Hayne, heydon, crennan, kiefel and bell jj the public service association and professional officers



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HIGH COURT OF AUSTRALIA
FRENCH CJ,

HAYNE, HEYDON, CRENNAN, KIEFEL AND BELL JJ


THE PUBLIC SERVICE ASSOCIATION AND

PROFESSIONAL OFFICERS' ASSOCIATION

AMALGAMATED OF NSW APPELLANT


AND
DIRECTOR OF PUBLIC EMPLOYMENT & ORS RESPONDENTS

The Public Service Association and Professional Officers' Association Amalgamated of NSW v Director of Public Employment

[2012] HCA 58

12 December 2012

S127/2012


ORDER
Appeal dismissed with costs.

On appeal from the Industrial Court of New South Wales



Representation
D F Jackson QC with A A Hatcher SC and M Gibian for the appellant (instructed by W G McNally Jones Staff Lawyers)
M G Sexton SC, Solicitor-General for the State of New South Wales with J G Renwick SC and A M Mitchelmore for the first to fourth respondents (instructed by Crown Solicitor (NSW))
Submitting appearance for the fifth respondent


Interveners
M G Hinton QC, Solicitor-General for the State of South Australia with
J C Cox intervening on behalf of the Attorney-General for the State of South Australia (instructed by Crown Solicitor (SA))
S G E McLeish SC, Solicitor-General for the State of Victoria with
K E Foley intervening on behalf of the Attorney-General for the State of Victoria (instructed by Victorian Government Solicitor)
S G E McLeish SC, Solicitor-General for the State of Victoria with
G J D del Villar intervening on behalf of the Attorney-General of the State of Queensland (instructed by Crown Law (Qld))
G R Donaldson SC, Solicitor-General for the State of Western Australia with F B Seaward intervening on behalf of the Attorney-General for the State of Western Australia (instructed by State Solicitor (WA))

Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.



CATCHWORDS
The Public Service Association and Professional Officers' Association Amalgamated of NSW v Director of Public Employment
Constitutional law (Cth) – Judicial power of Commonwealth – Constitution, Ch III – Institutional integrity of State court vested with federal jurisdiction – Section 146C(1) of Industrial Relations Act 1996 (NSW) provides that Industrial Relations Commission of New South Wales must "give effect to any policy ... that is declared by the regulations to be an aspect of government policy that is required to be given effect to by the Commission" when making or varying any award or order – Commission comprises judicial and non-judicial members – Judicial members of Commission sit as Industrial Court of New South Wales to exercise specific functions of Commission – Industrial Court is superior court of record and may be invested with federal jurisdiction – Whether s 146C(1) impairs institutional integrity of Industrial Court by requiring judicial members when sitting as Commission to comply with regulations when making or varying any award or order.
Words and phrases – "institutional integrity", "policy".
Constitution, Ch III.

Industrial Relations Act 1996 (NSW), Ch 4, s 146C(1).

Industrial Relations (Public Sector Conditions of Employment) Regulation 2011 (NSW).


FRENCH CJ.



Introduction

  1. Section 146C of the Industrial Relations Act 1996 (NSW) ("the IR Act") requires the Industrial Relations Commission of New South Wales ("the Commission"), when making or varying any award or order, to give effect to any policy on the conditions of employment of public sector employees that is declared by the regulations to be an aspect of government policy that is required to be given effect to by the Commission.

  2. The Public Service Association and Professional Officers' Association Amalgamated of NSW ("the PSA") challenged the validity of s 146C in the Industrial Court of New South Wales ("the Industrial Court") on the basis that it imposes a requirement upon judicial members of the Commission who are also members of the Industrial Court to give effect to government policy when sitting as the Commission other than in Court Session1. The PSA submitted that the section thereby undermines the judicial integrity of the Industrial Court having regard to the overlapping composition and the proximate operations and functions of the Commission and the Industrial Court. The Industrial Court rejected that argument. The appeal, by way of special leave to this Court from the decision of the Industrial Court, should be dismissed.

  3. Before referring to the procedural history, it is necessary to describe relevant elements of the statutory framework creating the Commission and the Industrial Court.

The statutory framework – the Industrial Relations Act 1996 (NSW)

  1. The objects of the IR Act include the provision of a framework for the conduct of industrial relations that is fair and just2 and the promotion of efficiency and productivity in the economy of the State3. The IR Act is subject to the Fair Work Act 2009 (Cth), including provisions of that Act which have effect in New South Wales because of the referral of certain matters to the Commonwealth Parliament by the Industrial Relations (Commonwealth Powers) Act 2009 (NSW)4.

  2. The IR Act establishes the Commission5. The Commission consists of a President, a Vice-President, Deputy Presidents and Commissioners6. The President, the Vice-President and the Deputy Presidents are referred to in the IR Act as "Presidential Members"7. The Commission may be constituted by one member or a Full Bench of the Commission8. A Full Bench of the Commission consists of at least three members constituted by the President for the purposes of a proceeding and must include at least one Presidential Member9.

  3. The IR Act provides for the appointment of a Presidential Member of the Commission as a "Member of the Commission in Court Session"10. A person so appointed is referred to in the IR Act as a "judicial member" of the Commission11. To be appointed as a judicial member of the Commission, a person has to have held judicial office in New South Wales or in the Commonwealth or in another State or Territory, or be an Australian lawyer of at least seven years' standing12. Judicial members can constitute the Commission, other than in Court Session, when exercising other functions13.

  4. The term "Commission in Court Session" refers to the Commission "constituted by a judicial member or members only for the purposes of exercising the functions that are conferred or imposed on the Commission in Court Session by or under [the IR Act] or any other Act or law."14 The Commission in Court Session is designated "the Industrial Court of New South Wales"15. Section 152(1) of the IR Act provides that:

"The Commission in Court Session is established by this Act as a superior court of record."

  1. For the purposes of Pt 9 of the Constitution Act 1902 (NSW) ("the Constitution Act"), the Industrial Court is a court of equivalent status to the Supreme Court and the Land and Environment Court16. A Full Bench of the Industrial Court can be composed only of judicial members17. The term "judicial office" in Pt 9 of the Constitution Act includes the "Chief Judge, Deputy Chief Judge or Judge of the Industrial Court or member of the Industrial Relations Commission in Court Session"18. The office of a judicial member of the Commission therefore attracts the same protection, in relation to removal or suspension from office, as is afforded by the Constitution Act to judges of the Supreme Court of that State19.

  2. The general functions of the Commission are set out in s 146 of the IR Act. They include:

. setting remuneration and other conditions of employment20;

. resolving industrial disputes21; and

. hearing and determining other industrial matters22.

The Commission is required to take into account the public interest in the exercise of its functions, and for that purpose is required to have regard to the objects of the IR Act, the state of the economy of New South Wales and the likely effect of the Commission's decisions on that economy23. That requirement does not apply to criminal proceedings before the Industrial Court or proceedings that the Industrial Court "determines are not appropriate."24 The power to make awards is conferred in general terms by s 10, which provides:

"The Commission may make an award in accordance with this Act setting fair and reasonable conditions of employment for employees."


  1. Certain functions of the Commission can only be exercised by the Industrial Court. They include proceedings relating to:

. unfair contracts25;

. breach of industrial instruments26; and

. the recovery of money, other than small claims under s 38027.

The Industrial Court may make binding declarations of right in relation to a matter in which it has jurisdiction and may do so whether or not any consequential relief is or could be claimed28.



  1. If a matter arises in proceedings before the Commission (other than in Court Session) that is within the jurisdiction of the Industrial Court, then "the Commission may continue to deal with that matter as the Commission in Court Session"29. It must be duly constituted or reconstituted by a judicial member or members30, and any member who is not a judicial member cannot take part in the proceedings on that matter31.

  2. There was no dispute that the Industrial Court is a "court" for the purposes of s 71 of the Commonwealth Constitution, and a court of the State of New South Wales for the purposes of s 77(iii)32. It is designated as a court by the IR Act, its members are accorded the protections of judicial office and its functions involve the exercise of judicial power33. The Industrial Court is a "court of a State" in which the Commonwealth Parliament can invest federal jurisdiction.

  3. It is questionable whether the Commission and the Industrial Court should be characterised as two distinct legal entities. The first to fourth respondents and the Attorney-General of Queensland argued, in effect, that they should. The PSA submitted that they are a single body. The text of the IR Act supports the characterisation of the Commission as one body clothed with distinct legal characters according to its composition and functions. It exercises what might broadly be called arbitral functions in its character as the Commission sitting other than in Court Session. There may be some "arbitral" functions which could also be classified as "judicial". The boundary between those classifications is not necessarily defined by a bright line34. It is, however, clear that the Industrial Court exercises judicial functions.

  4. It was not suggested that the conjunction of different legal characterisations and functions in the one body gives rise to any constitutional infirmity. The doctrine of the separation of judicial from executive and legislative powers, which is derived from the text and structure of the Commonwealth Constitution, has the consequence that a body like the Commission, combining non-judicial and judicial functions, could not be established by a law of the Commonwealth35. State legislatures, however, are not constrained by that doctrine. As Spigelman CJ said in relation to the Commission in Court Session in Powercoal Pty Ltd v Industrial Relations Commission (NSW)36:

"The mere fact that powers are not strictly separated does not impair the institutional integrity of the court."

Further, nothing in this case turns upon the question of whether the Commission when sitting other than in Court Session can be characterised as a "court" for the purposes of particular statutory provisions37.



The Amendment Act and the procedural history

  1. On 7 March 2011, the PSA filed an application in the Commission seeking two new awards. The awards claimed provided for increases in salaries and allowances for a wide range of public sector employees. The first claim related to employees already covered by a number of awards, agreements and determinations specific to particular government departments and authorities. The second claim concerned employees covered by awards relating to the Roads and Traffic Authority of New South Wales. The application was made on the basis that the nominal terms of the existing awards would expire on 30 June 2011 and that increases in salaries and allowances were justified under current "Wage Fixing principles". Considerations said to support the PSA's claims included the need for economic adjustments having regard to the current rate of inflation, changes in the cost of living and improvements in productivity and efficiency in aggregate across the public sector.

  2. While the proceedings were pending, the Industrial Relations Amendment (Public Sector Conditions of Employment) Act 2011 (NSW) ("the Amendment Act") was enacted38. It introduced a new s 146C into the IR Act. That section provides, inter alia:

"Commission to give effect to certain aspects of government policy on public sector employment

(1) The Commission must, when making or varying any award or order, give effect to any policy on conditions of employment of public sector employees:

(a) that is declared by the regulations to be an aspect of government policy that is required to be given effect to by the Commission, and

(b) that applies to the matter to which the award or order relates.

(2) Any such regulation may declare a policy by setting out the policy in the regulation or by adopting a policy set out in a relevant document referred to in the regulation.

(3) An award or order of the Commission does not have effect to the extent that it is inconsistent with the obligation of the Commission under this section.

(4) This section extends to appeals or references to the Full Bench of the Commission.

(5) This section does not apply to the Commission in Court Session.

(6) This section extends to proceedings that are pending in the Commission on the commencement of this section. A regulation made under this section extends to proceedings that are pending in the Commission on the commencement of the regulation, unless the regulation otherwise provides.

(7) This section has effect despite section 10 or 146 or any other provision of this or any other Act."



It is not necessary for present purposes to set out s 146C(8), which defines "award or order", "conditions of employment" and "public sector employee".

  1. Sections 10 and 146 of the IR Act are expressly subordinated to s 146C by operation of s 146C(7) and thereby to any declared policy upon conditions of employment. That is to say, the constraint imposed on the award-making power by s 10, that it relate to "fair and reasonable conditions of employment", may be displaced or qualified. So, too, may the requirement, in s 146, to have regard to the objects of the IR Act, the state of the economy of New South Wales and the likely effect of the Commission's decision on that economy. In effect, a policy declared by a regulation made under s 146C may preempt judgments by the Commission of those matters. It was not suggested that s 146C is invalid on that account. A parliament can confer a decision-making power on a body of its own creation, and authorise regulations which limit or qualify the exercise of that power in particular circumstances39.

  2. A parliament may also authorise the making of regulations which have effect notwithstanding provisions of the Act under which they are made. Section 146C does that. Such powers are analogous to so-called "Henry VIII" clauses40, authorising the making of regulations which amend the Act under which they are made. Those powers have been criticised for their effects upon the relationship between the parliament and the executive41, but not held invalid on that account under either the Commonwealth Constitution or constitutions of the States42.

  3. The Amendment Act affected the powers of the Industrial Court in one particular respect. The Industrial Court, as noted earlier, has jurisdiction in proceedings under Ch 2, Pt 9 of the IR Act relating to unfair contracts. It can declare void or vary a contract which it finds to be unfair43. The Amendment Act amended s 105 to provide that a contract is not an unfair contract "merely because of any provision in the contract that gives effect to a policy" declared under s 146C44. The PSA submitted that the amendment to s 105 significantly restricts the Commission's powers. The first to fourth respondents' answer was that the Amendment Act merely confined, in one respect, the existing statutory jurisdiction of the Industrial Court by removing a particular ground on which unfairness might be alleged. Whichever characterisation is preferred, the amendment to s 105 does not support any argument that s 146C is invalid. It does not subject the Industrial Court to any impermissible executive intrusion into its functions.

  4. There is a general regulation-making power conferred on the Governor by s 407(1) of the IR Act. That subsection authorises the Governor to make regulations "not inconsistent with this Act, for or with respect to any matter that by this Act is required or permitted to be prescribed or that is necessary or convenient to be prescribed for carrying out or giving effect to this Act." The reference to "the Governor" in s 407(1) is a reference to "the Governor with the advice of the Executive Council."45 The regulation-making power is subject to the general constraint imposed by s 31(1) of the Interpretation Act 1987 (NSW), that it "shall be construed as operating to the full extent of, but so as not to exceed, the legislative power of Parliament."

  5. Section 146C does not, in terms, create a regulation-making power distinct from the general power conferred on the Governor by s 407. However, it attaches legal consequences to the kind of regulation for which it provides. It also has the effect that the requirement in s 407(1) that regulations be "not inconsistent with this Act" is qualified in respect of regulations of the kind to which s 146C refers. To that extent, it may be regarded as having expanded the power conferred by s 407.

  6. The Industrial Relations (Public Sector Conditions of Employment) Regulation 2011 ("the Regulation") was made on 20 June 2011 pursuant to s 146C. It declared certain aspects of government policy to be given effect to by the Commission when making or varying awards or orders. Those aspects of government policy are referred to later in these reasons.

  7. On 20 July 2011, the PSA filed a Notice of Motion before the Industrial Court, seeking a declaration that the Amendment Act is invalid. In the alternative, the PSA sought a declaration that the Regulation is invalid. The motion was heard by the Industrial Court on 1 August 2011. On 31 October 2011, the Industrial Court dismissed the motion and reserved the costs.

  8. On 11 May 2012, this Court (Gummow, Hayne and Kiefel JJ) granted the PSA special leave to appeal from the refusal of the Industrial Court to declare that the Amendment Act is invalid. Before turning to the decision of the Industrial Court and the grounds of appeal, it is necessary to refer to the terms of the Regulation.

The Regulation

  1. The object of the Regulation, according to the Explanatory Note, was "to declare the Government's public sector policies for the purposes of section 146C of the Industrial Relations Act 1996." Clause 4 of the Regulation provides:

"The matters set out in this Regulation are declared, for the purposes of section 146C of the Act, to be aspects of government policy that are to be given effect to by the Industrial Relations Commission when making or varying awards or orders."

What are called "paramount policies" are declared in cl 5, being:

"(a) Public sector employees are entitled to the guaranteed minimum conditions of employment (being the conditions set out in clause 7).

(b) Equal remuneration for men and women doing work of equal or comparable value."

Other policies are declared in cl 6(1) but stated to be subject to compliance with the declared paramount policies. Those policies include:

"(a) Public sector employees may be awarded increases in remuneration or other conditions of employment that do not increase employee-related costs by more than 2.5% per annum.

(b) Increases in remuneration or other conditions of employment that increase employee-related costs by more than 2.5% per annum can be awarded, but only if sufficient employee-related cost savings have been achieved to fully offset the increased employee-related costs.[46]

(c) For the purposes of achieving employee-related cost savings, existing conditions of employment of the kind but in excess of the guaranteed minimum conditions of employment may only be reduced with the agreement of the relevant parties in the proceedings.

(d) Awards and orders are to resolve all issues the subject of the proceedings (and not reserve leave for a matter to be dealt with at a later time or allow extra claims to be made during the term of the award or order). However, this does not prevent variations made with the agreement of the relevant parties.

(e) Changes to remuneration or other conditions of employment may only operate on or after the date the relevant parties finally agreed to the change (if the award or order is made or varied by consent) or the date of the Commission's decision (if the award or order is made or varied in arbitration proceedings).



(f) Policies regarding the management of excess public sector employees are not to be incorporated into industrial instruments."

  1. Definitions of the terms "guaranteed minimum conditions of employment", "employee-related costs" and "employee-related cost savings" are set out in the Regulation47.

The decision of the Industrial Court

  1. It is no disrespect to the careful reasoning of the Industrial Court to observe that the essential steps in that Court's reasons for dismissing the PSA's motion were:

. The motion required consideration of the effect of the Amendment Act on the functions of the Industrial Court and whether the impugned legislation would lead to an identification of the Court in the exercise of its functions with the Executive Government of New South Wales48.

. The IR Act provides for the creation of two related but distinct bodies, the Industrial Court and the Commission. Section 146C expressly does not apply to the Industrial Court. That is a complete answer to the suggested invalidity of the Amendment Act49.

. As to the validity of the Regulation, it is sufficiently authorised by s 146C50, which prescribes the field of operation to which the Regulation needs to be connected in order to be valid51.

The grounds of appeal

  1. By its Notice of Appeal to this Court, the PSA challenged the proposition that the exclusion of the Industrial Court from the application of the Amendment Act answers its complaint that the Amendment Act undermines the institutional integrity of the Industrial Court. The PSA contended that the Industrial Court erred in failing to consider whether the requirement imposed upon judicial members of the Commission to give effect to government policy, when sitting as the Commission other than in Court Session, undermines the institutional integrity of the Industrial Court having regard to the closely intertwined composition, operation and functions of the Commission and the Industrial Court. The PSA also asserted that the Industrial Court and the Commission are a single body constituted in different ways so as to exercise particular functions. The Industrial Court was said to have erred in finding that incompatibility or repugnance could only arise as a result of non-judicial functions conferred on a judge persona designata.

Industrial tribunals in New South Wales

  1. The PSA, in its submissions, emphasised the close connection between the functions conferred on the Commission and the Industrial Court, including the Court's jurisdiction to enforce orders and awards of the Commission. It pointed to the dual functions of judicial members of the Commission. The organisational overlap of the Commission in its non-judicial and judicial characters and the involvement of judicial members in the non-judicial work of the Commission was the foundation for the PSA's argument that s 146C provides impermissibly for the Commission, including its judicial members, to be subject to direction and control by the Executive Government from time to time. It is desirable to put that argument in context by reference to the variable proximity of non-judicial and judicial functions in the history of labour market regulation in New South Wales. So much is indicated by reference to the relevant legislative history.

  2. In 1901 a "court of arbitration" was established in New South Wales52. Its jurisdiction covered the hearing and determination of industrial disputes53. It was also empowered to make awards including the prescription of a minimum rate of wages or other remuneration54. The membership of the Court comprised a President and, at the request of the President, a Deputy President, both of whom were to be judges of the Supreme Court of New South Wales55. In 1908 the Court of Arbitration was replaced by an "Industrial Court"56. Industrial "boards" were established with power to make awards and decide disputes with respect to the industries for which they were constituted57. The Industrial Court's jurisdiction was primarily concerned with appeals from decisions of the boards58, the enforcement of awards59 and proceedings in respect of offences such as prohibited strikes or lockouts60. Membership of that Court was limited to Supreme Court or District Court judges61.

  3. The Industrial Court was replaced by the Court of Industrial Arbitration in 191262. The Court of Industrial Arbitration was designated a superior court. Its jurisdiction and powers extended to those conferred upon the industrial boards63, including the making of an award if a board refused to do so64. The Court was to be constituted by the judge of the former Industrial Court65. Supreme Court or District Court judges or barristers of at least five years' standing were entitled to be appointed if the office of the judge became vacant, or as an additional judge of the Court66.

  4. In 1926 the Industrial Commission of New South Wales was established. The jurisdiction and powers of the Court of Industrial Arbitration were vested in the Commission67. The amending legislation provided for "conciliation committees", each of which was empowered to "inquire into any industrial matter in the industry for which it is established" and to "make an order or award binding on any or all employers and employees in the industry"68. The jurisdiction of the Commission was limited by reference to that of the conciliation committees. The Commission could not determine any industrial matter or make an award relating to the industry for which a committee was established, except upon appeal from a committee or unless satisfied that the proceedings before a committee had failed to result in an award69. In 1927 the Commission was established as a superior court of record70. Its membership was limited to a Supreme Court or District Court judge, a barrister of at least five years' standing or a solicitor of at least seven years' standing71.

  5. The Industrial Arbitration Act 1940 (NSW) constituted a new Industrial Commission of New South Wales. Like its predecessor, that Commission was designated as a superior court of record72. The qualifications for appointment to the new Commission remained the same73. Unlike its predecessor, however, the new Commission's jurisdiction and powers extended to those conferred on conciliation committees74. Upon an application for a new award or the renewal of an award, the Industrial Commission was empowered to "review the conditions of the industry or calling, together with the wages payable in such industry or calling"75.

  6. The Industrial Arbitration Act 1940 (NSW) was repealed by the Industrial Relations Act 1991 (NSW)76. That Act constituted an Industrial Relations Commission of New South Wales77. It also constituted the Industrial Court of New South Wales as a superior court of record78. The Commission was empowered to establish conciliation committees in relation to an identifiable industry or enterprise79. That Act provided that a person might be appointed and hold office both as a judge of the Industrial Court and as a Presidential Member of the Commission80. In 1996, the Industrial Relations Act 1991 (NSW) was repealed by the IR Act81, which is the legislation under consideration in these proceedings.

  7. The legislative history indicates a longstanding, albeit varying, connection between non-judicial and judicial functions in labour market regulation in New South Wales. Those relationships may be seen as reflecting the constitutional authority of the State legislature in structuring the regulatory and judicial institutions of the State unconstrained by the doctrine of separation of executive and judicial powers applicable to federal courts. There are, however, as this Court has held in a number of decisions, limits upon the powers of State legislatures to make laws imposing on State courts functions which are incompatible with their institutional integrity as courts. A State legislature cannot subject State courts to direction by the executive government of the State82, nor enlist a court of the State to implement decisions of the executive in a way that is incompatible with the court's institutional integrity83. Nor can it confer upon a judge of a State court a non-judicial function which is substantially incompatible with the functions of the court of which the judge is a member84.

  8. There is no suggestion in this case that, apart from s 146C itself, the IR Act creates a relationship between the Commission and the Industrial Court which gives rise to any impermissible incompatibility between the exercise by the judicial members of their functions as members of the Commission and their functions as members of the Industrial Court. As appears from what follows, s 146C does not give rise to any such incompatibility.

The operation of s 146C and the Regulation

  1. The operation of s 146C and the nature of the Regulation determine the disposition of this appeal. It was submitted by the PSA that s 146C(1) requires the Commission, in making or varying an award or order, to give effect to any policy on conditions of employment of public sector employees that is declared by the regulations. The declaration, it was submitted, amounts to an instruction to the Commission by the Executive, requiring it to comply with the identified policy of the Government. It was said to be immaterial that the direction takes the form of a regulation. The PSA also pointed to the express application of s 146C to pending proceedings and the application of any policy declared by regulation to proceedings pending at the time of the making of such regulation. The PSA submitted that the capacity to direct the Commission in pending proceedings permits the Government to alter or dictate the outcome, or require the acceptance of the Government's own submissions, in those proceedings.

  2. The PSA submissions require attention to be given to the following questions:
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