APPEAL AGAINST A DECISION OF THE COMMISSION IN MATTER NUMBER APPL 63/2023 GIVEN ON 22 NOVEMBER 2023

WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

FULL BENCH

CITATION : 2024 WAIRC 00825

DELIVERED : WEDNESDAY, 18 SEPTEMBER 2024

FILE NO. : FBA 9 OF 2023

Appellant

AND

Western Australian Prison Officers' Union of Workers

Respondent

ON APPEAL FROM:

Jurisdiction : WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

Coram : SENIOR COMMISSIONER R COSENTINO

Citation : [2023] WAIRC 00919

File No : APPL 63 OF 2023

Catchwords : Industrial Law (WA) – Application to interpret clause 36 of the Department of Justice Prison Officers’ Industrial Agreement 2020 regarding recovery of overpayments – Principles of interpretation of industrial instruments applied – Meaning of ‘payroll error’ – Causation of error by the conduct of the employer or the employee – Appellant’s construction preferred – Appeal upheld – Declaration varied

Legislation : Department of Justice Prison Officers’ Industrial Agreement 2020

Industrial Relations Act 1979 (WA)

Minimum Conditions of Employment Act 1994 (WA)  

Result : Appeal upheld

Representation:

Counsel:

Appellant : Mr J Carroll of counsel and with him Mr C Arnold of counsel

Respondent : Mr D Stojanoski of counsel and with him Ms A Humphry of counsel

Solicitors:

Appellant : State Solicitors Office

Respondent : Slater & Gordon

Case(s) referred to in reasons:

Ammon v Colonial Leisure Group Pty Ltd [2019] WASCA 158

Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99

Australian Liquor, Hospitality and Miscellaneous Union v Board of Management, Fremantle Hospital (Unreported, Complaint No 87 of 1997, delivered 17 November 1997)

Callan v Smith [2021] WAIRC 00216; (2021) 101 WAIG 1155

Civil Service Association of Western Australia Incorporated v Director-General, Department of Justice [2019] WAIRC 00713; (2019) 99 WAIG 1531

Director General, Department of Education v United Voice WA [2013] WASCA 287; (2014) 94 WAIG 1

MacFarlane v Halperin Fleming & Meertens [2001] WAIRC 04492; (2002) 82 WAIG 150

Minister for Corrective Services v Western Australian Prison Officers’ Union [2023] WAIRC 00909; (2023) 103 WAIG 1953

Minister for Immigration and Border Protection v SZVFW [2018] HCA 30; (2018) 92 ALJR 713

Pritchard v M 6:8 Legal Pty Ltd [2024] WASCA 4

Re Harrison; Ex parte Hames [2015] WASC 247

Western Australian Prison Officers’ Union of Workers v Minister for Corrective Services [2024] WAIRC 00227; (2024) 104 WAIG 623

Western Australian Prison Officers’ Union of Workers v Minister for Corrective Services [2023] WAIRC 00016; (2023) 103 WAIG 93

Workpac Pty Ltd v Skene [2018] FCAFC 131; (2018) 264 FCR 536

Reasons for Decision

THE FULL BENCH:

Background

1         In the Department of Justice Prison Officers’ Industrial Agreement 2020, there is a provision, in cl 36 of the Agreement, that deals with ‘Payment Errors’. This clause is in the following terms:

36. Payment Errors

36.1 The parties agree that Officers should inform the Employer's Payroll Branch of any suspected payment error as soon as practicable after the error is identified.

36.2 Underpayments of the Fortnightly Annualised Rate of Pay will be corrected in the next available ad hoc payment, provided that the Officer informs the Employer's Payroll Branch of the error by the close of business on the Tuesday prior to Pay Day. Other underpayments will be corrected in the following Pay Period.

36.3 Where an Officer proves that they have incurred financial cost (such as overdraft fees, dishonoured cheque fees or dishonour fees in relation to routine deductions from the bank account into which the Officer is paid) as a direct result of an underpayment of their ordinary salary, the Employer shall reimburse the Officer those financial costs in the next Pay Period.

36.4 Where an Officer is overpaid, the Employer will provide the Officer with the written details of the overpayment and notify the Officer of their intent to recover the overpayment. The Employer is entitled to adjust subsequent payments to the Officer as follows:

(a) One-off overpayments may be deducted by the Employer in the Pay Period immediately following the Pay Period in which the overpayment was made.

(b) Other overpayments may be deducted by the Employer after consultation with the Officer at a rate agreed in writing between the Employer and the Officer, provided that the rate at which the overpayment is recovered is not less than the rate at which it was overpaid or $50 per week, whichever is the lesser amount per Pay Period.

(c) Any amounts still outstanding as at cessation of employment may be deducted by the Employer from the Officer's termination payment.

36.5 Other arrangements regarding payroll errors may be agreed between the Employer and the Officer in exceptional circumstances.

2         A disagreement between the parties to the Agreement arose as to how cl 36 should be applied.  An application to the Commission under s 46 of the Industrial Relations Act 1979 (WA) was made for an interpretation of cl 36. The facts giving rise to the application were as follows:

The facts giving rise to the application:

1. The Applicant employs prison officers in Western Australia under the Industrial Agreement.

2. From time to time, the Applicant makes overpayments to its employees, including:

a) Overpayments due to conduct of the Applicant (Applicant Generated Overpayment);

i. e.g. where the Applicant mistakenly pays an employee an allowance that the employee is not entitled to and has not requested.

b) Overpayments due to conduct of both the Applicant and employee (Mixed Cause Overpayment);

i. e.g. where an employee applies for leave that they have not yet accrued and the Applicant mistakenly grants that leave; or

ii. e.g. where an employee is rostered on for annual leave, but does not submit their leave application until after they have returned from leave resulting in the payment of allowances during the leave period to which the employee was not entitled.

and;

c) Overpayments induced by the conduct of the relevant employee (Officer Induced Overpayment).

i. e.g. where an employee has been refused leave, but does not attend their shifts.

3. As a Government employer, the Applicant has a duty to recover those overpayments. However, that duty to recover is to be fulfilled in a manner that is consistent with the Industrial Agreement.

4. Regardless of the circumstances of the overpayment, the current approach of the Applicant in respect of overpayments falling outside the circumstances of section 73.1 is to:

a) inform the employee of the overpayment and their right to dispute the overpayment in accordance with clause 179 of the Industrial Agreement;

b) for overpayments that occurred in the immediately preceding pay period, the overpayment is recovered in the current pay period and the employee is informed of the pay adjustment;

c) for overpayments relating to other previous pay periods, the Applicant consults with the employee regarding the rate of repayment and unless written agreement has been obtained, the Applicant does not make pay adjustments in excess of $50/week.

5. In some instances, the relevant employee may refuse to agree to recovery at any rate (including where the overpayment is an undisputed Officer Induced Overpayment). In those circumstances, the Applicant commences making adjustments from the employee’s salary at the $50/week minimum.

6. In order to fulfil its duty to recover overpayments consistently with the requirements of the Industrial Agreement, the Applicant seeks a declaration of the true interpretation of the Industrial Agreement. (see AB 17-18)

3         Whilst there were three questions posed in the application, one was related to the operation and effect of the Minimum Conditions of Employment Act 1994 (WA), which is not relevant for the purposes of these proceedings.  A question posed concerning the operation of cl 36.4(b) is also not relevant. It is only ‘Question 1’ that is relevant and it was:

Question 1:

Does clause 36 of the Industrial Agreement apply to overpayments which were not the result of a ‘payment error’ of the Employer (i.e. Officer Induced Overpayments)? (see AB 19)

4         In short, the appellant maintained that cl 36 of the Agreement should be interpreted such that it is only in circumstances where overpayments result from an error by the employer, that the clause is enlivened. Overpayments that are contributed to by an employee’s conduct, whether the conduct be innocent, negligent or fraudulent, do not attract the operation of cl 36 on the appellant’s argument. On the other hand, the respondent contended that there is no such distinction, and cl 36 applies to all situations where there is an overpayment or an underpayment of an employee, irrespective of the cause. 

The Commission’s decision

5         In relation to the issues arising as to Question 1 in the application, the learned Senior Commissioner concluded that the respondent’s approach to the construction of cl 36 should be preferred: Minister for Corrective Services v Western Australian Prison Officers’ Union [2023] WAIRC 00909; (2023) 103 WAIG 1953.  In reaching that conclusion, the learned Senior Commissioner held that:

(a) In s 46 matters, the Commission needs to consider and resolve ambiguity and apply the interpretation principles discussed in cases such as Re Harris; Ex parte Hames [2015] WASC 247; Director General, Department of Education v United Voice WA [2013] WASCA 287; (2014) 94 WAIG 1 and Workpac Pty Ltd v Skene [2018] FCAFC 131; (2018) 264 FCR 536;

(b) That the term ‘payment error’ is ambiguous;

(c) That the phrases ‘payment error’, ‘payroll error’ and ‘error’ have the same meaning and are interchangeable;

(d) To the extent that cl 36 distinguishes between different kinds of payment errors and how they are to be resolved, did not advance the appellant’s contentions and in fact was contrary to them;

(e) Clauses 57.12 and 73, in relation to the reimbursement of removal assistance and the adjustment of personal leave respectively, as defined categories of repayments, read with cl 36 shows that the Agreement was intended to be exhaustive as to such matters and not leave other categories of overpayments unresolved;

(f) The terms of cl 36 as to overpayments is commercially sensible without the need to carve out employee induced overpayments;

(g) The approach of the appellant to the interpretation of cl 36 creates a gap in relation to the recovery of overpayments where there is no error by the employer. There is no apparent reason for this because the Agreement was intended to be a ‘comprehensive agreement’ and it is not consistent with this to leave unfenced some parts of the payment error field; and

(h) The appellant’s construction incorporates the ordinary meaning of ‘payment error’ but then seeks to impose a limitation on it beyond the ordinary meaning of the words used and the concept of ‘employer error’ is of itself, ambiguous.

6         The learned Senior Commissioner made the following declaration under s 46 of the Act:

THAT the answer to the following question:

‘Does clause 36 of the Department of Justice Prison Officers’ Industrial Agreement 2020 apply to overpayments which were not the result of a ‘payment error’ of the Employer (i.e. Officer Induced Overpayments)?’

is ‘yes’.

Grounds of appeal and the contentions of the parties

7         The appellant now appeals against the declaration of the Commission. The single ground of appeal is as follows:

The Commission erred in law in the construction of clause 36 of the Department of Justice Prison Officers’ Industrial Agreement 2020 by finding that clause 36 applied to overpayments that are induced by the conduct of an employee when, on its proper construction, the clause only applies to payment errors where the error in making payment is not induced or substantially contributed to by conduct or representations of an employee.

8         The appellant seeks an order that the appeal be upheld and that the Commission’s declaration be quashed and in lieu thereof that the Full Bench declare as follows:

2) Declaration 1 issued on 22 November 2023 be quashed and varied in accordance with the true interpretation of clause 36 of the Department of Justice Prison Officers’ Industrial Agreement 2020, namely:

Clause 36 of the Department of Justice Prison Officers’ Industrial Agreement 2020 applies exclusively to ‘payment errors’ which are errors made by the employer that are not induced or substantially contributed to by conduct or representations of an employee.

9         In support of his ground of appeal, the appellant submitted that his contention as to the proper construction of cl 36 is consistent with the text, context and apparent industrial purpose of the clause. The respondent’s view as to the interpretation of cl 36, according to the appellant, does not take into account its full text, fails to consider its industrial purpose and context and moreover, would lead to industrially peculiar results. The latter in circumstances where an employee is the cause of an overpayment, where they have acted negligently or fraudulently.

10      In this regard, it was submitted that the terms of cl 36, when considered in the context of the Agreement read as a whole, was not intended to operate in all circumstances of overpayments, irrespective of how the overpayments arise.  In this respect, the appellant drew support for its argument from two other clauses of the Agreement cl 57 and cl 73. These provisions deal with the payment of a removal allowance and personal leave respectively.  In both, there is provision for the employer to recover payments made to an employee, if certain conditions are not met.

11      The upshot of the appellant’s submissions in relation to these other clauses of the Agreement, was that as they provide for distinct kinds of overpayments, this is indicative that the terms of cl 36 was not intended to be exhaustive in its operation.  It was not intended to apply to overpayments of any kind; rather it was intended to be more restrictive in its effect and only have application in the case of established error.

12      There were further submissions made by the appellant that in particular, cl 36.4 dealing with overpayments, recognised that potentially harsh effects of recovering overpayments are minimised by imposing a maximum recovery rate on an employee of $50 per week.  It was submitted that looking at these provisions objectively, it was intended to operate as a protection to employees such that in circumstances where they have received an overpayment through no fault of their own and have relied upon the overpayment, in paying for daily living expenses the monetary impact upon them is minimised.

13      As to this particular provision, the appellant submitted that it would be a strange outcome that in circumstances where an officer causes the overpayment by fraudulent conduct, the officer would, in effect, receive an ‘interest free loan’ from the employer, by having to only repay the overpayment at a minimum weekly rate.  The appellant contended that this could not have been the objective intention of the parties to the Agreement at the time it was entered into.  It was submitted that the more likely intention was that this provision would operate only in circumstances where the employee was an innocent party to the overpayment.

14      In terms of industrial context more broadly, the appellant also referred to ss 17C and 17D of the MCE Act in relation to deductions from an employee’s pay.  In this respect, the appellant referred to Australian Liquor, Hospitality and Miscellaneous Union v Board of Management, Fremantle Hospital (Unreported, Complaint No 87 of 1997, delivered 17 November 1997) and MacFarlane v Halperin Fleming & Meertens [2001] WAIRC 04492; (2002) 82 WAIG 150.  The effect of this submission was that based on the terms of the MCE Act, and these cases, the relevant state of the law was, at the time the Agreement was made, that there was no restriction on an employer recovering an overpayment of salary, irrespective of the reason.  Whether it was caused by employer or employee error or other conduct, recovery could be the full amount of the overpayment in any future pay period. 

15      Thus, in this context, according to the appellant, cl 36(4) setting out how overpayments may be recovered, provided greater protection to employees than under the MCE Act, but consistent with its text and context, its intention is to ameliorate the harsh impact on an employee regarding overpayment errors by the employer through no fault of the employee.

16      Finally, the appellant referred to the learned Senior Commissioner’s reasons and her observations that if the appellant’s construction of cl 36 was to be preferred, then this would lead to a gap in relation to recovery of underpayments as it would not apply in cases not involving an employer’s error (see reasons at first instance at [64] AB 82).  Reference was also made to the learned Senior Commissioner’s observation that the Agreement, being a ‘comprehensive agreement’ meant that taken in context, it did not comfortably lead to the view that some areas in relation to payment errors would not be covered by cl 36 (see reasons at first instance at [64] AB 82).

17      The appellant contended that these conclusions should not be sustained.

18      In relation to the learned Senior Commissioner’s conclusion that the Agreement was comprehensive, the appellant contended that this reference in cl 6.2 of the Agreement means that it was the intention of the parties that the Agreement would replace the relevant award in full.  It was submitted that this did not mean that the statement in cl 6.2 supports the conclusion that the Agreement comprehended ‘anything and everything’ that may occur under the Agreement and did not support the view that cl 36 would apply to every circumstance of underpayments or overpayments.  Furthermore, the situation of an underpayment, arising from an entitlement provision of the Agreement, can be enforced under s 83 of the Act leading to there being no gap.

19      In further support of his contentions, the appellant also referred to cl 36.3 of the Agreement which requires the employer to reimburse an employee financial costs, such as overdraft fees, dishonoured cheque fees or other fees from routine bank account deductions, in the event the employee can prove that these costs were incurred as a direct result of an underpayment.  The appellant submitted that it would be an odd result if the employer were obliged to do so, when the reason for the underpayment in the first place, resulted from the employee’s misconduct.  It was submitted that this is a further reason why the clause ought to be read down consistent with the appellant’s contentions.

20      In response, the respondent contended that the learned Senior Commissioner correctly interpreted cl 36 of the Agreement and submitted that the phrase ‘payment error’ is not defined in cl 36 of the Agreement and its meaning is ambiguous, as was accepted at first instance.  Furthermore, the respondent contended that there is no warrant for reading words of limitation into cl 36 as the appellant submitted, as there is nothing in cl 36 taken as a whole, and viewed objectively, which would limit its scope of operation.  The respondent contended that the ordinary meaning of the words used in the clause should lead to the conclusion that it will apply to any and all underpayments and overpayments which are identified from time to time, as simply ‘the payment of an incorrect amount’ (respondent’s written submissions at [16]).  In reliance on Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 at 109-110, the respondent’s argument was that this plain reading of the language used in cl 36 of the Agreement is that which it can legitimately bear.

21      Furthermore, to adopt the appellant’s approach, and to effectively read words into the phrase ‘payment errors’ or more generally into the clause itself, would be tantamount to rewriting the Agreement which is impermissible: Western Australian Prison Officers’ Union of Workers v Minister for Corrective Services [2023] WAIRC 00016; (2023) 103 WAIG 93 at [47].

22      In terms of the context of cl 36 within the Agreement as a whole, the respondent submitted that the clause is comprehensive and deals with all relevant situations arising where there is an underpayment or an overpayment.  On the respondent’s view of cl 36 as applying universally to overpayments irrespective of the circumstances, this must also include cases where the employee is at fault, even deliberately, in leading to the error. Given this, it is not correct on the respondent’s submission, to limit the clause and it should be seen to be a provision which ‘covers the field’ in relation to these matters, unless the agreement otherwise provides as for example, in cl 57.12 and cl 73.1, referred to by the appellant. 

23      The respondent disputed the effect of these two clauses and the basis upon which they inform the proper interpretation of cl 36.  It was submitted that both cl 57 and cl 73 deal with different subject matter and provide for very specific circumstances. Clause 57.12 concerns the recovery of removal assistance payments where an employee has not met the minimum service period required.  Clause 73.1 sets out what occurs when an employee does not make a claim for personal leave on the first day back at work.  The submission was made that they do not bear upon the meaning of cl 36 of the Agreement.

24      As to the submissions made by the appellant regarding cl 6.2 and the ‘comprehensive’ nature of the Agreement the respondent contended that the learned Senior Commissioner’s conclusions were open in this respect.  Furthermore, whilst recovery action is available to an employee (or an employer) in appropriate circumstances, this does not alter the fact that cl 36 was intended to provide for a means of dealing with such circumstances within the Agreement itself.  Nor, according to the respondent, should the terms of cl 36.3 be seen to be unusual.  This is because on the respondent’s argument, it would be unlikely that the fraudulent conduct of an employee would lead to an underpayment, and ultimately, it is the employer’s responsibility to ensure that correct payments are made.  Hardship may apply regardless of whether it is the employer who makes the error, or whether the error is caused by inadvertent conduct of an employee.

25      As to the appellant’s submissions regarding the MCE Act, and the two cases relied upon, the respondent submitted that they do not assist the appellant.  Its submission was that cl 36 is intended to provide a means of correcting errors through the employer’s payroll system.  It also is intended to protect employees from the harsh consequences of any such errors. Viewed from a purposive perspective, the respondent contended that cl 36 does no more than provide a means to rectify payment errors without the need to identify the source of those errors and the consequences of being affected by such an error. 

26      Finally, it was submitted that an employee, by making an innocent error, may lead to an overpayment in circumstances where, having to repay the entire amount immediately, may cause hardship.  A provision such as cl 36.4 of the Agreement offsets such hardship.  In response to the appellant’s reference to the extreme circumstance of an employee engaging in fraudulent behaviour to induce an overpayment, the respondent submitted that other remedies would be available to the employer to deal with such conduct.  This does not necessitate reading cl 36 down, as contended by the appellant.

Consideration

Relevant principles to apply

27      The decision of the learned Senior Commissioner at first instance was not a discretionary decision and turns on the proper construction of cl 36 of the Agreement.  Accordingly, the correctness standard applies to the disposition of the appeal: Ammon v Colonial Leisure Group Pty Ltd [2019] WASCA 158 at [124]‑[129] citing and applying Minister for Immigration and Border Protection v SZVFW [2018] HCA 30; (2018) 92 ALJR 713 and Pritchard v M 6:8 Legal Pty Ltd [2024] WASCA 4.

28      Additionally, the principles of interpretation of industrial instruments are well settled.  Recently, the Full Bench referred to them in Western Australian Prison Officers’ Union of Workers v Minister for Corrective Services [2024] WAIRC 00227; (2024) 104 WAIG 623 where it was said at [16]:

16 There was no contest as to the relevant principles to apply in the interpretation of industrial instruments. In Fedec v The Minister for Corrective Services [2017] WAIRC 00828; (2017) 97 WAIG 1595 Smith AP (as her Honour then was) and Scott CC observed at [21]-[23]:

Interpreting an industrial agreement - general principles of interpretation

[21] The approach that is to be applied when interpreting an industrial agreement is well established. This is:

(a) Industrial agreements are usually not drafted with careful attention to form by persons who are experienced in drafting documents that have legal effect.

(b) The task of construction of an industrial agreement is to be approached in a way that allows for a generous construction: City of Wanneroo v Holmes [1989] FCA 369; (1989) 30 IR 362.

(c) Industrial agreements are made for industries in light of the customs and working conditions of each industry and must not be interpreted in a vacuum divorced from industrial realities: George A Bond & Co Ltd (in liq) v McKenzie [1929] AR (NSW) 498; City of Wanneroo v Holmes (378‑379) (French J).

[22] The general principles that apply to the construction of contracts and other instruments also apply to the construction of an industrial agreement. In Re Harrison; Ex parte Hames [2015] WASC 247, Beech J said [50]‑[51]:

The general principles relevant to the proper construction of instruments are well‑known. In summary:

(1) the primary duty of the court in construing an instrument is to endeavour to discover the intention of the parties as embodied in the words they have used in the instrument;

(2) it is the objectively ascertained intention of the parties, as it is expressed in the instrument, that matters; not the parties' subjective intentions. The meaning of the terms of an instrument is to be determined by what a reasonable person would have understood the terms to mean;

(3) the objectively ascertained purpose and objective of the transaction that is the subject of a commercial instrument may be taken into account in construing that instrument. This may invite attention to the genesis of the transaction, its background and context;

(4) the apparent purpose or object of the relevant transaction can be inferred from the express and implied terms of the instrument, and from any admissible evidence of surrounding circumstances;

(5) an instrument should be construed so as to avoid it making commercial nonsense or giving rise to commercial inconvenience. However, it must be borne in mind that business common sense may be a topic on which minds may differ; and

(6) an instrument should be construed as a whole. A construction that makes the various parts of an instrument harmonious is preferable. If possible, each part of an instrument should be construed so as to have some operation (Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 [35] (French CJ, Hayne, Crennan & Kiefel JJ); Kidd v The State of Western Australia [2014] WASC 99 [122]; Red Hill Iron Ltd v API Management Pty Ltd [2012] WASC 323 [106] - [112]; Primewest (Mandurah) Pty Ltd v Ryom Pty Ltd [2014] WASCA 28 [55] (Martin CJ, Pullin & Murphy JJA agreeing)).

These general principles apply in the construction of an industrial agreement (Director General, Department of Education v United Voice WA [2013] WASCA 287 [18]‑[20] (Pullin J, Le Miere J agreeing), [83] (Buss J)). The industrial character and purpose of an industrial agreement is part of the context in which it is to be construed (Amcor Ltd v Construction, Forestry, Mining & Energy Union [2005] HCA 10; (2005) 222 CLR 241 [2] (Gleeson CJ and McHugh J); Director General v United Voice [81]; see also Amcor v CFMEU 66 (Kirby J), 129‑130 (Callinan J)).

[23] To these principles, the following observations made by Pullin J in Director General, Department of Education v United Voice WA [2013] WASCA 287; (2013) 94 WAIG 1 [18]‑[19] should be added:

The Agreement has to be construed to determine what the intention of the parties was at the time the Agreement was entered into. This has to be determined by ascertaining what a reasonable person would have understood the words of the Agreement to mean taking into account the text, the surrounding circumstances known to the parties and the purpose and object of the transaction: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [40]; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 [22].

Surrounding circumstances may only be taken into account if the ordinary meaning of the words used by the parties is ambiguous or susceptible of more than one meaning: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337, 352; McCourt v Cranston [2012] WASCA 60 [23].

29      We adopt and apply the above principles in the determination of this appeal.

The meaning of clause 36

30      As a preliminary point, the existence of cl 36 in the Agreement, whilst it deals with the subject matter of payment errors, does not relieve the employer of making payments to employees in accordance with its obligations under the Agreement.  The correct payments, notwithstanding payment mistakes by the employer, leading to underpayments to an employee, remain enforceable under s 83 of the Act.  Nothing in cl 36 could be construed as absolving the employer from liability in this respect.  On each occasion a payment falls due under the Agreement the employer incurs a liability to pay the employee, in default of which, a contravention occurs: Callan v Smith [2021] WAIRC 00216; (2021) 101 WAIG 1155.

31      What the clause appears to do is enable a convenient and expeditious means of rectifying such errors.  The appellant contended at the hearing of the appeal that accepting this to be the case, in terms of the obligation on the employer to make correct payments to employees, cl 36.2 provides an incentive for the employer to promptly rectify an underpayment error, as an alternative to enforcement.  However, one views this aspect of the clause, the parties to the Agreement, the Minister and the respondent, have agreed to a procedure that could avoid the need for the respondent to invest time and expense to enforce the Agreement, or for the Department to take action to recover monies paid, as long as the obligations imposed by the clause are met.

32      For the purposes of the Agreement it was not an issue at first instance that it is the employer who administers the payroll and the employer’s payment system.  From cl 36.1 and cl 36.2, this is done by the employer’s ‘Payroll Branch’, which is expressly recognised.  Given the commonly understood notion of what a body of this kind would do, it is fair to assume for the purposes of ascertaining the meaning of the clause as a whole, that the Payroll Branch is part of the employer’s operation responsible for receiving and processing information, and compiling and distributing payments to employees, for work performed by employees and also for payments to be made when employees are not at work but are to still be paid, such as for various types of paid leave under the Agreement, amongst other functions.

33      As with all matters of interpretation, the starting point is the text. The initial focus should be on the words used by the draftsperson.  Furthermore, as an industrial instrument, drafted by persons with a practical bent, infelicity of expression and technicality should give way to an approach focussed on the industrial context, and the objective intention considered from the perspective of reasonable persons in the positions of the parties to the Agreement.

34      In cl 36, a number of key phrases are referred to.  ‘Payroll’, as a noun, is ‘…The roll of persons to be paid with the list of names’ and ‘the total paid to employees and the total number of employees…’ (Macquarie Dictionary).  An ‘error’ is a mistake. It relevantly means ‘…4. Something incorrectly done through ignorance or inadvertence; a mistake…’(Shorter Oxford Dictionary). A ‘payment’ is ‘1. The action, or an act, of paying. 2. A sum of money (or other thing) paid; pay, wages; price…’(Shorter Oxford Dictionary).  Textually, the phrases ‘payment errors’ and ‘payment error’, which appear in cl 36, should be regarded as synonymous with ‘payroll error’ or ‘payroll errors’.  In our view, considering the meaning of the various phrases and words used in cl 36 in their ordinary sense, in context, the concepts of ‘payment errors’, ‘payment error’ and ‘payroll errors’ in the heading to the clause, and in cl 36.1 and cl 36.5, refer, collectively, to mistakes or things incorrectly done by the Payroll Branch of the employer, in the act of paying employees.  Regard can be had to the heading in an industrial instrument, as an aid to construction: Civil Service Association of Western Australia Incorporated v Director-General, Department of Justice [2019] WAIRC 00713; (2019) 99 WAIG 1531 at [23].

35      These errors by the Payroll Branch of the employer may either be underpayments, in which case cl 36.2 and cl 36.3 apply or overpayments, in which case cl 36.4 applies.  Whilst the draftsperson has used slightly different language in the clause, including ‘underpayments’, ‘overpaid’ and ‘overpayments’, given that the subject matter of the clause concerns payroll errors, each should be read as qualified by the subject matter, such that the clause deals with ‘underpayment payroll errors’ and ‘overpayment payroll errors’.  In our view, this is the ordinary and natural meaning to be accorded to these expressions in the clause. 

36      The issue for determination, in light of these provisions, is whether it is only in the case of errors caused by the employer, that is errors made by the Payroll Branch, not contributed to by an employee, that cl 36 applies.

37      As already noted, we accept the appellant’s contention that ‘payment errors’, taken in the context of the cl 36 when read as a whole, should be construed as ‘payroll error’.  All of the phrases referred to, as noted at [34] above, variously refer to one thing: a mistake made by the Payroll Branch, as specified in cl 36.1, in making payments to employees.

38      Keeping in mind the necessity for the existence of a mistake, and that mistake being made by the employer responsible for paying employees, in light of this view of the operation of cl 36, is it the case that for the purposes of cl 36.4, which was principally the focus of the question for determination, an overpayment caused by the innocent, negligent or intentional misrepresentation by an employee is caught by its terms?

39      The answer to this question can be illuminated by an example.  If an employee deliberately misrepresents to the employer that they were working when they were not, by for instance, a falsified claim for overtime or for higher duties, would the overpayment induced by this misrepresentation to the Payroll Branch, and the subsequent payment made by the Payroll Branch to the employee, constitute a payroll error?  For the following reasons, we do not think it would.

40      In this example, the record in existence as to the hours of work or duties performed, as claimed by the employee, would, on its face, be reliable, regular and legitimate.  Unless a payroll officer in the Payroll Branch was alerted to a problem with the reliability of the particular record on which the payment to the employee is to be made, there would be no reason to question it.  Assuming that the payment made to the employee by the Payroll Branch correctly applies the entitlements set out in the Agreement to the hours of work and work done as claimed, the payments so made would contain no error.  They would be accurate, albeit based on false information supplied by the employee.  The payment itself would not contain a mistake.

41      The fact that the ‘correct’ payment is made by the Payroll Branch to the employee in this circumstance, at the time it was made, due to the misconduct of the employee, in our view could not be subsequently characterised as a ‘payroll error’, if and when the misconduct of the employee becomes known. A payroll error can only be made at the time a payment to an employee is made.  More particularly, it would be an odd outcome that in these circumstances, where hypothetically an employee defrauded the employer for what could be a significant sum of money, the capacity of the employer to recoup the fraudulently induced overpayment is limited to $50 per week, by cl 36.4(b) of the Agreement. In such a case, the clause, if it operated as contended by the respondent, would enable an employee to profit from their misconduct, at the employer’s expense.  We do not consider that reasonable persons in the positions of the parties, would have intended such an outcome from the operation of the clause, viewed objectively.

42      In our view, the intent of a provision such as cl 36.4(b), when read with cl 36 as a whole, is designed to only operate in the case of a mistake by the employer, the consequences of which, should not be visited upon the employee.  It is evident that this provision, from its terms, is intended to ameliorate any unfairness or disadvantage a payroll mistake made by the employer in the calculation of the employee’s pay by an overpayment, may cause an employee when steps are taken by the employer to recover the overpayment. It achieves this purpose by limiting the regular amount the employee is required to repay to the employer, reflecting the fact the overpayment was made through no fault of the employee.  It is difficult to see why this arrangement should apply for the benefit of the employee, in circumstances where the employee deliberately deceives the employer and the employer is not in any way at fault.

43      A further provision of cl 36 tending to support the construction we prefer is cl 36.3. As noted earlier, this subclause applies in the case of an underpayment that occurs under cl 36.2.  It is provided that in cases where the employee is able to establish to the satisfaction of the employer that they have incurred costs, such as bank fees etc, because of an underpayment, they are to be reimbursed for this cost by the employer. A requirement of this subclause is the establishment of causation: the costs incurred by the employee to be recoverable, must be a ‘direct result of an underpayment’.  As with cl 36.4(b), the evident purpose of cl 36.3 appears to be to ameliorate the impact of a payroll error on an employee.  Whilst it is perhaps unlikely that an employee would deliberately contribute to their own underpayment, in this situation, as with cl 36.4(b) discussed immediately above, it would be passing strange for the employer to be obliged to reimburse an employee for costs such as bank fees etc, in circumstances where the employer played no part in the error leading to the underpayment.  This would not seem in the industrial context, to be a fair outcome. 

44      Alternatively, is the situation posed in the facts giving rise to the application in 2(c) at [2] above, where the employee by their conduct, falling short of deliberate misconduct, fails to do something leading to the employer making a payment to the employee that they are not entitled to receive. In that circumstance, described in the application as ‘Officer Induced Overpayment’, there would be no error made by the employer, and the cause of the overpayment is solely the conduct of the employee.  For the above reasons, it is also difficult to see why the employer should be burdened with the constraints imposed by cl 36.4, or the obligations imposed by cl 36.3, when the employer was not in any way responsible for the overpayment or underpayment respectively.  Taken in context, this is consistent with the meaning to be given to ‘payroll error’, discussed above.  That is, a payment made to an employee not as a result of an error by the employer, but which resulted in the employee receiving the incorrect pay. 

45      It is trite that the meaning of cl 36 is to be considered in the context of the Agreement as a whole. In this light, we consider that the submissions of the appellant as to cl 57 and cl 73 of the Agreement, as alternative types of overpayment provisions, which were relied on by the appellant and the subject of his submissions on the appeal, have some merit and are relevant matters of context, from which to view the effect of cl 36. 

46      Clause 57 - Removal Allowance of the Agreement, provides that where an officer has to move their residence because of a transfer to another work location, the officer is entitled to the reimbursement of reasonable costs in relation to various items of expenditure, such as transport, storage costs etc. Provision is made in cl 57.12 for the payment of a greater amount of removal assistance than set out in the clause, by agreement between the employer and the employee. However, in the case of an officer who leaves the position and transfers permanently, within 12 months, the employer may recover the amount paid by deducting the sum from monies due to the officer. In this case, the monies recoverable do not result from any error. The monies are recoverable because of a circumstance that has occurred, and a condition that has not been fulfilled.

47      Clause 73 deals with claims for personal leave.  In cl 73.1, an officer in order to claim personal leave, must do so on their first shift back at work. If this does not occur, the employer can adjust the officer’s pay. Again, as with cl 57.12, there is no error at the time of the relevant payment, but a subsequent change in circumstances enables the employer to recover the payment made.

48      Neither cl 57.12 nor cl 73.1 require, for their operation, the establishment of error of any kind, to enable the employer to recover the overpayment. At the time the removal allowance is paid, or the personal leave payment is made, there was an entitlement. In the former case, by an agreement. The payment is correctly made at the time, but the clauses enable a clawback if certain circumstances transpire.

49      Clause 36 of the Agreement could have no application to such circumstances in either case. This is for at least two reasons. First, no error is involved, which is the touchstone of cl 36. Second, irrespective of this point, both cl 57 and cl 71 deal with specific subject matter. The Agreement having made specific provision for these two types of overpayment, both clauses will operate to the exclusion of the more general overpayment provision in cl 36.  Clause 36 makes no reference to cl 57 or cl 73, and it is not to be read as subject to either.

50      Furthermore, when these provisions of the Agreement in cl 57 and cl 73 are juxtaposed with cl 36, the differences in operation are apparent.  In the case of both cl 57 and cl 73, the limitations and restraints on recovery of monies, and the measures to ameliorate adverse effects on an employee, which apply in cl 36, have no application in either clause.  The employer is able to simply recover the total amount concerned from the employee, without restraint. 

51      As to the contentions of the appellant regarding ss 17C and 17D of the MCE Act, by s 5 of the MCE Act, minimum conditions of employment are taken to be implied into all industrial instruments.  An industrial agreement is an industrial instrument, by the extended definition of an ‘award’ in s 3. Whilst only the second case referred to by the appellant in MacFarlane specifically considered  the effect of ss 17C and 17D, we are not persuaded that consideration should be given to them in this matter.  Unless and until the meaning of these provisions are considered by the Full Bench as a matter directly arising, with the benefit of argument from all parties, rather than arising as a sidewind, then the effect of them is best left to another day.

52      Finally, as to the ‘comprehensive’ nature of the Agreement point, the learned Senior Commissioner at [64] of her reasons referred to it as ‘expressed to be a comprehensive Agreement’ (see AB 82). Whilst no specific provision of the Agreement was mentioned in this context, it is assumed that she was referring to cl 6.2.  The effect of this provision is a statement of intent that the Agreement is comprehensive in the sense that it replaced in its entirety, the relevant award otherwise applicable. Any inconsistency between the Agreement and the relevant award, would be resolved in favour of the Agreement. 

53      Such a clause was not, respectfully, intended to be supportive of a conclusion that the terms of cl 36 ‘cover the field’ as to all matters concerning underpayments and overpayments.  Rather, it meant that all of the terms of the award were to be read as replaced by the Agreement, leaving no need for the award terms to apply.  On the interpretation of cl 36 that we prefer, not all matters of overpayments would be caught by the clause.  This however does not mean that the Agreement fails to be comprehensive, in the sense used in cl 6.2.  Also, it does not mean that an employee is thereby without a remedy.  As we have noted above, there is nothing in the terms of cl 36 to suggest that an employee’s right to enforce the Agreement, or for that matter, the right of the employer to take a civil action to recover a debt by way of an overpayment, were intended to be ousted by the clause. The capacity to pursue such matters was not affected by cl 36.

54      The above approach to the construction of cl 36 leads to no absurdity or repugnancy and would not be unworkable, read with the terms of the Agreement as a whole. Whether there has been a contravention of cl 36 will involve a question of fact, as to whether the relevant payroll error was caused by the conduct of the employer or the employee.

Conclusion

55      For the foregoing reasons, the approach of the appellant to the construction of cl 36 of the Agreement is to be preferred.  However the declaration sought on the appeal, set out at [8] above, is different to that sought and argued at first instance. The question posed at first instance and the declaration made by the learned Senior Commissioner, are set out at [3] and [6] above respectively. Whilst we would uphold the appeal and vary the declaration made by the Commission at first instance, we would do so in terms of the question asked of the learned Senior Commissioner, to the effect that on its proper interpretation, cl 36 of the Agreement does not apply to overpayments to employees which were not the result of a ‘payment error’ by the employer.