Industrial Relations Commission of New South Wales CITATION: New South Wales Local Government, Clerical, Administrative, Energy, Airlines & Utilities Union and Cessnock City Council and another [2007] NSWIRComm 1061 NOTIFIER New South Wales Local Government, Clerical, Administrative, Energy, Airlines & Utilities Union PARTIES: RESPONDENTS Cessnock City Council Local Government and Shires Association FILE NUMBER(S): 3607 of 2006 CORAM: Stanton C Industrial dispute - small claim - Local Government Award Council Flexibility Agreements - 1998 Agreement and subsequent 2001 and 2005 Agreements - error in method of calculating "wrap up" quantum - competency payments - swings and roundabouts principle - obligation to check proposed agreements - sanctity of agreements - mutual intention of parties. CATCHWORDS: Held, application dismissed. LEGISLATION CITED: Industrial Relations Act 1996 Australian Industry Group v Automotive, Food, Metals, Engineering, Printing & Kindred Industries Union (2003) 25 IR 449 Compass Group Australia Pty Ltd and Australian Workers Union Offshore Campstaff Enterprise Agreement 2003 (PR772172, CASES CITED: 4 May 2006) Electrical Trades Union of Australia v Quensland Electricity Commission and Ors (1986) 16 IR 292 Federated Municipal and Shire Council Employees' Union of Australia, NSW Division and Cessnock City Council (unreported, Matter IRC975/99, Sams DP, 17 November 1999) Justice v Sarah A Lunn (PR974185, 27 November 2006) Re Operatonal Ambulance Officers (2001) 113 IR 384 HEARING DATES: 04/05/07, 25/05/07, 15/06/07, 06/07/07 DATE OF JUDGMENT: 26 September 2007 NOTIFIER Mr P Collins New South Wales Local Government, Clerical, Administrative, Energy, Airlines & Utilities Union LEGAL REPRESENTATIVES: RESPONDENT Ms C Hann Local Government Association of New South Wales DECISION: - 44 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM : STANTON C 26 September 2007 Matter No. IRC 3607 of 2006 Notification under section 130 by the New South Wales Local Government, Clerical, Administrative, Energy, Airlines and Utilities Union of a dispute with Cessnock City Council and another re calculation errors DECISION [2007] NSWIRComm 1061 1 This matter is before the Commission for determination pursuant to s.146A of the Industrial Relations Act 1996 ('the Act') following the notification of an industrial dispute by the New South Wales Local Government, Clerical, Administrative, Energy, Airlines and Utilities Union ('the Union') with Cessnock City Council ('the respondent') on 7 December 2006. A small claim application was filed pursuant to s 380 of the Act on 5 March 2007. 2 The question, dispute or difficulty that the Commission has been asked to resolve is: whether retrospective payment should be afforded to Mr Reginald Ross in accordance with s 380 of the Industrial Relations Act 1996 for errors associated with the calculation of the rostered day off and wrap up of travelling allowances under the Cessnock City Council Construction and Road Maintenance Staff Agreement 1998 ('the 1998 Agreement'), an agreement made pursuant to cl 30, Council Agreements under the Local Government (State) Award 1977 . That Agreement was operative from 16 March 1998 and followed negotiations that commenced in 1996 and formed the basis for subsequent agreements negotiated in 2001 and 2005. The current parent award is the Local Government (State) Award 2004 . Clause 30 of the 1997 Award relevantly stated: 30. Council Agreements i) The parties agree to review operations at council level on an ongoing basis, with the view to providing enhanced flexibility and efficiency. The union(s) shall be advised prior to the commencement of negotiations. ii) The award shall apply unless varied either expressly or impliedly by such council agreement, provided that: (a) The agreement has been genuinely arrived at by negotiation without compulsion; (b) Such agreement is consistent with the current wage fixing principles; (c) Such agreement is to provide not less than the entry level rate of pay; (d) Such agreement is processed in accordance with subclause (iii) of this clause. iii) Council agreements shall be processed as follows: (a) Any agreement reached shall be committed to writing and shall include a date of operation and a date of expiration; (b) The Agreement shall be signed by the council and appropriate union(s) and a copy shall be forwarded to the Local Government and Shires Associations of NSW. The current provision under the 2004 Award is set out under cl 36, Council Agreements as follows: 36. Council Agreements i) The parties agree to review operations at the council level on an ongoing basis with a view to providing enhanced flexibility and efficiency and to meet the particular working needs of the council and its employees. ii) The terms of any agreement reached between the parties shall substitute for the provisions of the award provided that: (a) the extent of the agreement shall be limited to the award's Clause 10, Payment of Employees; Clause 13 subclauses (ix)and (x), Travelling and Camping Allowances; Clause 16, Hours of Work; Clause 17, Overtime, Clause 18, Holidays; Clause 21, Part time Employment; Clause 23, Job Share Employment; and Clause 26, Performance Evaluation and Reward; (b) the agreement does not provide less than the entry level rates of pay; (c) the agreement is consistent with the Industrial Relations Act NSW 1996 and current wage fixing principles; and (d) the agreement shall be processed in accordance with subclause (iii) of this clause. Provided further that, where the agreement proposes to vary award provisions other than those nominated in paragraph (a) above, the agreement shall be processed in accordance with the Enterprise Arrangement Principle. iii) A Council Agreement shall be processed as follows: (a) the unions shall be notified prior to the commencement of negotiations; (b) the agreement has been genuinely arrived at by negotiation without compulsion; (c) the agreement shall be committed to writing and shall include a date of operation and a date of expiration; (d) the council and the appropriate union(s) shall sign the agreement and a copy sent to the Association; (e) any party to a Council Agreement may at any stage during the above process refer the matter to the Industrial Relations Commission of NSW. 3 On 3 March 1998, the General Secretary of the Municipal Employees Union ('the MEU'), New South Wales Branch wrote to the respondent's General Manager to formally advise: ... members ... agreed to the terms as outlined in the draft agreements and the commencement date for all agreements shall be 16 March 1998 and shall remain in force for a period of 42 months. It will be required that prior to the signing of the agreements that the local delegates in consultation with management fully peruse all documentation with a view to identifying any mistakes. 4 The "wrap up" of allowances involved the abolition of a number of allowances in return for the payment of one hour of overtime per day, Monday to Friday, inclusive of annual leave, public holidays and recreation (RDO) leave. Under the "wrap up" proposal, the overtime level of an employee who worked an average of seven hours of overtime per week was capped at five hours per week and to avoid disadvantage, an employee who worked no overtime received a windfall gain of five hours. 5 The 1998 Agreement was ultimately approved by members of the Union following an examination and review of the "wrap up" calculation during the negotiations by the Union's then paymaster, Mr Ron Beech and then organiser, Mr Graeme Kelly to ensure no-one was disadvantaged. 6 In early 1999, Mr Ross complained to his Union delegate, Mr Les Coyle, that the respondent appeared to be deducting three minutes per day from his work time. On 1 March 1999, Ms Janette Crosdale, Human Resources Manager, and Mr Maurice Kidd, payroll officer met with Mr Coyle and Mr Ross to discuss the complaint. In short, the respondent rejected the claim. and on 3 May 1999, the respondent's General Manager wrote to Mr Coyle in the following terms: To ensure the accuracy and validity of the calculations, the Union invited Mr Ron Beech, Paymaster for the MEU to audit the calculations. Mr Beech advised the negotiating team that he accepted that the calculations were correct. The negotiations were successfully concluded, including the calculation of the travelling time make-up. I am not prepared to change the calculation of the travelling make-up as Council and the Union agreed at the time of the negotiations that the calculation was correct. The subsequent signing of the agreement created an obligation on both Council and the Union to abide by the provisions of the negotiations, including the calculation of the travelling allowance make-up. The respondent contends that the Union did not reply to the General Manager's correspondence. 7 During the course of negotiations for the 2005 Agreement, Mr Ross conferred with his Union organiser, Mr Peter Collins, who extensively investigated the matter and a meeting was subsequently arranged with Ms Crosdale and Mr Kidd. In July 2006, the respondent agreed that a mistake had been made in calculating Mr Ross' travelling allowance in the "wrap up" salary and advised the Union that it "would adjust the calculation for the recreation leave component with an offer of backpay to 1 July 2006." The adjustment included the addition of 0.05 hours time when an employee takes a recreation day, effectively increasing the overtime on leave component of the "wrap-up" calculation to 6.016 weeks. A claim for retrospective payments were denied on the grounds that both the Union and the respondent were equally at fault. The offer of backpay was subsequently rejected by the Union. 8 The small claim application filed on on 5 March 2007 was subsequently amended and sought payments to remedy the respondent's breach of the applicable agreements retrospective to 5 March 2001. The Commission was also informed that Mr Ross was not the only employee affected by this controversy between the parties and to that extent this matter is a test case with relevance to certain other employees also covered by the same agreements. 9 Directions for arbitration were first issued on 12 January 2007. On 28 February, directions were amended by consent of the parties and the matter was set down for hearing commencing 4 May 2007. Mr P Collins appeared for the Union with Mr L Coyle. Ms C Hann of the Local Government and Shires Association of New South Wales appeared for the respondent with Ms J Crosdale. OPENING SUBMISSIONS The Union 10 Mr Collins contended that the 1998 Agreement was struck on the understanding that no employee would be financially disadvantaged. However, some eight years later, it was discovered that Mr Ross had been disadvantaged following an error in the method of calculating the "wrap up" quantum: ... the "wrap up" incorporated the wrapping up of the allowances and then a calculation as to the employees' rate of pay at that time and an annualisation of that rate of pay. The agreement provided for all employees to receive one hour's overtime a day for five days a week, 52 weeks of the year and the commitment that had been given by the parties was that no employee would receive a reduction in their income associated with the implementation of the agreement. 11 Mr Collins further contended the respondent had breached the 1998 Agreement as Mr Ross had suffered a reduction in his normal rate of pay: ... the agreement has been breached by the agreement not being honoured to the full extent of what the parties intended. 12 Mr Collins submitted the matter had been raised previously by Mr Ross in the context of dispute proceedings concerning the absorption of competency payments before his Honour, Deputy President Sams in Federated Municipal and Shire Council Employees' Union of Australia, NSW Division and Cessnock City Council (unreported, Matter IRC 975 of 1999, 17 November 1999). Mr Ross' approach at that time was rejected. Accordingly, he did not raise the matter again until 2006 when the Union was able to prove that an error had occurred. The Respondent 13 Ms Hann submitted that the matter should be determined on two questions: Firstly, did the respondent and the Union have a valid agreement? Secondly, if so, was that agreement actually breached? 14 Ms Hann submitted that a common thread in the respondent's case was the need to maintain the integrity of the agreement and "the need to preserve bargains that are made in good faith". It was the respondent's contention that there was a valid agreement in place and neither that agreement nor the underpinning award had been breached in relation to Mr Ross' employment. Simply put, the respondent had paid Mr Ross in accordance with the "wrap up" salary calculations that were negotiated and agreed to by the parties under the 1998 Agreement and the subsequent agreements entered into by the parties in good faith. 15 Ms Hann submitted that Mr Coyle was seconded to the respondent's Human Resources Department at the Union's request for a period of six months to further progress the 1998 Agreement negotiations that had spanned almost two years. 16 Ms Hann submitted the 1998 Agreement was a "Council flexibility agreement" which required the consent of both parties. The Union had given its approval following the vetting and examination of its terms. 17 In the respondent's view, if the Union was aware of Mr Ross's concerns regarding his "wrap up" calculation in 1999, why did it wait until 2006 to finally pursue the matter with some vigour? Ms Hann contended that in relation to the first question, the answer was "yes" as the Union was aware of Mr Ross' concerns when he first approached Mr Coyle in 1999. Moreover, Annexure G to Ms Crosdale's affidavit sets out correspondence dated 3 May 1999, sent to Mr Coyle in his capacity as Secretary, MEU Outdoor Division, stating that the respondent was not prepared to change the calculation as both parties had agreed in negotiations that the said calculations were correct. In that regard, she confirmed that no response was subsequently received from the Union. 18 Ms Hann further contended that for whatever reason, the Union made a conscious decision not to pursue the matter during negotiations for the 2001 and 2005 Agreements. For its part, the respondent had provided clear and unambiguous information on the "wrap up" calculation audited at the time by the Union's payroll officer, to both the Union and those employees who were covered by the agreement, including Mr Ross and Mr Coyle, since at least 1998. Moreover, the nature of the calculation was referred to in the 1998 Agreement set out under Annexure E of Ms Crosdale's affidavit. Ms Hann also pointed to an explanation circulated during the 1998 negotiations with the objective of addressing some of the confusion related to the treatment of the "wrap up" based on two employee examples and set out under Annexure F of Ms Crosdale's affidavit. THE EVIDENCE The Union 19 Mr Reginald Ross deposed that he was involved in the negotiation of the Cessnock Council Construction and Road Maintenance Employees' Workplace Agreement 1998, operative from 16 March 1998. He stated a feature of this Agreement was that "in return for trading in ... allowances, they offered everyone 38 hours per week plus 5 hours overtime at time and a half for 52 weeks a year". 20 It was Mr Ross' evidence that the parties had agreed that no employee would be disadvantaged as a result of the "wrap up" of allowances and the overtime proposal. 21 Mr Ross deposed at length how the respondent's mistake was made and contended that he had sought to explain the basis of his complaint at the meeting between the Union and the respondent convened on 1 March 1999. It was also his evidence that respondent's officers dismissed his claim - "they thought I was ridiculous for trying to argue that". Mr Ross stated that as he had failed to convince that meeting, which was also attended by Mr Coyle, he had adopted the view that "they must have been right". 22 During 2005, the respondent's Director of Works, Mr Lou Oldfield, sought to alter the start location of a number of employees. At that time, he asked for a copy of his "wrap up" calculations. Mr Ross subsequently recalculated his "wrap up" and referred his findings to Mr Coyle and Mr Collins, who subsequently put the matter to the respondent. 23 Mr Ross stated there had been an underpayment of one hour's pay per month since March 1998. Mr Ross deposed while the respondent had acknowledged the error, the Union had advised him: Council would not be paying any back pay as the error was never picked up by the Union when they signed the original agreement and no-one has checked the calculations in the subsequent agreements. 24 Mr Ross explained that the calculations for the purposes of the agreement comprised 43.6 weeks of work, four weeks annual leave, two weeks of public holidays and 2.4 weeks on account of recreation leave. He explained that the respondent had deducted an hour of overtime from the recreation day payment under the 1998 Agreement calculations. He also stated that at the time, Mr Kidd had explained that 0.45 of an hour each day accrued towards the monthly recreation day. 25 In cross-examination Mr Ross estimated that prior to the 1998 Agreement and the introduction of annualised salaries, he would have earned approximately $100 per week in overtime and allowance payments that were not paid for leave purposes. 26 Mr Ross agreed with Ms Hann that the respondent had not breached the 1998 Agreement as he had been paid in accordance with cl 9.2 of that industrial instrument. He also agreed that the 1999, 2001 and 2005 Agreements had involved "very lengthy" negotiations. 27 Mr Ross stated that when he first questioned the "wrap up" calculation in 1999, he informed Mr Coyle, who he believed was Union Secretary at the time. He also confirmed that he personally did not raise the matter with the Union on any formal basis and he was unaware whether Mr Coyle had done so. 28 Mr Ross stated that during the meeting on 1 March 1999, he found it difficult to articulate his point of view "even to the Union delegates at that time". He said it was not until 2005 that he put further calculations and particulars to the respondent in response to Mr Oldfield seeking to alter the starting point of 13 outdoor employees. 29 Mr Ross stated he had also made a claim in March 1999 in relation to the respondent's decision to absorb competency payments but chose not to pursue the calculation of "wrap up" in those proceedings before Deputy President Sams because absorption and "wrap up" were technically different matters. Mr Ross confirmed that he was aware that his Honour had dismissed the application in that matter, but could not recall his Honour's statement that "... the integrity of an agreement must be preserved." 30 Ms Hann referred Mr Ross to the second line of Annexure I attached to Ms Crosdale's affidavit, a document held by the respondent that purported to summarise the log of claims raised by outdoor maintenance employees in negotiations for the 2001 Agreement. The document contained a reference that stated in part: Reg - 3 min for RDO. 13 hours preserved travelling. Accountant to look at. Mr Ross agreed that the reference referred to the "wrap up" calculation. However, to the best of his recollection, the claim was not pursued at the time. 31 In re-examination, Mr Ross stated he did not believe that his concerns were taken seriously at the 1 March 1999 meeting when he attempted to explain that he was being disadvantaged when the intent of the agreement was that no-one would be disadvantaged. He believed his lack of experience in financial matters and the ridicule that he perceived from time to time "from down the office" had hindered his argument. 32 Mr Ross stated that when the 1999 Agreement was formalised, it was his opinion that his "wrap up" was being paid correctly. 33 Mr Leslie Coyle has held the position of Team Leader since 1977. He was elected a Union delegate in 1986 and was involved in the 1997/98 negotiations for a new Staff Agreement. 34 Mr Coyle deposed that members of the Union had voted to accept the terms of the proposed 1998 Agreement following a check of the calculations and the subsequent approval of both Mr Kelly and Mr Beech, who had also met with the respondent's representative, Mr Kidd and himself to discuss the matter. He said that Mr Beech had visited the respondent on one occasion and that was prior to March 1998 and prior to the agreement going to a vote. Moreover, it was Mr Coyle's evidence that the agreed calculations formed part of the agreement reached in March 1998. 35 Mr Coyle stated that in the early part of 1999, Mr Ross complained to him that he was not being paid correctly and thought the respondent was deducting three minutes per day from his pay. Accordingly, he arranged a meeting with Ms Crosdale and Mr Kidd on 1 March 1999. Unfortunately, neither Mr Ross nor himself could convince the meeting that a mistake had been made in calculating Mr Ross' "wrap up". 36 It was Mr Coyle's evidence that during 2005, the respondent sought to vary the start and finish location of certain employees. As the Union had appointed Mr Collins to conduct the negotiations, Mr Ross sought Mr Coyle's assistance to arrange a meeting with Mr Collins to explain his concerns. 37 Mr Coyle stated he and Mr Collins subsequently presented a spreadsheet explaining the alleged "wrap up" calculation error to Ms Crosdale and Mr Kidd who subsequently agreed that an error had been made. In January 2007, affected employees received correspondence acknowledging an error had been made and salaries had been adjusted. However, the respondent also informed employees that back pay would not be paid "because the Union were as much at fault when the original Agreement was negotiated". 38 In cross examination, Mr Coyle confirmed that at the request of the Union, he had been seconded to the respondent's Human Resources Department for approximately six months in 1998 to help facilitate the new agreement. He agreed that his role involved problem solving and explanation of aspects of the proposed agreement to members. His role also provided a conduit between the Union and the respondent. 39 Mr Coyle agreed that Mr Ross had approached him in relation to the "wrap up" calculation in 1999 and in response, he convened a meeting with Ms Crosdale, Mr Findlay, Mr Kidd, Mr Ross and himself to discuss the matter. He was emphatic that he had informed the Union about Mr Ross' claim, but could not recall the timing of that communication nor could he recall whether Mr Ross had raised his claim with him during the intervening period between 1999 and 2005. 40 Ms Hann also referred Mr Coyle to the second line of Annexure I attached to Ms Crosdale's affidavit, a document that purported to summarise a log of claims raised by outdoor maintenance employees in negotiations for the 2001 Agreement, which stated: Reg - 3 min for RDO. 13 hours preserved travelling. Accountant to look at. Mr Coyle could not recall having previously seen the document and was unable to identify the writing or indicate whether in his view, the phrase, " Reg - 3 min for RDO. 13 hours preserved travelling" . referred to the "wrap up" calculation". However, Mr Coyle did confirm that the negotiations for the 1998, 2001 and 2005 Agreements involved "lengthy negotiation periods". 41 In re-examination, Mr Coyle confirmed his understanding that Mr Ross' "three minute claim was viewed as a bit of a joke" as it represented a trivial amount. He also stated that when the claim was formally put to the meeting with the respondent on 1 March 1999, he neither understood the nature of the claim nor the argument put by Mr Ross. The respondent 42 Mr Bernard Mortomore deposed he commenced employment with the respondent in July 1975 and was appointed General Manager in 2005. He was a member of the respondent's negotiation team for the 2001 and 2005 Agreements, although his appointment as Acting General Manager and later, General Manager in 2005 precluded his participation in the "finalisation negotiations". 43 Mr Mortomore deposed that he could not recall any discussions during the negotiations conducted in 2001 and 2005 concerning "an error in the calculation of the travelling component of the "wrap up" salary" nor, to his knowledge, was the issue raised in the Union's various log of claims. 44 It was Mr Mortomore's evidence that he first became aware of the Union's claim in July 2006 when Ms Crosdale brought the matter to his attention. Upon investigation of the claim, Ms Crosdale advised him that an error in the calculation had been made and in response, he had directed that relevant salary adjustments should be paid retrospective to 1 July 2006. However, the Union rejected that offer and subsequently referred the matter to the Commission. 45 In cross-examination, Mr Mortomore confirmed that when he used the term "an error in the calculation" he was referring to the error in the calculation of the "wrap up" salary in the 1998, 2001 and 2005 Agreements explained to him by Ms Crosdale. 46 In response to Mr Collins, Mr Mortomore stated he offered the 1 July 2006 retrospective payment to affected employees because he "thought it was reasonable to backdate it to when the claim had been raised" and to go back the six years as claimed involved a payment of some $130,000. 47 In re-examination, Mr Mortomore stated that in addition to economic grounds, the respondent opposed full retrospectivity on the grounds that the claim had not been raised during the 2001 and 2005 negotiations and the 1998 Agreement "was at the time signed off by the Union and everyone else involved. Everyone at the time obviously understood or thought that it was correct ..." 48 Ms Janette Crosdale joined the respondent in 1988 and was appointed Human Resources Manager in 1995. She was involved in the 1998, 2001 and 2005 Agreement negotiations. 49 Prior to the commencement of the 1998 Agreement, Ms Crosdale deposed that the respondent's outdoor staff were engaged pursuant to the Local Government (State) Award and Industrial Agreement 8267/89, which provided "a number of overtime payments to employees for starting men, plant preparation and servicing, carting men and stores". 50 Ms Crosdale stated the respondent commenced negotiations with the MEU in July 1996 for a Council Agreement pursuant to cl 32 of the Local Government (State) Award 1995 and explained that such agreements enabled the parties to agree to contract out certain award provisions including payment of employees, travelling and camping allowances, hours of work, overtime and holidays. The then Director of Works, Mr Bowditch, had subsequently presented a proposal concerning new work arrangements that included the conversion of certain "unproductive overtime payments ... into productive overtime worked on the job". 51 Ms Crosdale deposed the proposal called for employees to be paid either 38 hours per week ordinary time earnings, plus an additional five hours of overtime paid at ordinary time plus one half per week, or their then current salary, whichever was the greater. In short, the proposal wrapped up regular overtime and allowances applicable under the Industrial Agreement, including servicing and fuelling, starting men, carting men and travelling allowances. Employees were required to start and finish work at the job rather than the Works Depot. 52 The respondent's proposals were rejected by the outdoor staff employees in September, October and November 1996. Negotiations resumed in February 1997 following the appointment of a new organiser, Mr Kelly. Mr Kelly had suggested that in order to progress the agreement negotiations, Mr Beech should review the calculations for the "wrap up" salary proposed by the respondent. Mr Beech subsequently "agreed with and approved the calculation". 53 Ms Crosdale deposed that a joint statement was issued on 1 July 1997 signed by the then General Manager, Mr Cowan and Mr Kelly to report that outdoor employees had agreed in principle to accept the five hour overtime proposal. The statement reported negotiations would continue with roads construction and maintenance, workshop, parks and gardens, stores and waste disposal depot employees for new agreements. The statement also noted that the respondent had agreed to a MEU request that Mr Coyle would be seconded to the Human Resources Department to assist the negotiating process. 54 Ms Crosdale stated that during his secondment, Mr Coyle had liaised with the respondent and the various outdoor staff sections "to ensure that all outdoor staff had an understanding of the provisions of the agreement including the calculation of the "wrap up" salary". On 27 February 1998, outdoor employees voted by secret ballot to accept the terms of the proposed Council Agreement. 55 Ms Crosdale stated the travelling allowance component of the "wrap up" salary was based on an average of the travelling allowance claimed by outdoor employees over the period from 6 January 1995 to 6 September 1996. 56 Ms Crosdale deposed the overtime paid on the leave component was based on 8.4 weeks leave which included 20 days of annual leave, 10 public holidays and 12 recreation days. Accordingly, the claimable travelling allowance was based on 43.6 weeks. Where the total travelling allowance claimable was greater than the overtime paid on leave, an employee received a travelling allowance make-up payment. However, there was no additional payment made where the overtime paid on leave was greater than the total travelling allowance claimable. 57 Ms Crosdale confirmed that she and Mr Kidd had met with Mr Ross, Mr Coyle and Mr Findley on 12 March 1999 to discuss "a claim regarding the calculation of the travelling allowance in relation to the inclusion of recreation days in the overtime on leave calculation". She also confirmed that she and Mr Kidd disagreed with Mr Ross' explanation as they thought his calculation "covered the payment of overtime on recreation days". Moreover, Mr Kidd had pointed out to the meeting at the time that when an employee took a recreation day, the respondent actually credited that employee 0.05 hours so as to ensure the employee had enough time banked to cover his rostered day off. 58 Ms Crosdale deposed that following the meeting on 12 March, she conferred with Mr Cowan who subsequently wrote to the Union on 3 May 1999 and advised that the respondent was not prepared to change the calculation of the travelling make-up in the Agreement: ... It is my understanding that the travelling make-up was included in the calculation of the agreed rate of pay ... to ensure that those employees who at the time received less than five hours overtime ... would not be disadvantaged by wrapping up of travelling allowance within the agreed rate of pay. I am not prepared to change the calculation of the travelling make-up as Council and the Union agreed at the time of the negotiations that the calculation was correct. The subsequent signing of the agreement created an obligation on both Council and the Union to abide by the provisions of the negotiations, including the calculation of the travelling allowance make-up. 59 According to Ms Crosdale's written evidence, throughout the extended negotiation process of approximately 2 years, she recalled an integral component of the negotiations was the provision of financial information to the outdoor employees demonstrating the calculation of the "wrap up", including the employees' current and proposed salaries under the Council Agreement. In her view, "...signing the Agreement had created an obligation on both Council and the Union to abide by the terms of the Agreement, including the calculation of the travelling allowance make-up, for its nominal term". In the absence of any further response from the MEU or Mr Ross at the time, the respondent assumed its position had been accepted and the Agreement would stand. 60 Ms Crosdale referred to the decision of Deputy President Sams in Federated Municipal and Shire Council Employees' Union of Australia, NSW Division and Cessnock City Council where the MEU had sought the payment of competency payments "on top of make-up pay similar to that of award increases". She also referred the Commission to the decision at pp 9-10 where his Honour, in rejecting the Union's claims, stated "The parties have a duty to preserve the integrity of the Agreement" and at p 11 where it was noted that there were both "swings and roundabouts of the package of arrangements entered into at the time". 61 It was Ms Crosdale's evidence that when negotiations concerning the respondent's ten Council Agreements commenced in early 2001, various logs of claims were submitted to the relevant work groups, including a log from outdoor employees which made reference to "Reg - 3 minutes for RDO and thirteen hours preserved travelling". Ms Crosdale deposed she understood that reference to mean that Mr Ross was once more pursuing his 1999 claim. However, she could not recall or find any contemporaneous notes to support a contention that the matter of the "wrap up" calculation was raised or discussed by the Union or Mr Ross during those negotiations. Similarly, Ms Crosdale could not recall the matter being raised during the 2005 round of negotiations. 62 Ms Crosdale deposed that in July 2006, she was approached by Mr Coyle and Mr Collins regarding Mr Ross' "wrap up" salary calculation. Mr Collins later presented a spreadsheet setting out a detailed explanation of the claim with regard to the recreation days being included in the 8.4 weeks used in the calculation of the overtime on leave component of the travelling allowance calculation. Upon realisation that an error had been made in the calculation, Ms Crosdale stated that she advised the Union that "Council would adjust the calculation for the recreation leave component with an offer of backpay to 1 July 2006". This adjustment also included the additional 0.05 hours previously credited by the respondent when an employee takes a recreation day which effectively "changed the overtime on leave component of the calculation to 6.016 weeks". The offer on retrospectivity was subsequently rejected. Ms Crosdale's also denied the respondent was dismissive of Mr Ross' initial claim. 63 In cross examination Ms Crosdale contended that Mr Bowditch's statement that "no employee is to lose any money" in the 1996 presentation to staff formed part of an incentive for employees to enter into the negotiations on the basis that they would not be disadvantaged by the proposals. She also confirmed that Mr Beech and Mr Kelly would have been given an indicative wrap up calculation to check including an explanation "... of how the wrap up salary would have been made up". 64 Ms Crosdale explained what the respondent had meant when it stated to employees "pay will be maintained at current rate", in the following terms: Under the industrial agreement that was in effect at the time these negotiations were undertaken, plant operators in particular could claim a range of overtime payments for servicing and peeling of their plant. Those overtime components ranged from a grader operator who could claim up to eight hours a week to a truck driver around about four hours a week. Another type of plant operator could be anywhere between four hours to six and a half hours a week depending on the plant. So what that meant was that where an employee earned in excess of 38 hours plus five hours overtime for 52 weeks, then that excess, because they earned in excess or could claim in excess of five hours overtime ... was maintained so their overall salary was maintained. That was part of the proposal by management. 65 Ms Crosdale denied the respondent had breached cl 9.1 of the 1998 Agreement: ... at the time in 1998 when we actually made the agreement, the calculation was agreed to by the Union and signed off under the agreement and as far as I was aware at the time ... the agreement was based on the calculations (put) to the employees and they agreed on that as audited by the paymaster. 66 Ms Crosdale stated that when the parties signed agreement in March 1998, "... we had a set of calculations that both parties agreed to". However, she was unable to identify with any precision which set of calculations had been referred to Mr Beech nor the date of their compilation. 67 Referring to correspondence forwarded to Mr Ross on 24 October 1998, Ms Crosdale reiterated her earlier explanations concerning the calculation of the make up allowances on a weekly and annual basis. She commented that the respondent was entitled to absorb competency payment increases from the make up following the decision of Sams DP. She also confirmed that recreation days should not have been incorporated within the overtime on the leave component of the calculation and the respondent had recently recognised that error. Ms Crosdale summarised what she believed had changed between 1998 and 2007 in relation to Mr Ross' claim: The Union ... yourself and Mr Les Coyle came to see me in my office ... I said I felt that council were paying him correctly ... it was described to me ... that it's to do with the three minutes and ... the rec leave. I felt that that was correct. At that stage, Mr Collins sent me a spreadsheet which I agreed to have a look at. That took me a number of months ... Once I actually looked at that and saw the rationale of that spreadsheet and how that was in reference to our calculation, I saw that there was in fact an error in the calculation. 68 It was Ms Crosdale's evidence that the error existed at the time the 1998 Agreement was struck. However, at the time, both the respondent and the Union were unaware that an error had been made and the respondent's interpretation and payment of salaries negotiated were based on what the parties had agreed upon: Council honoured the agreement from 16 March 1998 as per the calculation through a second agreement and through a final agreement ... 69 Ms Crosdale said that when she met with Mr Ross in 1999, she understood his claim at the time "was to do with the three minutes work per day and the taking of his recreation day". His claim was rejected because she thought he was being paid correctly under the 1998 Agreement and there was insufficient evidence put forward to convince her otherwise. The claim was also couched in different terms to that articulated by Mr Collins in 1996. 70 In re-examination, Ms Crosdale stated that in essence, the calculation that formed part of cl. 9.2 of the 1998 Agreement had not changed since the 1996 presentation to employees by Mr Bowditch. She also contended that the MEU had checked the 1998 Agreement calculations twice - first by Mr Beech and second, in March 1998 following correspondence to the respondent dated 3 March which stated: It will be required that prior to the signing of the agreements that the local delegates in consultation with management fully peruse all documentation with a view to identifying any mistakes. SUBMISSIONS The Union 71 Mr Collins submitted that a grievance was lodged by Mr Ross in July 2006 over an error in the calculation of entitlements associated with cl 9, Payment of Employees under the 1998 Agreement. He said the General Manager acknowledged and rectified the error in January 2007 and subsequently offered a retrospective payment to July 2006. That offer was rejected and the dispute was subsequently referred to the Commission for resolution. . 72 In March 1998, a Council Agreement under the Local Government (State) Award 1997. Mr Collins submitted that the respondent had erred in the application of the Agreement, specifically relating to clauses 9.1 and 9.2. those provisions relevantly stated: 9.1 All employees will be paid 38 hours per week at ordinary time and 5 hours per week at time and a half or at their current salary, which ever is the greater. The wrap up salary replaces all current regular overtime and allowances – servicing fuelling, starting men, carting men and travelling. First Aid allowance will continue to be paid separately. Payment will be subject to variation as a result of any award decisions and, where applicable, State Wage Case decisions. 9.2 This salary, including overtime shall be paid for all annual leave, public holidays and recreation leave as follow: Annual leave - 20 days Public Holidays - 10 days (New Year's Day, Australia Day Good Friday, Easter Monday, Anzac Day, Queen's Birthday, Labour Day, Picnic Day, Christmas Day, Boxing Day). Recreation Leave - 12 days (which may vary depending on recreation leave arrangements). 73 Mr Collins submitted that cl 9.1 created a binding obligation on the respondent to pay employees either 38 hours ordinary time plus 5 hours per week at time and a half or, their then current salary, whichever was the greater. He said the Agreement contained no reference as to the method of calculation and submitted the interpretation of the wording "was plainly obvious" and accordingly, the respondent was obliged to provide payment in accordance with the provision. 74 Mr Collins submitted the decision of Sams DP in Federated Municipal and Shire Council Employees' Union of Australia, NSW Division and Cessnock City Council had considerable application to these proceedings and he specifically referred to his Honour's statement at p8: The Commission's principles, which are derived from a long line of authority, is that a Court or tribunal should give, to the words used, their ordinary, natural and common sense English meaning. 75 Mr Collins contended that the evidence in these proceedings lent support to the view that the literal interpretation of the words contained at cl 9.1 was simply that no one would suffer a loss of income. He further cited Sams DP's decision at p11: In applying the ordinary commonsense meaning of these words and what was intended, it is my unequivocal conviction that the words meant that no employee would suffer a loss of income as a result of the introduction of the new agreement. In other words, at the time the agreement was put in place, employees would receive no less than they were being paid at that point of time. While it may seem unfair, this aspect of the agreement was one of the "swings and roundabouts" of the package of the arrangements entered into at the time. I note that the agreement also provided a roll up of a fixed overtime amount, whether it was worked or not. This was one aspect of the agreement which can be described as an "upside". On the other hand, the absorption of the make up allowance might be characterised as a "downside". Put colloquially it meant accepting the "good with the bad". 76 Mr Collins submitted that the Union had demonstrated that contrary to the Agreement Mr Ross had suffered a loss of income as a result of its introduction. Moreover, this loss cannot be considered part of the "swings and roundabouts" referred to by his Honour. 77 It was Mr Collins' submission that a key consideration for the Commission in determining this matter was the intent of the parties at the time of making the Agreement in 1998 and it was made abundantly clear to all parties that no person would suffer any loss of income associated with the introduction of the Agreement. He contended that cl 9.1 articulated that notion and Ms Crosdale's evidence supported the view that the undertaking was not honoured. 78 Mr Collins further submitted that cl 9.2 "created an obligation to pay the amount determined in cl 9.1 on annual leave, public holidays and recreational leave" and accordingly, cl 9.2 was also breached as the correct leave payment was not paid. 79 In relation to the respondent's case, Mr Collins submitted that Ms Hann's opening submission: Contrary to paragraph 16 of Mr Collins' submissions, the Council is not in breach of the agreement. The respondent will establish that since March 1998, the respondent has paid Mr Ross in accordance with the calculations that were negotiated and agreed to by the parties in the 1998 council agreement was contrary to the evidence of Mr Ross, Mr Coyle, Ms Crosdale and Mr Mortomore. 80 Mr Collins said that Mr Ross's evidence was that he held the position of plant operator when he discovered the error in December 1998 and at the time he experienced difficulty in convincing anyone that he had been disadvantaged so much so that he felt ridiculed for raising the matter. 81 Mr Collins said Mr Coyle's evidence supported Mr Ross in relation to the sequence of events that lead to the 1998 Agreement and the grievances pursued by Mr Ross in 1999 and 2006. Mr Coyle had admitted that he had difficulty in understanding the nature of the complaint by Mr Ross in March 1999 and beyond to 2005. It was also Mr Coyle's evidence that the claims made by Mr Ross were trivialised.. 82 Mr Collins referred to the evidence of Mr Mortomore, who explained that the error ultimately conceded by Ms Crosdale was also related to past agreements. Mr Mortomore accepted an error had been made and offered a retrospective payment to July 2006 when the Union had raised the matter. Mr Collins said that in cross-examination Mr Mortomore had articulated that the decision rejecting payments beyond 2006 was based partially upon economic grounds. Moreover, there was no evidence to support the submission that Mr Ross had been paid in accordance with the 1998 Agreement nor was any factual evidence brought forward to support Ms Crosdale's assertion that Mr Beech had reviewed and approved the Agreement on behalf of the Union. 83 Referring to the cross examination of Ms Crosdale, Mr Collins stated she admitted that she had never met Mr Beech, and was only informed verbally that he had approved the calculations. Mr Collins said the respondent had not produced any evidence to support what calculation had been supplied to the Union and Ms Crosdale could not confirm which calculations were given to Mr Beech. He said the respondent sought to rely on the fact that Mr Beech, the then paymaster of the Union, had audited the calculations as its defence, yet no evidence was produced as to the nature of the actual calculations agreed to. 84 Mr Collins referred to Ms Crosdale's cross examination concerning Mr Ross being disadvantaged: Q. Miss Crosdale, I was asking you whether or not the third page of that letter actually resulted in Mr Ross being disadvantaged. Do you agree? A. I think I actually answered it before, when I said, at the time no, but subsequently having learnt that he was, then I'd have to answer yes. Q. I think you answered previously that yes as of 2007? A. That's correct Q. But as of December 1998 on the basis of the correct calculations, would Mr Ross have been disadvantaged? A. Yes. 85 Mr Collins submitted that cl 9.1 was breached when the respondent changed the method of calculation for Mr Ross by incorporating the travelling allowance as a deduction resulting in Mr Ross being paid 3 minutes per day less than the greater of his then current rate of pay, or 38 hours plus 5 hours overtime as proposed. 86 Mr Collins concluded by submitting the following summary: 1) The respondent and the Union entered into an agreement in good faith in 1998 and subsequent agreements in 2001 and 2005. 2) A commitment was given by the respondent and accepted by the Union and employees that no employee would suffer a reduction in income. That commitment is reflected in clauses 9.1 and 9.2 of the Agreement. 3) The respondent is in breach of clauses 9.1 and 9.2 as Mr Ross has not received his full entitlement to payment in accordance with the Agreement's terms. 4) The respondent has failed to prove that it was ever the intention of the parties to implement a method of calculation that was contrary to the intent of the Agreement. 5) The result of the calculation error has meant that Mr Ross has worked one hour per month for no compensation since December 1998. For the respondent 87 Ms Hann submitted the common thread in the respondent's case was the need to maintain the integrity of the valid agreements made with the Union and "preserve bargains made in good faith". For its part, the Union has also agreed that the 1998, 2001 and 2005 Agreements were entered into in good faith. 88 Ms Hann submitted that since March 1998, the respondent had paid Mr Ross in accordance with the calculations negotiated and jointly agreed to. She contended there was no breach of that Agreement nor the Award in relation to Mr Ross, who in cross examination had agreed that he had been paid in accordance with cl 9.2 of the 1998 Agreement. Moreover, consistent with cl 9.1 of the Agreement, Mr Ross had not suffered a reduction in pay upon implementation of the Agreement as he was paid a "make up allowance to ensure that he did not suffer a reduction in pay". 89 Ms Hann contended it was the Union's responsibility to properly investigate Mr Ross' claims and furnish the respondent with detailed particulars in 1999. The Union was aware of Mr Ross' claims on two grounds. Firstly, Mr Ross had first approached his delegate, Mr Coyle, as early as 1998. Secondly, the respondent had written to the Union on 3 May 1999 in response to Mr Ross' claims. As no reply was received in relation to that correspondence, the respondent contends that it was entitled to assume that the Union agreed with the position taken. Moreover, the Union had failed to raise the matter in the 2001 and 2005 negotiations. 90 The respondent contended that while the Union's opening submission acknowledged that the calculation anomaly had "been perpetuated by both parties in subsequent agreements", its closing submissions drew the conclusion that the matter was "now purely the respondent's anomaly". Ms Hann submitted that position was not supported by the evidence of Mr Ross, Mr Coyle or Ms Crosdale. Rather, the evidence in chief of Mr Ross disclosed the Union had been aware of the anomaly since at least 1999 and had failed to investigate or pursue the claim: I was advised by the Union that Council would not be paying any back pay as the error was never picked up by the Union when they signed the original agreement and no one has checked the calculations in subsequent agreements. 91 Ms Hann relied upon Mr Coyle's evidence to confirm an inference that the Union had audited the 1998 Agreement immediately prior to the conduct of the final ballot: Part of the process of having the changes agreed to, included having the organiser for the Union, Mr Graeme Kelly and the Union's financial officer, Mr Ron Beech, check the Agreement and calculations. They both agreed it was OK, so we voted to accept the conditions. 92 Ms Hann denied that the calculation had been changed following implementation of the 1998 Agreement and also stated that the majority of employees under the 1998 Agreement had received pay rises. 93 Following annual competency assessments conducted in December 1998, Ms Hann submitted that a number of employees in receipt of the agreed "make up allowance" had also received an increase in their base rate of pay. The respondent believed at he time it was entitled to absorb the make-up allowance from salary increases arising from competency assessments. In Mr Ross' case, as the quantum of the proposed salary adjustment exceeded his make up allowance, the calculation "changed to that of employees who did not receive a make-up allowance". The Union disputed the respondent's treatment of the allowance and the matter was subject to arbitration before this Commission. 94 In Federated Municipal and Shire Council Employees' Union of Australia, NSW Division and Cessnock City Council, his Honour, Deputy President Sams held the respondent was entitled to absorb the competency assessment salary increases: ... While it may now seem unfair, this aspect of the agreement was one of swings and roundabouts of the package of arrangements entered into at the time. I note that the agreement also provided a roll up of fixed overtime amount whether it was worked or not. This was one aspect of the agreement which can be described as an upside ... Put colloquially, it meant accepting the good with the bad. 95 Ms Hann said the respondent had not breached the 1998, 2001 or 2005 Agreements nor had it sought to mislead the Union or employees in relation to the calculations. Simply put, no breach of ss 9.1 or 9.2 had occurred. Rather, Mr Ross' evidence was that he had been paid in accordance with the calculations expressly outlined in s 9.2 of the 1998 Agreement: This salary, including overtime, shall be paid for all annual leave, public holidays and recreation leave as follows: Annual leave 20 days Public holidays 10 days Recreation leave 12 days. 96 Ms Hann submitted the Local Government (State) Award expressly excluded overtime payments from the composition of ordinary pay applicable to public holidays and annual leave. 97 Ms Hann also stated that there was compliance with s 9.1 of the Agreement as Mr Ross "retained his current salary on the signing of the agreement as it was greater than the salary proposed under the agreement". Moreover, under cross examination, both Mr Ross and Ms Crosdale had agreed that Mr Ross received a "make up allowance" that comprised the additional overtime claimable under the previous industrial instrument. Accordingly, Mr Ross was not disadvantaged. The respondent had not breached the Agreement's "intent" as Mr Ross did not suffer any reduction in pay upon implementation of the Agreement and he continued to receive his current salary. In addition, Clause 9.1 must be examined in the context of the Agreement as a whole using the "swings and roundabouts" principle outlined by Deputy President Sams. 98 Ms Hann asserted that s 9.2 of the Agreement set out the objective intention of the parties in relation to the leave component of the "wrap up" calculation and subjective considerations were irrelevant. In that regard, she referred to the decision of the Australian Industrial Relations Commission in Justice v Sarah A Lunn (PR974185, 27 November 2006), a matter that dealt with termination of employment, where a Full Bench determined at [29]: ... A fundamental feature of the general law of contract, applicable in relation to contracts of employment, is that the intention of the parties is determined objectively and, indeed, evidence of the subjective intention of the parties is not admissible in construing a contract. 99 Ms Hann submitted the Union's contention that employees had been disadvantaged "fails to balance the benefits of the Agreement" and referred to a number of tangible benefits derived by employees under the 1998 and subsequent Agreements: 1) Overtime on leave, thus ensuring the employees would not suffer a drastic reduction in pay while on leave; 2) Plant Operators and truck drivers under the Agreement no longer had to service plant on weekends; 3) The travel allowance paid was 20 cents higher than the travel allowance under the Award; 4) The majority of employees, some 27 out of 48 covered by the 1998 Agreement received an increase in annual salary and the respondent spent approximately $63,000 per year more on salaries for field staff under the Agreement. 100 Ms Hann noted the Union's claim should recognise that in order to prevent "a negative recreation leave (balance)", employees were paid an additional 0.05 hours each recreation day work cycle to bring the quantum of ordinary time worked and recreation leave accrued up to the Agreement's 43 hour working week. 101 Ms Hann contended the respondent should not be prejudiced as a result of the Union's ongoing inaction which on the evidence of Mr Ross, Mr Coyle and Ms Crosdale stems from as early as March 1999 when Mr Ross and the Union failed at that time to provide sufficient evidence to convince the respondent of the merit of his claim. Moreover, the respondent acknowledges the "wrap up" was clearly a complex calculation and the anomaly was clearly not apparent at first instance by the parties despite the thorough auditing and examination prior to the making the Agreement in 1998. 102 Contrary to the Union's assertions that the "wrap up" calculation was only reviewed once by the Union prior to the making of the 1998 agreement, Ms Hann submitted Ms Crosdale's evidence was that the Union had "checked and double checked the calculations" on more than one occasion. She referred to Annexure D of Ms Crosdale's affidavit, a letter to the respondent from the then MEU dated 3 March 1998 which, she submitted, contradicted the Union's submissions that the Agreement calculation had only been reviewed once by Mr Beech: It will be required that prior to the signing of the arrangements that the local delegates in consultation with management fully peruse all documentation with a view to identifying all mistakes. 103 Ms Hann also contended the fact that Mr Coyle was seconded to the respondent's Human Resouces Department for a period of 6 months at the time to help facilitate the new Agreement, the evidence that Mr Ross was involved in the 1998 Agreement negotiations and the evidence that throughout the protracted negotiations, the respondent had provided financial information to both the Union and employees demonstrating the calculation of the "wrap up", including an employee's current and proposed salary, was compelling. 104 Ms Hann submitted the "calculations" that had changed were related to individual employee's and not the leave calculation set out in clause 9.2 of the Agreement: Ms Crosdale in her evidence and during cross examination confirmed that the anomaly occurred in clause 9.2 of the Agreement. This calculation did not change during the negotiation process. The calculation at clause 9.2 of the Agreement was the calculation communicated to employees and the Union in Mr Bowditch's presentation in 1996 (Annexure A of Ms Crosdale's affidavit). Mr Beech, the paymaster of the Union would have audited this calculation during his visit in February 1997. 105 Ms Hann rejected the Union's submission that the respondent had "ignored" Mr Ross' claim. She said Union did not reply to correspondence from the then General Manager to the MEU dated 3 May 1999 concerning the matter which stated: I am not prepared to change the calculation of the travelling make-up as Council and the Union agreed at the time of negotiations that the calculation was correct. 106 Ms Hann submitted that the Union had been aware of Mr Ross' claim since 1998 and contended a conscious decision was made not to pursue the matter. In the respondent's view, the Union had also been afforded many opportunities to pursue the claim and articulate the alternate calculation of the "wrap up", including: The arbitrated dispute before Deputy President Sams in November 1999 instigated by Mr Ross and followed his initial claim regarding the calculation of leave in the "wrap up" pay arrangement; By application to the Commission seeking a variation during the initial nominal term of the Agreement; and During the robust and lengthy negotiations for the subsequent 2001 and 2005 Agreements, particularly against the backdrop of Ms Crosdale's evidence that a "Log of Claims" document from the 2001 agreement negotiations included the reference "Reg – 3 min for RDO. 13 hours preserved travelling. Accountant to look at". 107 Ms Hann referred to Mr Collins' closing submissions and said he had "the temerity to suggest that Mr Ross has been prejudiced by the ignorance of Council". In the alternative, she contended, with respect, that Mr Ross had actually been prejudiced by the ignorance of his Union and it was not until 2006 when sufficient information in the form of a spreadsheet was provided and articulatedby Mr Collins that the respondent investigated the claim and rectified the anomaly immediately. 108 It was the respondent's submission that a decision in favour of the Union's application would set a dangerous precedent and demonstrate that "even though an agreement may have been struck between parties, the terms of the agreement are still 'up for grabs' during its nominal term". Moreover, Ms Hann contended the parties predominantly enter into agreements to ensure industrial harmony and any capacity to raise further claims during its nominal term would undermine that purpose. 109 Ms Hann contended that the Union should honour the Agreements made with the respondent and sought to rely upon a decision of the Australian Industrial Relations Commission in Compass Group Australia Pty Ltd and the Australian Workers Union Offshore Campstaff Enterprise Agreement 2003 (PR772172, 4 May 2006) where Commissioner Mansfield determined: Agreements, once made on behalf of the parties to a dispute must be honoured by both employees and employers. 110 Ms Hann asserted that the rationale adopted by the Australian Industrial Relations Commission in the Compass Group Australia Pty Ltd decision was echoed by the Full Court of the Federal Court in Australian Industry Group v Automotive, Food, Metals, Engineering, Printing & Kindred Industries Union (2003) 25 IR 449 at 463]: Once parties to an agreement have settled their difference on the matters in issue, it is appropriate that their bargain be protected and that further industrial action not be permitted with respect to issues which were once in dispute but are now settled. 111 Ms Hann submitted the 1998 Agreement withstood a challenge by the Union concerning an unintended consequence of that instrument when Deputy President Sams in Federated Municipal and Shire Council Employees' Union of Australia, NSW Division and Cessnock City Council held: In my view, where there is a provision in an agreement, which is unambiguous and its interpretation plainly obvious, it must be the agreement provision which has primacy. Put another way, it is not open for the parties to overturn, negate or otherwise act to subvert or displace an agreement provision which is so pellucidly clear. ... The parties have a duty to preserve the integrity of the agreement. I have a duty to ensure justice to both parties. A contravention of the agreement would destroy the integrity of the agreement and be a denial of justice. 112 It was the respondent's contention that clause 9.2 of the Agreement was clear and unambiguous. The leave calculation had remained unchanged from the respondent's initial staff presentation in 1996 through to 2006 when the matter was more formally raised by the Union. Ms Hann argued the Commission should uphold the decision of Deputy President Sams and refuse to intervene: The Commission should not contemplate taking apart the clear agreement of the parties simply because the Union sees the opportunity to rectify an unintended consequence for these privileged employees. It is opportunistic to pick apart agreements with the benefit of hindsight and demand retrospective payments. 113 Ms Hann noted the evidence that there were some economic factors behind the respondent's decision not to make retrospective payments beyond 2006, but stressed that in re-examination, Mr Mortomore had expanded upon the more compelling reasons for that course of action: From my understanding of it, the previous agreements, these issues hadn't been raised. The agreement that was done in '98 was at the time signed off by the Union and everyone else involved. Everyone at the time obviously understood or thought that it was correct and I believed that it was unreasonable to go back beyond that point and revisit something that there had been an opportunity to look at on a number of occasions and hadn't been done so. When asked whether, essentially, it was about preserving the integrity of the past agreements Ms Hann stated that Mr Mortomore had answered " I believe so ". 114 Ms Hann submitted that certain new evidence submitted during the hearing that related to "a complex document formulated by Ms Crosdale in 1998" and the Union's subsequent cross examination without notice was prejudicial to the respondent and should bear no weight in the Commission's considerations. It was the respondent's firm view that such material should have been filed in reply. 115 In conclusion, Ms Hann submitted: 1) It is now apparent to all parties that clause 9.2 of the 1998 Agreement contained an error in the calculation of leave and twelve recreation days per annum should not have been included in that calculation. 2) The Union has compounded the error by its refusal in 1999 to respond to the General Manager's letter or provide additional information in relation to Mr Ross' claim. The error has been similarly compounded by the refusal to join both of Mr Ross' claims in the competency assessments before Deputy President Sams in November 1999 and the subsequent failure to formally include the matter in their 2001 and 2005 log of claims. 3) The evidence of Ms Crosdale and supported by Mr Ross and Mr Coyle during cross examination demonstrates that Mr Ross' claim was canvassed during the 2001 negotiations. However, the Union chose not to pursue that claim. 4) The Union has agreed that the error was an oversight of both parties but is intent on making the respondent pay. 5) Once the respondent received comprehensive information in relation to the error in 2006, it was rectified. The revised calculation should not be applied retrospectively. 5) If the respondent were to be found liable to pay staff an amount in accordance with the orders sought by the Union, then it would have significant although not completely detrimental impact on the respondent's finances. The cost is approximately $130,000 with a potential flow on to other employees. The claim should be dismissed. In reply 116 Mr Collins restated the Union's threshold position that cl 9.2 did not and does not contain any calculation in relation to how an employee is to be paid. He said that there had been a breach of the agreement as employees had not been paid in accordance with cl 9.1 and the evidence from Mr Mortomore and Ms Crosdale in supported that position. 117 Mr Collins pondered that if no breach has occurred, why the respondent has seen fit to amend the rates of pay and rectify payments in accordance with the arguments advanced by the Union? He submitted the answer to the respondents question "was the Union aware of Mr Ross's claim regarding the calculation in 1999?" is yes. In his evidence Mr Coyle said he was aware but he did not understand the claim well enough to advance arguments on Mr Ross's behalf to the Ms Crosdale and Mr Kidd, who he understood had a far greater knowledge and skill in the methods of calculation than himself. 118 Mr Collins argued the Commission must accept that Mr Coyle is the yard delegate employed as a Team Leader. Mr Collins said that whether he had acted on his own accord in not responding to the General Manager's letter or had some guidance from a Union official at the time or whether in fact he responded orally had not been tested in evidence. Mr Collins said Mr Ross stated in his evidence that he felt the respondent "laughed off" the claim and a similar view was also expressed by Mr Coyle. 119 Mr Collins said the simple response to the respondent's question "if so why did the Union wait until 2005 to finally pursue the claim?" is that it was not until 2005 that he, as an official of the Union, met with Mr Ross and could understand the claim and place it before the respondent in a form that was readily understood. 120 Mr Collins submitted that the respondent had attempted to bring evidence before the Commission to suggest the Union had submitted a log of claims with a reference to the calculations (Ex "6", Annexure 1). However, he said neither Mr Coyle nor Mr Ross had recognised that document as a log of claims prepared by the Union and there was no evidence before the Commission to indicate when it was prepared, who was the author or its purpose. Accordingly, it should carry no weight in these proceedings. 121 Mr Collins submitted that the respondent has an obligation to pay the employees in accordance with the terms and conditions of the Agreement and said "the method of calculation to a certain extent is immaterial". He referred to Ms Crosdale's evidence concerning the Union's audit in February 1997 and submitted that the calculations had changed throughout negotiations and after the Agreement "had been ratified by the parties". He said Ms Crosdale had confirmed that the breach had operated since the making of the 1998 Agreement when she said "the calculation hasn't changed from the Agreement in 1998 through to the Agreement in 2006". 122 Mr Collins further submitted that cl 9.2 does not provide any reference to a method of calculation. rather, it only provides a commitment to when payment will be received for an overtime payment, namely all days including those listed in 9.2. He also submitted that what the Award provides is immaterial as a Council Agreement is intended to vary the award provisions exclusively for the benefit of the parties to the Agreement. 123 Mr Collins stated the new evidence submitted had only been discovered two days prior to the hearing and it did not prejudice the respondent as it essentially confirmed the evidence of Ms Crosdale that there had been a number of changes to the method of calculation. He said it was misleading to describe it as a complex document and as it is a document that Ms Crosdale has utilised over the years to demonstrate the method of calculation. 124 In conclusion, Mr Collins submitted: 1) The respondent cannot assert that cl 9.2 contained an anomaly to the calculations of leave as the provision contains no calculations. It simply confirms the intent of the parties to annualise salaries. 2) The respondent's assertion that the Union had compounded the error by its inaction is not supported by the facts of the case. It was the Union's belief that the error of calculation was not " ... an intentional act by Council to deprive employees of their entitlements under the Agreement". Rather, it could be argued that the respondent had also compounded the error by not having suitable internal checks in place to examine the calculation that would have led to its early discovery. 3) The refusal to agree to apply retrospectivity to the claim is prejudicial to Mr Ross "who has been let down by the respondent not providing a correct calculation" to his Union and, the inability of the respondent to understand and explore the error when first raised in 1999. 4) In refusing retrospectivity, the respondent has only considered economic reasons rather than "the benefits gained over the years by this increased productivity". 125 Mr Collins completed his submissions in reply by submitting that the Commission should find in favour of his member and award the appropriate compensation for lost earnings. CONSIDERATION 126 The parties have defended their respective positions in this matter with much vigour and diligence. In determining this matter, I have considered all of the extensive evidence and submissions put the parties in support of their respective positions. I have also had regard to the Commission's obligations under s 163 (1)(c) of the Act to determine this matter "... according to equity, good conscience and the substantial merits of the case without regard to technicalities or legal forms". 127 Prior to agreement being reached in respect of the 1998 Agreement, it is evident to the Commission that the matters subject to that agreement, particularly the "wrap up" salary component, were extensively canvassed with affected employees by both the Union and respondent. Indeed, Mr Coyle was seconded to the Human Resources Department for some 6 months to assist in the facilitation of the agreement within the respondent's workforce. Additionally, Mr Beech, the Union's then payroll officer, drew the conclusion upon auditing the proposal during negotiations that it was correct. 128 When Mr Ross first raised the matter in 1999, the respondent dismissed his claim on the grounds that it thought he had been afforded the correct payments in accordance with the recently concluded agreement negotiations. The fact that Mr Ross was unable to articulate his concerns to the respondent and the Union at the time was unfortunate in all the circumstances. 129 When viewed against the industrial backdrop that Mr Beech had examined, according to the respondent's evidence, a version of the agreement and the Union's correspondence dated 3 March which stated the requirement that prior to signing, the local Union delegates in consultation with management "fully peruse the document with a view to identifying any mistakes", the respondent was entitled take the view, particularly following at least two Union examinations, that the 1998 Agreement was free of any impediments, particularly so soon after the instrument was struck. Consent of the Union and its members, a prerequisite to the making of the 1998 and subsequent agreements, was given freely. Moreover, it was also Ms Crosdale's evidence that the calculation that formed part of cl. 9.2 of the 1998 Agreement had not changed per se since the respondent's 1996 presentation to employees. 130 It is abundantly clear on the evidence before the Commission that the relevant outdoor staff had given their trade union representatives the power to negotiate on their behalf for a new enterprise agreement and to be bound by that agreement. That position was not disputed by the Union. Further, the 1998 and subsequent 2001 and 2005 Agreements were all approved by meetings of members and "signed off" at the conclusion of the relevant negotiations by the respondent's representatives and the authorised Union representatives at the time. All parties acted in good faith which is consistent with the history of sensible and productive industrial relations between the Union and the respondent. 131 Council Agreements are legally binding industrial instruments. The predominant purpose of an agreement is to afford the parties finality and bring industrial certainty for a pre-determined period of time. The public interest consideration requires strict adherence to both the terms and spirit of the agreements reached. Bargains reached by the parties are important. As such, agreements need to be considered in their entirety. Accordingly, it is in the public interest that the sanctity of such agreements is protected and that they are honoured. In Electrical Trades Union of Australia v Queensland Electricity Commission and Ors (1986) 16 IR 292 a Full Bench of the Australian Industrial Relations Commission stated observed at 316: It is a cornerstone of proper industrial relations that agreements made must be honoured even if they subsequently prove to be inconvenient to one or other of the parties. If there is not a guarantee that agreements will be honoured the processes of conciliation as a means of resolving industrial disputes will be at least inhibited and possibly frustrated. This would be contrary to the specific objects of the Conciliation and Arbitration Act . 132 The public interest in the maintenance and preservation of industrial instruments made by consent dictates that they should not be re-opened during their nominal term unless there are good and cogent reasons for doing so. Support for that proposition can be drawn from the observations of the Full Bench in respect of varying an award in the special case decision Re Operational Ambulance Officers (2001) 113 IR 384 at 418: By s10 of the Industrial Relations Act 1996, the Commission is required, in considering an application to vary an award, to assess whether the conditions of employment in the award are fair and reasonable. This is a primary test for evaluating whether an award should be altered . 133 Having regard to the background and history of this matter and the intention and conduct of the parties in relation to the "wrap up" agreement, it is apparent from the evidence that the 1998 Agreement was negotiated on the understanding that the "swings and roundabouts" principles would apply to the applicable annualised salaries so as to avoid double counting of overtime. The majority of employees received a pay rise following the introduction of annualised salaries and on any global analysis, employees were advantaged with fair and reasonable conditions of employment and overall, the benefits afforded may outweigh any errors made in the calculation of the "wrap up". 134 It is apparent according to the evidence that the clear intention of the parties was that the "wrap up" annualised salaries, as first explained and presented to employees in 1998, formed the basis of their consent to the proposal in full and final settlement of all claims, for the nominal term of the Agreement. Moreover, the 2001 and 2005 Agreements were also made with the consent of both parties and the evidence is that the negotiation of these instruments was in reality an extension and continuation of the negotiation process that originally formed the 1998 Agreement. Caution and restraint need to be exercised in the re-opening of awards or agreements during their nominal term. 135 In asserting that s 9.2 of the Agreement set out the objective intention of the parties in relation to the leave component of the "wrap up" calculation, Ms Hann referred to the decision of the Australian Industrial Relations Commission in Justice v Sarah A Lunn where the Full Bench determined: A fundamental feature of the general law of contract, applicable in relation to contracts of employment, is that the intention of the parties is determined objectively and, indeed, evidence of the subjective intention of the parties is not admissible in construing a contract. 136 Clearly, the reference by the Full Bench to the objective approach to determine the intention of the parties is a feature of the common law of contract which is used to determine matters related to content and interpretation. It is this objective approach that ensures the sanctity of the agreement is preserved. 137 On my analysis, the communicated intention of the parties was to accept the "wrap up" calculation as negotiated and agreed to immediately prior to the making of the 1998 Agreement. At the time, its acceptance by all parties was both public and unequivocal. The 1998 Agreement was put to members of the Union following the scrutiny and approval of senior officials of the Union. 138 Notwithstanding Mr Ross' initial approach to the Union and the respondent in 1999, the facts remain that at all times between the making of the 1998 Agreement and Mr Collins' diligence to actively pursue the matter in 2005, the interpretation of how the "wrap up" calculation was to be applied in practice was broadly consistent with the methodology and remuneration outcomes jointly agreed in 1998. 139 Having regard to the mutual intention of the parties at the time the 1998 Agreement was made and the cautious approach adopted by them to ensure its correctness, the evidence clearly established in this case is that each of the parties to the various Agreements expressly agreed and accepted that the 1998 "wrap up" calculation was correct. Viewed objectively, this was the clear and mutual intention of the parties at the time the Agreements were struck. Against this backdrop, it is my view that the mutual intention of the "wrap up" agreement as agreed at the time would have led a reasonable person with the same knowledge as the parties to reach a conclusion that it was correct. Moreover, that mutual intention subsequently influenced agreement making between the parties for some six years. 140 Taking the test of reasonableness a step further, it is my view that when the vote was taken to accept the 1998 Agreement, a reasonable person would have also understood that the Agreement represented the introduction of annualised salaries in return for acceptance of the "wrap up" as it had then been carefully explained and checked for accuracy by both parties in full settlement of all claims related to its making. That normally requires consideration, not only of the agreement terms, but also of the surrounding circumstances known to the parties, and the purpose and object of the negotiations. Accordingly, it follows that the industrial instruments negotiated between 1998 and 2005 also correctly reflected the agreement of both parties. Moreover, it was not until the error was articulated by Mr Collins that the respondent became aware of the error. Clearly, the error was an administrative oversight and there was no untoward or unconscionable conduct on the part of the respondent. 141 The respective failure of both parties to discover the error until July 2006 also lends support to the proposition that throughout the negotiations that led to the making of the 1998 Agreement, the parties relied upon, and the Union agreed with, the respondent's calculations. They had no reason at the time to either query or test those calculations. Both parties have made the same honest mistake in good faith and in the event the respondent had made an error that had resulted in a similar overpayment to Mr Ross, the appropriate time to rectify that payment and preserve the sanctity of the Agreement would be at its expiry. 142 When entering the agreement making process, each party has a fundamental responsibility to ensure that they understand and properly express the terms of agreement and that their respective positions on matters subject to the negotiations are clearly articulated and properly expressed. Against that framework, if one or other party gains an advantage, it is part of the negotiation process. The nature of enterprise bargaining is such that during negotiations, the parties to the proposed agreement may and, in the majority of cases, do alter or adjust their respective positions, and from time to time, they also surrender rights to secure advantages and generally progress negotiations. 143 The purpose of industrial awards and agreements is to provide appropriate industrial safeguards to both employees and employers. Moreover, it follows that rates of pay and conditions of employment subject to those regulatory instruments which have been checked and settled by agreement between the parties is not an appropriate base to establish through arbitration whether or not an error was made some 9 years ago. In the present matter, there is no evidence that the 1998, 2001 and 2005 Agreements represent anything other than fair, proper and reasonable outcomes for both parties. In my view, the benefits afforded to employees by the making of these agreements clearly outweighs the detrimental impact of the wrap up calculation error. The wrap up benefits were at the time a reasonably generous benefit in return for important changes agreed at the workplace. The issue for determination in this matter is not so much how the error occurred, but rather, whether the Commission should override the agreement of the parties and the circumstances related to their consent at the time. Responsibility for the errors that have permeated the Agreements since 1998 clearly rests with both parties. Accordingly, the application is dismissed. I so order. 144 Notwithstanding my determination in this matter, I recommend that the respondent gives consideration to making the appropriate adjustment to affected employees' salaries retrospective to 1 July 2006 when the claim was further investigated and the parties agreed that a mutual error had been made. J D Stanton Commissioner DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.