2017 WAIRC 00102

WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

CITATION : 2017 WAIRC 00102

CORAM
: SENIOR COMMISSIONER S J KENNER

HEARD
:
WEDNESDAY, 19 OCTOBER 2016, WEDNESDAY, 7 DECEMBER 2016

DELIVERED : MONDAY, 27 FEBRUARY 2017

FILE NO. : B 155 OF 2016

BETWEEN
:
BRETT ARTHUR KING
Applicant

AND

GRIFFIN COAL MINING COMPANY PTY LTD
Respondent

Catchwords : Industrial Law (WA) - Contractual benefits claim - Preliminary matter - Whether the terms and conditions of The Griffin Coal Mining Company (Maintenance) Agreement 2012 were incorporated into the applicant's contract of employment - Interpretation of contracts - Principles applied - Terms are ambiguous or capable of more than one meaning - What a reasonable person in the position of the parties would have understood the contract to mean - Application dismissed
Legislation : Industrial Relations Act 1979 (WA)
Fair Work Act 2009 (Cth)    
Result : Application dismissed
REPRESENTATION:
Counsel:
APPLICANT : MR M RITTER SC
RESPONDENT : MR J BLACKBURN SC
Solicitors:
APPLICANT : TURNER FREEMAN LAWYERS
RESPONDENT : KING & WOOD MALLESONS

Case(s) referred to in reasons:
AGRICULTURAL AND RURAL FINANCE PTY LTD V GARDINER (2008) 238 CLR 570
Australian Workers’ Union v BHP Iron Ore Pty Ltd [2001] FCA 3
Black Box Control Pty Ltd v Terravision Pty Ltd [2016] WASCA 219
Burgess v Mount Thorley Operations Pty Ltd (2003) 132 IR 400
Byrne v Australian Airlines Ltd (1995) 185 CLR 410
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
Franklins Pty Ltd v Metcash Trading Ltd (2009) 264 ALR 15
Gramotnev v Queensland University of Technology [2015] QCA 127
Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd (2012) 45 WAR 29
Moama Bowling Club Limited v Armstrong (No1) (1995) 64 IR 238
Mopani Copper Mines Plc v Millenium Underwriting Ltd [2008] EWHC 1331
QBE Insurance Australia Ltd v Vasic [2010] NSWCA 166
Romero v Farstad Shipping (Indian Pacific) Pty Ltd (2014) 231 FCR 403
Shop, Distributive and Allied Employees Association v ALDI Foods Pty Ltd [2016] FCAFC 161
Soliman v University of Technology Sydney [2008] FCA 1512
Thomas George Hartwig v Interstate Enterprises Pty Ltd t/as ATS Recruitment Services [2016] WAIRC 00741; (2016) 96 WAIG 1359

Case(s) also cited:
ACTEW Corp Ltd v Pangallo [2002] FCAFC 325
Ammon v Consolidated Minerals Ltd (no 3) [2007] WASC 232
AMWU v Mechanical Engineering Services Pty Ltd [2007] FCA 1736
Australian and International Pilots Association v Qantas Airways Ltd [2011] FCA 1487
Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99
AWU v BHP Iron Ore Pty Ltd [2000] FCA 39
AWU v BHP Iron Ore Pty Ltd [2001] FCA 3
BHP Iron Ore Pty Ltd v AWU [2000] FCA 430
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266
Burgess & Ors v Mount Thorley Operations Pty Limited [2002] NSWIRComm 106
Byrnes v Kendle (2011) 243 CLR 253
CEPU v CJ Manfield Pty Ltd [2011] FMCA 374
City of Subiaco v Local Government Advisory Board [2011] WASC 322
Civil Service Association of Western Australia Inc v Western Australian College of Teaching (2011) WAIRC 1002; (2011) 91 WAIG 2391
Colby Corporation Pty Ltd v Commissioner of Taxation (2008) 244 ALR 71
Elacon Australia Pty Ltd v Brevini Australia Pty Ltd (2009) 263 ALR
Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 88 ALJR 447
Goldman Sachs JB Were Services Pty Ltd v Nikolich [2007] FCAFC 120
Kirshell Pty Ltd v Nilant and Others [2006] WASCA 223
Ledington v University of Sunshine Coast, PR935250, AIRC, 3 September 2003
Mineralogy Pty Ltd v Sino Iron Pty Ltd [2013] WASC 194
Moreton Bay Regional Council v Mekpine Pty Ltd [2016] HCA 7; (2016) 256 CLR 437
Mt Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104
Murray Irrigation Limited v Balsdon (2006) 67 NSWLR 73
Promoseven Pty Ltd v Markey [2013] FCA 1281
Riverwood International Australia Pty Ltd v McCormick (2000) 177 ALR 193; [2000] FCA 889
Soliman v University of Technology, Sydney (No 2) [2009] FCAFC 173
State of South Australia v McDonald [2009] SASC 219
Stratton Finance Pty Limited v Webb [2014] FCAFC 110; (2014) 34 ALR 166
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
Tracey Fergusson v The Salvation Army (Western Australia) Property Trust (2014) 95 WAIG 348
TWU v K & S Freighters Pty Ltd [2010] FCA 1225
Visscher v The Honourable President Justice Giudice [2009] HCA 34; (2009) 239 CLR 361
Wates Construction (London) Ltd v Franthom Property Ltd (1991) 7 Const LJ 243
Yousif v Commonwealth Bank of Australia [2010] FCAFC 8
Zafiriou v Saint-Gobain Administration Pty Ltd [2014] VSCA 331


Reasons for Decision

Application and background
1 The applicant Mr King was employed by the respondent Griffin Coal Mining Company Pty Ltd as a mechanical tradesman/boilermaker since about January 1984. GCM mines and processes coal in the Collie Basin, south of Perth. GCM is one of two coal companies supplying coal principally for domestic power generation in this State.
2 In the course of Mr King’s employment, various industrial awards and agreements have had application. These have applied to both the production and maintenance operations of the company. For most of its history, the operations of GCM were subject to awards and industrial agreements of the Coal Industry Tribunal of Western Australia and its predecessors. More recently, industrial regulation of GCM’s operations has been subject to the terms of the Fair Work Act 2009 (Cth) and awards and enterprise agreements made under its terms. The most recent such enterprise agreement was the Griffin Coal (Maintenance) Collective Agreement 2012. Another collective agreement applied to the production operations of the company. Both of these collective agreements have been underpinned by a federal award known as the Black Coal Mining Industry Award 2010.
3 The situation giving rise to the present proceedings is briefly as follows.
4 In 2012 the Agreement was made and approved by the Fair Work Commission and was given legislative effect under Part 2-4 of the FW Act. Sometime later, in about February 2014, GCM contracted out both its production and maintenance operations to an unrelated company, the Carna Group Pty Ltd. The transfer of instruments provisions of the FW Act applied to this transaction and therefore Mr King’s employment remained covered by the 2012 Agreement.
5 In about December 2014 GCM resumed responsibility for directly employing its production and maintenance workforce when Carna ceased to do so. This transaction again attracted the terms of the FW Act dealing with transfer of instruments and therefore the 2012 Agreement continued to apply to Mr King’s employment.
6 At the time of this transaction, Mr King, along with all other maintenance employees of GCM, received a letter of offer of employment. It is that letter, which although undated, was signed by Mr King on 30 December 2014, that is controversial in these proceedings. Mr King maintained that the effect of it was to expressly incorporate the terms of the 2012 Agreement into his contract of employment. This was denied by GCM.
7 This contention assumes significance because in January 2016 GCM made an application under the FW Act to terminate the 2012 Agreement. At about the same time, employees of GCM were made offers of new contracts of employment. Mr King declined to accept the offer. In July 2016 the FWC terminated the 2012 Agreement with effect from mid-August 2016. As a consequence of these events, Mr King maintained that changes to the terms and conditions of employment, made by GCM, arising from the fresh offers of employment, have breached his contract of employment, the terms of which he maintained, incorporated the 2012 Agreement. Whilst the quantum of these breaches has yet to be particularised, they involve matters such as shift rosters, salary payments, fares and allowances, superannuation and long service leave.
8 Mr King now claims that GCM has denied him contractual benefits in relation to these matters. Whilst the terms of the offer of employment letter the subject of these proceedings may affect many other employees, it is only Mr King’s claim that the Commission is dealing with.
9 For the purposes of progressing these proceedings, the parties proposed and the Commission agreed, to consider whether the 2012 Agreement was incorporated into Mr King’s contract of employment as a preliminary issue. Affidavits were filed by Mr King and by Mr Kumar, the Executive Director of GCM. Written outlines of submissions were also filed. The Commission has been considerably assisted by the careful and helpful submissions of counsel for Mr King, Mr Ritter SC and for GCM, Mr Blackburn SC.
Relevant principles
Construction of contracts generally

10 The parties made submissions as to the relevant principles to apply in the construction of contracts. There was no real dispute about the approach. It is to be borne in mind that interpretation of a contract, like any other instrument, is a text based activity.
11 Some rules have been developed in the cases as to the approach to adopt in construing the terms of a contract. A recent summary of the relevant principles to be applied was set out by the Court of Appeal (WA) in Black Box Control Pty Ltd v Terravision Pty Ltd [2016] WASCA 219. In this case, Newnes and Murphy JJA and Beech J observed at par 42:

Construction of contracts: general principles

42 The principles relevant to the proper construction of instruments are well known, and were not in dispute in this case. In summary:

(1) The process of construction is objective. The meaning of the terms of an instrument is to be determined by what a reasonable person would have understood the terms to mean.50
(2) The construction of a contract involves determination of the meaning of the words of the contract by reference to its text, context and purpose.51
(3) The commercial purpose or objects sought to be secured by the contract will often be apparent from a consideration of the provisions of the contract read as a whole.52 Extrinsic evidence may nevertheless assist in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding of the genesis of the transaction, its background, the context and the market in which the parties are operating.53
(4) Extrinsic evidence may also assist in determining the proper construction where there is a constructional choice, although it is not necessary in this case to determine the question of whether matters external to a contract can be resorted to in order to identify the existence of the constructional choice.54
(5) If an expression in a contract is unambiguous and susceptible of only one meaning, evidence of surrounding circumstances cannot be adduced to contradict its plain meaning.55
(6) To the extent that a contract, document or statutory provision is referred to, expressly or impliedly, in an instrument, that contract, document or statutory provision can be considered in construing the instrument, without any need for ambiguity or uncertainty of meaning.56
(7) There are important limits on the extent to which evidence of surrounding circumstances (when admissible) can influence the proper construction of an instrument. Reliance on surrounding circumstances must be tempered by loyalty to the text of the instrument. Reference to background facts is not a licence to ignore or rewrite the text.57 The search is for the meaning of what the parties said in the instrument, not what the parties meant to say.58
(8) There are also limits on the kind of evidence which is admissible as background to the construction of a contract, and the purposes for which it is admissible. Insofar as such evidence establishes objective background facts known to the parties or the genesis, purpose or objective of the relevant transaction, it is admissible. Insofar as it consists of statements and actions of the parties reflecting their actual intentions and expectations it is inadmissible. Such statements reveal the terms of the contract which the parties intended or hoped to make, and which are superseded by, or merged into, the contract.59
(9) An instrument should be construed so as to avoid it making commercial nonsense or giving rise to commercial inconvenience.60 However, it must be borne in mind that business common sense may be a topic on which minds may differ.61
(10) An instrument should be construed as a whole. A construction that makes the various parts of an instrument harmonious is preferable.62 If possible, each part of an instrument should be construed so as to have some operation.63
(11) Definitions do not have substantive effect. A definition is not to be construed in isolation from the operative provision(s) in which the defined term is used. Rather, the operative provision is ordinarily to be read by inserting the definition into it.64

12 One question addressed in this matter was the most recent debate in the cases in relation to the need for ambiguity or differences in meaning, in order for a court to have regard to extrinsic evidence. This arises from the principles discussed in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337. In this case, Mason J, in what is described as the “true rule” said at par 22:
22 The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning.
13 As to the application of the “true rule”, in Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd (2012) 45 WAR 29 McLure P observed as follows at pars 74-80:
The scope of the “true rule” of construction

74 Both parties rely on extrinsic material in support of their submissions as to the proper construction of the 1984 and 1989 Agreements. Accordingly, it is necessary to enlarge on the scope of the “true rule” in Codelfa.
75 The role of the court in construing a written contract is to give effect to the common intention of the parties. The common intention of the parties is to be ascertained objectively. That is, the meaning of the terms of a contract in writing is to be determined by what a reasonable person would have understood them to mean: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165. The subjective intention or actual understanding of the parties as to their contractual rights and liabilities are irrelevant in the construction exercise.
76 The practical limitation flowing from the Codelfa true rule is that surrounding circumstances cannot be relied on to give rise to an ambiguity that does not otherwise emerge from a consideration of the text of the document as a whole, including whatever can be gleaned from that source as to the purpose or object of the contract.
77 The word “ambiguous”, when juxtaposed by Mason J with the expression “or susceptible of more than one meaning”, means any situation in which the scope or applicability of a contract is doubtful: Bowtell v Goldsbrough, Mort & Co Ltd (1905) 3 CLR 444, 456 - 457. Ambiguity is not confined to lexical, grammatical or syntactical ambiguity.
78 Moreover, the extent to which admissible evidence of surrounding circumstances can influence the interpretation of a contract depends, in the final analysis, on how far the language of the contract is legitimately capable of stretching. Generally, the language can never be construed as having a meaning it cannot reasonably bear. There are exceptions (absurdity or a special meaning as the result of trade, custom or usage) that are of no relevance in this context.
79 Further, on my reading of Codelfa, pre-contractual surrounding circumstances are admissible for the purpose of determining whether a term is implied in fact. That may be because the stringent test for the implication of a term in fact excludes any possibility of an implied term contradicting the express terms.
80 If extrinsic evidence is admissible, the next issue is the scope of the “surrounding circumstances” for the purpose of construction. Mason J in Codelfa also answered that question. He said:
“Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although … if the facts are notorious knowledge of them will be presumed.

It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable (352).”

14 I respectfully adopt this summary and the above observations of McLure P in Hancock Prospecting, for the purposes of these reasons.

The facts
Some objections to evidence
15 There were arguments put to the Commission as to the use that may be made of the evidence led in these proceedings, consistent with the above principles. I first deal with some objections made to the witness statements. Objections were taken by GCM to pars 45 to 72 of Mr King’s statement on the basis that it dealt with events and matters subsequent to the formation of the Contract. Mr King very properly accepted these objections. Evidence of such matters is not generally able to be taken into account in the interpretation of an agreement. The state of the law in Australia in respect to this proposition was set out in the decision of the majority of the High Court in Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570 at par 35 and also in Franklins Pty Ltd v Metcash Trading Ltd (2009) 264 ALR 15.
16 The qualification to the omission of this evidence was the application by GCM to cross-examine Mr King on some aspects of this material at pars 52 to 58, dealing with when Mr King became aware of the incorporation argument, in relation to the termination proceedings in the FWC. The Commission permitted GCM to raise this matter with Mr King, but I have not found it necessary to have any regard to it.
17 Additionally, objections were taken by Mr King to aspects of the witness statement filed by Mr Kumar. Objections were taken to pars 51(b), 54, 56, 85, 86 (in relation to references by Mr Kumar to the “unreasonableness” of the operation of the 2012 Agreement) 87 and 103 to 105. In response GCM, again quite properly, agreed that pars 56 and 86 be modified to remove references to “unreasonably” but otherwise remain and that pars 87, and 103 to 105 be removed. In order to keep the proceedings moving, as Mr Kumar was giving his evidence by video link from India, the parties agreed to the provisional admission of Mr Kumar’s witness statement, subject to a final decision on the objections by the Commission in due course. For the reasons given by Mr King, apart from those agreed, pars 54, 56 and the first sentence of par 86 of Mr Kumar’s witness statement are struck out.
18 Whilst not raised by either Mr King or GCM, I also do not take into account pars 22 to 26 of Mr Kumar’s witness statement, and the annexures to which they refer, as they also referred subsequent conduct.

Mr King
19 Mr King has been employed by GCM for over 32 years. Most of that time he has been employed in the company’s maintenance operations. Mr King said there are currently 39 maintenance employees employed by the company. In addition to being a maintenance employee, Mr King has also been a member of the Automotive Food Metals and Printing and Kindred Industries Union for many years. He has been a union representative, holding one of two site based representative positions for the AMWU, for in excess of 20 years. In that capacity, Mr King has been a member of the negotiating teams in relation to the negotiation of enterprise agreements since about the mid-1990s. He has been involved in at least five enterprise agreement negotiations on behalf of the maintenance workforce.
20 Mr King outlined the changes in conditions of employment for maintenance employees employed by GCM since the 1980s. A major change occurred in the mid1990s when the company’s operations moved from seven hours per day, five days per week to 12 hour shifts on a four days on/four days off basis. Mr King referred to the Griffin Coal (Maintenance) Enterprise Bargaining Agreement 2005 – 2008, an agreement made by the Coal Industry Tribunal of Western Australia. That agreement was succeeded by the 2012 Agreement. Mr King noted that apart from the introduction of two ‘sportsmen’s rosters’ and some wage increases, the terms of the 2005 and 2012 agreements were very similar.
21 In about February 2011, the operations of GCM were under administration. The company was purchased by Lanco Infratech Limited via its Australian subsidiary, Lanco Resources Australia Pty Ltd. Mr King said that on the takeover by Lanco, the terms and conditions of employment for maintenance employees did not change. The terms of the then 2005 Agreement continued to apply. What did change however, in about February 2014, was the composition of GCM’s workforce. At that time, Mr King said that Lanco advised of its intention to contract out its production and maintenance activities to Carna. Mr King said that as a consequence of this and negotiations between GCM, Carna and the AMWU, all maintenance employees of GCM were offered continued employment with Carna. The offer of employment from Carna was set out in a letter dated 20 February 2014 which was in the following terms:
Dear Brett

Transfer of Employment and Acceptance
On or around the 1st April 2014 Carna Group Pty Ltd will commence operations from the Griffin Coal Mine Site.
On this date:
1. A transfer of business between the Griffin Coal Mining Company Pty Ltd and Carna Group Pty Ltd will occur in accordance with section 311 of the Fair Work Act 2009;
2. As a result of this transition, your employment with the Griffin Coal Mining Company Pty Ltd will transfer to Carna Group Pty Ltd;
3. Your employment with Carna Group Pty Ltd will continue to be covered by The Griffin Coal Mining Company Pty Ltd (Maintenance) Collective Agreement 2012 as amended, replaced or terminated from time to time; and
4. Carna Group Pty Ltd will recognise the service of transferring employees for all purposes including all leave and redundancy.

On this basis, we are pleased to offer you employment with Carna Group Pty Ltd. Accordingly, please indicate your acceptance below and return a copy of this document to your Supervisor by 1st April 2014.
If you have any enquiries in relation to this matter, please contact me on 9733 7600.
Yours sincerely

[signed]
Kelly Fraser
HR Manager – Carna Group


I, Brett King hereby acknowledge and agree to the terms and conditions of the above offer.

[signed] 26-3-14
Signature Date
Exhibit A1, tab 2
22 Mr King accepted the offer and signed it on 26 March 2014. In addition to the offer of employment from Carna, there was a further commitment then given by GCM, that if the agreement between GCM and Carna terminated, employees would be reemployed by GCM. The letter given to Mr King by GCM in relation to that commitment was dated 17 March 2014 and was in the following terms:
Dear Brett,
On 23 March 2014 Carna Group Pty Ltd (Carna) will commence operations from the Griffin Coal mine site.
Accordingly, The Griffin Coal Mining Company Pty Ltd (GCM) advises the following:
(a) in the event the Mining Agreement between GCM and Carna is terminated (Termination of Agreement); and
(b) you were an employee who transferred from GCM to Carna as at 23 March 2014; and
(c) you remain an employee of Carna at the time of the Termination of Agreement,
your employment and entitlements will transfer to GCM.

Your sincerely,

[signed]
CHRIS GODFREY
Executive General Manager Industrial and Employee Relations
The Griffin Coal Mining Company Pty Ltd
Exhibit A1, tab 3
23 On acceptance of employment with Carna, Mr King testified that he worked under the same terms and conditions of employment performing the same work and nothing changed. The terms of the 2012 Agreement continued to apply to his employment with Carna.
24 It would appear that the relationship between GCM and Carna ran into some difficulties. The long and short of it is that in December 2014, a major contractual dispute arose between GCM and Carna. The result of this dispute was the termination of the contract between Carna and GCM. Mr King said that as a representative of the AMWU, discussions took place between the union and GCM, which led to most maintenance employees being offered reemployment with GCM. The offer of reemployment by GCM to Mr King was set out in an undated letter to him as follows:
Dear Brett

Transfer of Employment and Acceptance

On 4 December 2014, The Griffin Coal Mining Company Pty Ltd ("Griffin Coal") resumed operations at the Griffin Coal mine sites in Collie from the Carna Group Pty Ltd ("Carna").

At that date:
1. A transfer of business between Carna and Griffin Coal will occur in accordance with section 311 of the Fair Work Act 2009;
2. As a result of that transition, Griffin Coal offers you employment with it effect [sic] from 4 December 2014;
3. Your employment with Griffin Coal will be covered by [The Griffin Coal Mining Company Pty Ltd (Maintenance) Collective Agreement 2012]; and
4. Griffin Coal will recognise your service with Carna for all purposes including all leave and redundancy.
If you wish to accept this offer of employment with Griffin Coal on these terms please indicate your acceptance by signing and dating below and return a copy of this document to your supervisor by the 15th December 2014 after which time this offer will lapse.
If you have any enquiries in relation to this matter, please contact HR on 9780 2477.
Yours sincerely

VINOD KUMAR
Vice President Operations
The Griffin Coal Mining Company Pty Ltd

25 At the time of the discussions between GCM and the AMWU regarding the employment of the maintenance workforce, Mr King said that he was on leave and overseas, until about midDecember 2014. Whilst he was away, Mr King was appraised generally of the situation regarding the transfer of employees back to GCM. He also said that he became aware that the AMWU requested a commitment in writing from GCM that all service by maintenance employees with Carna would be continuous for entitlement purposes with GCM. Prior to this issue being clarified, Mr King said that he received a further letter from GCM of 10 December 2014 in connection with the changes. That letter said:
Dear Brett
Thank you for accepting our offer of reemployment with Griffin Coal. We appreciate that the last few months of your employment with the contractor have been turbulent and uncertain. We thank you for your support and understanding through that period.
As you are aware, the global coal industry has been experiencing very tough times over the past few years which have only worsened in the past months.
The WA coal industry has not been immune from the global downturn but also faces the additional challenges of long term domestic coal contracts which do not cover the cost of production including significant increases in the overburden strip ratio to access the coal.
These factors are severely impacting on Griffin Coal’s operations, which is only recovering two thirds of its mining costs and running at a substantial loss. We have only been able to continue operating due to the financial support of the parent company. Such support is unsustainable if the business is unable to return to profitability in the foreseeable future.
In order to make the business sustainable, we are exploring all options including obtaining and uplifting the domestic coal price, increasing productivity and reducing costs.
We are hopeful, with all the parties working together, we will be able to secure the future of the business and put that uncertainty behind us. This will require commitment and understanding from all parties to invest in the future.
I take this opportunity to wish you and your family a Merry Christmas and Happy New Year 2015.

Yours sincerely,
[signed]
VINOD KUMAR VANGA
Vice President (Operations)
The Griffin Coal Mining Company Pty Ltd
Exhibit A1, tab 5
26 I note that this letter appeared to have been received by Mr King prior to his signing and lodging his formal acceptance of GCM’s offer on 30 December 2014. I will return to this issue later in these reasons.
27 Following the discussions between the AMWU and GCM about prior service, Mr King said that the company declined to amend the offers of employment however, it provided to employees a letter of clarification. In addition to that, GCM extended the time for the acceptance of offers of employment to the maintenance employees to 23 December 2014. The letter of clarification, which was dated 18 December 2014, was as follows:
Dear Brett,
The transition of Maintenance staff from their current employer Carna Group Pty Ltd (“Carna”) to The Griffin Coal Mining Company Pty Ltd (“Griffin”) your members have raised concern in respect of the clause below;
4. Griffin Coal will recognise your service with Carna for all purposes including all leave and redundancy.
Griffin would like to affirm to your members that this clause does recognise the entitlements from the employment service provided with both Griffin and Carna.
The process of transferring all employees is a time consuming task. In assisting the payroll team and also ensuring a speedy transition we would like your members to have their completed forms returned to the Human Resources department by Tuesday 23rd December 2015.

Kind regards

[signed]
Dale Kennett
Human Resources
Exhibit A1, tab 6
28 Mr King said that he was further away from work for some days in late December and returned to work and signed the letter of offer from GCM on 30 December 2014. He handed it to GCM’s human resources department. He said nobody raised with him the later date on which he had signed the offer. Mr King continued to work in his position receiving the same benefits and entitlements as he had done prior to the initial transfer of employment to Carna. As an aside, whilst GCM took issue with this later signing date in its notice of answer and contended it had implications for Mr King’s contractual argument, the matter was not pressed in the hearing. In any event, I am not persuaded any material consequence flowed from it. GCM accepted Mr King’s signed acceptance and he resumed work for GCM without demur. If there was any non-compliance by Mr King in relation to acceptance of the offer, in my view, GCM waived it.

Mr Kumar
29 The background circumstances from GCM’s position, leading up to the reemployment by GCM of its maintenance workforce in December 2014, was the subject of evidence from Mr Kumar. Mr Kumar initially commenced employment with the company in November 2013 as its Vice President of Operations. Prior to this, Mr Kumar was employed by Lanco Infratech for some years in its coal mining operations and he has over 30 years’ experience in the mining industry, mainly in coal mining. Mr Kumar outlined the company’s operations at its Ewington mine and its maintenance operations at both Muja and Ewington. He testified that the operations are now restricted to the domestic coal supply only. GCM stopped exporting coal in the last quarter of 2014, as a result of rising costs and the sharp decline in international coal prices.
30 Mr Kumar testified that in addition to its maintenance workforce, GCM employs 167 production employees most of whom are members of the Construction, Forestry, Mining and Energy Union and whom are employed under the Griffin Coal (Production) Collective Agreement 2012. The Production Agreement reached its nominal expiry date on 31 July 2016.
31 Mr Kumar referred to the GCM and Carna relationship. He said that as at 2013, GCM’s mobile equipment was ageing and the company did not have the financial capacity to reinvest and upgrade it. On this basis, GCM made the decision to appoint a contractor to manage its operations and to make the necessary capital investment in the repairing and maintenance of its equipment fleet. Mr Kumar said that consistent with this decision, GCM approached Carna in about late 2013. As a result, Mr Kumar said Carna committed to investing in GCM’s equipment fleet and a mining services contract was entered into with Carna on 28 January 2014. Under the contract, GCM would continue as the owner of its Ewington 1 and Ewington 2 mine sites and associated maintenance facilities at Ewington and Muja. GCM would also continue to own all equipment and associated infrastructure. Carna’s obligations included providing mining services to GCM, which included operating and maintaining the mining processes consistent with GCM’s plans.
32 On 13 February 2014, a staff briefing took place at which GCM management informed the production and maintenance employees of the new arrangements with Carna. A second meeting also took place on 20 February 2014. Mr Kumar said he attended both meetings. Whilst he did not have a clear recollection of the matters discussed at the meetings, Mr Kumar testified that employees were informed about financial restraints and that there was a need for Carna to make an investment in the GCM equipment fleet which was ageing. Carna started operations at the GCM sites on 23 March 2014.
33 The state of the coal mining industry generally and GCM’s financial position specifically, was the subject of a considerable amount of evidence from Mr Kumar. As at December 2014, Mr Kumar said that based upon his own knowledge and experience in the industry, there were significant global challenges around that time. A major factor was a significant reduction in coal prices since 2011 and what Mr Kumar referred to at GCM as ‘inflexible and steadily increasing production costs’. Mr Kumar referred to the fall in thermal coal spot prices for export, having declined since February 2012 from US$120 per tonne to US$58 per tonne over the 2015 year. Mr Kumar also referred to a general oversupply in the market and the weakening in demand from China. In relation to these macro issues, Mr Kumar annexed to his witness statement a copy of the Resources and Energy Quarterly Report prepared by the Department of Industry, Innovation and Science for the December 2014 quarter.
34 It was Mr Kumar’s evidence that the significant fall in the international market price for thermal coal was a major factor in GCM’s decision to stop exporting coal from the last quarter of 2014. Mr Kumar testified that combined with GCM’s high production costs, the continued export of coal by GCM was untenable.
35 As at the time Lanco acquired GCM in February 2011, Mr Kumar said the company’s then production was 4 million tonnes per annum. Of this, it was GCM’s intention to export 1 million tonnes through the Kwinana Port. As a consequence of the decision to cease the export of coal, GCM’s coal production was limited to its domestic supply arrangements which were approximately 2.85 million tonnes per annum. Whilst the company had significant plans for export and projections were positive when the 2012 Agreement was made, the situation had quite dramatically changed over the ensuing period.
36 Mr Kumar also referred to the financial position of GCM by December 2014. He said the company was losing money on every tonne of coal produced and sold. In the year ending 31 December 2014, GCM’s losses were $80.7 million. Mr Kumar testified that the activities of GCM were only able to continue with the ongoing financial support from its parent, Lanco Infratech. Mr Kumar’s evidence was that the position was no better in the 2015 calendar year, with GCM’s losses to 31 December of that year at approximately $37 million. He referred to and annexed to his witness statement the company’s unaudited financial statements from March 2011 to 31 December 2015 and the company’s audited annual report for the year ending 31 March 2015, in these respects.
37 As to the degree of knowledge of these matters, Mr Kumar testified that the state of the GCM business and the substantial decline in international prices for coal was publicised broadly. He said this was well known amongst the workforce and in and about the town of Collie itself. Mr Kumar referred to newspaper articles in the local ‘Collie Mail’ in particular, one published on 9 January 2015, with the heading ‘Lanco tells Indian media Griffin is ‘nearly unviable’’. A bundle of news articles over the period 9 July 2013 to 9 January 2015, including the article just referred to, were tendered by GCM as exhibit R2. They touched on some of the matters referred to in Mr Kumar’s evidence and also the circumstances of the termination of the mine services contract between Carna and GCM.
38 In light of these various matters, Mr Kumar testified that throughout his involvement with the company, a focus has always been to attempt to improve its operations and its production costs, one component of that being to reduce labour costs. He said that the enterprise agreements covering the company’s operations imposed a high cost base on the business and contained many inefficient and inflexible provisions. Whilst the company was attempting to address these issues, Mr Kumar said that neither the AMWU nor the CFMEU were prepared to renegotiate the agreements to address all of GCM’s concerns. Mr Kumar expressed the view that the enterprise agreements also had an impact on Carna’s operations and its capacity to operate under the mining services contract.
39 By about July 2014, Mr Kumar said that it had become clear to GCM that Carna was unable to make the necessary investments in equipment to properly conduct GCM’s mining operations and difficulties emerged in GCM’s relationship with Carna. Mr Kumar said there were a number of stoppages at the site.
40 Matters came to a head on 3 December 2014. Mr Kumar said that Carna purported to terminate the mining services contract with GCM. On the same day, GCM wrote to Carna disputing its contentions, maintaining that Carna had repudiated the mining services agreement and accepted Carna’s repudiation thereby terminating the contract on that day. Mr Kumar said that he arrived at the Ewington site on 3 December 2014 in the morning and discovered that Carna had left the site the night before and taken all of its equipment with it. As a result, mining operations at GCM had stopped. Importantly, Mr Kumar said that GCM’s priority at that moment was to ensure that it obtained a workforce in order to recommence operations by midnight that same day.
41 There was a flurry of activity. Mr Kumar referred to a meeting in the early evening of 3 December 2014 at the CFMEU union office in Collie to provide an update as to what was going to occur. The upshot at that time was that by 4 December 2014, some 223 production and 87 maintenance employees recommenced employment with GCM. Mr Kumar said that production was uninterrupted and employees had returned to site even before formal offers of employment had been issued and accepted. In relation to the contract letters, Mr Kumar said that he took some advice and provided the form of the letter to be sent to both maintenance and production employees to GCM’s human resources department, to be sent out. Mr Kumar confirmed that the letter received by Mr King was in standard form and was sent to all maintenance employees. Furthermore, Mr Kumar referred to the letter of 10 December 2014 sent to all of the company’s employees including Mr King, a copy of which is set out above. Mr Kumar’s evidence was that the content of this letter was not new to GCM employees and was common knowledge.
42 Reference was also made by Mr Kumar to the issue raised by the AMWU, the subject of Mr King’s testimony, that being clarification that GCM would recognise employees’ prior service with Carna for all purposes. Mr Kumar approved the company’s response of 18 December 2014, which confirmed that this would be the case. In relation to this, Mr Kumar said that he was aware that under the FW Act there was no legal obligation on GCM to recognise employees’ prior service with Carna, as Carna was not an associated entity of GCM. However, “Griffin wanted a smooth transition. Even though Griffin was in financial trouble it wanted to protect the employees’ entitlements by honouring them in good faith”.

Contentions of the parties
43 In their written outlines of submissions, senior counsel for both Mr King and GCM made a number of key points. Mr King contended that in applying the relevant principles for the construction of contracts, the subjective intentions, beliefs or understandings about its terms are not relevant to the Commission’s determination. Furthermore, any actions, thoughts or strategies of GCM or its senior management, which were not directly communicated to Mr King or determined in his absence, are not relevant and may not be taken into account.
44 The broad submission put by Mr King was that award, collective agreement and employer policy terms may be incorporated into written contracts of employment by express reference. In this respect, Mr King relied upon observations by the Full Court of the Federal Court of Australia in Romero v Farstad Shipping (Indian Pacific) Pty Ltd (2014) 231 FCR 403 where at pars 34 – 35, the Court observed:
34 One point that is clear is that whether or not a policy will be incorporated into a contract of employment will depend upon the parties’ intentions as objectively ascertained: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 (at [40]-[41]).
35 In approaching the task of ascertaining the parties’ intention, the starting point will be the language of the contract. The language adopted is to be viewed in context, not in abstract isolation. Further, regard must be had to the purpose and object of the transaction.
45 In this connection, Mr King submitted that the terms of cl 3 of the Contract letter was plain. To the extent that the 2012 Agreement provides for mutually enforceable promises as between Mr King and GCM, including matters such as pay rates, working hours and shift work provisions, they were terms of the Contract. It was emphasised in Mr King’s submissions, that cl 3 of the Contract does not just mention the 2012 Agreement. Rather, taken in its context, the expression ‘covered by’ as used in the letter of offer, must mean that the terms of the 2012 Agreement ‘applied to and were included in’ the Contract. The clause is plain in meaning and unambiguous. Whilst context is important, it cannot be used to alter the meaning of the words used by the parties to the Contract.
46 Mr King contended that context in this case goes to the purpose and object of the transaction. There were two elements to it. The first was the evidence that the working relationship between GCM and Carna broke down to the extent that Carna left GCM’s site without notice. As a result, GCM had no employees to mine and process its coal reserves or to operate and maintain its equipment. GCM needed to obtain a workforce with urgency. It was the company’s “number one priority”. This priority was separate to the financial issues in the past and the offer had to be seen in this light. GCM achieved this purpose by offering an employment contract on the terms as specified, which expressly included the terms of the 2012 Agreement.
47 The second point was employees of GCM, including Mr King, were placed in the position whereby an inference would be open that they would be concerned to secure their terms and conditions of employment, in a time of considerable uncertainty. This was particularly so because the company had previously referred to the possible termination of the 2012 Agreement after its expiry and a return to the award, with the attendant loss of entitlements. On this basis, given both the parties had this in their contemplation, the further submission of Mr King was that taken in its context, having regard to these two key factors, it would be objectively reasonable that the parties to the Contract intended the promissory obligations contained in the 2012 Agreement to be contractually binding.
48 Allied to this point was the submission that cases such as Byrne v Australian Airlines Ltd (1995) 185 CLR 410 and Australian Workers’ Union v BHP Iron Ore Pty Ltd [2001] FCA 3 were distinguishable. This was on the footing that the awards there under consideration would be very difficult to cancel by the unilateral action of one party. On the other hand, as the submission went, in the case of this matter, it would be open to GCM to apply to have the 2012 Agreement terminated under the FW Act, as was mentioned as a possibility. This later in fact occurred.
49 Furthermore, Mr King contended that the words ‘covered by’ were not inserted into the Contract for the purpose of the meaning in s 53 of the FW Act. There were three submissions in this respect. Firstly, the context was important and that was this was a contract between Mr King and GCM. Secondly, such a reference would be unnecessary, as the coverage of the 2012 Agreement is set out in the document itself. Finally, construed correctly, and in context, cl 3 of the Contract set out Mr King’s terms and conditions of employment. A statement that an agreement ‘covers’ an employee in the same sense as s 53 of the FW Act, does not confer any benefits or entitlements to the agreement. For that to occur, the agreement also needs to ‘apply to the person’: s 52(1) FW Act; Shop, Distributive and Allied Employees Association v ALDI Foods Pty Ltd [2016] FCAFC 161 per White J at par 110.
50 Accordingly, as the submission went, to give meaning to the words ‘covered by’ consistent with s 53 of the FW Act, would not only be unnecessary, but an inapt way to describe the application of the 2012 Agreement. To secure that purpose, that is to prescribe the terms and conditions of the 2012 Agreement as conferring benefits on Mr King in the context of the letter, would be achieved by incorporating its terms by reference. An extension of his argument was that there was no need for Mr King to agree to the terms of the 2012 Agreement, as it would cover his employment anyway. Thus the only reason to include it in the offer would be to incorporate its terms.
51 On the other hand, GCM submitted that giving the language in the Contract its ordinary and natural meaning, and assuming there was no ambiguity in its terms, leads to the conclusion that it would be inconceivable to conclude that there was an intention to incorporate the 2012 Agreement. Having regard to evidence of surrounding circumstances, and construing the contract in accordance with business common sense, it was clear on the evidence that the global coal mining industry was experiencing a severe and worsening situation in 2014 and this materially impacted on GCM. Furthermore, GCM was not covering its costs of production and was losing millions of dollars each quarter. The company contended that these surrounding circumstances included GCM’s attempts to make the business more financially sustainable and hitherto, it had been relying on its parent company to continue to operate.
52 Another factor GCM said was also known to both parties, as a part of the surrounding circumstances as at the time of the offer to Mr King, was the abrupt cessation of work by Carna and the corresponding need for GCM to urgently employ a workforce, in order that its operations not be interrupted. This was of course, the same point made by Mr King, but for different purposes. A further relevant circumstance, as contended by GCM, and which can be taken into account in construing the contract according to its case, was that the letter provided to Mr King was in the same terms as that provided to other employees of GCM.
53 As to the ordinary and natural meaning of the words ‘covered by’, GCM contended that when read naturally, these words are not words of incorporation. The submission of GCM was that rather than incorporate, the words were used to advise Mr King that the 2012 Agreement would have application to his employment.
54 Furthermore, to the extent that Mr King sought to refer to and draw some support for his case from the Carna letter, also set out above, that was misguided. The omission of words such as ‘will continue to be governed by’ and ‘as amended, replaced or terminated from time to time’ when referring to the 2012 Agreement, if any evidentiary regard can be had to them, would be unsafe to support a conclusion of express incorporation. This was so because GCM contended that it is somewhat speculative to offer an explanation as to the difference in wording. In any event, the submission was that Mr King’s Contract letter was, on the evidence, adapted from the Carna letter, following Mr Kumar taking legal advice. The Carna letter was therefore a template for the contract.
55 As to the words ‘on these terms’ the submission was that they should not be construed as only identifying contractually enforceable terms, as properly construed, their reference also includes the provisions of the 2012 Agreement which operate by statute. In any event, in order to negative an argument that such words would be superfluous if nothing in the letter to Mr King had contractual force, GCM pointed to par 4 by which GCM would recognise prior service with Carna for all purposes, despite such an obligation not being imposed by the FW Act.
56 GCM further contended that despite the plain and ordinary meaning of the language of the contract, if regard is had to circumstances in existence and known by both parties prior to the entering into the Contract, the conclusion that the 2012 Agreement was not intended to be contractually binding, is compelling. In this respect, GCM submitted that it would be inconceivable that the company would intend, having regard to circumstances in existence and known by both parties, that being the parlous state of the coal mining industry and GCM’s severe financial difficulties, that there would be an intention to ‘lock in’ the terms of existing industrial instruments into contracts of employment applying to all of GCM’s production and maintenance employees.
57 Finally, having regard to the circumstances of the cessation of the Carna contract, GCM contended that what it did, by moving quickly to retain a workforce, amounted to a ‘quick fix’. That is, Mr King’s employment was secured. The submission thus was that these factors are able to be taken into account by the Commission as a part of the objects and purposes of the transaction in question. Had it been GCM’s intention to, in the circumstances existing at the time, incorporate expressly the terms of the 2012 Agreement, then very clear words to that effect would have been used.

Consideration
58 Coming to a conclusion in this matter, in the context of all of the evidence available to be taken into account, has not been straightforward. In adopting an objective approach to interpretation, the ascertainment of the views of a reasonable observer, in the position of the parties at the material time, from their mutual dealings, can be elusive. In QBE Insurance Australia Ltd v Vasic [2010] NSWCA 166, when discussing the scope of permissible material to which regard may be had in the interpretation of an agreement, Allsop P (Giles and MacFarlan JJA agreeing) said at pars 26-28:
26 The notion of what is known to the parties does not require the facts to be present to the mind and consciousness of the contracting parties at the time of contracting. But the whole construct is one that places the reasonable person, whose understanding is critical, in the mutual position that the parties were in. This involves attributing to the reasonable person what the parties knew in the context of their mutual dealings. I do not take the analysis of Macfarlan JA in The Movie Network Channel v Optus as stating a principle otherwise than in conformity with the essential elements of the binding High Court principles to which I made reference in Franklins v Metcash at [14]-[24] and to which Macfarlan JA himself referred in The Movie Network Channel v Optus. The relevant circumstances in that process are those with which the reasonable person should be attributed in order that one objectively correct meaning can be ascribed to the text.

27 Were it not for the misconceptions (if I may say so, without intending disrespect) in the submissions on behalf of QBE and MMI, I would not find it necessary to say any more. In the circumstances, however, the matter should be put beyond doubt by reference to binding High Court authority.

28 It is appropriate, first, to set out the passages from Lord Wilberforce in Reardon Smith Line v Hansen-Tangen [1976] 1 WLR 989 at 996-997 (relevant parts of which were set out by Macfarlan JA in The Movie Network Channel v Optus at [100]). The relevant passages that have been deeply influential in Australia are as follows:

“It is often said that, in order to be admissible in aid of construction, these extrinsic facts must be within the knowledge of both parties to the contract, but this requirement should not be stated in too narrow a sense. When one speaks of the intention of the parties to the contract, one is speaking objectively – the parties cannot themselves give direct evidence of what their intention was – and what must be ascertained is what is to be taken as the intention which reasonable people would have had if placed in the situation of the parties. Similarly when one is speaking of aim, or object, or commercial purpose, one is speaking objectively of what reasonable persons would have in mind in the situation of the parties. It is in this sense and not in the sense of constructive notice or of estopping fact that judges are found using words like ‘knew or must be taken to have known’ (see, for example, the well-known judgment of Brett LJ in Lewis v Great Western Railway Co (1877) 3 QBD 195.

[His Lordship then referred to Hvalfangerselskapet Polaris Aktieselskap Ltd v Unilever Ltd (1933) 39 Com Cas 1 and Charrington & Co Ltd v Wooder [1914] AC 71 and summarised the position as follows.]

… what the court must do must be to place itself in thought in the same factual matrix as that in which the parties were. All of these opinions seem to me implicitly to recognise that, in the search for the relevant background, there may be facts which form part of the circumstances in which the parties contract in which one, or both, may take no particular interest, their minds being addressed to or concentrated on other facts so that if asked they would assert that they did not have these facts in the forefront of their mind, but that will not prevent those facts from forming part of an objective setting in which the contract is to be construed.”

59 Furthermore, his Honour continued at par 35 as follows:
35 It is clear from the binding Australian authorities that the scope of the surrounding circumstances, knowledge of which is to be attributed to a reasonable person in the situation of the contracting parties (not one or some only of them), is to be understood by reference to what the parties knew in the context of their mutual dealings. As Lord Wilberforce said, this does not involve a species of constructive notice. Constructive notice implies a degree of enquiry by reference to some external standard. Just because something is available to be found does not make it relevant, if the parties did not know of it. The reasonable person may be taken to know of things that go beyond those that the parties thought to be important or those to which there was actual subjective advertence by the parties. Further, the circumstances may include such things as the legal context to the transaction, especially if a market is involved. Nevertheless, the scope of the relevant material is necessarily bounded by the objective task of the reasonable person giving meaning to the words used by the parties in the circumstances in which the contract came to be written, by reference to what the parties knew in the sense stated by Lord Wilberforce in Reardon Smith, by Mason J in Codelfa and by the High Court in the various cases since Codelfa. This is how I read the reasons of Macfarlan JA in The Movie Network Channel v Optus, with which I agree.

60 There have been a number of recent employment cases, both at first instance and on appeal, that have dealt with the question of whether an industrial instrument of some kind, such as an award, agreement or a policy document, is expressly incorporated into a contract of employment. Whilst each case will turn on its own facts and circumstances, in Soliman v University of Technology Sydney [2008] FCA 1512, Jagot J commented at pars 64-65 as follows:
64 Riverwood International Australia Pty Ltd v McCormick (2000) 177 ALR 193; [2000] FCA 889 (North and Mansfield JJ) confirmed the principles applying to incorporation of documents by reference into employment contracts (adopting the principles identified by Weinberg J in McCormick v Riverwood International (Australia) Pty Ltd (1999) 167 ALR 689; [1999] FCA 1640 at [70] to [78]). First, it must be assumed that the contract of employment was made in good faith with the object of at least potential mutual benefit by due performance. Secondly, the meaning of the contract is to be determined objectively, the essential question being what reasonable business people in the position of the parties would have taken the clause to mean (citing Schenker & Co (Aust) Pty Ltd v Maplas Equipment and Services Pty Ltd [1990] VR 834 at 840). Thirdly, parties may be bound by the meaning to be reasonably inferred in the circumstances even if that meaning is not advanced by either party. Fourthly, the meaning of contractual terms is ascertained by considering them in context (including the “objective background of the transaction…its factual matrix, genesis and aim, and the common assumption of the parties” (citing Chesire & Fifoot’s Law of Contract, 7th Aust ed, 1997). Fifthly, the terms of the contract are those the parties intended to incorporate including express terms, inferred terms based on actual intention, and implied terms based on presumed intention. Sixthly, “it is not enough that it is reasonable to imply a term; it must be necessary to do so to give business efficacy to the contract” (citing Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 346). Seventhly, “evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning” (citing Codelfa at 352).

65 In Goldman Sachs JBWere Services Pty Ltd v Nikolich (2007) 163 FCR 62; [2007] FCAFC 120 at [287] Jessup J described the approach in Riverwood as one where “all the facts and circumstances surrounding the making of the contract in question” should be considered in ascertaining whether any terms should be inferred based on intention. Black CJ, also in Goldman Sachs at [23], observed that:

The principles to be applied in determining whether any, and if so what, parts of WWU were terms of the contract of employment are not in doubt. It is well established that if a reasonable person in the position of a promisee would conclude that a promisor intended to be contractually bound by a particular statement, then the promisor will be so bound. This objective theory of contract has been repeatedly affirmed as representing Australian law by the High Court. Thus, in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, 179, the Court said:

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.

61 Relevant to the present case also, are observations of mine in Thomas George Hartwig v Interstate Enterprises Pty Ltd t/as ATS Recruitment Services [2016] WAIRC 00741; (2016) 96 WAIG 1359 when I said at par 18 as follows:
18 It is trite to observe that awards and industrial agreements are independent from contracts of employment, as was made clear in Byrne v Australian Airlines Limited; Frew v Australian Airlines Limited [1995] HCA 24; (1995) 185 CLR 410. Incorporation of the terms of industrial instruments into contracts of employment will not be lightly inferred. Notably, in Byrne, the issue was whether relevant terms of an award that bound the parties was implied or imported into the contract of employment. Even in the case where an employer is a party to a relevant award or industrial agreement, which is not the case here, as I observed in Tracey Louise Fergusson v The Salvation Army (Western Australia) Property Trust as the trustee for the Salvation Army (WA) Social Work trading as Salvos Stores [2014] WAIRC 01042; (2014) 95 WAIG 348 at [16]:

16 ... The mere mention of an award, or a provision of one, will not provide a basis to conclusively determine that the award is contractually binding. As the learned authors in Sappideen C, O’Grady P, Riley J and Warburton G, Macken’s Law of Employment (7th ed, 2011) 266 say:

Nevertheless, mere mention of the existence of an award or enterprise agreement which binds the parties will not conclusively determine that the award or agreement clauses are incorporated into and binding in contract. It may be that on proper construction of the contract document, the reference to the award or agreement manifests nothing more than an acknowledgment by the parties of the statutory instruments which will also govern their relationship, according to the terms of the statute. Mention of industrial instruments in a contract document may serve to identify ‘relevant information capable of affecting the parties contractual relations rather than documents intended to be binding and enforceable as part of their contractual relations’.

17 Thus, the reference to industrial instruments in contracts of employment in terms such as “are prescribed by”; “are as prescribed”; “subject to and governed by”, have been held to be insufficient to constitute words of incorporation: Gramotnev v Queensland University of Technology [2013] QSC 158; Australian Workers’ Union v BHP Iron-Ore Pty Ltd [2001] FCA 3; (2001) 102 IR 410; Soliman v University of Technology, Sydney [2008] FCA 1512; (2008) 176 IR 183.

62 The first issue I consider is the terms of the Contract letter, read in its ordinary and natural sense. There are four operative parts. The initial paragraph of the letter records the resumption of operations by GCM from Carna from 4 December 2014. This paragraph is not in any sense promissory and simply notes what occurred as a matter of fact.
63 The first numbered paragraph notes that on the resumption of operations by GCM, a transmission of business for the purposes of the FW Act will take place. In my view, this is not a promissory obligation. It simply notes the statutory impact under the FW Act, of the resumption of operations by GCM.
64 The second numbered paragraph is plainly contractual. By its terms, GCM made an offer to Mr King of employment, with an effective commencement date of 4 December 2014. This offer was capable of acceptance and was accepted by Mr King and a contract of employment was formed. Paragraph 4 stated that GCM would recognise Mr King’s prior service with Carna which was also promissory in nature. There was no automatic transfer of such service for entitlement purposes under the FW Act, because Carna and GCM were not related entities. Although it appeared that there was some dispute about the terms of this paragraph, this promise appeared to be consistent with GCM’s prior undertaking, referred to in its letter of 17 March 2014, set out above. However, at that time, Mr King’s contract of employment was with Carna and not GCM. GCM’s commitment did not have contractual effect at that time. It was an undertaking as to what would occur in the future.
65 Returning then to par 3, the controversial provision in this case. The word “cover” in the sense of a verb, as used in the letter, may have a number of meanings. The Shorter Oxford Dictionary defines the word relevantly to mean “1. to overlay, overspread with something so as to hide or protect. 2. to put a covering on. 3. to clothe…to wrap, wrap up”. Similarly, as referred to by GCM in its submissions, the Oxford Dictionaries Online refers to one version of the word “cover” as being “3.3 (of a rule or law) applied to (a person or situation):” The Macquarie Dictionary definition includes “to put something over or upon as for protection or concealment…to be or serve as a covering for; extend over; occupy the surface of…”
66 It may be said that taken in their ordinary and natural sense, the use of the words “will be covered by” meant that the 2012 Agreement would apply to or extend to Mr King’s employment on his acceptance of the GCM offer. As a statement of fact and of law, this was true. The 2012 Agreement, by the operation of the terms of the FW Act, did so cover and apply to GCM and Mr King. This was because of the operation of the transfer of business provision to which the letter initially referred. That did not change as a consequence of the resumption of operations by GCM.
67 Furthermore, the ordinary and natural meaning of the words may also be consistent with the terms of the 2012 Agreement “extending over, clothing or wrapping around” the contract of employment formed by the offer and acceptance. This is because as a trite principle of law, an award or industrial agreement, although operating by statutory force, can only operate on and may modify a contract of employment, once the contract comes into existence.
68 It could be said therefore, that the language of the Contract letter, read in its ordinary and natural sense, without more, is incapable of sustaining the conclusion that the 2012 Agreement was expressly incorporated into the Contract. The language used does not contain clear words such as “this Agreement will be incorporated into and will form part of your contract of employment”, or words to a similar effect (cf Moama Bowling Club Limited v Armstrong (No1) (1995) 64 IR 238). Similarly, it does not put this proposition in the negative sense either. Taken in isolation, it could be said that the words are used for the purposes of the identification of the industrial instrument which would continue to apply to Mr King’s employment, despite the transition back to employment by GCM.
69 Regardless of these observations however, as consideration needs to be given to the context, I will turn to this issue now. For the purpose of these proceedings, I proceed on the basis that the terms of par 3 of the Contract are ambiguous or are capable of more than one meaning. It is therefore necessary to consider objectively, in accordance with the authorities referred to earlier, what a reasonable person, in the position of the parties, from their mutual dealings, would have understood the Contract to have meant. This requires an analysis on the evidence, of the state of common knowledge of both Mr King and GCM leading up to and as at the time of the making of the Contract. It also requires some consideration of what a reasonable bystander, armed with the knowledge of the parties, may objectively infer from their conduct, even though they may not have had particular matters at the forefront of their minds at the material time.
70 On the evidence, it must be accepted that the situation as it unfolded on 3 and 4 December 2014 was quite exceptional. As a result of a major contractual dispute between GCM and Carna, Carna left GCM’s sites without notice. Carna took its equipment with it. GCM needed to secure a production and maintenance workforce quickly in order to continue its operations and to meet its contractual obligations to its customers. Furthermore, it was a common fact that on 4 December 2014 production and maintenance employees recommenced employment with GCM and that they did so prior to signing and returning the letters of offer of re-employment by GCM.
71 Thus an object and purpose of the transaction, given these unusual circumstances, was to promptly secure a workforce, in order that production would continue uninterrupted. A further obvious purpose, was that the employees, formerly of Carna, would have ongoing security of employment with GCM. Not all employees returned to GCM, but most did. Some remained with Carna.
72 As to these events, I am satisfied that a reasonable person in the position of the parties understood that Carna ceased its operations on site on the night of 3 December 2014 without notice to GCM. Furthermore, all of Carna’s mining equipment was removed from site and accordingly to continue with its operations GCM needed to urgently secure a production and maintenance workforce in order to meet its contractual obligations to its clients.
73 Mr King was taken in his evidence quite extensively to his knowledge of the state of the coal mining industry and GCM’s situation in particular. Annexure BAK5 to Mr King’s witness statement was the letter of 10 December 2014 from Mr Kumar, set out above. The letter refers to the difficulties experienced in the coal mining industry globally and the effect on the industry in Western Australia. The letter also specifically refers to GCM’s operations and its poor financial position. Reference was made to the need to explore ways of increasing productivity and reducing cost, amongst other things. Mr King confirmed that he received this letter prior to accepting the offer of re-employment by GCM. Importantly, he further testified that “nothing in the letter was new to him”.
74 Additionally, Mr King was taken through exhibit R2, which included the news articles published over the period July 2013 through to January 2015. These various articles, a number of which were from the local newspaper “The Collie Mail”, concerned the poor financial state of GCM’s operations; reductions in staff; ongoing financial losses, and disputation and disruption to its operations following the contracting out to Carna. This included various stoppages of work. I do not propose to traverse the material article by article. It is fair to say however, that Mr King was aware of the majority of these reports and read them. Furthermore, his evidence was that there was considerable “chit chat” on the shop floor about the circumstances facing the company and the various events to which the press articles refer.
75 This material of course, refers to events leading up to and the cessation of operations by Carna immediately prior to Mr King’s re-engagement by GCM. Much of the evidence adduced through Mr King, including the letter of 10 December 2014, and the material reflected in the news reports, was also referred to in the evidence of Mr Kumar. There was also evidence that both parties were aware of the difficult relationship between GCM and Carna and that there were disputes between them. This resulted in stoppages of work on site on at least a couple of occasions.
76 The thrust of Mr King’s testimony was confirmed by Mr Kumar when commenting on the 10 December 2014 letter to all employees. Mr Kumar also said that its content was not new to employees. The workforce followed industry news and regular meetings took place with both production and maintenance staff, including union delegates, about the state of the global coal industry and the company’s options to keep the business sustainable. Mr King said he did attend meetings between company representatives and employees where the financial position of the company was discussed. That being so, it is open to reach the view that a reasonable bystander, from all of the surrounding circumstances in existence as at December 2014, would be taken to have accepted the content of the letter from GCM of 10 December 2014, as not being news to them either.
77 Consequently, the parties would have been aware that in the two or so years leading up to the re-employment of Mr King under the Contract, GCM faced increasingly difficult financial circumstances. The global coal mining industry was in a poor state. World prices for coal had fallen by 50%. Whilst it might be said that the news articles and the letter of 10 December 2014 were not material produced by Mr King himself, it was not established, nor put to GCM, that the content of this material was in any material sense, misleading or false. On the contrary, its general tenor was confirmed on the evidence.
78 Furthermore, I am satisfied that it was known by the parties that GCM’s export plans, as a part of its business improvement strategy, were no longer viable from 2014. I am also satisfied on the evidence that a reasonable person in the position of the parties would be aware, from their mutual dealings, that GCM was losing millions of dollars, was not able to cover its production costs and was reliant on its parent company, Lanco Infratech, for its continued survival. I am also satisfied on the evidence that a reasonable person, in the position of the parties, would be aware of GCM’s oft stated need to improve productivity and lower the costs of its mining operations.
79 There is a further matter that relates to this that I comment on now. As at the time of the original contracting out, as I have mentioned above, an undertaking was given by GCM to the workforce, including Mr King, by letter of 17 March 2014, to the effect that if the GCM/Carna agreement terminated, then employees’ employment and entitlements would transfer back to GCM. This was plainly a letter of comfort to the GCM workforce. The possibility of the resumption of operations by GCM at some future point, is an inference clearly open to a bystander from the terms of this letter, with knowledge of the subsequent events known to both parties. Otherwise what would be the purpose of it?
80 Taking this fact, with the common knowledge between the parties of the turbulent period of Carna’s time onsite, as the months passed after March 2014 and leading to December 2014, it would be objectively reasonable to conclude that at some point in the future, GCM may be required to re-engage its work force. Thus, whilst the specific circumstances of the cessation of work by Carna on 3 December 2014 were not then notified to or anticipated by GCM it seems, objectively considered, it was a possible outcome in the future not to be discounted in my view. Also, this letter known to both parties, can provide a basis, again objectively, for a lessening of any uncertainty surrounding the transfer back to GCM. GCM had already given an undertaking to re-employ Mr King and to recognise his prior service and entitlements.
81 Taking a step back to earlier events, I am also satisfied on the evidence that a reasonable person in the position of the parties would have been aware of the circumstances of the outsourcing of GCM’s operations to Carna in late January 2014 and the offers of employment by Carna to GCM employees, including Mr King, of 20 February 2014. On both Mr King and Mr Kumar’s evidence, I am satisfied a reasonable person would be aware that there was a need for GCM to bring in an operator who could refurbish GCM’s ageing fleet of mining equipment by investing in GCM’s operations. This was the evidence in common from both Mr King and GCM.
82 Whilst there were also submissions made by Mr King about the terms of the Carna letter set out above, and how it differed from the Contract, I have reservations about whether reference to it can be made in the context of these proceedings. The contract of employment the subject of the Carna letter, was between Carna and Mr King. It did not involve GCM. Carna and GCM are not related entities. Mr Kumar’s evidence was that he did not know who produced the Carna contract letter and did not recall seeing it before it was given to employees. He testified it was “dealt with internally by Carna without any consultation with Griffin.” Mr King did not give any evidence about the Carna letter of offer other than he received and signed it. In my view, in these circumstances, it would be unsafe to draw any specific conclusions, by way of a comparison between the two offers.
83 In the alternative, if I am incorrect and regard can be had to the Carna letter, both it and the Contract letter were drawn in very similar terms. The operative pars 1 to 4 of both letters are virtually identical, save for the change of company name, the use of “governed” instead of “covered” and the removal of the words “continue” and “as amended, replaced or terminated from time to time” in par 3. Furthermore, it would be open to a reasonable person, in the position of the parties, having some knowledge of the industrial relations system, to understand that in ordinary circumstances, the 2012 Agreement, as a single enterprise agreement, would not apply to Carna. It was a GCM agreement. It only had application in the circumstances of the outsourcing of GCM’s operations, by the operation of s 311 of the FW Act.
84 It is in this context, that the use of the words “will continue to be governed by”, with reference to the 2012 Agreement in Carna’s letter, made sense. Bearing in mind that the particular factual matters do not necessarily need to be consciously in the forefront of the minds of one party or both at the time of contracting, to be part of the objective background and context, in my view it is open to conclude that a reasonable person, considering the material objectively, in the context of the background facts then known, leading up to the offer of re-employment by GCM to Mr King, would conclude that the Contract letter was a modification of the earlier letter offering Mr King employment with Carna.
85 As to the deleted words, in particular the words “as amended, replaced or terminated from time to time”, as was contended by GCM, it is difficult to draw any firm conclusions from the deletion of forms of words from one document that may have been used in the drafting of a later document, in the absence of clear evidence: Mopani Copper Mines Plc v Millenium Underwriting Ltd [2008] EWHC 1331. This is particularly so where the two documents in question are not drawn by the same parties and for the same transaction. This is opposed to the case for example, of prior agreements expressly referred to by parties in a later agreement, that may be referred to as part of the background circumstances, as an aid to construction: Hancock Prospecting per McLure P at par 81.
86 It was understood by both parties, that the 2012 Agreement made under the FW Act, would continue to apply to and cover Mr King’s employment on his re-engagement by GCM after the cessation of operations by Carna. Mr King said that he took advice from the AMWU Perth office about this. As to the broad issue of the presumed knowledge of the statutory effects, whilst in Gramotnev v Queensland University of Technology [2015] QCA 127, a decision of the Queensland Court of Appeal, Jackson J (McMurdo P and Holmes JA agreeing) took the view that the statutory effect of an enterprise agreement is not a matter that can or should be taken into account in determining what a reasonable bystander would conclude a contract to mean, the present matter is distinguishable on its facts. In that case a lecturer Mr Gramotnev, contended that relevant terms of the University’s enterprise agreements, along with other documents including policies, were express terms of his contract of employment.
87 However, the background circumstances of the present case are quite different to those in Gramotnev. Also, the relevant test is what a reasonable person in the position of the particular parties, from their mutual dealings, would be taken to understand what a contract, or part of it, means. In this case, it is notorious that the operations of GCM have a very long history of collective industrial regulation, in both the State and federal jurisdictions. Mr King had been extensively involved in negotiations for enterprise agreements over many years and had a good understanding of the bargaining process. His evidence was also that he knew that the 2012 Agreement would continue to apply to him under the FW Act, when he transferred back to GCM from Carna. He was also aware that being made under the FW Act, it was not open to GCM to pay less than the rates of pay provided in the 2012 Agreement.
88 Additionally, the evidence was that prior to December 2014, Mr Kumar had made himself aware of the industrial relations system in operation in Australia and specifically, that enterprise agreements operated outside of contracts of employment and if terminated, the relevant award would then apply. Mr Kumar was also aware that on the resumption of operations by GCM, the enterprise agreements would continue to apply to the GCM workforce. The conclusion that some regard can be had to the “statutory effect” issue, on the facts of this particular case, is consistent with the outcomes reached in both BHP and in Burgess v Mount Thorley Operations Pty Ltd (2003) 132 IR 400.
89 Returning to the terms of the Contract letter, I am not persuaded that the use of the words “on these terms” in the penultimate para of the Contract, alter the view expressed above, as to the statutory effect. Given my earlier outline of other parts of the Contract, “these terms” are capable of being construed as a reference to the operative parts of the letter containing promises by GCM. Firstly, the offer of employment took effect from a date earlier than its acceptance in Mr King’s case and despite him not recommencing in employment until 15 December 2014. Secondly, par 4 contemplated, consistent with the prior undertaking, that despite no statutory obligation to do so, GCM would recognise all service with Carna as service with GCM. In my view, the words “on these terms”, taken in context, record what is set out in the preceding pars, and include the reference to the 2012 Agreement, that would operate in accordance with the FW Act in any event.
90 In relation to the argument of Mr King that both Byrne and BHP are distinguishable, because both dealt with awards more difficult to cancel, it is not the case that the provisions of the FW Act are necessarily straightforward in relation to termination of enterprise agreements either. An application must be made to the FWC and the requirements of s 266 of the FW Act must be met. In this case, it is a matter of record that GCM made such an application and it was defended by the AMWU with some vigour. The decision of the FWC terminating the 2012 Agreement went on appeal to the Full Bench of the FWC.
91 The terms of the FW Act in this respect, stand in contrast to this Commission’s jurisdiction under the IR Act. In this jurisdiction by way of comparison, a party to an industrial agreement can simply retire from it, after its expiry, by the giving of 30 days’ notice. This step is not open to appeal or review. In these circumstances, I do not consider this contention adds great strength to the incorporation argument. I should also add that I refer to these matters only in the context of Mr King’s submission in relation to the Byrne and BHP cases and not as an aid to construction, given that the termination of the 2012 Agreement by the FWC was an event subsequent to the making of the Contract.

Conclusion
92 I have carefully considered all of the evidence in relation to the background circumstances and context, and the purposes and object of the entry into the Contract in December 2014. Having regard to the language used in the Contract, objectively, as to what a reasonable person in the position of the parties would have considered the Contract to mean, despite Mr King’s attempt to persuade me to the contrary, I cannot come to the conclusion that the terms of the 2012 Agreement were intended to be incorporated into the Contract and to have contractual effect. In my view, the language used by the parties and the use of the words “covered by” was, considered in context, to advise and inform that on the resumption of work, employees such as Mr King would continue to receive the entitlements set out in the 2012 Agreement. Nothing further was necessary to be specified as this was the effect of the FW Act, a fact known to the parties. The 2012 Agreement had applied to and covered Mr King’s employment with GCM from its making, during the time of the Carna contract, and continued to do so on the resumption of operations by GCM.
93 Despite the obvious need for GCM to secure its workforce to resume operations and to continue to supply its customers, it was not necessary to incorporate the 2012 Agreement to achieve this purpose. An offer and acceptance of employment was all that was needed. In my view, considered in context, that is what the Contract letter was intended to, and did achieve.
94 By reason of the prior letter of comfort, which required some clarification, Mr King was to carry over all of his entitlements back to GCM. This was known. Employees continued to work in their jobs. Mr King continued in his position on the GCM site, which he has been in since about 1989, without change, when he returned from leave. The only real change was the identity of his employer.
95 In addition to all of the foregoing, I do not consider a reasonable bystander would consider that it was intended that the terms of the 2012 Agreement be secured contractually, unable to be varied without the agreement of both parties, possibly for years ahead, having regard to the mutual knowledge of the situation facing the coal mining industry generally and GCM’s economic position specifically, as at December 2014. This is particularly so where it was known to both parties from their dealings, and thus objectively ascertainable, that the same form of offer was made to all of the maintenance workforce of the company. On Mr King’s argument, this would necessarily mean that the terms of the 2012 Agreement would be taken to bind contractually both GCM and its entire maintenance workforce. To reach that conclusion, would be a bridge too far, both in Mr King’s case and more generally, in my opinion. Furthermore, any possible inference available as to the prospect of termination of the 2012 Agreement at some point in the future would, in my view, be more than outweighed by the other objectively ascertainable factual context to which I have earlier referred.
96 Given that absent the incorporation of the 2012 Agreement into Mr King’s contract of employment, there can be no foundation for his present claims, the appropriate order to make would be to dismiss the application.