Industrial Relations Commission New South Wales Medium Neutral Citation: Public Service Association and Professional Officers' Association Amalgamated Union of NSW v Director of Public Employment [2011] NSWIRComm 143 Hearing dates: 1 August 2011 Decision date: 31 October 2011 Jurisdiction: Industrial Court of NSW Before: Walton J, Vice-President; Kavanagh J; Backman J Decision: 1. The Notice of Motion filed on 20 July 2011 is dismissed. 2. Costs are reserved. Catchwords: Constitutional law - application for declaratory relief - challenge to constitutional validity of Amendment Act - Chapter III courts - Court and Commission separate entities - Kable doctrine - question of impairment of institutional integrity or appearance of - no invalidity found - regulation - regulation within power - motion dismissed Legislation Cited: Administrative Appeals Tribunal Act 1975 (Cth) Administrative Decisions Tribunal Act 1997 Commonwealth Constitution Constitution Act 1902 (NSW) Fair Work Act 2009 (Cth) Industrial Relations Act 1996 Industrial Relations (Commonwealth Powers) Act 2009 Industrial Relations Amendment (Public Sector Conditions of Employment) Act 2011 Industrial Relations (Public Sector Conditions of Employment) Regulation 2011 Interpretation Act 1987 Judicial Officers Act 1986 Judiciary Act 1903 (Cth) Police Act 1990 Victorian Civil and Administrative Tribunal Act 1998 (Vic) Cases Cited: Brian Rochford Ltd v Textile Clothing & Footwear Union of New South Wales (1998) 85 IR 332; (1998) 47 NSWLR 47 GIO Australia Ltd v O'Donnell (1996) 70 IR 1 Gypsy Jokers Motorcycle Club Inc v Commissioner of Police [2008] HCA 4; (2008) 234 CLR 532 Hilton v Wells (1985) 157 CLR 57 Hollingsworth v Commissioner of Police (1998) 81 IR 276; (1998) 47 NSWLR 104 International Finance Trust Company Limited v New South Wales Crime Commission [2009] HCA 49; (2009) 240 CLR 319 K-Generation Pty Ltd v Liquor Licensing Court [2009] HCA 4; (2009) 237 CLR 501 Kable v Director of Public Prosecutions for the State of New South Wales [1996] HCA 24; (1996) 189 CLR 51 Morrison v Chevalley [2010] NSWIRComm 116; (2010) 198 IR 30 Re Criminal Proceeds Confiscation Act 2002 (Qld) [2003] QCA 249; [2004] 1 Qd R 40 South Australia v Totani [2010] HCA 39;(2010) 242 CLR 1 Vanstone v Clark [2005] FCAFC 189; (2005) 147 FCR 299 Virtue v New South Wales Department of Education and Training (1999) 92 IR 428 Wainohu v State of New South Wales [2011] HCA 24; (2011) 278 ALR 1 Category: Principal judgment Parties: Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales (Applicant) Director of Public Employment (First Respondent) The Roads and Traffic Authority of New South Wales (Second Respondent) NSW Attorney General (Intervening) NSW Minister for Finance & Services (Intervening) Unions NSW (Intervening) Representation: A A Hatcher SC with M Gibian of counsel (Applicant) R C Kenzie QC with A T Britt of counsel (First Respondent) S E J Prince of counsel (Second Respondent) J V Agius SC with S B Benson of counsel (Intervenor - NSW Minister for Finance & Services) M G Sexton SC with J G Renwick SC (Intervenor - NSW Attorney General) I Taylor of counsel (Intervenor - Unions NSW) W G McNally Jones Staff (Applicant) Crown Solicitor's Office (First & Second Respondents) Solicitor-General (NSW Attorney General) File Number(s): IRC 1276 of 2011 Judgment 1By Notice of Motion filed on 20 July 2011, the Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales ("the PSA") made an application for a declaration that the Industrial Relations Amendment (Public Sector Conditions of Employment) Act 2011 ("the Amendment Act") (which enacted s 146C of the Industrial Relations Act 1996 ("the Act")) is invalid and, in the alternative, a declaration that the Industrial Relations (Public Sector Conditions of Employment) Regulation 2011 ("the regulation") is invalid. Constitutional Validity 2The Industrial Court of New South Wales is the title of the Industrial Relations Commission of New South Wales ("the Commission") when constituted as the Commission in Court session ("the Court") (see s 151A of the Act). It is a superior court of record (s 152). The Court is constituted by a judicial member or members of the Commission only for the purposes of exercising the functions that are conferred or imposed on the Court by or under the Act or any other Act or law (s 151(1)). The Court's jurisdiction is set out in s 153 and includes the declaratory jurisdiction which is invoked in this matter (see s 154). 3The Court is a " court of a State " capable of being invested with federal jurisdiction for the purposes of s 77(iii) of the Commonweath Constitution and is invested with federal jurisdiction by operation of s 39(2) of the Judiciary Act 1903 (Cth): Morrison v Chevalley [2010] NSWIRComm 116; (2010) 198 IR 30 at [141]-[151] (see the approach of Gummow, Hayne, Heydon, Crennan and Kiefel JJ in K-Generation Pty Ltd v Liquor Licensing Court [2009] HCA 4; (2009) 237 CLR 501 at [113]-[131] and also note that the Court is invested with specific federal jurisdiction under Pt 4-1, Div 2 of the Fair Work Act 2009 (Cth)). In this regard, the Court is vested with the power to resolve the question of constitutional validity raised in this matter. As we will discuss below, this same consideration is also relevant to the ultimate disposition of the questions posed in this matter. Submissions 4The legal premises upon which the PSA, for whom Mr A A Hatcher SC and Mr M Gibian of counsel appeared, founded its application for a declaration of constitutional invalidity were as follows: 1. Any legislation which impairs the institutional integrity of the Court in a manner inconsistent with Chapter III of the Constitution is invalid. Legislation which purports to direct courts as to manner and outcome of the exercise of their jurisdiction impermissibly impairs the character of the courts as independent and impartial tribunals. 2. The conferral of functions by legislation having the effect of impairing the institutional integrity of a State court or which are incompatible with the Court operating as a repository of federal jurisdiction will not only arise from interference in the judicial functions of the Court itself or its judges sitting in that capacity. Such incompatibility can also arise as a result of non-judicial functions being conferred on the Court or such functions being conferred upon individual judges of the Court. Thus, a function conferred upon a judge in his or her individual capacity or upon another body of which a judge is a member will give rise to repugnance or incompatibility for the purposes of Chapter III of the Constitution where the performance of the function would impair the defining characteristics of the court of which the judge is part. 5The latter proposition is based on the joint judgment of French CJ and Kiefel J in Wainohu v New South Wales [2011] HCA 24; (2011) 278 ALR 1 at [47] that the application of the Kable principle ( Kable v Director of Public Prosecutions for the State of New South Wales [1996] HCA 24; (1996) 189 CLR 51) had the result that the State legislatures could not validly enact a law which would confer upon any court a function (judicial or otherwise) incompatible with the role of that court as a repository of federal jurisdiction. 6Upon those foundations, the PSA contended that the Amendment Act was constitutionally invalid because the Act impaired the institutional integrity of the Court by impairing the institutional integrity of the Commission when constituted as the Court. The Amendment Act did so, it was submitted, by destroying the reality and appearance of the independence and impartiality of 'the Commission' and by enlisting 'the Commission' as an instrument for the implementation of government policy. 7It was not, however, part of the case brought by the PSA that the Amendment Act would be constitutionally invalid if it had the effect of impairing the Commission in the aforementioned manner, when the Commission was only constituted as a tribunal carrying out the arbitral functions of setting wages, conditions of employment or other such functions conferred upon the tribunal under the Act. 8Notwithstanding that s 146C(5) of the Act expressly excluded the Court from the operation of the Amendment Act, the PSA contended that the requisite impairment, nonetheless, arose because: 1. The Commission is created as a single body constituted as either the Commission or the Commission in Court Session for the purposes of exercising different functions conferred on that body; 2. Alternatively, whether the Commission and the Court should be regarded as distinct tribunals is immaterial because, having regard to the provisions of the Act, it is clear that the composition, operation and function of the Commission and the Court are extremely closely intertwined. 9As to the first of these propositions, the PSA contended that the Commission and the Court comprised a single body for the following reasons: (a) The only persons capable of being appointed as members of the Court are Presidential Members of the Commission; (b) It has been held that the Commission is created as a single body constituted as either the Commission or the Commission in Court Session for the purpose of exercising different functions conferred on that body: Brian Rochford Ltd v Textile Clothing & Footwear Union of New South Wales (1998) 85 IR 332; (1998) 47 NSWLR 47 at 65. 10As to the second contention, Mr Hatcher submitted the question as to whether the Commission and the Court were distinct tribunals was ultimately immaterial because, having regard to the provisions of the Act, the composition, operation and function of the Commission and the Court were extremely closely intertwined, such that the requisite impairment, nonetheless, arose. This was evident from features of the Act and other relevant legislation, including: (a) Only a Presidential Member of the Commission could be appointed as a member of the Court; (b) A person appointed as a member of the Court was referred to as a " judicial member of the Commission "; (c) The Court " is the Commission constituted by a judicial member or members " for the purposes of exercising functions conferred on the Court; (d) Certain functions " of the Commission " are to be exercised only by the Court; (e) Certain functions conferred upon the Commission are only to be exercised by judicial members of the Commission; (f) If a matter arises in Commission proceedings within the jurisdiction of the Court, the " Commission may continue to deal with that matter " as the Court; (g) Whilst the Act permitted the Commission to be constituted in any proceedings by any member of the Commission or a Full Bench of the Commission (s 155), judicial members of the Commission (being Presidential Members) have jurisdiction to, and the Act contemplates that judicial members will sit on matters not required to be dealt with by the Commission constituted as the Court: see s 151(2). Furthermore, some functions of the Commission are required to be exercised by judicial members of the Commission even though not allocated to the Commission when constituted as the Court: see Police Act 1990, s 181K; (h) The Court has jurisdiction with respect to the enforcement of rights or obligations created by the Commission in exercise of its arbitral functions such as proceedings with respect to contraventions of dispute orders, breach of industrial instruments and recovery of money: ss 153(1)(d), (f) and (g). That is, the Court may be required to undertake a judicial determination of rights created by the Commission when giving effect to government policy. This combination of functions fatally undermines the reality and appearance of the independence and impartiality of the Commission in Court Session ; (i) The Amendment Act also affected the functions of the Court. The Amendment Act inserted a new s 105(2) into the Act so as to provide that a contract is not to be found to be unfair " merely because of any provision in the contract that gives effect to a policy that is declared under section 146C ". The determination of unfair contract proceedings under Pt 9 of Ch 2 of the Act is reserved for the Court: s 153(1)(c). As a consequence, the Court is required to make findings dictated by government policy declared for the purposes of s 146C; (j) The Court has power under s 154 of the Act to make " binding declarations of right in relation to a matter in which the Commission (however constituted) has jurisdiction ". Because s 146C of the Act may operate in a way which controls or restricts the jurisdiction of the Commission, the scope of the Court's power under s 154 and the manner of exercise of that power may directly be affected by a decision of the executive as to government policy; (k) The Commission constituted by a judicial member, in a proceeding in which it is required to act according to the direction of the Executive by reason of s 146C may, under s 176(3), reconstitute itself as the Court in the very same proceeding in order to deal with a matter arising in the proceeding that is within the jurisdiction of the Court. The Court may hear and determine a proceeding which was, at least in part, subject to executive direction under s 146C; (l) All members of the Court have jurisdiction to exercise the arbitral functions of the Commission and, when doing so, will (as a result of the Amendment Act) be subject to the direction of the executive and required to give effect to any declared government policy. The fact that members of the Court, when exercising arbitral functions as judicial members of the Commission, are required to give effect to government policy constitutes an incursion into the independence of those judges so profound as to destroy the reality (or at the very least appearance) of the independence and impartiality of the Commission when constituted as the Court. 11The gravamen of the case advanced by Mr M G Sexton SC, with whom Dr J G Renwick SC appeared on behalf of the Attorney General of New South Wales ("the Attorney"), was that s 146C(5) of the Act removed any prospect of constitutional invalidity. There were two distinct bodies created by the Act - the Commission and the Court. The Court is a Chapter III court and, as such, was a distinctly separate body to the Commission. The Court exercised judicial functions which the Commission, as an administrative body, could not exercise. The provisions in the Amendment Act did not confer new functions on members of the Court in their capacity as individuals, nor did they confer any new functions on members of the Court in that capacity. The functions to which the Amendment Act related were conferred on the Commission as a whole. That is, they were not conferred upon a person appointed to carry out a function by reference to his or her judicial office. Consideration 12We have found the submissions of the Attorney, in this aspect of the matter, persuasive. 13As Gleeson CJ stated in Gypsy Jokers Motorcycle Club Inc v Commissioner of Police [2008] HCA 4; (2008) 234 CLR 532 (at [11]): [11] T he first step in the making of that assessment of the validity of any given law is one of statutory construction. So far as different constructions appear to be available, a construction is to be selected which would avoid rather than lead to a conclusion of constitutional invalidity ... 14Section 146C relevantly states: 146C 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. 15The following features of the Amendment Act and the Regulation made under s 146C should, as submitted by the Attorney, be noted : First, it only applies to awards or orders affecting employment of "public sector employees", that is, employees who are paid out of public funds; Second, it "does not apply to the Commission in Court Session", ie the Industrial Court; Third, it applies to pending and future proceedings; Fourth, it requires that the Commission give effect to any policy declared, directly or indirectly, by the regulations to be an aspect of government policy that the Commission is required to give effect to, and it prevents any award or order which is "inconsistent with this obligation" having legal effect. Fifth, the Regulation provides for: "paramount policies" being certain guaranteed minimum conditions of employment (Clauses 5 and 7) and equal remuneration for men and women doing work of equal or comparable value; "other polices" declared, but subject to paramount policies, in effect requiring " increases in remuneration or other conditions of employment that do not increase employee-related costs by more than 2.5% per annum" unless "sufficient employee-related cost savings have been achieved to fully offset the increased employee-related costs" (Clause 6); and finality (Clause 6(1)(d)). 16The Minister for Finance and Services stated in the Second Reading speech for the Industrial Relations Amendment (Public Sector Conditions of Employment) Bill 2011 (Hansard, Legislative Council, 24 May 2011 at 889 ff): The policy intention is to ensure an appropriate balance between public sector wage increases and the availability of funds for the delivery of the Government's commitments and value for money for New South Wales taxpayers. Where agencies and unions are able to identify agreed employee-related savings, these will be able to be passed on in higher wages. ... I now turn to elements of the bill. The primary amendment to be made to the Industrial Relations Act is the insertion of a new section 146C containing the explicit requirement that when making or varying awards or orders the commission must give effect to the Government's policy on conditions of employment for the public sector as declared under the regulations. The reference to the Government's policy on conditions of employment is intended to be broad enough to enable all relevant elements of the public sector wages policy to be included in the declaration made under the regulations. It will be appreciated that while the focus of the wages policy is on ensuring appropriate restraints on the quantum of pay increases, as outlined above, in order to do so the policy may also refer to other relevant conditions of employment, such as increased leave entitlements or a new classification structure. The commission will be required to give effect to the Government's policy only where any such declared policy applies to the matter before it. These will be matters arising in the public sector. Clearly, this requirement will not apply to, for example, matters relating to local government employers and employees. 17Four Justices of the High Court of Australia in Gypsy Jokers stated (at [39]): [39] As a general proposition, it may be accepted that legislation which purported to direct the courts as to the manner and outcome of the exercise of their jurisdiction would be apt impermissibly to impair the character of the courts as independent and impartial tribunals ... 18However, that statement concerned courts. Subject to a particular issue arising from the recent judgment of the High Court in Wainohu, which we will discuss below, the range and nature of statutory commands to a State tribunal are unlimited by either Chapter III of the Constitution or the doctrine first stated in Kable . 19Aspects of the Kable doctrine were elucidated in the judgment of the Chief Justice of the High Court in South Australia v Totani [2010] HCA 39; (2010) 242 CLR 1 at [69] as follows: [69] The text and structure of Ch III of the Constitution postulate an integrated Australian court system for the exercise of the judicial power of the Commonwealth with this Court at its apex . There is no distinction, so far as concerns the judicial power of the Commonwealth, between State courts and federal courts created by the Parliament . The consequences of the constitutional placement of State courts in the integrated system include the following: 1. A State legislature cannot confer upon a court of a State a function which substantially impairs its institutional integrity and which is therefore incompatible with its role as a repository of federal jurisdiction . 2. State legislation impairs the institutional integrity of a court if it confers upon it a function which is repugnant to or incompatible with the exercise of the judicial power of the Commonwealth . 3. The institutional integrity of a court requires both the reality and appearance of independence and impartiality . 4. The principles underlying the majority judgments in Kable and further expounded in the decisions of this Court which have followed after Kable do not constitute a codification of the limits of State legislative power with respect to State courts. Each case in which the Kable doctrine is invoked will require consideration of the impugned legislation because : "the critical notions of repugnancy and incompatibility are insusceptible of further definition in terms which necessarily dictate future outcomes". For legislators this may require a prudential approach to the enactment of laws directing courts on how judicial power is to be exercised, particularly in areas central to the judicial function such as the provision of procedural fairness and the conduct of proceedings in open court. It may also require a prudential approach to the enactment of laws authorising the executive government or its authorities effectively to dictate the process or outcome of judicial proceedings. 5. The risk of a finding that a law is inconsistent with the limitations imposed by Ch III, protective of the institutional integrity of the courts, is particularly significant where the law impairs the reality or appearance of the decisional independence of the court ... 20The Chief Justice found that legislative powers, in both Commonwealth and State spheres, "were subject to the qualification that they will not authorise a law which subjects a court in reality or appearance to direction from the executive as to the content of judicial decisions" (at [71]). 21In the same judgment, Gummow J (at [149]) referred to a court being enlisted in the implementation of legislative policy. Crennan and Bell JJ referred to legislation (at [428]) which draws a court into the implementation of government policy. 22In referring to the judgment of the Chief Justice in Totani, the Attorney emphasised that, when the Chief Justice said a "State legislature cannot confer upon a court of the state a function which substantially impairs its institutional integrity" and "the risk of a finding that the law is inconsistent with ... independence of the court", the principles stated concerned "a court". 23In Totani , the Magistrates Court in South Australia made control orders against individuals premised upon a decision by the Attorney-General on the application of the Commissioner of Police. The High Court found that the South Australian court's function had been identified with the executive function of the Attorney-General, and that identification was the vice in the legislation. 24The concept that runs through the Kable cases, being the four that have been successful, Re Criminal Proceeds Confiscation Act 2002 (Qld) [2003] QCA 249; [2004] 1 Qd R 40, and then three recent decisions in the High Court - International Finance Trust Company Limited v New South Wales Crime Commission [2009] HCA 49; (2009) 240 CLR 319), Totani and Wainohu - is the identification of a court function with the Executive. All of those cases and the Kable doctrine generally focused on the functions of "a court" and what impact the impugned legislation has on those court functions. 25Wainohu , the most recent decision of the High Court in relation to Kable , can be distinguished from the current question. The majority held that the vice of the impugned legislation was a provision which dictated that the eligible judge was not required to give reasons for the decision that he or she made in relation to a declaration concerning the particular organisation in question. 26We adopt the submission of the Attorney that the ratio decidendi in Wainohu is to be found in the judgments of the plurality, namely, Gummow, Hayne, Crennan and Bell JJ (at [109]): [109] The vice in s 13(2) as it presently stands is that s 9 and s 12 confer new functions on Supreme Court Judges in their capacity as individuals with the result that an outcome of what may have been a contested application cannot be assessed according to the terms in which it is expressed. This is unlike the outcome under Pt 3 of the Act . The opaque nature of these outcomes under Pt 2 also makes more difficult any collateral attack on the decision, and any application for judicial review for jurisdictional error. The effect of Pt 2 is to utilise confidence in impartial, reasoned and public decision-making of eligible judges in the daily performance of their offices as members of the Supreme Court to support inscrutable decision-making under s 9 and s 12. 27It is critical to the determination of the application in this matter, therefore, to consider what would be the effect of the Amendment Act on the functions of the 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 Wales. 28When considered in this light, s 146C(5) defeats, in our view, any challenge to the constitutional invalidity of the Amendment Act, which may have otherwise arisen if the Amendment Act relevantly operated upon the Court or upon exercise of the jurisdiction of the Court by justices appointed to discharge judicial functions under the Act. This is because that subsection stipulates that the provisions of s 146C do not apply to the Court, which is, as we will discuss below, an entity separate from the Commission. The legislative dictates of the Amendment Act are restricted in their true effect to the Commission constituted as a tribunal administering a range of wage fixing and other matters under the Act. 29The Act provides for the establishment of the Industrial Relations Commission, s 145, whose functions are set out or referred to in s 146, and whose membership is set out in s 147. The Commission's members include persons designated as Presidential Members by virtue of appointments to specified offices, and who thereby become eligible for an additional appointment to the Court, but the latter appointment is not guaranteed. 30There is also a superior court of record, as we have noted, established by the Act which is referred to in parts of the Act as "the Commission in Court Session", but whose name "is to be" the Industrial Court of NSW: ss 151A and 152. The Court's jurisdiction is set out, or referred to, in s 153 and includes the declaratory jurisdiction which is invoked in this matter. As the parties agreed, it is a court falling within the operation of Ch III of the Constitution, as discussed in Totani . 31The Attorney submitted that the acceptance of the Court as a Chapter III court , in this sense, must result in the conclusion that the Commission is a separate body. This has some considerable force. Though the Act predates Kable, the acceptance of the Court as a Chapter III court, necessitates the finding of a dichotomy between it and the Commission constituted as a tribunal (which cannot be a Chapter III court given its composition and the nature of its powers). This is because the Court must conform to the requirements of Chapter III. 32As to the various sections of the Act referred to by the PSA, we do not consider the provisions sustain the contention that there exists but one entity. In truth, the provisions of the Act relied upon can be construed for either case, that is, that the Commission is one body exercising dual functions or is constituted by two distinct bodies, etc. The provisions point in both directions and are, in isolation, simply inconclusive. 33We agree with the PSA that the key link between the Commission and the Court is that Presidential Membership of the Commission is a pre-requisite to separate appointment as a member of the Court (s 149). However, it is only the separate appointment as a member of the Court which is protected by Pt 9 of the Constitution Act 1902 (NSW) ('the Constitution Act'), even though the Judicial Officers Act 1986 applies to members of both institutions. (Other powers of the Court were addressed in Morrison v Chevalley at [148].) We consider this to be an important factor in favour of a conclusion that the Act creates two related but distinct bodies. 34We note that the PSA relied upon the judgment of Austin J in Rochford to support its contention that there exists only one entity, the Commission, with dual functions. However, in Rochford, Austin J only decided that the Commission appeared to have, in the case of an unfair dismissal matter, a judicial function and that for the purposes of the Corporations Law, the Commission, when exercising unfair dismissal functions, could be described as a court for the particular provisions of that legislation. That discussion does not detract from the determination that there are two bodies here. It goes no further than saying an aspect of the Commission's powers appeared to have a court based function in a context of the Corporations Law. Austin J stated (at (66)): Therefore in my opinion there are sufficient structural indications in the Act for me to conclude that the Commission is properly described as a "court" even when it is not the Commission in Court Session, at any rate when it is discharging the sort of function conferred by Chapter 2, Pt with respect to unfair dismissals. 35We would emphasise only judicial members of the Commission hold judicial office under the Constitution Act, and although, in some of the functions exercised by the Commission and the Court, there is cross over between the bodies in personnel, reconstitution and the like, as identified in the PSA submission, the members and functions of the Court are fundamentally distinct, such that no provision of the Amendment Act impairs or appears to impair, in our view, the judicial independence of the Court when it exercises judicial power. 36It is in this context, we have considered the decision in Wainohu. The majority posed the question (at [107]) as to whether the relevant provision "displays in its practical operation within the scheme of the Act repugnancy to or incompatibility with the institutional integrity of the Supreme Court". The Attorney submitted that, immediately before posing that question, the majority had quoted from the judgment of Mason and Deane JJ in Hilton v Wells (1985) 157 CLR 57 (at 83-84) in relation to the concept of persona designata. In that joint judgment, their Honours stated (at 83-84): Another reason for adhering to a strict application of settled principle is that when a function is entrusted to a judge by reference to his judicial office the legislators and the community are entitled to expect that he will perform the function in that capacity. To the intelligent observer, unversed in what Dixon J. accurately described - and emphatically rejected - as "distinctions without differences" ( Meyer (93)), it would come as a surprise to learn that a judge, who is appointed to carry out a function by reference to his judicial office and who carries it out in his court with the assistance of its staff, services and facilities, is not acting as a judge at all, but as a private individual. Such an observer might well think, with some degree of justification, that it is all an elaborate charade. 37As already noted, the members of the Commission in this case are not appointed to carry out the relevant function by reference to any judicial office (which, in any event, only some of them might hold). 38The provisions in the Amendment Act do not confer new functions on members of the Court in their capacity as individuals. Nor do they confer any new functions on members of the Court in that capacity. The fact that "judicial members of the Commission", that is, the persons who constitute the Court (s 149(3)), may also sit as members of the Commission, is not to the point. In contrast to the law in issue in Wainohu , the functions to which the Amendment Act relates are conferred on the Commission as a whole, not judges persona designata . That is, they are not conferred upon a person appointed to carry out a function by reference to his or her judicial office. 39We refer, in this respect, to the remarks of McHugh J in Kable when he stated (at 118-119): A State may invest a State court with non-judicial functions and its judges with duties that, in the federal sphere, would be incompatible with the holding of judicial office. But under the Constitution the boundary of State legislative power is crossed when the vesting of those functions or duties might lead ordinary reasonable members of the public to conclude that the State court as an institution was not free of government influence in administering the judicial functions invested in the court. 40Here, the Court has not been invested with non-judicial functions. The importance of the comment of McHugh J is that it indicates that the problem with the identification of a State court with the executive government is the effect or perception of government influence on the administration of the court's judicial functions. It follows, whatever the role of the Commission, there is no basis for any fair-minded person to conclude that the legislation here in question would result in the effect or perception of government influence in relation to the functions of the Court. 41There are links between the Court and the Commission, as the Attorney contended, just as there are in many other State and federal bodies, including those provided for in the Administrative Appeals Tribunal Act 1975 (Cth), s 6(2); the Administrative Decisions Tribunal Act 1997, s 14; and the Victorian Civil and Administrative Tribunal Act 1998 (Vic), ss 9-11. However, as we have stated, the judges of the Court hold separate commissions, the two bodies and their functions are distinct, and the judges are not appointed persona designata to the Commission, even though judicial members must already be members of the Commission before being eligible to be appointed as judges. There is a capacity, for reasons of administrative convenience, to "reconstitute" the Commission into the Court (s 176), but such a reconstitution is, as the term itself denotes, constituting the original body as something else, with only eligible members able to constitute the Court, and only evidence admissible before the Court being allowable. 42It was also contended by the PSA that the Amendment Act, by inserting a new s 105(2), restricted the capacity of the Court to make an independent finding as to whether a contract was an unfair contract because the Court was required to make findings by reference to government policy. 43The subsection is in the following terms: (2) A contract is not an unfair contract for the purposes of this Part merely because of any provision in the contract that gives effect to a policy that is declared under section 146C. 44However, we consider that, where s 105(2) precludes the operation of the unfair contracts jurisdiction in relation to public sector awards that give effect to the policy, the provision merely (and only) has the consequence of confining a pre-existing statutory jurisdiction conferred on the Court, and that much is within the power of the legislature. 45True, it is, as submitted for the PSA, the Court has jurisdiction with respect to the enforcement of rights or obligations created by the Commission in exercise of its arbitral functions, such as proceedings with respect to contraventions of dispute orders, breach of industrial instruments and recovery of money: ss 153(1)(d), (f) and (g). (Those sections concern proceedings under Ch 3, Pt 2, Dispute Orders, and Ch 7, Enforcement of the Act.) However, the exercise of a judicial function by the Court, in that respect, is not fettered by the legislation. The provisions referred to do not co-opt the Court as an arm of executive policy and only concern enforcement provisions which ultilise judicial power. There is nothing in the Amendment Act to suggest that the exercise of powers by the Court in such matters would not require a full judicial adjudicative process consistent with the jurisdiction conferred by the Act (or remove a requirement to give reasons for decision). Conclusion 46By way of statement issued on 22 August, the Court determined that these proceedings be adjourned until such time as the approach adopted by the New South Wales Court of Appeal to the application for leave to amend in Chevalley & Anor v Inspector Morrison & Ors (CA 2010/342090) was known. The Court received advice on 31 August 2011 from the Crown Solicitor that the Court of Appeal declined an application for leave to amend the summons to raise the further constitutional argument regarding the effect of s 146C of the Act on the Court. In the result, we have proceeded to judgment. 47This Court stated in GIO Australia Ltd v O'Donnell (1996) 70 IR 1 (at 9-10): ... there are in truth two tribunals, the Industrial Relations Commission of New South Wales, which is not a court, and the Industrial Relations Commission of New South Wales in Court Session, which is a superior court of record. 48This conclusion was accepted in Hollingsworth v Commissioner of Police (1998) 81 IR 276 at 309-310; (1998) 47 NSWLR 104 and Virtue v New South Wales Department of Education and Training (1999) 92 IR 428 at 448. We do not consider that there is any proper basis to depart from those conclusions in this matter. 49The Act provides for the creation of two related but distinct bodies. In this light, it is evident that s 146C(5) is a complete answer to the suggestion of constitutional invalidity. The provision does not apply to the Court, which is an entity separate from the Commission. The provisions in the Amendment Act do not confer new functions on members of the Court in their capacity as individuals. Nor do they confer any new functions on members of the Court in that capacity. The fact that "judicial members of the Commission", that is the persons who constitute the Court (s 149(3)), may also sit as members of the Commission, does not alter this conclusion. In contrast to the law in issue in Wainohu , the functions to which the Amendment Act relates are conferred on the Commission as a whole, not judges persona designata . That is, they are not conferred upon a person appointed to carry out a function by reference to his or her judicial office. 50We reject the application seeking to have the Amendment Act declared invalid. The primary application brought by the motion is, therefore, dismissed. The Regulation 51The PSA contended that a regulation can only be made in accordance with s 407 of the Act. Section 146C does nothing to amend, vary or extend the operation of the express power conferred by the Act to make regulations. A regulation is only authorised if it is otherwise "not inconsistent with" the Act. A regulation must also comply with the general law to the effect that a regulation will not be valid if it contradicts, or is repugnant to, the statute under which it is made: see summary of the law in Vanstone v Clark [2005] FCAFC 189; (2005) 147 FCR 299 at [120]-[126]. 52The PSA submitted the regulation is (in a number of respects) fundamentally inconsistent with and repugnant to the Act both by reason that it contradicts express provisions of the Act and that it runs counter to the general aims of the Act. In assessing whether the regulation is inconsistent with the Act, regard may be had firstly to the objects of the Act in s 3. 53Section 3 sets out the general aims of the Act as follows: 3. Objects The objects of this Act are as follows: (a) to provide a framework for the conduct of industrial relations that is fair and just, (b) to promote efficiency and productivity in the economy of the State, (c) to promote participation in industrial relations by employees and employers at an enterprise or workplace level, (d) to encourage participation in industrial relations by representative bodies of employees and employers and to encourage the responsible management and democratic control of those bodies, (e) to facilitate appropriate regulation of employment through awards, enterprise agreements and other industrial instruments , (f) to prevent and eliminate discrimination in the workplace and in particular to ensure equal remuneration for men and women doing work of equal or comparable value, (g) to provide for the resolution of industrial disputes by conciliation and, if necessary, by arbitration in a prompt and fair manner and with a minimum of legal technicality, (h) to encourage and facilitate co-operative workplace reform and equitable, innovative and productive workplace relations. 54In imposing arbitrary restrictions upon the nature and quantum of changes to remuneration or conditions of employment which may be made by the Commission by way of an award applying to public sector employees, the PSA submitted that the regulation is fundamentally inconsistent with the objectives of the Act, particularly found in ss 3(a), (c), (d), (e), (g) and (h). 55The PSA contended the inconsistency between the regulation and the objects of the Act is accentuated in circumstances in which the jurisdiction of the Commission is now restricted to public sector and local government employees: Industrial Relations (Commonwealth Powers) Act 2009. That is, the vast bulk of the employees now falling within the coverage of the Act will be affected by the operation of the regulation. 56Further, the PSA contended the regulation contradicted numerous specific provisions of the Act governing the powers and procedures of the Commission and the rights conferred by the Act including as follows: In requiring the Commission to give effect to a policy which restricts changes to remuneration or conditions of employment for public sector employees by reference to an arbitrary level of increase in employee-related costs (as defined), the Regulation is inconsistent with the power conferred upon the Commission to make awards "setting fair and reasonable conditions of employment": ss 10 and 136(1)(b). In requiring the Commission to give effect to a policy which restricts changes to remuneration or conditions of employment for public sector employees, the Regulation conditions or restricts the rights conferred upon industrial organisations of employees to make application for an award or seek the arbitration of industrial disputes in which the organisation is interested: ss 11(2)(b) and 130(1)(a). In requiring the Commission to give effect to a policy which requires awards and orders to resolve all issues and not reserve leave for matters to be dealt with at a later time or for extra claims to be made, the Regulation is inconsistent with the powers conferred on the Commission to vary awards during or after the expiry of their nominal terms: ss 17(3) and 136(1)(b). In requiring the Commission to give effect to a policy which requires that changes in remuneration or conditions of employment only operate on or after agreement is reached or a decision of the Commission made, the Regulation is inconsistent with the power of the Commission to make or vary awards with retrospective effect: s 15(3). In requiring the Commission to give effect to a policy which prevents the Commission giving approval to enterprise agreements containing changes to remuneration or conditions outside arbitrary limits, the Regulation is inconsistent with the rights conferred upon industrial parties to make enterprise agreements and the obligation imposed upon the Commission to approve such agreements upon application: ss 30, 31, 34 and 35. 57The Act established, it was contended, a system of conciliation and arbitration in which industrial parties are able to notify industrial disputes and make application for the making of awards to an independent "industrial umpire", the Industrial Relations Commission, which has the power to determine fair and reasonable conditions of employment for the employees concerned. The regulation is patently inconsistent with the express provisions establishing that system and with the general aims of the Act to facilitate the regulation of employment through awards, enterprise agreements and other industrial instruments and to provide for resolution of industrial disputes by conciliation and arbitration. Accordingly, it was submitted, the regulation is invalid. 58The PSA advanced an alternative submission. Even if the regulation is found not to be inconsistent with the Act, it is only authorised to the extent that it is either with respect to any matter required or permitted to be prescribed or necessary or convenient to be prescribed for carrying out or giving effect to this Act. The Act does not expressly require or permit the matters dealt with in the regulation to be prescribed. Where the Act intends to do so, it clearly and expressly confers such a power: see ss 9A(8), 13(3), 127(3), 129(5), 146B(5), 181A(7), 183, 208(4), 216(4), 221(3), 249(1), 282(1), 283(1) and 383(2). 59The regulation could only be supported if its making was necessary or convenient to be prescribed for carrying out or giving effect to this Act. 60It seems to us that there a significant flaw in the contentions advanced by the PSA. Section 146C expressly requires or permits a regulation to be made which declares an aspect of government policy which the Act requires the Commission to give effect to. This is, in our view, sufficient authorisation for making the regulation. 61It is plain that the purpose of the regulation is to carry out or to give effect to the Act. The explanatory note to the regulation states: The object of this Regulation is to declare the Government's public sector policies for the purposes of s 146C of the Industrial Relations Act 1996. That section requires the Industrial Relations Commission to give effect to such policies when making or varying awards or orders relating to the remuneration or other conditions of employment of public sector employees. This regulation is made under the Industrial Relations Act 1996, including s 146C. 62Section 34 of the Interpretation Act 1987 permits the use of such extrinsic material in the interpretation of an Act or regulation. 63The purpose of the regulation is clearly designed to declare the government's public sector policies for the purposes of s 146C of the Act. 64We agree with Mr J V Agius SC, with whom Mr S Benson of counsel appeared for the Minister for Finance and Services, that it is the Act, by virtue of s 146C, rather than the regulation that directs the Commission to give effect to the government's policy on conditions of employment of public sector employees. The regulation sets out the matters which are, for the purposes of s 146C, to be aspects of government policy that are to given effect by the Commission when making or varying awards or orders on conditions of employment. 65Again, it is the Act itself, by virtue of s 146C, that requires the Commission when exercising its award-making functions to give effect to the policies declared by the regulation. That requirement is not mandated by the regulation but by s 146C of the Act. 66There is plainly a requisite connection between the subject matter in the regulation and s 146C of the Act. The section prescribes the field of operation of the Act to which the regulation needs to be connected to be valid. 67The application for a declaration as to the invalidity of the regulation must be refused and, therefore, the alternative application for a declaration in the motion is dismissed. Orders 68We make the following Orders: 1. The Notice of Motion filed on 20 July 2011 is dismissed. 2. Costs are reserved. Amendments 07 November 2011 - "s 146(5)" amended to now read as "s 146C(5)" Amended paragraphs: 8 07 November 2011 - "s 146(5)" amended to now read as "s 146C(5)" Amended paragraphs: 11 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. Decision last updated: 07 November 2011