FWCFB 7889
FAIR WORK COMMISSION DECISION
Fair Work Act 2009
s.604—Appeal of decision
DP World Brisbane Pty Ltd and Others v Maritime Union of Australia, The
VICE PRESIDENT CATANZARITI
SENIOR DEPUTY PRESIDENT WATSON
SENIOR DEPUTY PRESIDENT HAMBERGER
DEPUTY PRESIDENT KOVACIC
BRISBANE, 6 NOVEMBER 2014
Appeal against decision  FWC 1523 and order [PR548508] of Deputy President Booth at Sydney on 10 March 2014 in matter number C2012/1405.
 This matter concerns an appeal by DP World Brisbane Pty Ltd, DP World (Fremantle) Limited, DP World Melbourne Limited and DP World Sydney Limited (collectively “DP World” or the Appellants) against a decision and order of Deputy President Booth issued on 10 March 2014.
 The decision and order concerned a dispute initiated by The Maritime Union of Australia (MUA - the Respondent) in accordance with the dispute settlement procedure of the 2011 enterprise agreements operating at DP World’s Brisbane, Fremantle, Melbourne and Sydney terminals 1. In short, the dispute determined by Deputy President Booth concerned the implementation by DP World of the DP World Alcohol and Other Drugs Policy (the Policy) across its operations. The Policy is a national policy intended to replace site-specific drug and alcohol policies operating at DP World’s terminals.
 The Policy provides for random alcohol and drug tests. Tests for alcohol use an approved breathalyser unit with a saliva sample by way of oral swab also taken to test for drugs. The saliva sample is tested on site. If the saliva sample test result is negative the employee returns to work. If, however, the saliva sample tests positive for specified drugs, the employee is required to provide a urine sample which is then tested off site. This purpose of this second test is to confirm the results of the saliva test 2.
 The MUA contended before Deputy President Booth that, in developing the Policy, DP World had not complied with its obligations to consult under the relevant enterprise agreements and that, further, the inclusion of urine testing as confirmatory testing for drugs in the Policy was inconsistent with the enterprise agreements. The relevant clause, clause 17.8, in all of the enterprise agreements provided:
“17.8 Drug and Alcohol testing
The parties acknowledge the Company’s drug and alcohol policy will incorporate a testing regime which includes random drug and alcohol testing and will utilise swab testing.”
 By way of background, the MUA’s log of claims for the 2011 enterprise agreements included a claim in respect of drug and alcohol testing. The claim was “Drug/alcohol - For cause testing as per Fremantle system.” 3 The Fremantle system, i.e. the arrangement at DP World’s Fremantle terminal, involved “for cause” testing, preliminary tests conducted using oral fluid testing, confirmatory tests using urine testing, with confirmatory tests only performed where the donor had tested positive at the preliminary test.
 The Transport Workers’ Union of Australia (TWU) was granted permission to make submissions in the proceedings below on the basis that the Policy would also apply to its members entering DP World’s facilities.
 With regard to the consultation issue, Deputy President Booth declined to make the orders sought by the MUA and the TWU and stated that, as the TWU was not covered by the enterprise agreements operating at DP World’s terminals, the Commission had no jurisdiction to order DP World to consult with the TWU concerning the Policy 4.
 In respect of the inclusion of urine testing in the Policy, Deputy President Booth determined that the parties had intended that oral swab testing be used for random tests for drugs but was unable to determine the parties’ intention regarding the method of testing for a second test. In those circumstances, the Deputy President considered it necessary to “give consideration to the merit of using urine testing for a second test.” 5 Having done so, the Deputy President concluded that “use of urine for a second test following a non-negative oral test is unjust and unreasonable and I will order that both the initial and second tests use oral fluid not urine.”6 The Deputy President issued an order to that effect on 10 March 20147. The order also provided that the second test was to test for the same drugs as the initial test.
 DP World lodged an appeal against Deputy President Booth’s decision and order on 29 March 2014, citing eight grounds for appeal. Those grounds included that the Deputy President erred in:
● failing to give effect to the common intention of the parties that the relevant enterprise agreements would require a drug and alcohol testing regime that utilised urine testing for the second and confirmatory test;
● finding that it was necessary to give consideration to the merit of using urine for a second test; and
● finding that the use of urine testing for a second test is unfair and unreasonable.
 On 9 April 2014, Vice President Catanzariti handed down a decision 8 staying the operation of Deputy Booth’s decision and order pending determination of DP World’s appeal.
The Appellants’ submissions
 In its outline of submissions, DP World contended that Deputy President Booth erred:
(1) in respect of the proper construction and application of clause 17.8;
(2) by failing to construe clause 17.8 having regard to the common intention of the parties;
(3) by making inconsistent findings, and by failing to give proper or adequate weight, in relation to the relative merits of the second or confirmatory test being an oral swab test or a urine test; and
(4) by finding that the use of a urine test for the confirmatory test was unjust and unreasonable.
 DP World submitted that the dispute was not about whether urine testing should be the primary or sole means of testing employees for drug usage or impairment but about whether urine testing should (or could, under the enterprise agreements) be used for the second or confirmatory test.
 DP World further submitted that Deputy President Booth failed to have regard to the fact that urine testing for the second/confirmatory test had been an established practice at all its terminals for some time, with urine testing used at its Brisbane and Sydney terminals for both the first and second test (elsewhere oral swab testing was used for the primary test). Against that background, DP World submitted that the Commission should be slow to impose a result on the parties which is inconsistent with their bargains and the historical arrangements between the parties.
 With regard to its contentions outlined above, DP World submitted that:
● Deputy President Booth’s literal interpretation of clause 17.8 was not literal as it required the insertion of words that do not appear in the clause and overlooked breath testing as the primary test for alcohol related impairment;
● there was nothing in the Policy which proscribed the use of urine or breath testing, adding that the Policy was consistent with clause 17.8;
● industrial instruments should be construed so as to identify the common or mutual intentions of the parties as expressed in the terms of their agreement, adding that the common intention of the parties in this case was for the Policy to reflect the Fremantle system;
● during bargaining both parties had made concessions on the drug and alcohol policy issue, with DP World agreeing to the inclusion of a clause regarding the issue in the 2011 agreements and the MUA agreeing to random testing (as opposed to for cause testing as per its original claim);
● Deputy President Booth erred in finding that the term Fremantle system highlighted oral testing more than for cause testing as it was only in Fremantle that oral swab testing was used 9 - with DP World highlighting that in fact oral testing was also a feature of the site-specific drug and alcohol policies operating at the time at DP World’s Adelaide and Melbourne terminals;
● Deputy President Booth’s findings placed DP World in a position where it was forced to accept an ineffective testing system, adding that her focus on the safety dimensions of the testing regime overlooked the use of urine testing to validate the primary test; and
● Deputy President Booth’s conclusion that urine testing was unjust and unfair did not take into account that prior to the 2011 agreements every DP World terminal used urine testing without demur.
 At the hearing, DP World contended that Deputy President Booth’s reading of clause 17.8 was inconsistent with the history and context of the site-specific drug and alcohol policies operating at its terminals 10. Further, Deputy President Booth did not do what the dispute settlement provisions in the 2011 enterprise agreements required the Commission to do, i.e. settle a dispute about the application of the agreement11. This is because Deputy President Booth did not interpret clause 17.8, instead concluding that as the intent of the clause was unclear she needed to consider the merits of two forms of testing for the purpose of the second test to determine which was the most appropriate.
 In summary, DP World submitted that permission to appeal should be granted, the appeal upheld and the orders made by Deputy President Booth set aside. Further, the Bench should dismiss the MUA’s amended application or, alternatively, remit it to a different member for re-hearing.
The Respondent’s submissions
 Conversely, the MUA submitted that the appeal should be dismissed and that permission to appeal should be refused.
 More specifically, the MUA submitted that Deputy Booth correctly interpreted clause 17.8 as there was nothing in the provision which suggested that there was an intention to continue urine testing, particularly as urine testing is not mentioned at all in the provision. In support of that point, the MUA emphasised that only one form of testing was prescribed by clause 17.8 12, i.e. oral swab testing.
 The MUA further submitted that Deputy President Booth in determining the dispute applied the correct test, that being whether the Policy was “unjust or unreasonable.” In that regard, the MUA submitted that the Deputy President’s conclusion was consistent with all the authorities of the Commission and its predecessors on the methods of testing.
 As to the matter before this Bench, the MUA cited the Full Bench decision in Endeavour Energy v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia; Administrative, Clerical and Services Union; Association of Professional Engineers, Scientists and Managers, Australia 13 as establishing that it is not the function of an appeal bench to revisit the facts, circumstances and submissions in order to reach its own conclusions as to merits, except where error has been demonstrated in the decision at first instance14.
 When asked by the Bench as to whether the Policy permitted breath testing for alcohol, the MUA submitted that a variation to the agreements would be required to permit any form of testing other than oral swab testing.
 The MUA also asserted that DP World in its submissions sought to rely on arguments which it had not raised in the proceedings before Deputy President Booth. The MUA cited several examples of this, including the Appellants’ submission that the purpose of the Policy went beyond testing for impairment to issues such as education and training, and support for employees. The MUA described this as “unfair and inappropriate” 15, later characterising the Appellants’ submissions as “an attempt to rerun the case of first instance in a situation where there is no error.”16
The TWU’s submissions
 The TWU was granted permission to make submissions in the appeal proceedings. The TWU made limited submissions in relation to interpretation, but otherwise supported the submissions of the MUA. With regard to the interpretation of the relevant agreement clause, the TWU submitted that based on a literal reading of the provision it precluded the use of urine testing. The TWU also submitted that material relating to the negotiations leading to the making of the enterprise agreements and the parties’ conduct following the approval of the agreements were matters that fell outside the type of objective facts that may be considered in the interpretation of an industrial instrument.
 The TWU further submitted that the proper approach for the Full Bench to adopt on appeal is to consider whether it was open to Deputy President Booth on the evidence and material in this matter to conclude that the requirement that urine testing for the second test was unjust and unreasonable and that an oral swab test should be adopted instead.
 As to the proposition that the interpretation of the clause proposed by the MUA would preclude breath testing for alcohol, the TWU submitted that one possible explanation for this was that it was an oversight as presumably there was no issue with this form of testing. 17
Consideration of the issues
 Apart from the primary questions of construction and interpretation before the Deputy President, the decision under appeal involved the exercise of discretion. As such, the principles in House v The King 18 are relevant:
“The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.” 19
 In short, for the appeal to succeed we must find that Deputy President Booth’s decision was affected by error.
 Turning now to the substance of the appeal. The dispute Deputy President Booth was asked to determine required the interpretation of clause 17.8 of DP World’s 2011 enterprise agreements. In this regard, we note and accept DP World’s submissions “that this is not a case about whether urine testing should be the primary or sole means of testing employees as to their usage of drugs or impairment” and that “it would be wrong to view the case in that way.” 20
 As referred to in Deputy President Booth’s decision, the approach to the interpretation and construction of enterprise agreements was considered by a Full Bench in DP World Brisbane Pty Ltd v The Maritime Union of Australia 21 where the Full Bench reviewed the authorities as follows:
“ The task of construing an expression in an enterprise agreement (such as the expression ‘subject to any appeal rights’ in clause 24.1.1(e)) begins with a consideration of the ordinary meaning of the words having regard to their context and purpose. As Gleeson CJ and McHugh J observed in Amcor Limited v CFMEU:
‘The resolution of the issue turns upon the language of the particular agreement, understood in the light of its industrial context and purpose ...’
 Context may appear from the text of the agreement taken as a whole, its arrangement and the place in it of the provision under construction. The legislative context against which the agreement was made and in which it was to operate is also a relevant contextual consideration.
 The task is to identify the common intention of the parties as expressed in the terms of their agreement, the subjective intentions or expectations of the parties are irrelevant. In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd the High Court described the task, in the context of commercial contracts, as follows:
‘It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.’
 Importantly, the task of interpreting an enterprise agreement does not involve re-writing a provision in order to give effect to the Commission’s view of what would be fair and just, without regard to the terms of the agreement. As Madgwick J observed in Kucks v CSR Limited:
‘But the task remains one of interpreting a document produced by another or others. A court is not free to give effect to some anteriorly derived notion of what would be fair or just, regardless of what has been written into the award. Deciding what an existing award means is a process quite different from deciding, as an arbitral body does, what might fairly be put into an award. So, for example, ordinary or well-understood words are in general to be accorded their ordinary or usual meaning.’
 The Acts Interpretation Act 1901 (Cth) may also be applicable to the construction of agreements approved under Division 4 of Part 2-4 of the Act, as if the agreement were an act. This may be so because of the operation of s.46 of the Acts Interpretation Act 1901 (Cth) …
 A consequence of the application of the Acts Interpretation Act 1901 (Cth) to enterprise agreements would be that extrinsic materials may be used as an aid to construction, as provided for in s.15AB of that act.
 While the parties before us accepted that the Acts Interpretation Act 1901 (Cth) applied to enterprise agreements, it is unnecessary for us to decide this issue because in the circumstances of this case there is no relevant extrinsic material as to the parties’ mutual intentions in respect of clause 24.1.1(e).” [Citations not included]
 In its submissions DP World relied on various authorities which dealt with the approach to interpretation, including the matters which may be taken into account when interpreting an agreement. The authorities included K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd 22; Mainteck Services Pty Ltd v Steiun Heurty SA23; and Stratton Finance Pty Limited v Webb24.
 As to the admissible surrounding circumstances, DP World relied on BP Australia Pty Limited v Nyran Pty Limited 25 which said:
“…`the objective framework of facts’. It will include evidence of prior negotiations so far as they tend to establish objective background facts known to both parties and the subject matter of the contract. It will also include facts so notorious that knowledge of them is to be presumed. Additionally it will include evidence of a matter in common contemplation and constituting a common assumption. From the evidence of that setting the parties’ presumed intention may be taken into account in determining which of two or more possible meanings is to be given to a contractual provision.”
 On the issue of interpretation, the MUA relied upon Codelfa Construction Pty Ltd v State Rail Authority (NSW) (Codelfa) 26 which stated:
“The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning.”
 The TWU similarly relied on Codelfa, among other authorities, when dealing with the issue of interpretation in its submissions.
 The key elements which can be distilled from the above authorities regarding the construction or interpretation of agreements are:
(i) the construction task begins with considering the ordinary meaning of the words having regard to their context and purpose - ordinary or well-understood words should generally be accorded their ordinary or usual meaning;
(ii) where the language is ambiguous or open to differing interpretations it is permissible to have regard to surrounding circumstances or context to assist in the interpretation of an agreement;
(iii) regard should not be had to the subjective beliefs or understandings of the parties about their rights and liabilities;.
(iv) the meaning of the provision is to be determined with regard to what a reasonable person would have understood it to mean, with this usually requiring consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction; and
(v) a court or tribunal is not free to give effect to some anteriorly derived notion of what would be fair or just, regardless of what has been written into the industrial instrument.
 What is apparent, based on the submissions in this matter and the submissions and evidence before Deputy President Booth, is that the language in clause 17.8 is open to differing interpretation. As previously mentioned, clause 17.8 provided that “The parties acknowledge the Company’s drug and alcohol policy will incorporate a testing regime which includes random drug and alcohol testing and will utilise swab testing.” From a reading of the clause it is clear that it provides a policy which incorporates a testing regime that includes random drug and alcohol testing. This is not disputed. However, the words “and will utilise swab testing” are ambiguous in that they can be interpreted to mean either that oral swab testing be the sole form of testing (as advocated by the MUA) or but one form of testing (as advocated by DP World). Put simply, the words can be read and interpreted in either an exclusive or non-exclusive way.
 Against that background, Deputy President Booth observed that:
“ Notwithstanding my literal reading of the clause I am left with sufficient doubt about its meaning that it becomes necessary for me to give consideration to the merit of using urine testing for a second test.”
 Drawing on the key elements derived from the abovementioned authorities, in circumstances where there was doubt about the meaning of the clause, Deputy President Booth should, with respect, have turned to the surrounding circumstances and context to determine the dispute before her, i.e. the interpretation of clause 17.8. However, as can be seen from the above extract from her decision, Deputy President Booth concluded that it was necessary for her to consider the merit of using urine for the second test.
 In doing so, Deputy President Booth fell into significant error. This is because the dispute before the Commission did not concern whether it was appropriate for urine testing to be used for the second test or whether its use was unjust or unreasonable - but, rather, whether clause 17.8 permitted or precluded urine testing for the second or confirmatory test.
 In those circumstances, we consider it is in the public interest to grant DP World permission to appeal the decision and order of Deputy President Booth.
 As to the interpretation of clause 17.8, key aspects of the surrounding circumstances and context can be summarised as:
● urine testing was an established part of the site-specific drug and alcohol testing arrangements operating at each of DP World’s terminals;
● the MUA’s claim in respect of the drug and alcohol policy issue sought “For cause testing as per Fremantle system”;
● it was not disputed that the Fremantle system involved preliminary drug tests conducted using oral fluid testing, confirmatory tests using urine testing, with confirmatory tests performed only where the donor had tested positive at the preliminary test;
● no concerns were raised by employees regarding urine testing during the consultations undertaken by DP World in developing the Policy; and
● alcohol breath testing was also not explicitly referred to in clause 17.8 despite being an established component of DP World’s site-specific arrangements.
 The surrounding circumstances and context in this case support an interpretation of clause 17.8 that it does not preclude the use of urine testing for the second or confirmatory drug test.
 Finally, we wish to deal with one of the submissions made by the MUA, i.e. that DP World sought to raise issues on appeal that it had not raised before Deputy President Booth. DP World addressed this submission in its oral submissions in reply. While we acknowledge that some of the issues relied upon by DP World in the proceedings before us may not have been canvassed by it as fully below, we are nevertheless satisfied that they were touched on below.
 For the reasons outlined above, permission to appeal is granted. The appeal is upheld and Deputy President Booth’s decision and order are quashed, and the stay order lifted.
Y Shariff of counsel for the Appellants.
S Crawshaw SC for the Respondent.
M Gibian of counsel for the TWU.
1 DP World Brisbane Enterprise Agreement 2011 - AE894187; DP World Fremantle Enterprise Agreement 2011 - AE894529; DP World Melbourne Enterprise Agreement 2011 - AE893717; DP World Sydney Enterprise Agreement 2011 - AE893741
2 Appeal Book at page 1820
3 Ibid at page 1053
4  FWC 1523 at paragraph 
5 Ibid at paragraph 
6 Ibid at paragraph 
8  FWC 2404
9  FWC 1523 at paragraph 
10 Transcript at PN204
11 Ibid at PN 211
12 Ibid at PN295
13  FWAFB 4998
14 Transcript at PN346
15 Ibid at PN324
16 Ibid at PN351
17 Ibid at PN359
18 (1936) 55 CLR 499.
19 Ibid at 504-505
20 Applicant’s Outline of Submissions at paragraph 2.2
21  FWCFB 8557
22 (1985) 157 CLR 309 at 315
23  NSWCA 184 at paragraphs 73 to 84
24  FCAFC 110 at paragraphs 36 to 39
25  FCA 520; 198 ALR 442 at 
26 (1982) 149 CLR 337 at 352