FULL RECOMMENDATION
INDUSTRIAL RELATIONS ACTS, 1946 TO 2004 SECTION 32, INDUSTRIAL RELATIONS ACT, 1946 PARTIES : HORAN HOMES (CASTLEMAINE) LTD - AND - BUILDING AND ALLIED TRADES UNION DIVISION : Chairman: Ms Jenkinson Employer Member: Mr Grier Worker Member: Mr Nash |
1. Construction Industry Registered Employment Agreement - Pensions Assurance and Sick Pay.
BACKGROUND:
2. A Labour Court hearing took place on the 19th October, 2006 and the Court issued a preliminary decision as follows:
DECISION:
The issue for consideration in this case concerns the scope of the Registered Employment Agreement (Construction Industry Pensions Assurance and Sick Pay), (the REA) as varied. It arises in the context of a complaint by the Building and Allied Trades Union (the Complainant) made pursuant to s32 of the Industrial Relation Act 1946 against Horan Homes (Castlemaine) Ltd, (the Respondent).
The substance of the complaint is that the Respondent has failed or neglected to comply with the said Agreement. The Respondent contends that it is not “a firm” within the meaning of the Agreement and consequently is not encompassed by its terms. The Court has decided to hereby give its preliminary ruling on this point.
The REA is expressed to apply to workers in prescribed categories who are employed by a building or civil engineeringfirm. The Respondent contends that the term “firm” means a partnership of persons and that it does not include a limited liability company. Since the Respondent is such a company it contends that the REA has no application in respect of the workers, which it employs.
Meaning of the Word “Firm”
The word “firm” can be understood as a legal term of art or it can bear an ordinary colloquial meaning. As a term of art it is defined in Murdoch’s Dictionary of Irish Law, 4th Edition, at p 462 as follows: -
- “Persons who have entered into partnership with one another; the name under which their business is carried on is called the firm name: Partnership Act 1890, s4”
The Oxford Dictionary of English, Second Edition, defines the terms as meaning: -
- “A business concern, especially one involving a partnership of two or more persons”.
Thus in its legal sense the term connotated a partnership, as in a legal or accountancy firm. However in its popular or colloquial sense it is used to describe a business regardless of its legal persona, as in Small Firms Association or in referring to State support for small firms. The term can, therefore, be properly described as ambiguous.
Issue for Consideration
In order to determine the within complaint the Court must consider which of the competing meanings is to be ascribed to the word as it appears in the REA. It is clear from s28 of the Act that the REA is an employment agreement, or a collective agreement as it would be more properly described in modern parlance. It was made between the CIF (which is a Trade Union of employers in the construction industry) and a number of named Trade Unions of workers. By operation of s30 of the Act the terms of the REA are incorporated into the individual contracts of employment of workers to whom it relates.
The primary arbitral role in the interpretation of Registered Employment Agreements has been assigned to this Court by s 33 of the Act. This Section provides: -
- (1) The Court may at any time, on the application of any person, give its decision on any question as to the interpretation of a registered employment agreement or its application to a particular person.
(2) A court of law, in determining any question arising in proceedings before it as to the interpretation of a registered employment agreement or its application to a particular person, shall have regard to any decision of the Court on the said agreement referred to it in the course of the proceedings.
(3) If any question arises in proceedings before a court of law as to the interpretation of a registered employment agreement or its application to a particular person, the court of law may, if it thinks proper, refer the question to the Court for its decision, and the decision of the Court thereon shall be final.
While this matter was not referred under the said s 33 the Court must nonetheless give its decision on the interpretation of the REA and its application to the Respondent herein in order to determine the complaint under consideration.
The Legal Principles Applicable
The REA should be construed in accordance with the ordinary rules of contractual construction (seeAdams & Others v British Airways plc[1995] IRLR 577). The object of the process is to ascertain the intention of the parties to the REA and, where there is ambiguity, to ascribe to it the meaning intended by its authors. In that process the Court must apply a presumption that the parties intended their agreement to make sense from the perspective of business efficiency. It is also to be assumed that the parties did not intend their bargain to produce an unreasonable result. InDodd v Churton[1897] 1 QB 562, Lord Esher MR formulated the rule as follows: -
- “One rule of construction with regard to contracts is that, where the terms of a contract are ambiguous, and one construction would lead to an unreasonable result, the Court will be unwilling to adopt that construction.”
It seems clear to the Court that the REA was concluded for the purpose of ensuring that all workers in the Construction Industry had access to pensions assurance and sick pay benefits. It also sought to ensure that all employers had an equal liability to provide these benefits thus maintaining a level playing field amongst employers in the industry. The general scheme of the REA is that workers who move from one employer to another, which is a well-known feature of the industry, could transfer their accrued pension benefits with them. This could only operate effectively if all employers in the industry were required to operate the scheme envisaged by the REA.
If the term “firm” is to be given its narrow legal technical meaning the agreement could not produce that result. It would only be applicable to enterprises formed as partnerships. From its own knowledge and experience the Court is satisfied that only a fraction of builders are likely to be so constituted. The great majority of employers, which are limited liability companies or sole traders, and their employees, would be outside the scope of the Agreement. In the result the agreement would be rendered nugatory in the extreme.
It is against that background the Court must ask itself if such a result could reasonably be ascribed to the parties to the Agreement.
Relevant Law
A similar question arose for consideration by the House of Lords inSchuler A.G. v Wickman Tool Sales Ltd[1974] AC 235. Here the House was required to decide if the expression “condition” used in a commercial contract was to be interpreted as referring to a term the breach of which constitutes a repudiation of the contract (which is the accepted legal meaning of the word). The Plaintiff had concluded a contract with the Defendant whereby the latter was to distribute panel presses manufactured by the former. The parties had provided that it was aconditionof the contract that named representatives of the Defendant would visit specified customers of the Plaintiff at least once per week. The Plaintiff subsequently rescinded the contract on the grounds that the stipulated visits had not been made. The Plaintiff advanced the argument that the use of the word “condition” meant that a failure, for any reason, to make a visit at the frequency specified constituted a repudiation of the contract. The House rejected this submission on the basis that such a conclusion would be so unreasonable that the parties could never have agreed to it. In his speech Lord Reid said the following: -
- “In the present case it is not contended that Wickman’s failures to make visits amounted in themselves to fundamental breaches. What is contended is that the terms of cl 7 'sufficiently express an intention' to make any breach, however small, of the obligation to make visits a condition so that any such breach shall entitle Schuler to rescind the whole contract if they so desire.
Schuler maintains that the use of the word 'condition' is in itself enough to establish this intention. No doubt some words used by lawyers do have a rigid inflexible meaning. But we must remember that we are seeking to discover intention as disclosed by the contract as a whole. Use of the word 'condition' is an indication -- even a strong indication -- of such an intention but it is by no means conclusive. The fact that a particular construction leads to a very unreasonable result must be a relevant consideration. The more unreasonable the result the more unlikely it is that the parties can have intended it, and if they do intend it the more necessary it is that they shall make that intention abundantly clear.”
The move away from a literal interpretation of contracts to a more purposive approach was developed further in subsequent decisions of the House of Lords. InAntaios Compania Naviera S.A. v. Salen Rederierna A.B.[1985] A.C. 191, 201, Lord Diplock in a speech concurred in by his fellow Law Lords observed:
- "if detailed semantic and syntactical analysis of a word in a commercial contract is going to lead to a conclusion that flouts business common sense, it must be made to yield to business common sense."
InMannai Investment Co Ltd v Eagle Star Life Assurance Co[1997] AC, 749,Lord Steyn had this to say; -
- “In determining the meaning of the language of a commercial contract, and unilateral contractual notices, the law therefore generally favours a commercially sensible construction. The reason for this approach is that a commercial construction is more likely to give effect to the intention of the parties. Words are therefore interpreted in the way in which a reasonable commercial person would construe them. And the standard of the reasonable commercial person is hostile to technical interpretations and undue emphasis on niceties of language.”
In his speech Lord Hoffman gave an everyday example of how language must be understood in the context in which it is used. He said: -
- “I propose to begin by examining the way we interpret utterances in everyday life. It is a matter of constant experience that people can convey their meaning unambiguously although they have used the wrong words. We start with an assumption that people will use words and grammar in a conventional way but quite often it becomes obvious that, for one reason or another, they are not doing so and we adjust our interpretation of what they are saying accordingly. We do so in order to make sense of their utterance: so that the different parts of the sentence fit together in a coherent way and also to enable the sentence to fit the background of facts which plays an indispensable part in the way we interpret what anyone is saying.”
InInvestors Compensation Scheme v West Bromwich Building Society[1998] 1 All ER 98Lord Hofmann, in giving the leading speech, set out five essential principles to be applied in the construction of contracts, as follows: -
- “My Lords, I will say at once that I prefer the approach of the learned judge. But I think I should preface my explanation of my reasons with some general remarks about the principles by which contractual documents are nowadays construed. I do not think that the fundamental change which has overtaken this branch of the law, particularly as a result of the speeches of Lord Wilberforce in Prenn v Simmonds [1971] 3 All ER 237 at 240-242, [1971] 1 WLR 1381 at 1384-1386 and Reardon Smith Line Ltd v Hansen-Tangen, Hansen-Tangen v Sanko Steamship Co [1976] 3 All ER 570, [1976] 1 WLR 989, is always sufficiently appreciated. The result has been, subject to one important exception, to assimilate the way in which such documents are interpreted by judges to the common sense principles by which any serious utterance would be interpreted in ordinary life. Almost all the old intellectual baggage of 'legal' interpretation has been discarded. The principles may be summarised as follows.
(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
(2) The background was famously referred to by Lord Wilberforce as the 'matrix of fact', but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.
(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action forrectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.
(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax (see Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] 3 All ER 352, [1997] 2 WLR 945.
(5) The 'rule' that words should be given their 'natural and ordinary meaning' reflects the commonsense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in Antaios Cia Naviera SA v Salen Rederierna AB, The Antaios [1984] 3 All ER 229 at 233, [1985] AC 191 at 201:- '. . . if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business common sense, it must be made to yield to business common sense.'
(It is noteworthy in the context of the instant case thatinInvestors Compensation Scheme v West Bromwich Building Societyand inSchuler A.G. v Wickman Tool Sales Ltd,the Law Lords use the word “firm” or “firms” in a sense to include bodies corporate).
What emerges from these authorities is that words used in a contract must be understood in a way, which makes business sense and imputes to the parties a desire to achieve a reasonable result having regard to the purpose of their bargain. These authorities relate to the construction of commercial contracts but the rationale on which they are based applies with arguably greater force to the construction of collective agreements such as the REA. Moreover, the primary role in interpreting such agreements is assigned to this Court and not to a Court of law. This indicates an intention on the part of the Oireachtas that such agreements should be construed in a way that takes account of industrial relations realities and that words and expressions should be given the meaning, which they would bear in an industrial relations setting.
The REA was written not by lawyers but by industrial relations practitioners. It is addressed to building employers, workers and their trade unions. Its purpose is clear and there can be no doubt that the parties to the agreement intended it to have general application in the industry. To ascribe to the parties to the REA an intention to limit its application to partnerships and to exclude all other employers would produce a manifestly absurd result. Accordingly, the Court is satisfied that the word “firm” must be understood in its colloquial meaning as referring to a business or enterprise regardless of its legal persona. In so far as the Court may have concluded otherwise in earlier cases it must now regrettably conclude that those cases were wrongly decided.
For all of these reasons the Court is satisfied that the Respondent herein is a building firm within the meaning of the REA and comes within its scope.
Accordingly, having given its finding and ruling on this preliminary point, the Court will proceed to hear the case submitted by Building and Allied Trades Union (the Complainant) pursuant to s32 of the Industrial Relations Act 1946 against Horan Homes (Castlemaine) Ltd, (the Respondent).
Signed on behalf of the Labour Court
Caroline Jenkinson
21st_November, 2006______________________
JBDeputy Chairman
NOTE
Enquiries concerning this Decision should be addressed to Jackie Byrne, Court Secretary.