Industrial Relations Commission New South Wales Medium Neutral Citation: Crown Employees (Correctional Officers, Department of Corrective Services) Award 2007 for Kempsey, Dillwynia and Wellington Correctional Centres [2014] NSWIRComm 44 Hearing dates: 19 June 2013, 3 and 4 April and 28 May 2014 Decision date: 08 October 2014 Jurisdiction: Industrial Relations Commission Before: Walton J, President; Staff J; Tabbaa C Decision: We answer the question posed by CSNSW as 'No'. In terms of the refinement of that question during the course of proceedings, we conclude that the savings deriving from the deletion of eight custodial positions from the Correctional Centres fell outside the meaning of employee-related cost savings in cl 9(1) of the Industrial Relations (Public Sector Conditions of Employment) Regulation 2014 due to the operation of sub-clause (d) of that clause. Catchwords: AWARD - application to vary award -referral of questions to Full Bench pursuant to s 193(1) - proceedings referred by President to Full Bench - interlocutory issue - operation of s 146C - were the savings relied upon by the PSA employee-related cost savings having regard to cl 9(1)(d) of the Regulation? - savings arising from Memorandum of Understanding - question whether those savings are savings additional to 'whole of Government savings measures' - application of the principles of statutory interpretation - required to make factual determinations - statement evidence and documentary evidence - savings are 'whole of Government savings' - cannot be relied upon to sustain the amended application - answer to the question is 'No' - savings deriving from the deletion of eight custodial positions from the Correctional Centres fell outside the meaning of employee-related cost savings in cl 9(1) by virtue of cl 9(1)(d) - matter to be listed for directions. Legislation Cited: Industrial Relations Act 1996 Industrial Relations (Public Sector Conditions of Employment) Regulation 2011 Industrial Relations (Public Sector Conditions of Employment) Regulation 2014 Industrial Relations Amendment (Public Sector Conditions of Employment) Act 2011 Interpretation Act 1987 Cases Cited: Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Thelander [2012] HCA 56; (2012) 248 CLR 378; (2012) 293 ALR 412 Health Employees Conditions of Employment (State) Award and other Awards [2011] NSWIRComm 129 HSU east and Director-General, Department of Finance and Services [2012] NSWIRComm 112 Public Service Association and Professional Officers' Amalgamated Unions of New South Wales v Department of Education and Communities [2013] NSWIRComm 32 Public Service Association and Professional Officers' Associated Amalgamated Union of New South Wales [2014] NSWCA 116 Public Service Association and Professional Officers' Association Amalgamated Union of NSW v Director General, Department of Premier and Cabinet [2010] NSWIRComm 59 Re Corrections Health Service Nurses' (State) Award (1999) 90 IR 235 Re Crown Employees (NSW Fire Brigade Retained Firefighting Staff) Award 2008 [2012] NSWIRComm 122 Re Crown Employees (Public Sector - Salaries 2011) Award (No 3) [2011] NSWIRComm 104 Re Crown Employees Wages Staff (Rates of Pay) Award 2011 & Ors [2013] NSWIRComm 53 State Wage Case 2010 (No 2) [2011] NSWIRComm 29 Taylor v The Owners - Strata Plan No 11564 [2014] HCA 9; (2014) 306 ALR 547; (2014) 88 ALJR 473 Texts Cited: Macquarie Dictionary 2nd Revision Category: Procedural and other rulings Parties: Public Services Association and Professional Officers' Association Amalgamated Union of New South Wales (Applicant) Corrective Services NSW (Respondent) Representation: M Gibian of counsel (Applicant) J V Murphy of counsel (Respondent) W.G. McNally Jones Staff (Applicant) Corrective Services NSW (Respondent) File Number(s): IRC 156 of 2011 IRC 828 of 2012IRC 1843 of 2011 decision 1By a Memorandum of Understanding dated 17 August 2011 ("the MOU"), the Commissioner of Corrective Services New South Wales entered into an agreement with the Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales ("the PSA") to delete 350 positions across the whole of the operations of Corrective Services NSW (a division of the Department of Justice, hereafter referred to as 'CSNSW') so as to "achieve employee-related cost savings" of not less than $33 million. 2Overall, the MOU had the purpose of making CSNSW more competitive as an alternative to the privatisation of Correctional Centres by the New South Wales Government. 3The MOU was given effect to at, inter alia, the Kempsey, Dillwynia and Wellington Centres by the deletion of eight custodial positions. Those Centres were governed by an "island" award known as the Crown Employees (Correctional Officers, Department of Corrective Services) Award 2007 for Kempsey, Dillwynia and Wellington Correctional Centres ("the Award"). 4Some three years later, by an amended application brought by leave of the Commission, the PSA sought to vary the Award in various respects concerning, inter alia, Chief Correctional Officers and Principal Correctional Officers. 5The confluence of the potential increase in employee-related costs under the application and the aforementioned savings in employee-related costs effected by the MOU resulted in an issue being ventilated in these proceedings as to whether the application was precluded by the terms of the Industrial Relations (Public Sector Conditions of Employment) Regulation 2011("the 2011 Regulation") which declared matters for the purposes of s 146C of the Industrial Relations Act 1996 ("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. (It may be noted that, since the Commission reserved its decision in this matter, the 2011 Regulation was replaced by the Industrial Relations (Public Sector Conditions of Employment) Regulation 2014 ("the Regulation") but no change to the 2011 Regulation is material to the present proceedings as cll 6, 8 and 9 of the Regulation are in the same terms as in the 2011 Regulation). 6The issue was first ventilated in a hearing of the PSA's primary application before Staff J on 14 June 2013. At that hearing, his Honour accepted CSNSW's submission to program a hearing as to what CSNSW described as a "threshold question". At the commencement of that hearing, on 1 July 2013, Staff J, upon the request of CSNSW, resolved that a question should be referred to the President pursuant to s 193(1) of the IR Act for a determination in respect of s 193(2) of that Act. That question, as stated by Staff J, was as follows: Whether whole of government savings, that is, measures that bring a government department or agency within budget can be relied upon by the applicant as representing employee related cost savings in discharge of its obligations under s 146C of the Industrial Relations Act 1996 and the Industrial Relations (public Sector Conditions of Employment) Regulation 2011". 7On 2 July 2013, the then President, Boland J, determined that "these proceedings, including any Special Case aspect of them, are to be dealt with by a Full Bench of the Commission. The evidence in the matter is to be taken by Staff J on behalf of the Full Bench." 8Upon the matter being returned to Staff J, the question or questions to be determined by the Full Bench were crystallised in the form of questions formulated by the parties. A question filed by CSNSW (on 26 July 2013) was expressed in the following terms: To the extent that the deletion of eight (8) custodial positions from the three (3) correctional centres affected by this application and as referred to in paragraphs 13-15 of the witness statement of Stewart Little filed on 25 January 2013, has resulted in a reduction of Corrective Services NSW's expenditure, doe [sic] such reduction in expenditure fall within the definition of "employee-related cost savings" in Regulation 9 of the Industrial Relations (Public Sector Conditions of Employment) Regulation 2011? 9The PSA also filed a question for adjudication by the Full Bench (on 9 August 2013). However, the Full Bench determined that the question posed by the PSA would be deferred until later in the proceedings. 10Ultimately, the question addressed by the Full Bench was refined in the course of argument to be whether savings effected at the three Correctional Centres governed by the Award as a result of the MOU fell outside the meaning of employee-related cost savings in cl 9(1) of the Regulation in consequence of the operation of paragraph (d) of the clause. It was contended by CSNSW that the savings obtained from the application of the MOU could not constitute savings in addition to whole of Government savings measures for the purposes of cl 9(1)(d) because, in substance, those savings exclusively concerned whole of Government savings measures and, in the result, in the absence of alternate discrete employee-related cost savings, the application would be precluded by the Regulation. (The PSA may consider further savings measures in the light of our ruling on the present question.) 11This decision is directed to the resolution of the question posed by CSNSW as refined by the parties during the course of argument (per the preceding paragraph). We shall refer to the composite of these questions as "the question" or "the issue". 12Hence, it became unnecessary to decide at this stage of the proceedings the precise amount of savings under the MOU as the preliminary issue raised by CSNSW proceeded upon the basis that, even if the savings deriving from the MOU were such as would fully offset the increased employee-related costs arising from the amended application, they did not satisfy the conditions of cl 6(1)(b) of the Regulation, permissive of increases in employee-related costs above 2.5 per cent because those savings derived entirely from whole of Government savings measures for the purposes of cl 9(1)(d). In any event, it was common ground that the variation, if granted, would have the effect of increasing employee-related costs, although there was a dispute as to the quantum of those costs. 13We shall comment further on the nature of the issue ventilated but, so expressed, it involves a question of statutory construction. 14The principles applicable to making such a determination have been recently discussed in judgments of the High Court in Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Thelander [2012] HCA 56; (2012) 248 CLR 378; (2012) 293 ALR 412 ('Certain Lloyd's'); Australian Education Union v Department of Education and Children's Services [2012] HCA 3; (2012) 248 CLR 1; (2012) 285 ALR 27 and Board of Bendigo Regional Institute of Technical and Further Education v Barclay [2012] HCA 32; (2012) 248 CLR 500. 15An extrapolation of principles from those judgments was provided by the Full Bench of this Court in Public Service Association and Professional Officers' Amalgamated Unions of New South Wales v Department of Education and Communities [2013] NSWIRComm 32 at [24] as follows: [24] There are three recent High Court authorities which provide guidance as to the correct approach to statutory interpretation, namely, Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Thelander [2012] HCA 56; (2012) 293 ALR 412, Australian Education Union v Department of Education and Children's Services [2012] HCA 3; (2012) 285 ALR 27 and Board of Bendigo Regional Institute of Technical and Further Education v Barclay [2012] HCA 32. Key principles, relevant to the present proceedings, can be distilled from these authorities: (1) The legal meaning of a provision of a statute is to be ascertained by processes of statutory construction: Certain Lloyd's Underwriters at [25] per French CJ and Hayne J. Thus, the fundamental object of statutory construction is to ascertain legislative intention: Certain Lloyd's Underwriters at [88] per Kiefel J. However, the use of the metaphor 'legislative intention' must not mislead. This expression must be understood as the intention that the courts will impute to the legislature by a process of construction: Certain Lloyd's Underwriters at [88] per Kiefel J. The duty of a court is to give the words of a statutory provision the meaning that the legislature is taken to have intended them to have: Certain Lloyd's Underwriters at [25] per French CJ and Hayne J (applying Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355; (1998) 72 ALJR 841; (1998) 153 ALR 490 at [78] per McHugh, Gummow, Kirby and Hayne JJ); (2) Ordinarily, the legal meaning of a provision of a statute will correspond with the grammatical meaning, but not always: Certain Lloyd's Underwriters at [25] per French CJ and Hayne J and at [68] per Crennan and Bell JJ (applying Project Blue Sky at [78] per McHugh, Gummow, Kirby and Hayne JJ). Nonetheless, the process of statutory construction must begin with a textual analysis of the words of a provision - that is, a consideration of the ordinary and grammatical meaning of the words: Australian Education Union at [26] per French CJ, Hayne, Kiefel and Bell JJ; Barclay at [41] per French CJ, Crennan, Gummow and Hayne JJ; Certain Lloyd's Underwriters at [23] per French CJ and Hayne J. Although that initial step may involve the construction of the words of a provision in question when read in the context of the statute as a whole: Certain Lloyd's Underwriters at [88] per Kiefel J. Thus, the legal meaning is ascertained by reference to the language of the statute viewed as a whole: Certain Lloyd's Underwriters at [26] per French CJ and Hayne J and [88] per Kiefel J. The purpose of the statute resides in its text and structure: Certain Lloyd's Underwriters at [25] per French CJ and Hayne J; (3) Context may also be considered "in a broader sense as including the general purpose and policy of the legislation, in particular the mischief to which the statute is directed and which the legislature intended to remedy.": Certain Lloyd's Underwriters at [88] per Kiefel J; (4) The context and purpose of a provision are important to its proper construction. Legal meaning may be ascertained by reference to general purpose, consistency and fairness: Certain Lloyd's Underwriters at [24] per French CJ and Hayne J; (5) The determination of the purpose of a statute or a particular statutory provision may be based upon an express statement of purpose in the statute itself, inference from its text and structure and, if appropriate, reference to extrinsic materials: Certain Lloyd's Underwriters at [25] per French CJ and Hayne J. Whilst consideration of extrinsic materials should not displace the clear meaning of the text of a provision, the purpose of a provision may be elucidated by appropriate reference to them: Certain Lloyd's Underwriters at [70] per Crennan and Bell JJ; (6) It is conceivable that the context of the words, the consequences of a literal or grammatical construction, the purpose of the statute or the canons of construction may require the words of a legislative provision to be read in a way that does not correspond with their literal or grammatical meaning: Certain Lloyd's Underwriters at [68] per Crennan and Bell JJ quoting Project Blue Sky at [78] per McHugh, Gummow, Kirby and Hayne JJ; (7) Determination of a statutory purpose neither permits nor requires some search for what those who promoted or passed the legislation may have had in mind when it was enacted: Certain Lloyd's Underwriters at [25] - [26] per French CJ and Hayne J and [70] per Crennan and Bell JJ. In construing a statute it is not for a court to construct its own idea of a desirable policy, impute it to the legislature, and then characterise it as a statutory purpose: Australian Education Union at [27] - [28] per French CJ, Hayne, Kiefel and Bell JJ. 16The parties concurred that those principles of statutory construction were applicable to the construction of the legislation and delegated legislation in these proceedings. 17Those principles were applied more recently by the New South Wales Court of Appeal in Public Service Association and Professional Officers' Associated Amalgamated Union of New South Wales [2014] NSWCA 116 ("PSA 2014") at [44] to [47]. 44 The principles governing the construction of delegated legislation, such as the regulation in the present case, are those applicable to Acts of Parliament generally: Collector of Customs v Agfa-Gevaert Ltd [1996] HCA 36 ; (1996) 186 CLR 389 at 398; King Gee Clothing Co Pty Ltd v The Commonwealth [1945] HCA 23 ; (1945) 71 CLR 184 at 195. 45 The relevant principles have been stated on a number of recent occasions by the High court. In Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (NT) [2009] HCA 41 ; (2009) 239 CLR 27, the plurality emphasised (at [47]) that construction must begin with a consideration of the text itself and while the language employed is the surest guide to legislative intention, the meaning of the text may require consideration of the context which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy: See also Board of Bendigo Regional Institute of Technical and Further Education v Barclay [2012] HCA 32 ; (2012) 86 ALJR 1044 at [41]; Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55 ; (2012) 87 ALJR 98 at [39]; Certain Lloyd's Underwriters v Cross [2012] HCA 56 ; (2012) 248 CLR 378 at [23]. 46 Determination of the purpose of the statute or a particular provision may be based not only on an express statement of purpose in the statute itself but also by inference from its text and structure and where appropriate by reference to extrinsic material. However, the process does not involve a search for what those who presented and passed the legislation had in mind: Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28 ; (1998) 194 CLR 355; Certain Lloyd's Underwriters v Cross supra at [23]-[26]. 47 Extrinsic material cannot be used to construe a legislative provision unless a construction of the provision suggested by the material is reasonably open: CIC Insurance Ltd v Bankstown Football Club Ltd [1997] HCA 2 ; (1997) 187 CLR 384 at 408; Newcastle City Council v GIO General Ltd [1997] HCA 53 ; (1997) 191 CLR 85 at 113. In particular it is not for a court to construct its own idea of a desirable policy, impute it to the legislature and then characterise it as a statutory purpose: Australian Education Union v Dept of Education and Children's Services [2012] HCA 3 ; (2012) 248 CLR 1 at [28]. 18The Court of Appeal further observed the following (at [48]): There is one other matter which should be noted. It is well established that where a regulation is open to two constructions, one within the power conferred by the enabling Act and the other outside of such power, the former construction should be adopted: ut res magis valeat quam pereat: Widgee Shire Council v Bonney [1907] HCA 11; (1907) 4 CLR 977 at 983; Birch v Australian Mutual Provident Society [1906] HCA 51; (1906) 4 CLR 324 at 343; Airservices Australia v Canadian Airlines International Limited [1999] HCA 62; (2000) 202 CLR 133 at [229]-[230] and [408]. This principle finds statutory embodiment in s 32 of the Interpretation Act 1987 (NSW). However, that section is subject to any contrary intention appearing in the legislation (Interpretation Act, s 5). 19We note, for completeness, the more recent discussion of the principles of statutory interpretation by the High Court in Taylor v The Owners - Strata Plan No 11564 [2014] HCA 9; (2014) 306 ALR 547; (2014) 88 ALJR 473 at 482-483. The Legislation 20On 17 June 2011, the Industrial Relations Amendment (Public Sector Conditions of Employment) Act 2011 (the "Amendment Act") received assent. The Amendment Act amended the Act by inserting s 146C. 21It was common ground that s146C of the Act limited the jurisdiction of the Commission to make or vary awards it otherwise possesses under ss 10 or 17 of the Act. As earlier mentioned, the section does so by requiring the Commission to "give effect to any policy on conditions of employment of public sector employees" that is declared by the regulation. 22Section 146C provides: 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. (8) In this section: "award or order" includes: (a) an award (as defined in the Dictionary) or an exemption from an award, and (b) a decision to approve an enterprise agreement under Part 2 of Chapter 2, and (c) the adoption under section 50 of the principles or provisions of a National decision or the making of a State decision under section 51, and (d) anything done in arbitration proceedings or proceedings for a dispute order under Chapter 3. "conditions of employment" -see Dictionary. "public sector employee" means a person who is employed in any capacity in: (a) the Public Service, the Teaching Service, the NSW Police Force, the NSW Health Service, the service of Parliament or any other service of the Crown, or (b) the service of any body (other than a council or other local authority) that is constituted by an Act and that is prescribed by the regulations for the purposes of this section. 23Relevantly, the Regulation provides: 4 Declarations under section 146C 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. 5 Paramount policies The following paramount policies are declared: (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. Note. Clause 6 (1) (c) provides that existing conditions of employment in excess of the guaranteed minimum conditions may only be reduced for the purposes of achieving employee-related cost savings with the agreement of the relevant parties. Clause 9 (1) (e) provides that conditions of employment cannot be reduced below the guaranteed minimum conditions of employment for the purposes of achieving employee-related cost savings. 6 Other policies (1) The following policies are also declared, but are subject to compliance with the declared paramount policies: (a) Public sector employees may be awarded increases in remuneration or other conditions of employment, but only if employee-related costs in respect of those employees are not increased by more than 2.5% per annum as a result of the increases awarded together with any new or increased superannuation employment benefits provided (or to be provided) to or in respect of the employees since their remuneration or other conditions of employment were last determined. (b) Increases in remuneration or other conditions of employment can be awarded even if employee-related costs are increased by more than 2.5% per annum, but only if sufficient employee-related cost savings have been achieved to fully offset the increased employee-related costs beyond 2.5% per annum. For this purpose: (i) whether relevant savings have been achieved is to be determined by agreement of the relevant parties or, in the absence of agreement, by the Commission, and (ii) increases may be awarded before the relevant savings have been achieved, but are not payable until they are achieved, and (iii) the full savings are not required to be awarded as increases in remuneration or other conditions of employment. (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. (2) Subclause (1) (e) does not apply if the relevant parties otherwise agree or there are exceptional circumstances. (3) The relevant parties in relation to a matter requiring agreement under this clause are the employer and any other party to the proceedings that is an industrial organisation of employees with one or more members whose interests are directly affected by the matter. (4) In subclause (1) (a), new or increased superannuation employment benefits means any new or increased payments by an employer to a superannuation scheme or fund of an employee as a consequence of amendments to the Superannuation Guarantee (Administration) Act 1992 of the Commonwealth or the State Authorities Non-contributory Superannuation Act 1987. 7 The guaranteed minimum conditions of employment (1) For the purposes of this Regulation, the guaranteed minimum conditions of employment are as follows: (a) Unpaid parental leave that is the same as that provided by the National Employment Standards. (b) Paid parental leave that applies to the relevant group of public sector employees on the commencement of this clause. (c) Employer payments to employee superannuation schemes or funds (being the minimum amount prescribed under the relevant law of the Commonwealth). (2) The guaranteed minimum conditions of employment also include the following: (a) Long service or extended leave (being the minimum leave prescribed under the Government Sector Employment Act 2013 or the Long Service Leave Act 1955, whichever Act is applicable to the employment concerned). (b) Annual leave (being the minimum leave prescribed under the Annual Holidays Act 1944). (c) Sick leave entitlements under section 26 of the Act. (d) Public holiday entitlements under the Public Holidays Act 2010. (e) Part-time work entitlements under Part 5 of Chapter 2 of the Act. 8 Meaning of employee-related costs (1) For the purposes of this Regulation, employee-related costs are the costs to the employer of the employment of public sector employees, being costs related to the salary, wages, allowances and other remuneration payable to the employees and the superannuation and other personal employment benefits payable to or in respect of the employees. (2) In subclause (1), superannuation benefitsinclude any payments by the employer to a superannuation scheme or fund of an employee as a consequence of the enactment of or amendments to the Superannuation Guarantee (Administration) Act 1992 of the Commonwealth or the State Authorities Non-contributory Superannuation Act 1987. 9 Meaning of employee-related cost savings (1) For the purposes of this Regulation, employee-related cost savings are savings: (a) that are identified in the award or order of the Commission that relies on those savings, and (b) that involve a significant contribution from public sector employees and generally involve direct changes to a relevant industrial instrument, work practices or other conditions of employment, and (c) that are not existing savings (as defined in subclause (2)), and (d) that are additional to whole of Government savings measures (such as efficiency dividends), and (e) that are not achieved by a reduction in guaranteed minimum conditions of employment below the minimum level. (2) Savings are existing savings if they are identified in a relevant industrial instrument made before the commencement of this Regulation (or in an agreement contemplated by such an industrial instrument) and are relied on by that industrial instrument, whether or not the savings have been achieved and whether or not they were or are achieved during the term of that industrial instrument. 24We note that, in the judgment in PSA 2014, the Court of Appeal observed the following as to the operation of s 146C and the Regulation: 49 In considering the context in which the regulation falls to be considered, it is necessary to have regard to the opening words of s 146C(1), and s 146C(1)(a) of the Act. The opening words of s 146C(1) require the Commission when making or varying an award or order to give effect to any policy on conditions of employment of public sector employees. The extent of that requirement is limited by s 146C(1)(a) to any such 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 and that applies to the matter to which the award or order relates (per s 146C(1)(b)). The matters in regs 5 and 6 of the regulations are matters which are said to be aspects of government policy. So much is made clear by reg 4. The purpose of the legislation can thus be seen to require the Commission to comply with certain aspects of government policy concerning public sector employees in setting awards or resolving industrial disputes. 50 Each of the subregs 6(1)(a)-(e) of the regulations impose particular constraints on the award or order the Commission can make in exercising its powers under ss 10 or 21 of the Act (or its equivalent jurisdiction in making an order). Each of the matters referred to in those sub-regulations reasonably can be seen as an aspect of government policy. 25The parties did not dispute the operation of the IR Act and the Regulation in that respect. Submissions Submissions for the PSA 26Mr M Gibian, counsel for the applicant, made oral and written submissions on the issue which, when taken together, may be summarised as follows: (1)The respondent's request for the Commission to consider the "threshold question" must be treated as an application to have the amended application summarily dismissed. (2)The amended application could only be summarily dismissed if the Commission was satisfied, when considering the applicant's case at its highest, that no award or order at all could be made in the circumstances. In the present matter, the Commission could not be thus satisfied for the following reasons: (a)The Regulation does not require the PSA to prove sufficient employee-related cost savings have been achieved at the outset of a proceeding; and (b)The PSA has put forward evidence of relevant employee-related cost savings. (3)The matter must, therefore, be remitted to a Member of the Commission to be determined on the merits irrespective of the Commission's answer to the threshold question. (4)The unstated premise of the threshold question is that the PSA is only entitled to have its application heard after proving that employee-related cost savings "have been achieved to fully off-set the increased employee-related costs". That premise is without foundation. (5)Nothing in the Regulation suggests that it is necessary for an application of the present kind to identify the employee-related cost savings relied upon at the outset of proceedings (although such savings must be identified in the award or order ultimately made by the Commission (cl 9(1)(a)). To the contrary, the Regulation recognises that cost savings may not have been achieved at the time the Commission determines the application for an award or order (see cl 6(1)(b)(ii)). (6)Whilst it was anticipated in Re Crown Employees (NSW Fire Brigade Retained Firefighting Staff) Award 2008 [2012] NSWIRComm 122 ('Retained Firefighting Award 2008') that the grounds and reasons accompanying an application would refer to any cost savings relied upon if necessary, the Full Bench did not suggest that the terms of an award or order sought must itself identify (at the time of the application) the cost savings relied upon. Indeed, any such requirement would be "nonsensical" as the employee-related costs and cost savings required cannot be known until the Commission has decided what award provision should be made. (7)In Retained Firefighting Award 2008, the Full Bench envisaged that the more efficient way of dealing with claims which required consideration of s 146C of the IR Act and the Regulation would be to consider the merits of a claim first and then provide the parties with an opportunity to address the question of cost savings. There was no suggestion that, if the claim were granted on its merits, the applicant could not then take steps to identify or negotiate alternative savings measures. (It may be noted that the present application was not in the form contemplated by that Full Bench decision because it was filed prior to the decision date.) (8)In any event, the PSA has identified employee-related cost savings "more than sufficient to offset any increased employee-related costs of the variations sought in the application". (9)Arising from the MOU, eight custodial positions were deleted at the three Correctional Centres covered by the award. The reduction in positions produced annual savings of at least $520,634. Those savings fall within the definition of "employee-related cost savings" in cl 9 of the Regulation. (10)The identified savings are not, as the respondent contended, "whole of Government savings measures" for the purposes of cl 9(1)(d) of the Regulation for the following reasons: (c)The phrase "whole of Government savings measures" must be, and can only be, interpreted in accordance with the ordinary and natural meaning of the words used (see Re Crown Employees Wages Staff (Rates of Pay) Award 2011 & Ors [2013] NSWIRComm 53 at [26] ("Crown Employees Wages Staff Award 2011")). A 'measure' refers to "an action or procedure intended as a means to an end" (Macquarie Dictionary 2nd Revision, p 1067). A 'whole of Government savings measure' can only be understood to refer to a specific action or procedure adopted across the whole of the NSW Government. The initiatives contained in the MOU which resulted in the reduction in positions at Kempsey, Dillwynia and Wellington Correctional Centres were part of measures peculiar to CSNSW which could not, on any view, be said to be an "action or procedure" adopted across the whole of the NSW Government. The fact that the consequential savings were referred to by the Treasurer in the 2011/2012 Budget Speech ("the Budget Speech") does not transform a CSNSW program into a whole of Government savings measure. (d)The classification of the savings arising from those initiatives as "Efficiency Dividend - Other" constituted an after-the-event attribution, which does not change the nature of what was agreed and implemented as part of the MOU. The reference to savings attributable to "efficiency dividends" in cl 9(1)(d) of the Regulation can only be understood to refer to savings implemented to achieve an efficiency dividend target. In the MOU itself, the savings are clearly identified as "employee-related cost savings", using the precise terminology of the Regulation which had been proclaimed some two months earlier. The terms of the MOU must be understood as an express and deliberate recognition by the parties that the savings were employee-related cost savings for the purpose of the Regulation. The respondent cannot renege on the MOU by seeking to attribute those savings to meeting any efficiency dividend at a later date (see the approach in Public Service Association and Professional Officers' Association Amalgamated Union of NSW v Director General, Department of Premier and Cabinet [2010] NSWIRComm 59 at [53]-[63]). The Commission has repeatedly insisted upon the importance of parties being held to their industrial bargains: Re Corrections Health Service Nurses' (State) Award (1999) 90 IR 235 at 245. Further, the Regulation prescribes that, in the absence of agreement, the attribution of the savings is committed to the Commission (see cl 6(1)(b)(i)). In this sense, the nature of the savings cannot be the subject of unilateral determination by one party but must be the subject of objective determination. (e)The evidence demonstrated that CSNSW far exceeded any required "efficiency dividend savings." Any savings from the reduction in positions at Kempsey, Dillwynia and Wellington are, thereby, in addition to whole of Government savings measures as the efficiency dividend was satisfied notwithstanding those savings. If savings have been achieved over and above the any savings target, the excess is available to be used as "employee-related costs savings". (11)Whilst it is uncontroversial that the broad purpose of s 146C of the IR Act is to assist in maintaining "fiscal restraint", stating the purpose at that level of generality is of little utility in construing a particular provision. As the Full Bench has observed, "fiscal restraint is not an absolute term" (Crown Employees Wages Staff Award 2011" at [45]). The question here concerns the mechanisms employed to pursue that general objective and the procedure to be adopted consistent with the Regulation. (12)The specific purpose of the Regulation is to enable increases in remuneration or other conditions of employment if savings in employee-related costs are achieved. The interpretation of cl 9(1)(d) proffered by the respondent would mean that, if an agency overspent its budget in any respect, any employee-related cost savings could not be counted for the purposes of the Regulation as the Government wished agencies to be constrained to their budget. Such an interpretation would "eviscerate the provisions dealing with 'employee-related savings'". Submissions for CSNSW 27Mr J V Murphy, counsel for the respondent, made oral and written submissions which, when taken together, may be summarised as follows: (1)The threshold question raised by CSNSW does not represent an attempt to have the application summarily dismissed. The threshold question can, and should, be determined before the application proceeds as the PSA contends that the savings required to sustain the application have already been achieved. (2)The amended application was not filed in the form contemplated in Retained Firefighting Award 2008 at [32]. In that case, the Full Bench set out a 7 step process for claims to increase remuneration or alter conditions of employment, which required the application of Principle 8 - Arbitrated Cases of the Commission's Wage Fixing Principles. Step 4 of the process provided that, before the Commission determined the claim in accordance with the relevant Principle (step 5), the claim should identify what the applicant contended constituted the relevant cost savings. If the applicant failed to satisfy the Commission's requirements at step 4 of the process, the processing of the application could not proceed to step 5. It would be an errant exercise to resolve the merits of the case if the savings identified by the applicant could not aid their application. (3)The PSA bears the onus of identifying sufficient employee-related costs savings to off-set the cost of granting the amended application as required by s 146C of the IR Act and the Regulation (see Retained Firefighting Award 2008 at [32]). (4)The PSA has not discharged that onus as the only savings it relies upon to support its application do not fall within the definition of 'employee-related costs savings' in the Regulation. The savings are excluded from that definition as they are "whole of government savings" pursuant to cl 9(1)(d). In particular, the savings were classified as "Efficiency Dividend - Other" being savings "associated with any other form of Efficiency Dividend initiative aimed at making sustainable improvements in efficiency of expenditure within Government" and to achieve budget compliance. (5)This classification of those savings as "Efficiency Dividend - Other" was not, as the PSA contended, an after-the-event attribution. That designation is one understood to be appropriate by the Government and its various agencies. In any event, the savings are whole of Government savings by their nature, regardless of whether they were properly designated as such at the time or not. (6)The savings achieved by CSNSW were necessary because it had expended significantly more than its budget allocation. In the 2011 to 2012 financial year CSNSW was required by the Expenditure Review Committee of Cabinet to achieve annual savings in expenditure of approximately $31.7 million as part of the efficiency dividend prescribed by the Government. The program which achieved these savings, 'the IR Workplace Initiative', was part of a broader Government program announced by the then Treasurer in the Budget Speech, which sought to reduce expenditure. The reduction of the 350 positions within correctional services was to be effected by way of a proposed scheme which offered 5000 voluntary redundancies across the public sector. The reduction of the eight positions, upon which the PSA relied, was a part of that wider program. (7)"Clearly, the achievement of budget compliance by Government agencies is a Government priority, and measures designed to achieve this outcome are whole of Government measures. Savings achieved as a result of such measures are properly described as whole of Government savings". They are not "the type of saving that is available to fund a future salary increase or provide for improvement in other conditions of employment". (8)The PSA has sought to read down the term "whole of Government savings measures" in a manner that would allow any and all savings made by any government agency in an attempt to bring its expenditure within its budget allocation to be redistributed as wage increases or improved conditions of employment. This would defeat the very purpose of achieving such savings. This approach is entirely contrary to the accepted "legislative intention". (9)Further, it would be completely contrary to the underpinning principle of the Amending Act and the Regulation, namely, the maintenance of "fiscal restraint", for the Commission to permit these strategies to be used to support award variations which would generate employee-related costs. (10)This situation would not alter, even if savings were achieved in excess of any required "efficiency dividend savings". Such savings are still whole of Government savings. (11)The construction proffered by CSNSW is in accordance with the purpose of the Amendment Act, the Regulation and s 33 of the Interpretation Act 1987 (see Health Employees Conditions of Employment (State) Award and other Awards [2011] NSWIRComm 129 at [49] and Re Crown Employees (Public Sector - Salaries 2011) Award (No 3) [2011] NSWIRComm 104 at [34]). This purpose was demonstrated by the Minister's second reading speech. (12)Further, the MOU stated the purpose of these savings in the following terms: "The above strategies were developed to make CSNSW more competitive in any consideration of further privatisation of Correctional Centres in NSW". It is clear that it was never the intention or purpose of the MOU that those savings would be available to be redistributed back to employees by way of improved conditions of employment which would have the effect of increasing employee-related costs. Such action would be inconsistent with the purpose of the MOU. (13)The PSA contended that the presence of the term "employee-related cost savings" in the MOU was determinative of the nature of the savings arising from that document and can, therefore, be called in aid of the application. This is too simplistic as the definition of that term in cl 9 of the Regulation excludes what might otherwise be regarded as employee-related cost savings. Further, if the MOU was intended to use the Regulation definition, it would have been made clear. (14)In making the above submissions CSNSW has not "reneged" on the MOU. In fact, by seeking to apply savings designed to make CSNSW more competitive, the PSA reneged on its agreement. (15)Upon the above submissions, the answer to the question before the Full Bench must, therefore, be "No", and the application should be dismissed. Approach to the Determination of the Issue 28The approach we have adopted to the disposition of the question raised by CSNSW does not constitute a rejection of the procedure for the resolution of applications for improved salaries and conditions of employment in the Public Sector stipulated by the Full Bench in Retained Firefighting Award 2008 at [32]. In particular, we consider that, where the grant of an application would result in increases to employee-related costs by more than 2.5 per cent per annum (see cl 6(1)(b) of the Regulation), the Commission should normally first address the merits of the claim in terms of the wage fixing principles (see State Wage Case 2010 (No 2) [2011] NSWIRComm 29) before addressing the question of whether the applicant will satisfy the requirements of the Regulation, and particularly cl 6 thereof, provided that the applicant has identified, with some manner of particularity, the source of employee-related cost savings which may offset the employee-related costs arising from any application granted as a matter of merit (noting that other considerations such as they arise under s 146(2) will also require attention). 29The departure from the procedure applied in the present matter is a product of the nature of the employee-related cost savings identified by the PSA. If the issue in the proceedings had been whether those savings were sufficient to permit the grant of the claim, including doubts as to whether the savings relied upon (falling within the meaning of employee-related savings in cl 9) might, in fact, be productive of any employee-related cost savings whatsoever, no departure from the procedure specified in the Retained Firefighting Award 2008 would, in our view, be appropriate. However, in this matter, the issue does not concern the veracity of the identified savings in meeting the requirements of the Regulation (see cl 6(1)(b)(ii)) but whether those savings constitute savings of the requisite kind for the purposes of cl 9 of the Regulation. 30Whilst not warranted from the viewpoint of time or economy, given the substantial expenditure of that kind already spent in these proceedings, the issue raised by CSNSW should, in our view, be ventilated at this juncture for two reasons. First, there is an undercurrent in the proceedings of bad faith dealings which we consider counterproductive to the type of engagement the parties should properly undertake in addressing the issues raised by the Regulation (or indeed the merits of the case), and, ultimately, workplace relations. A ruling on the question will, in our view, assist in overcoming these problems consistently with the objects specified in s 3(h) of the Act. 31Secondly, a ruling as to the question will, if adverse to the PSA, require the organisation to consider what other savings might be brought to account in the satisfaction of the amended application. 32Thirdly, whilst our decision must necessarily be founded upon the facts and circumstances of this matter, the resolution may be of some guidance to parties dealing with claims for improvement in wages and conditions in the public sector. 33From that vantage point, it is clear the resolution of the issue is not truly a "threshold" issue as CSNSW submitted earlier in these proceedings or even preliminary in nature (except to the extent it was useful to deal with the question earlier in the proceedings). Nor does it, as counsel for the PSA contended, concern a strike out motion. An adverse resolution of the issue for the applicant cannot, of itself, be fatal to the application. Our ruling is interlocutory in character and designed to facilitate resolution of the industrial proceedings whether in a continuation of the arbitration of the proceedings or by further recourse to conciliation. It does not, of course, constitute a declaration of right. 34That discussion brings with it the question of evidence. A substantial amount of evidence was introduced into these proceedings which addressed issues of a much wider compass than those raised by the question. Whilst this was, in part, a function of the gradual confinement of the question being referred it has resulted in the relatively unsatisfactory situation (for the resolution of the question) whereby our adjudication occurs absent any agreed statement of facts and with a good deal of evidence adduced, strictly speaking, being irrelevant to the answer to the question raised (without any precise delineation in that respect). For example, there is material as to the subjective intentions of the parties in reaching and implementing the MOU which may have some bearing upon questions of good faith bargaining (and we express no final view in that respect) but which is inadmissible on the proper construction of the MOU and ultimately as to extrinsic material going to the construction of the Regulation (or s 146C of the Act). 35Nonetheless, having raised the issue with the parties during the course of the proceedings, and given the resolution of the question will necessarily depend, as we will discuss below, upon findings of fact, it will be necessary to make determinations of fact bearing upon the resolution of that question. We undertake that task under the heading immediately following. 36It is sufficient to complete the discussion under this heading to record the sources of evidence from which we have drawn (where relevant) our factual conclusions. 37The following witnesses were called to give evidence for CSNSW: (1)Mr Glenn Bacic, Director, Public Sector Industrial Relations in NSW Industrial Relations of The Treasury; (2)Mr Glenn Scholes, General Manager, Operations Branch with Corrective Services NSW; and (3)Mr David Huskins, Director, Custodial Operations Support at Corrective Services NSW. 38Each of those witnesses was cross examined by Mr Gibian. 39The following witnesses were called to give evidence for the PSA: (1)Mr Jason Hodges, Chief Correctional Officer, Mid North Coast Correctional Centre (Kempsey); (2)Mr Matthew Leslie Jones, First Class Correctional Officer, Mid North Coast Correctional Centre and delegate for the Prison Officers' Vocational Branch, Kempsey; (3)Mr Matthew James Bindley, State Chairperson of the Prison Officers' Vocational Branch of the PSA; (4)Mr Darren Leonard King, Chairperson of the Prison Officers' Vocational Branch, Lithgow sub-branch; and (5)Mr Stewart Little, former Senior Industrial Officer of the PSA. 40The latter three witnesses were cross examined by Mr Murphy. 41We note, for completeness, that there was also a reliance on documentary evidence. Factual Determinations 42When CSNSW undertook to build three new Correctional Centres at Kempsey, Wellington and Dillwynia, it indicated that those Correctional Centres would be privatised unless the PSA agreed to major industrial reforms. A reform process known as 'The Way Forward' was consequently adopted. That process resulted in the negotiation of the award: a stand alone or 'island' Award for the three sites made on 3 March 2004. The classification structure and certain conditions within the award differed from the industry standard. 43In the 2010/2011 financial year Budget Paper No 3 revealed that CSNSW spent $65.977 million more than its allocated budget for employee-related expenses in Custody Management. 44As earlier noted, the Expenditure Review Committee of Cabinet set CSNSW a savings target of $31.7 million as part of the efficiency dividend required by the Government. This was to be achieved by way of the IR Workplace Initiative, which was introduced in July 2011. A key part of that initiative was the revision of the structured day within each correctional centre. 45Reference has previously been made to the MOU, which concerned a number of major reforms to be undertaken across the New South Wales prison system reflective of the savings required in CSNSW. Those reforms included the closure of Parramatta, Kirkconnell and Berrima Correctional Centres and a voluntary redundancy program which would reduce staff at all major Correctional Centres it was executed on. As noted above, that document was implemented at the Kempsey, Dillwynia and Wellington Correctional Centres by the reduction of the eight positions upon which the PSA relies in these proceedings. 46The fundamental objective of the MOU was, prima facie, to make CSNSW more competitive so as to avoid further privatisation of Correctional Centres. 47The mechanism by which this goal was to be reached was: achieving minimum employee cost related savings of $33 M across Corrective Services NSW; And these savings were to be achieved by: deleting up to 350 positions which are in addition to the closure of facilities which will reduce 250 positions. 48No doubt the changes effected at Kempsey, Dillwynia and Wellington Correctional Centres led to a reduction in expenditure as the changes resulted in a reduction of labour costs. However, to the extent the question sought to draw a distinction between expenditure reduction and employee-related cost savings, we do not consider this evidence would sustain such a conclusion. The savings were employee-related cost savings as described in cl 9 of the Regulation. 49In the Budget Speech, delivered on 6 September 2011 (some three weeks after the MOU was signed), the then Treasurer Mr Baird set out a number of structural reforms which were designed to bring the State's finances under control and outline a "clear path" to Budget surplus. These long term structural reforms and additional savings measures across all Government agencies were expected to achieve approximately $8 billion in savings over the next four years. The Treasurer indicated that the Government was prepared to offer around 5,000 voluntary redundancies over that time "to underpin delivery of these savings". 50The Treasurer set out the specific savings to be achieved within CSNSW under the heading 'Prisons'. This included the closure of the Parramatta, Berrima and Kirkconnell Correctional Centres and a reduction of "around 350 positions across the Department of Corrective Services to be met through voluntary redundancies". Those particular reforms had been forecast in the MOU. (It may be noted that the Treasurer also set out specific savings to be achieved by reforms in other portfolio areas such as Health and Transport.) 51In the Budget Speech, the Treasurer affirmed the Government's commitment to bring Government spending under control. The Treasurer made reference to the Government having "closed idle prisons rather than waste taxpayers dollars on empty prison cells" and to the 2011/2012 program of voluntary redundancies which remained on track to reach its goal of 5,000 positions. 52CSNSW brought evidence that sought to draw correlation between the MOU, particularly the reduction in eight positions at the relevant Correctional Centres, and the savings measures instituted in the State Budget, referred to in the Budget Speech. 53The aforementioned IR Workplace Initiative was recorded in a document titled 'Roadmap Template - Summary for IR Workplace Initiatives' ('the Roadmap') under the heading 'Key Metrics'. The Roadmap was produced by the Fiscal Effectiveness Office of the Government. It demonstrated that the initiatives involved "restructuring the 28 day roster schedules with lower staffing requirements". The Roadmap clearly categorised the savings to be achieved through these initiatives as 'Efficiency Dividend - Other'. 54The Roadmap outlined approximately $31.4 million of cost savings. The savings were made up of $12.7 million saved through reduced overtime and employment of relief staff; $15.3 million through the reduction in total staff numbers (voluntary redundancies were offered to excess staff); and $3.4 million through further voluntary redundancies as a result of position deletions. 55These savings were also set out in a document titled 'Whole of Government Savings Measures - Monitoring Plan - Reporting to Expenditure Review Committee' dated 19 April 2012. Whilst this report was not specific to CSNSW, it included, inter alia, the closure of Parramatta, Kirkconnell and Berrima correctional facilities and the IR Workplace Initiative under the heading 'Efficiency Dividend Savings'. The report showed that the full financial year savings totalling $31.3 million were achieved in the year 2012/2013. 56On 17 June 2013 a 'Roadmap Summary Report' was produced, which described the outcomes of a program entitled "Whole of Government Savings" within. The name of the Roadmap was recorded as "IR Workplace Initiative". It was said to run from 1 July 2011 to 30 June 2020. The resultant savings were again categorised in this document as "Efficiency Dividend - Other". 57A benefits tracking report dated 30 January 2012 was provided by KPMG to the Commissioner of CSNSW. That document monitored the achievement of all of the savings initiatives being implemented to reduce expenditure as at 16 December 2011. It showed that CSNSW had achieved $45.3 million in savings as at 16 December 2011 and was anticipated to achieve a further $10 million between December 2011 and June 2012. These savings were achieved in consequence of the closure of Parramatta, Kirkconnell and Berrima Correctional Centres and the IR Workplace Initiative which included the 324 voluntary redundancies effected in 2011 (as well as a reduction in staff at the Parklea correctional centre). 58The Commissioner forwarded the KPMG report to the Director-General on 31 January 2012, stating that CSNSW had achieved $55.4 million in annual savings in the covering memorandum (whilst not specified in the covering memorandum, it may be presumed that the recipient was the Director-General of the Department of Justice, being that CSNSW is a division of the same). However, according to that report CSNSW was still $16.101 million over budget in the 2011/2012 financial year. The Commissioner confirmed that he was confident in achieving a total saving of $58.3 million per annum and was developing further cost saving strategies "to ensure budget compliance in the next financial year". 59Finally, the NSW Public Sector Wages Policy 2011, which was updated in April 2012, excluded from employee- related cost savings those savings which are whole of Government savings measures (such as efficiency dividends) (cl 5.2.4). It stated that employee-related cost savings should not include savings which the agency has already nominated as part of its efficiency dividend or other whole of Government savings measures (cl 7.3.2). Construction of cl 9(1)(g) of the Regulation 60We accept the submission of the PSA that the expression 'whole of Government savings measures' should be interpreted in accordance with the ordinary and natural meaning of the words used (see Crown Employees Wages Staff Award 2011 at [26]). A measure refers to an action or procedure intended as a means to an end. In the absence of any contention that the phrase was a 'term of art', the same process of construction must result in the phrase 'whole of Government' meaning literally the whole of the Government of New South Wales or its agencies. This is supported by the expression "such as efficiency dividends" appearing in brackets at the end of cl 9(1)(d) of the Regulation. It follows that the composite expression, 'whole of Government savings measure', should be understood to refer to a specific action or procedure intended as a means to an end which is adopted across the entire NSW Government. 61However, we also accept the submission by CSNSW that it does not necessarily follow that savings found by a particular agency of government may be excluded from the meaning of the expression whole of Government measures because the savings derive from a directive of Government to agencies of Government which may be achieved by different methodologies. Compliance with a requirement of the State Budget having general application would be one such example. CSNSW correctly submitted, in our view, that to allow savings from such initiatives to be treated as employee-related savings for the purposes of the Regulation would, in the case of consequential salary adjustments, not only render the savings nugatory but would be contrary to the purpose of s 146C to effect fiscal restraint. Whilst we agree "fiscal restraint is not an absolute term" (per Crown Employees Wages Staff Award 2011 at [45]), cl 9(1)(d) of the Regulation complements that objective by removing from the scope of cl 6(1)(b) that which is sourced from Government wide initiatives such as budget measures (even if the budget measure is achieved by employee-related cost savings) in contradistinction to specific offsets designed to counterbalance a particular wage or conditions claim. Consideration 62In our view, when so understood, the savings relied upon by the PSA as deriving from the MOU for the Centres are properly characterised, on the evidence before us, as being whole of Government savings within the meaning of the expression n cl 9(1). Our reasons for that conclusion (and by way of expanding the construction we have thus far provided) are as follows: (1)The statement in the MOU that the savings are employee-related savings is an axiom and nothing more. The deletion of custodial positions are, by their nature, employee-related cost savings. The statement merely permits, at most, any savings created by the deletion of up to 350 positions, to fall within the definition of cl 9 of the Regulation. (2)The categorisation of the savings in the MOU as employee-related costs savings (within the terms of cl 9 of the Regulation) does not prevent those savings being excluded for the purposes of cl 9(1)(d). (3)To the extent relevant, it is not open on the evidence to make a finding that there was an agreement that any offset above 2.5 per cent would be applied towards increases in remuneration or other conditions of employment. The stated purpose of creating savings was to make CSNSW more competitive and to avoid privatisation. To seek to apply that benefit back into employee costs is not consistent with that purpose. (4)Thus, whilst the Commission has repeatedly insisted upon the importance of parties being held to their industrial bargains (see Re Corrections Health Service Nurses' (State) Award (1999) 90 IR 235 at 245), in the present circumstances there is no such agreement. (5)In the absence of an agreement between the parties, the Commission is tasked, as we have noted, with categorising the savings. (6)In that respect, the terms of the MOU could not be determinative of the nature of the savings therein in any event (subject to an agreement between the parties pursuant to cl 6(1)(ii)). The terms cannot elevate the savings beyond that which they are by their nature. (7)Likewise, the attribution of the savings as 'Efficiency Dividend - Other' in the documents relied upon by CSNSW does not represent an irrevocable characterisation of the savings. At its highest, that evidence demonstrates that the savings were viewed by CSNSW and the NSW Government as part of a broader ongoing program overseen by the Fiscal Effectiveness Office. Hence, the submission of the PSA that the savings needed to be nominated and attributed at the time of the MOU does not require resolution. (8)In our view, as we have mentioned, for a 'measure' to be whole of Government, it does not need to be adopted by, or available to, every government agency in the same manner or to the same degree. In fact, no measure could ever be implemented identically across every department or agency in that manner. (9)A measure that is driven by the Government across agencies and from which any savings will be available for allocation across the whole of Government constitutes a whole of Government savings measure. (10)Upon the evidence, the savings relied upon by the PSA were the result of such a measure, which sought to return the State budget to surplus. The IR Workplace Initiative was a part of that wider program. (11)The 'measure' which gave rise to the savings was, thereby, not peculiar to CSNSW. (12)In the Budget Speech, the Treasurer referred to the reduction of 350 positions across CSNSW and later referred to the Government's preparedness to offer around 5,000 voluntary redundancies to "underpin" delivery of the discussed savings. This supports the proposition that the two initiatives were connected. (13)Any suggestion that, because the reduction of 350 positions was agreed to before the Budget Speech was delivered by the Treasurer, it could not form a part of the 5,000 voluntary redundancies announced in that speech was not supported by the evidence. It would be absurd to suggest that the 5,000 redundancies referred to in the Budget Speech were conjured up on the morning of 6 September 2011. Their political genesis must have occurred much earlier. (14)Further, whilst it is true that the inclusion of the savings in the 2011/2012 Budget Speech could not transform a CSNSW program into a whole of Government savings measure, it is equally true that the Treasurer's discussion of the savings occurring under the heading "Prison Reforms" in the Budget Speech cannot prevent a whole of Government savings measure from being characterised as such. (15)As earlier mentioned, the above interpretation is consistent with the purpose of the legislation. Section 146C was passed to achieve a government objective - a clear and stated "statutory purpose" of giving effect to Government policy. The policy underpinning s 146C and the Regulation was the philosophy to provide "a component of economic reform introduced by the New South Wales Government, central to which is the concept of fiscal restraint" (see HSU east and Director-General, Department of Finance and Services [2012] NSWIRComm 112 at [50]). (16)The intention of the legislature in amending the Act to include s146C and in promulgating the Regulation was undoubtedly to limit employment costs in the public sector. Increases in employee-related costs were to be limited to 2.5 per cent per annum. If employee-related cost savings cannot be achieved to fully offset any increase in employee-related costs in any one year beyond 2.5 per cent, on the face of the Regulation there can be no increase in remuneration for employees beyond that amount. (17)We do not accept the PSA's contention that, in consequence of the above construction of cl 9(1)(d), savings achieved in circumstances where an agency is over budget will necessarily be characterised as whole of Government savings measures (since the Government seeks to constrain all agencies to budget). 63Thus, the savings cannot be called in aid to offset an increase in employee-related costs. 64One final matter must be addressed in the disposition of the threshold question raised by CSNSW. The PSA made a submission that, in the event that the savings were determined by the Commission to be 'whole of Government savings', they could still be relied upon to offset costs because they were "additional" to whole of Government savings for the purposes of cl 9(1)(d). 65The PSA submitted that savings will be "additional to whole of Government savings measures" if any efficiency dividend target or other measure was satisfied, notwithstanding the savings relied upon. If savings have been achieved over and above any savings target, the PSA submitted that any excess is available to be used as "employee-related costs savings". 66CSNSW submitted that the PSA's suggestion that savings in excess of an efficiency dividend target are something other than whole of Government savings is a "non sequitur". We agree. Even if savings were achieved in excess of any required "efficiency dividend savings", it does not follow that savings which are properly characterised as whole of Government savings become something else. It is, in general terms, the measure which would need to be 'additional', rather than the amount of employee-related costs per se. Conclusion 67We answer the question posed by CSNSW as 'No'. 68In terms of the refinement of that question during the course of proceedings, we conclude that the savings deriving from the deletion of eight custodial positions from the Correctional Centres fell outside the meaning of employee-related cost savings in cl 9(1) of the Industrial Relations (Public Sector Conditions of Employment) Regulation 2014 due to the operation of sub-cl (d). 69The matter will be listed for directions for the further disposition of the proceedings. ********** Amendments 27 October 2015 - This decision has been amended as follows: References to "cl 8" in paragraphs [48] and [62](1) and (2) have been removed and replaced with "cl 9". 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: 27 October 2015