FEDERAL COURT OF AUSTRALIA Tasmanian Perpetual Trustees Ltd v Jordan [2008] FCA 464 INDUSTRIAL LAW – interpretation of award – whether State legislation or previous award relevant to interpretation of award ­– long service leave – pro rata payment in lieu on retirement Trustee Industry Award 1999 cll 18.1, 18.2, 18.3, 18.4 Award Simplification Case (1997) 75 IR 272 distinguished City of Wanneroo v Australian Municipal, Administrative, Clerical and Services Unions [2006] FCA 813 cited City of Wanneroo v Holmes (1989) 30 IR 362 applied Jordan v Tasmanian Perpetual Trustees Limited [2007] FMCA 1511 reversed Short v FW Hercus Pty Ltd (1993) 40 FCR 511 cited Kucks v CSR Limited (1996) 66 IR 181 cited TASMANIAN PERPETUAL TRUSTEES LIMITED v GLENN MATTHEW JORDAN TAD 39 of 2007 HEEREY J 10 April 2008 MELBOURNE (HEARD IN HOBART) IN THE FEDERAL COURT OF AUSTRALIA TASMANIA DISTRICT REGISTRY TAD 39 of 2007 BETWEEN: TASMANIAN PERPETUAL TRUSTEES LIMITED Appellant AND: GLENN MATTHEW JORDAN Respondent JUDGE: HEEREY J DATE OF ORDER: 10 april 2008 WHERE MADE: MELBOURNE (HEARD IN HOBART) THE COURT ORDERS THAT: 1. The appeal be allowed. 2. The respondent's application No. LNG6 of 2007 be dismissed. 3. Either party has leave to apply in relation to costs within 7 days of 10 April 2008. 4. If an application in relation to costs is made by a party, the other party has a further seven days to respond. 5. The issue of costs be decided on the papers. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA TASMANIA DISTRICT REGISTRY TAD 39 of 2007 BETWEEN: TASMANIAN PERPETUAL TRUSTEES LIMITED Appellant AND: GLENN MATTHEW JORDAN Respondent JUDGE: HEEREY J DATE: 10 april 2008 PLACE: MELBOURNE (HEARD IN HOBART) REASONS FOR JUDGMENT 1 Mr Robert Fitzgerald was employed by the appellant Tasmanian Perpetual Trustees Limited (TPT) for many years. He having retired, a question arose as to his entitlement for payment in lieu of long service leave under the Trustee Industry Award 1999. 2 The Award provides in cl 18.1.1 for a "general entitlement" to thirteen weeks of long service leave "on completing" fifteen years of continuous service and seven weeks of such leave "on completing" each period of eight years of continuous service after the first fifteen years. At the time he retired Mr Fitzgerald had completed three years of an eight year period of service. Was he entitled to pro rata payment in lieu of long service leave for that three year period? O'Sullivan FM answered that question in the affirmative: Jordan v Tasmanian Perpetual Trustees Limited [2007] FMCA 1511. TPT now appeals. 3 The respondent to the appeal, the applicant in the court below, is a Workplace Inspector under s 167(2) of the Workplace Relations Act 1996 (Cth). The Award 4 The relevant provisions of the Award are as follows. 18. LONG SERVICE LEAVE 18.1 Entitlement to long service leave 18.1.1 General entitlement Subject to 18.1.2, an employee is entitled to: 18.1.1(a) thirteen weeks of long service leave on ordinary pay on completing fifteen years of continuous service with one employer; and 18.1.1(b) seven weeks of long service leave on ordinary pay on completing each period of eight years of continuous service with that employer after the first fifteen years of continuous service with that employer. 18.1.2 Entitlement if service commenced before 1 March 1965 An employee whose continuous service commenced before 1 March 1965 is entitled to an amount of long service leave equal to: 18.1.2(a) 1/80 of the period of his or her continuous service with one employer completed prior to 1 March 1965; plus 18.1.2(b) 1/60 of the period of his or her continuous service with that employer completed subsequent to 28 February 1965; less 18.1.2(c) any long service leave which has already been granted to and taken by the employee. 18.2 Payment in lieu of long service leave if employment stops after fifteen years 18.2.1 Entitlement to payment in lieu If an employee becomes entitled to long service leave in accordance with 18.1, and that leave is not taken, the employee is entitled to payment in lieu of leave if his or her employment ends. 18.2.2 Entitlement The employee is entitled to payment in lieu of long service leave equal to: 18.2.2(a) 1/80 of the period of his or her continuous service with that employer prior to 1 March 1965; and 18.2.2(b) 1/60 of the period of his or her continuous service with that employer subsequent to 28 February 1965. 18.3 Entitlement to long service leave if employment stops after ten years 18.3.1 Between ten and fifteen years' continuous service This section only applies if an employee's employment is ended for any reason other than dismissal for serious and wilful misconduct and the employee has completed at least ten, but less than fifteen, years of continuous service with one employer. 18.3.2 Entitlement The employee is entitled to an amount of long service leave equal to: 18.3.2(a) 1/80 of the period of his or her continuous service with that employer completed prior to 1 March 1965; and 18.3.2(b) 1/60 of the period of his or her continuous service with that employer completed subsequent to 28 February 1965. 18.4 What happens if the employee dies before leave is taken If an employee dies before taking all the long service leave to which he or she is entitled, the employee's employer must pay to the employee's personal representative the full amount of the long service leave entitlement still owed to the employee (if any). The Magistrate's judgment 5 His Honour noted that there was no dispute about the facts. His Honour cited a number of authorities on the construction of awards: Short v FW Hercus Pty Ltd (1993) 40 FCR 511 at 520; Kucks v CSR Limited (1996) 66 IR 181 at 184 and City of Wanneroo v Australian Municipal, Administrative, Clerical and Services Unions [2006] FCA 813 at [57]. In the latter case French J referred to an observation in his earlier decision City of Wanneroo v Holmes (1989) 30 IR 362 at 380: Awards, whether made by consent or otherwise, should make sense according to the basic conventions of the English language. They bind the parties on pain of pecuniary penalties. 6 The learned Magistrate held at [47] that although cl 18.2 does not explicitly designate that the payment in lieu of long service leave after fifteen years of service was to be calculated on a pro rata basis, the "practical application" of cl 18.2.2(b) evinces that that was the intention of the framers of the Award. TPT's construction would, his Honour thought, render cl 18.2.2 redundant. Moreover, his Honour accepted the respondent's contention that cl 18.2.1 states that those who receive payment in lieu of long service leave on termination are those who are entitled to long service leave by virtue of cl 18.1. He considered that such an interpretation was consistent with the treatment of payment of other classes of employees in the Award as well as those under other instruments. He said at [54]: The interpretation contended for by the applicant [the present respondent] avoids a narrow and pedantic approach to the interpretation of the award and promotes the purpose of ensuring employees under the award receive payment for long service leave on termination. 7 His Honour at [56] accepted the argument that there was no "logical discernible policy reason" by which the Award should distinguish between, on one hand, those whose employment ended after ten but before fifteen years of continuous service, who were entitled to payment in lieu on a pro rata basis, and on the other, those whose service ended after fifteen years but just before a further eight years had passed, who could receive no payment in lieu for that second period. Consideration 8 Clause 18.2.2 cannot be read in isolation from its context, which includes its association with 18.2.1 and the general policy apparent from cl 18.1 that entitlement to long service leave arises "on completing" a specified period of continuous service. 9 Clause 18.2, as its heading indicates, is concerned with payment in lieu of long service leave where the employment stops after fifteen years. Sub-clauses 18.2.1 and 18.2.2 deal respectively with what might be termed liability and quantum. Entitlement under cl 18.2.1 only arises if there is entitlement to leave in accordance with cl 18.1 and "that leave is not taken". In other words, there must be the possibility of actually taking leave in accordance with cl 18.1.1(b), that is to say "on completing" the relevant period of service. The word "leave" appears three times in cl 18.2.1. It is plainly referring to the same thing – that is to say long service leave which the employee has been entitled to take in accordance with cl 18.1.1(b) but has not taken. I do not accept the contention of the respondent that the omission of the adjectival demonstrative "that" from the third mention of "leave" gives the word some other meaning. 10 Plainly cl 18.2.2 has work to do, if only from the practical point of view of setting out entitlements and avoiding confusion. The ratio of seven weeks to eight years would be slightly greater than one over 60 (one over 59.43). 11 The respondent's argument seems quite inconsistent with the express provision under cl 18.3 for pro rata long service leave which is specifically limited to periods of service between ten and fifteen years. If the intention were to provide generally for payment in lieu of long service leave on a pro rata basis one would not find 18.3 in its present form. 12 TPT's construction is consistent with cl 18.4. The entitlement is conditional on the non-taking of leave the deceased employee would have been entitled to take but did not. 13 I do not accept that there is anything "narrow and pedantic" or "unjust" in TPT's construction. The Award takes the approach that entitlement to long service is structured around milestones. This creates a benefit not only for the employee but also for the employer who has an interest in retaining experienced staff. It might seem unjust that an employee who has nine years and 364 days continuous employment misses out entirely on long service leave, but the alternative is to provide pro rata entitlement from commencement of employment, which plainly the Award does not do. 14 Clause 18.3 dealing with the ten to fifteen year employee can rationally be seen as a special case. There may be a need to protect employees who might be seen as vulnerable when they are approaching a point which involves the incurring of a significant liability for their employer. Be that as it may, the plain words and structure of the Award in my opinion leave no room for doubt as to the position of employees who serve beyond fifteen years. 15 Counsel for the respondent sought to rely on provisions in legislation in Tasmania and other States dealing with long service leave. This is quite irrelevant. Awards are a result of negotiation. For all I know a position less favourable in relation to long service leave may have been conceded in return for some other benefit. 16 Counsel also argued that I should look at the earlier award in 1965 which was "simplified": see Award Simplification Case (1997) 75 IR 272. I agree with counsel for TPT that it would not be proper to have regard to such factors in a context where no evidence of such matters was raised in the court below. The learned Magistrate noted at [5] that there was no dispute about the facts. The dispute concerned the correct interpretation of the relevant terms of the Award. The history of the earlier award would be a matter of fact, provable by evidence. Conclusion 17 The appeal will be allowed and the orders made on 15 October 2007 set aside. In place of those orders it is ordered that the respondent's application No. LNG6 of 2007 be dismissed. Leave is granted to the parties to file written submissions as to costs within seven days. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey. Associate: Dated: 10 April 2008 Counsel for the Appellant: J Bourke Counsel for the Respondent: W Friend Date of Hearing: 2 April 2008 Date of Judgment: 10 April 2008