour went on to cite with approval the following observation by Gibbs J in McGraw-Hinds (Aust.) Pty Ltd v Smith (1979) 144 CLR 633 at 643:

It is well recognized that a word may be used in two different senses in the same section of the one Act.

48    In any case, it is difficult to see what place a statutory presumption has in the interpretation of an enterprise agreement. An enterprise agreement is not a statute. Nor is it a legislative instrument or an instrument of the kind to which s 46 of the Acts Interpretation Act 1901 (Cth) applies: see Toyota Motor Corporation Australia Ltd v Marmara (2014) 222 FCR 152 (Jessup, Tracey and Perram JJ) at [68].

49    Second, his Honour did give effect to the phrase “ineligible to receive salary increases” in section 63(3). While he rejected the Commissioner’s contention that it was not directed to, and did not include, the salary increases the subject of section 7, his Honour considered (in effect at least) that the phrase was concerned with salary increases that would otherwise occur on incremental progression and progression through a broadband.

50    Third, when the EA is read as a whole and in context, it is apparent that section 63(3) is concerned with salary increases for which sections 9 and 11 provide, namely, those that would otherwise follow from incremental progression through a Salary Band and progression through a broadband, both of which are performance-based. As the Federation submitted, important matters of context include the surrounding words in section 63(3) (“incremental progression and progression through a broadband”); the surrounding parts of section 63, especially section 63(5); and other parts of the EA, especially section 7 itself, sections 9, 10 and 11, and Attachment A.

51    That context reveals that AFP employees within the Band 1–8 Classification Structure are assigned to a particular broadband and increment within it. As Attachment A to the EA makes clear, there are two pathways to salary increase: one horizontal and one vertical. The horizontal increases occur at annual intervals from the commencement date of the Agreement. The vertical increases require advancement through Increment Points, Salary Bands or Broadbands.

52    Section 7 states that “there will be a Base Salary increase” at annual intervals from the commencement date (emphasis added). Considered objectively, its evident purpose is to provide some protection for employees from diminution in the value of their salaries caused by increases in the cost of living during the life of the EA. But an employee’s salary can also increase by movement to a higher increment within the employee’s broadband or to a higher broadband. Those salary increases have nothing to do with the increases in Base Salary prescribed by section 7. They are governed by sections 9 and 11, both of which stipulate that such movements are subject to the employee participating in the PDA process and attaining a minimum rating of “fulfilled”, “as outlined in” or “in accordance with” section 63. Section 9 only allows for annual progression within a Salary Band through incremental advancement if the employee has participated in the PDA process and achieved the minimum rating. Section 11 only allows for movement through a broadband if the employee has participated in the PDA process and achieved the minimum rating. Increases in salary arising from incremental progression within a Salary Band or Broadband are expressly contingent upon participation in the PDA process (see sections 9 and 11). On the other hand, there is nothing in section 7 to suggest that Base Salary increases are contingent upon the attainment of a performance rating. The only condition it includes is the effluxion of time. Section 63(3) must be read with sections 9 and 11.

53    Support for the Federation’s construction can also be derived from other contextual indications. Section 12, for example, which deals with casual employment, excludes incremental advancement but provides that casual employees they will receive the annual increases in accordance with section 7. As they are excluded from incremental advancement, section 63 does not apply to them (see sections 12(5) and (6)).

54    Subsection (5) of section 63 states that there will not be incremental or broadband progression unless the PDA is at the “agreement signed stage”. Subsection (6) states that salary increases will be delayed until such time as the required rating of PDA fulfilled or higher has been achieved. Subsections (5) and (6) did not appear in the former EA. The Commissioner submitted that one of the purposes of adding them was to make it explicit that satisfactory completion of the PDA process is required for any increase in annual Base Salary. But the subsections do no such thing. Rather, they make it explicit that increases in salary which arise from progression within a Salary Band or Broadband are subject to satisfactory completion of the PDA process.

55    Contrary to the Commissioner’s submission, the primary judge’s interpretation does not render section 63(3) redundant. Infelicitously expressed though it may be, it seems to me that, properly construed in its context, the purpose of section 63(3) is to make it clear that salary increases associated with incremental progression and progression through a broadband are only payable to employees who have participated in the PDA process and obtained the minimum rating. Base Salary increases payable on the commencement day of the EA and on the anniversary dates are unaffected by those conditions.

56    This is not a bizarre outcome. Far from it. It is not uncommon for employers to provide for CPI increases for all staff and additional increases in particular circumstances and/or upon satisfaction of particular conditions. If it were the intention of the EA that the Base Salary increases required by section 7 be contingent upon satisfactory completion of the PDA process, it would be a simple thing to say so. Given its importance, that is what a reasonable person would expect. That object could have been effected in a number of ways, for example, by including at the beginning of section 7 the phrase “[S]ubject to section 63 of this Agreement” (or words to that effect) and/or by inserting after “salary increases” in section 63(3) the phrase “including the Base Salary increases in section 7”. If the Commissioner’s position were correct, then a person who did not achieve the minimum rating in one year or (for one reason or another) did not complete the PDA process would be penalised for the duration of his or her employment as the salary increases in subsequent years are calculated as a percentage of the salary paid in the previous year. This also affects numerous other entitlements, such as overtime rates and superannuation, which are calculated from the Base Salary rate. Whatever the subjective view of the Commissioner might have been, that is unlikely to have been the objective intention of the EA. Put differently, a reasonable person would be unlikely to interpret the terms of the EA in this way.

57    Fourth, I reject the Commissioner’s contention that the primary judge gave undue significance to matters of no significance. Those matters were said to be the absence of a cross-reference to section 63 in section 7 and vice versa; the location of section 63 in the “Miscellaneous” part of the EA far removed from section 7; and the capitalisation of the first letters of “salary” and “increase” in section 7 but not in section 63.

58    At [10] of his reasons the primary judge said this:

In short, on its face and in its terms, Clause 7 makes no reference to Clause 63, or otherwise to the PDA process. Nor, for that matter, does Clause 63 refer to Clause 7. Further, Clause 7 is under the heading “Salary Increases”, unadorned. Clause 63 is in Part IX of the EA, under the heading “Miscellaneous”. As the title suggests, this part of the EA covers a veritable miscellany of matters that range from, inter alia, “individual flexibility arrangement” (Clause 59), to “Job Sharing” (Clause 61), to Relocation Costs” (Clause 66), to “Dispute Resolution” (Clause 71), to name but some of the areas covered by Part IX. It is nowhere explained why, if the PDA process is so central to salary increases, it is placed in the “Miscellaneous” section of the EA, very far removed from Clause 7, with no specific cross reference to the matters set out plainly in Clause 7, in particular, “Base Salary”. This is also in circumstances where Clause 63 makes no reference to “Base Salary” (which is in upper case), as referred to in Clause 7, at all. Clause 63 merely, or only, refers to “salary”, in lower case”.

59    All the matters to which his Honour referred were matters of context. The primary judge was bound to construe section 63(3) in context. That context included the structure and location of all the relevant provisions of the EA. His Honour’s consideration of these matters was merely an application of the first principle of interpretation in Berri at [114]:

The construction of an enterprise agreement, like that of a statute or contract, begins with a consideration of the ordinary meaning of the relevant words. The resolution of a disputed construction of an agreement will turn on the language of the agreement having regard to its context and purpose. Context might appear from:

  (i)    the text of the agreement viewed as a whole;

  (ii)    the disputed provision’s place and arrangement in the agreement;

(iii)    the legislative context under which the agreement was made and in which it operates.

60    While not all the matters in question will carry the same weight, there is no reason to believe that, by identifying them as he did, the weight the primary judge gave them — or any of them — was excessive or disproportionate.

61    By ground 3, the Commissioner alleges that the primary judge erred in finding at [26] of his reasons that “there is nothing formally to bind [the officers] to matters negotiated as part of the EA, as those parties were bound by the terms agreed to on their behalf by the [Federation] as their bargaining representative”.

62    But his Honour did not find that the officers were not bound by matters negotiated as part of the EA.

63    At [26] of his reasons his Honour was dealing with the relevance or significance of the extrinsic material to which the Federation had objected. That is obvious by what appears in the preceding paragraph. In that context, his Honour expressed the opinion that, assuming there was an agreement or understanding that preceded the final form of the EA, since the officers were “not formally part of [the discussion that took place during the negotiations]”, “there is nothing formally to bind them that appears in the Minutes (and the Affidavits)”. It is not exactly clear what his Honour meant by the observation that the officers were not formally part of the negotiating discussions. The Federation submitted that the point his Honour was making is that there was nothing in the affidavit material, in particular the annexed minutes of the bargaining meetings, to indicate that during bargaining the officers had reached an agreement or understanding with the Commissioner such that that material would assist in interpreting the agreement. I do not think this is correct, either. If his Honour meant that the officers could never be bound by anything agreed during bargaining then his Honour was mistaken. The officers were represented throughout the bargaining process by the Federation. As I explain below, if during negotiations an agreement or common understanding had been reached with all the bargaining representatives and the language of the EA was ambiguous or susceptible of more than one meaning, the Court could have regard to it to interpret the EA. It would be irrelevant that the officers were not present at the meeting.

64    It is unnecessary, however, to reach a concluded view on this question. If his Honour did err, the error was immaterial. It was made in the context of an aside. At its highest it was obiter.

In the event that there is ambiguity when sections 7 and 63 are read together, did the primary judge err by failing to take the extrinsic material into account?

65    Despite the way in which ground 5 was couched, this is the real question raised on the appeal. The primary judge did not “disallow” the extrinsic material. Although the Federation objected to it, his Honour did not exclude it. Rather, he had regard to it and decided that it was of no assistance in the interpretation of the relevant sections.

66    I respectfully agree with the primary judge that there was no ambiguity about the meaning of section 7. Moreover, when it is construed in context, in accordance with orthodox principles, I do not think there is any ambiguity about the meaning of section 63(3) either. In any event, the extrinsic material was of no assistance. As the primary judge observed (at [50]), the evidence in question was not evidence of “objective background facts”.

The general principles

67    Both sides relied on the following statements of principle made in Berri at [114] and cited with approval by the Full Court in Bianco Walling at [59]:

7.    In construing an enterprise agreement it is first necessary to determine whether an agreement has a plain meaning or if it is ambiguous or susceptible of more than one meaning.

8.    Regard may be had to evidence of surrounding circumstances to assist in determining whether an ambiguity exists.

9.    If the agreement has a plain meaning, evidence of the surrounding circumstances will not be admitted to contradict the plain language of the agreement.

10.    If the language of the agreement is ambiguous or susceptible of more than one meaning then evidence of the surrounding circumstance will be admissible to aide (sic.) the interpretation of the agreement.

11.    The admissibility of evidence of the surrounding circumstances is limited to evidence tending to establish objective background facts which were known to both parties which inform and (sic.) the subject matter of the agreement. Evidence of such objective facts is to be distinguished from evidence of the subjective intentions of the parties, such as statements and actions of the parties which are reflective of their actual intentions and expectations.

12.    Evidence of objective background facts will include:

(i)    evidence of prior negotiations to the extent that the negotiations tend to establish objective background facts known to all parties and the subject matter of the agreement;

(ii)    notorious facts of which knowledge is to be presumed; and

(iii)    evidence of matters in common contemplation and constituting a common assumption

…

14.    Admissible extrinsic material may be used to aid the interpretation of a provision in an enterprise agreement with a disputed meaning, but it cannot be used to disregard or rewrite the provision in order to give effect to an externally derived conception of what the parties’ intention or purpose was.

…

(Emphasis in the original.)

The extrinsic evidence

68    The evidence was contained in affidavits of Luci Bozica Henson and Emma Hardy, both employees of the Commissioner, affirmed on 29 November 2019. Most of the evidence in the contemporaneous documents merely repeated what was in section 60(3) of the former EA (which was in the same terms as section 63(3) of the current EA) and therefore begs the question of what is meant by “salary increases” in section 63.

69    The Commissioner relied on a number of internal documents, apparently available on the AFP intranet, the most pertinent of which were:

(1)    A factsheet attached to an all-staff email sent on 12 February 2013 by Paul Williams, Manager of Human Resources Strategies for the AFP, about the former EA which introduced mandatory participation in the PDA process and which advised that:

To be eligible for the annual salary increase on 8 March, (referring to Part IX (3) of the EA) an employee must have attained a minimum rating of 'PDA Fulfilled' as of 28 Feb. The increases will be delayed until such time as a PDA exchange has occurred and ‘PDA Fulfilled’ achieved.

(2)    Three editions of the AFP Performance Development Agreement Procedures handbook, dated 27 August 2013, 1 August 2016 and 7 February 2017, which advised that to be eligible for the annual salary increase on 8 March, an employee must have attained a minimum rating of “PDA fulfilled”.

(3)    An email sent to all AFP staff on 29 January 2018 by Dave Turner, then the AFP’s Manager of “People Strategies”, which relevantly stated that:

In accordance with the current Enterprise Agreement:

All AFP employees are required to complete a PDA and must be PDA compliant in order to be eligible to receive salary increases, incremental progression and progression through a broadband.

(4)    The Better Practice Guide on Effective Performance Management, an internal HR manual about the PDA process, dated 20 September 2018, clause 18.2 of which stated:

To be eligible for the annual salary increase on 24 May, an employee must have attained a minimum rating of ‘PDA Fulfilled’ for the previous cycle. The increases will be delayed until such time as the employee is compliant with this requirement.

70    8 March 2012 was the date the former EA came into effect. 24 May 2018, of course, was the commencement date of the current EA. Ms Henson’s affidavit indicates that a copy of the first edition of the Better Practice Guide on Effective Performance Management was not provided to the Federation until 25 September 2018 — four months after the commencement date of the current EA. It is by no means apparent that the Federation was aware before then of the Commissioner’s interpretation of the former EA. Certainly the Court was not taken to any evidence to indicate that it was. An earlier document, entitled Better Practice Guide on Effective People Management (2013), was sent to the Federation on 15 May 2017. But it did not include cl 18.2 or any statement to the same effect. Although it has been accepted that, in some circumstances, conduct that post-dates the making of an agreement may be relevant to the interpretation of an industrial instrument, the conduct must be “such as to show that there has been a meeting of minds, a consensus”: Berri at [114]. As the Full Bench in Berri went on to observe, “[p]ost-agreement conduct which amounts to little more than the absence of a complaint or common inadvertence is insufficient to establish a common understanding”.

71    Emails sent to AFP staff by AFP management after the commencement date of the current EA, which were not copied to the Federation, reveal that salary increases at the commencement of the current EA were not paid to employees who were not “PDA compliant” at that time. After one of the officers, Kelly Luk (the second respondent in the appeal), discovered that he had not received his “pay rise” on 24 May 2018 (the commencement date of the current EA) as he clearly expected, he contacted the Commissioner’s payroll office asking the team “to check their records to see what’s going on”. He was informed that “to be eligible an employee must have attained a minimum rating of ‘PDA Fulfilled’ for the previous cycle … and have their current cycle agreement at the ‘Drafting Agreement’ stage” (the latter condition was admittedly erroneous). The email revealed that Mr Luk had been identified as an AFP employee who “may not be eligible” for the initial increase “due to non-compliance in the previous PDA cycle”. Emails to the same effect were apparently sent to other AFP employees. Another of the six officers, Timothy Collins (the third respondent), queried the advice of management in such an email to the “Performance Culture team” on 2 July 2018:

I understand the below email may have been automatically generated and I am after information specific to me. As the new EA is the one that has been legally endorsed and I am only moving to the new base wage of a 5.3, is it the intention to continue paying me under the expired EA?. I will not be moving up pay bands or increments – only moving to the new base pay level.

(Emphasis added.)

72    The Commissioner also relied on minutes of bargaining meetings of 3 March 2016, 3 August 2016 and 18 October 2017.

73    It was not in dispute that the minutes were an accurate record of the discussions that took place at those meetings. But they provide no assistance. The only relevant references in the minutes are at best ambiguous.

74    The minutes of the meeting on 3 March 2016 show that none of the bargaining parties raised a concern about the proposal by the Commissioner to “maintain the current requirement for an employee to participate in the PDA process and to have achieved the minimum rating of PDA fulfilled in order to be eligible to receive salary increases, incremental progression and progression through a broadband”. At the meeting on 3 August 2016 a draft version of a provision was circulated to the bargaining parties which explained that under the new enterprise agreement, employers “must continue to be PDA compliant in order to receive salary increases”. These references merely repeat the substance of section 63(3). They do not grapple with the question of whether “salary increases” includes Base Salary increases.

75    While the PDA process was discussed at the meeting on 18 October 2017, the only relevant mention of salary increases did not assist the Commissioner’s case. It was this:

PART 1–Introduction

Section 7 – Salary Increases

°    The AFP has updated the base salary increases to reflect a 3% salary increase on commencement of the new EA, 2% 12 months from commencement and 1% 24 months from commencement. The AFP advised that the cost of this proposal is approximately $120 million over life of the EA.

76    The Commissioner highlighted an entry in the minutes of the 3 August 2016 meeting in which Emma Hardy summarised the changes to a draft of “the PDA section”. The Commissioner emphasised the first two dot points:

•    PDA process will continue to be mandatory

•    An employee must continue to be PDA compliant in order to receive salary increases, incremental progression and progression through a broadband

77    The Commissioner argued that this was “really important” as there would be no incentive to participate in the PDA process if it was contemplated that pay increases would be made irrespective of “PDA compliance”. The problem with this argument is that it erroneously assumes that the only salary increases for which the EA provides are increases to Base Salary.

78    Although the Commissioner did not refer to it in argument, the minutes of the 3 August 2016 meeting also include a reference to the following discussion about the effect of the wording of a draft of section 63, which was not included in the extrinsic material:

Steve [Moriarty] advised that the proposed wording provides that as long as an employee completes the PDA process by a particular stage, they will be delayed in receiving their salary increase or increment. Emma Hardy confirmed that this is what the draft provides and is current practice.

Matthew Adams referred to paragraph 3 of this draft section and its reference to three different elements (salary increases, incremental progression and progression through a broadband) and advised that paragraphs 4 and 5 make reference to incremental progression and salary increases respectively.

Steve Moriarty was a bargaining representative for the CPSU (the Community and Public Sector Union). Matthew Adams was a representative of the AFP.

79    In the absence of a reference to Base Salary increases or to section 7 or its predecessor, these remarks do not take the matter any further. They certainly do not reflect a common understanding of all bargaining representatives that employees would not receive the annual percentage increases in Base Salary if they did not complete the PDA process. As the draft under discussion was not before the Court it is difficult to know what to make of them. I assume that Mr Adams was referring to subsections when he used the word “paragraph”. If that assumption is correct, then the draft section must have differed from the final form since neither subsection (4) nor subsection (5) mentions salary increases. In any event, this discussion begs the question of what salary increases section 63 was concerned with.

80    In any case, the authorities indicate that care must be taken in the use of evidence of this kind.

81    In Australian Liquor, Hospitality and Miscellaneous Workers Union v Prestige Property Services Pty Ltd (2006) 149 FCR 209 at [44] Gray J accepted that the construction of an award can be affected by a common understanding of the parties to it about a particular state of affairs and that if there is such a common understanding the Court should not depart from it in construing the award. But his Honour went on to say that “care must be taken … to distinguish a common understanding from common inadvertence”.

82    In Shop Distributive and Allied Employees’ Association v Woolworths Ltd (2006) 151 FCR 513 at [31] his Honour made the point again, saying:

It is necessary to take great care in the application of this limited principle, to avoid infringing the general principle that the conduct of the parties to an agreement cannot be taken into account in construing the agreement. For the limited principle to operate, there must be clear evidence that the parties have acted upon a common understanding as to the meaning of the relevant provision and not for other reasons, such as common inadvertence of the true meaning.

(Emphasis added.)

83    His Honour’s comments in both these cases were cited with apparent approval by Tracey J in Transport Workers’ Union of Australia v Linfox Australia Pty Ltd (ABN 47 004 718 647) [2014] FCA 829; 318 ALR 54 at [39] ff.

84    None of the evidence upon which the Commissioner relied disclosed notorious facts of which knowledge is to be presumed, a common understanding, a common assumption, or matters in common contemplation. For what it may be worth, as the email from Federal Agent Collins mentioned above at [71] illustrates, the Commissioner’s understanding was certainly not shared by all employees.

85    The effect of the Commissioner’s evidence was that it was the Commissioner’s understanding or interpretation of the former EA that, to be eligible for the annual increases in salary payable from the commencement dates of the agreement for which section 8 of the former EA provided, an employee must have attained a minimum rating of PDA fulfilled. It is also likely to have been the Commissioner’s understanding that this condition would not change in the new EA. But there was no clear evidence that this was a common understanding or assumption. No resolutions were voted on at the bargaining meetings. And the Court was not taken to any document indicating an endorsement by the Federation of the Commissioner’s interpretation. I respectfully agree with the observation made by the primary judge at [26] that “showing that something was discussed at the negotiation stage does not, without more, show what was actually agreed between the parties” (original emphasis). That observation reflects what was said in Berri at [83], namely, that “the fact that a proposal was discussed [during the negotiation of an enterprise agreement] does not mean it was agreed” (original emphasis). In any case, the evidence before the Court does not indicate that the particular question of interpretation which divides the parties in this litigation was even discussed during the bargaining process for the current EA and there is no evidence to indicate that it was discussed during the bargaining for the former EA.

Conclusion

86    For these reasons, apart from the need to correct the typographical error, the appeal should be dismissed.

87    Section 570 of the FW Act limits the circumstances in which costs can be awarded. Neither side sought costs in the event that they were successful. In the circumstances, I make no order as to costs.

Associate:

Dated:    25 March 2022

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