consideration
79 In light of the central role of the AEU case to the issues in this case, it is necessary to pay attention to that case.
80 In that case, the High Court considered the application of the Melbourne Corporation principle on the powers of the Australian Industrial Relations Commission to make awards.
81 The matters before the High Court arose out of the budgetary policies pursued by the State of Victoria which entailed a considerable reduction in the size of its public service and the number of its public sector employees, attendant upon the enactment of the Employee Relations Act 1992 (Vic) and the Public Sector Management Act 1992 (Vic) (the PSM Act). I refer below to these Acts collectively as the 1992 Acts.
82 The pre-existing Industrial Relations Act 1979 (Vic) (the IR Act) made provision for the compulsory arbitration of the terms and conditions of employment of public service employees, with the consequence that these public service employees were covered by State industrial awards.
83 The Employee Relations Act repealed the IR Act and applied the provisions of the Employee Relations Act to employees in the Victorian Public Service. Further, the Employees Relations Act provided that all awards made under the IR Act and then in force, would expire on 1 March 1993; and that employers and employees who had been bound by that award, would become parties to individual employment agreements on the same terms and conditions as those in the expired awards. The PSM Act provided for the repeal of the Public Service Act 1974 (Vic) (which provided for a similar system of arbitration and awards to the IR Act) and for the substitution of individual contracts of employment.
84 When the 1992 Acts came into effect, a number of severance agreements were offered to school teachers in government schools in Victoria as a measure to reduce the number of school teachers. Similar offers of voluntary separation were made to public service health workers in Victoria.
85 A consequence of these developments was that the unions whose members' terms and conditions of employment had been previously the subject of the State industrial awards, decided to seek for their members, the coverage and protection of federal awards.
86 In all but one of the matters before the High Court in AEU, a federal union of employees had served a comprehensive log of claims on the States relating to the terms and conditions of employment of employees of State government departments and agencies, and had applied to the Commission for the making of a finding of a dispute and the making of a federal industrial award under s 111 of the Industrial Relations Act 1988 (Cth).
87 The categories of government employees and office holders covered by the logs of claims were extensive, and included, public sector employees and office holders performing clerical, administrative and professional duties, teachers, nurses, cleaners, security personnel, domestic service workers and persons employed by the fire brigades. In all 14 of the proceedings, the Commission made the finding of dispute under s 101 of the Industrial Relations Act; and in nine of the proceedings the Commission had gone on to make an award under s 111 of that Act.
88 A number of the interim awards and orders related to logs of claims which were comprehensive in scope, relating to all aspects of employment. In relation, for example, to the school teachers, there was an interim award which substantially preserved the terms and conditions of employment which prevailed as at 20 October 1993, and an interim award requiring the State of Victoria, as the employer of the teachers, to take no further steps to process the voluntary separation packages. There were also interim orders made which permitted a person who had accepted a voluntary separation package to withdraw his or her acceptance and required the employer not to terminate the employment of government school teachers otherwise than in accordance with the provisions of the Act referred to in the earlier interim award.
89 The remaining matter which was before the High Court is of particular relevance to this case. This is because it involved an application by the Australian Federal Police Association to the Commission for consent to an alteration of the rules of eligibility of membership of the association to permit members of the police forces of any State or Territory to become members of that association. The Commission had, on 15 November 1993, consented to the alteration to the rules as had been sought.
90 The State of Victoria (referred to by the High Court as "the prosecutor") sought orders for writs of prohibition and certiorari to quash the decisions made by the Commission and preclude any further proceedings before the Commission. The prosecutor contended that the Commission had no power to make any of the findings of dispute or the awards or to grant an application for alteration to the rules of the Australian Federal Police Association.
91 The prosecutor relevantly contended that if awards were made on the logs of claims before the Commission, the State's capacity to determine the terms and conditions of its workforce would be transferred to the Commission because of the comprehensive nature of matters covered by the logs of claims. This exercise of power by the Commission, said the prosecutor, would constitute interference with, or curtailment of the governmental functions of the State, or its capacity to function as a government, and was, therefore, precluded by the implied limitation on the exercise of Commonwealth legislative powers under the Melbourne Corporation principle.
92 The majority of the High Court (Mason CJ, Brennan, Deane, Toohey, Gaudron and McHugh JJ) reviewed the scope and content of the implied limitation.
93 The majority referred to the fact that in Commonwealth v Tasmania (1983) 158 CLR 1 (Tasmanian Dam Case), Mason J, Brennan J and Deane J considered that the implied limitation, in its relevant aspect, was directed against the exercise of Commonwealth legislative powers in a manner which would be inconsistent with "the continued existence of the States or their capacity to function". The majority went on to observe that Mason J and Brennan J had considered that this aspect of the limitation was directed against "the impairment of the capacity of a State to function as a government, rather than against interference with or impairment of any function which the State government undertakes".
94 The majority rejected the prosecutor's submission that the observations of Mason J and Brennan J in the Tasmanian Dam Case which referred to "impairment of a State's capacity to function as a government" extended to "any impairment of capacity to exercise government functions".
95 In response to the prosecutor's submission, the majority also observed at 229:
In the Pay-roll Tax Case, Menzies J referred to the implied limitation in the context of interference with a State carrying out its "constitutional functions of government", a narrower expression than "government functions". Gibbs J referred to a law which curtailed or interfered with the "exercise of constitutional power by the States", but left open the question of what is the constitutional power that is protected. (Footnotes omitted.)
96 Further, at 229-230, the majority observed:
In our view, the prosecutor's submission on this point is against the weight of modern authority and draws a distinction which is unsatisfactory. To say that the limitation protects the existence of the States and their capacity to function as a government is to give effect more accurately to the constitutional foundation for the implied limitation identified by Dixon J in the passages earlier quoted from Australian Railways Union, including s 106 of the Constitution. To press the limitation as far as the prosecutor seeks to take it would travel beyond the language of s 106 and would confer protection on the exercise of powers by the States to an extent which is inconsistent with the subordination of those powers to the powers of the Commonwealth through the operation of s 109 of the Constitution. And the argument, if successful, would protect a substantial part of a State's workforce from the impact of federal awards, notwithstanding that the operation of those awards in relation to school teachers, health workers and other categories of employees would not destroy or curtail the existence of the State or its capacity to function as a government.
97 The majority went on to observe at 230:
The fact is that the existence of the States and their Constitutions and their capacity to function as governments should not be impaired by the operation of federal awards made in respect of the vast majority of the employees sought to be covered by the log of claims, at any rate if the award provisions were confined to minimum wages and working conditions which take appropriate account of any special functions or responsibilities which attach to them.
98 Further, the majority also declined to accept the distinction which the prosecutor sought to draw between "governmental functions" and "trading functions". The majority, at 230, observed:
We are unable to accept the distinction which the prosecutor sought to draw between "governmental functions" and trading functions. The argument was that the State functions as a government when carrying out public functions for a public purpose. On this view, health, education and police functions are government functions. Indeed, it is difficult to see why, on this view, trading functions are not governmental, if they are undertaken by the government in the public interest. The distinction is unsatisfactory for that reason.
99 The majority also rejected the contention that the implied limitation applied to protect what they referred to as the "administrative services exemption", such that it would preclude interference in respect of the employees of a State who are employed in providing the "administrative services" of a State. At 231, the majority, in referring to this exemption, observed:
[T]he exception is not related in any way to the implied limitations or to the purpose which it serves. That purpose protects the State and its capacity to function as a government. The exception consists of a category of the employees and is not directed to functions of government and even less to capacity to function as a government.
100 The majority then considered the argument by the Solicitor General for South Australia, who contended that the implied limitation protected from impairment the "integrity" or "autonomy" of a State. It was in that context, at 232, that the majority made the following crucial observations:
At this point it is convenient to consider South Australia's argument based on impairment of a State's "integrity" or "autonomy". Although these concepts as applied to a State are by no means precise, they direct attention to aspects of the State's function which are critical to its capacity to function as a government. It seems to us that critical to the capacity of the State is the government's right to determine the number and identity of persons whom it wishes to employ, the term of appointment of such persons and, as well, the number and identity of the persons whom it wishes to dismiss with or without notice from its employment on redundancy grounds. An impairment of a State's rights in these respects would, in our view, constitute an infringement of the implied limitation. On this view, the prescription by a federal award of minimum wages and working conditions would not infringe the implied limitation, at least if it takes appropriate account of any special functions or responsibilities which may attach to the employees in question. There may be a question, in some areas of employment, whether an award regulating promotion and transfer would amount to an infringement. That is a question which need not be considered. As the other provisions in a comprehensive award, the answer would turn on matters of degree, including the character and responsibilities of the employee.
In our view, also critical to a State's capacity to function as a government is its ability, not only to determine the number and identity of those whom it wishes to engage at the higher levels of government, but also to determine the terms and conditions on which those persons shall be engaged. Hence, Ministers, ministerial assistants and advisers, heads of department and high level statutory office holders, parliamentary officers and judges would clearly fall within this group. The implied limitation would protect States from the exercise by the Commission of power to fix minimum wages and working conditions in respect of such persons, and possibly others as well. And, in any event, Ministers and judges are not employees of a State. (Footnotes omitted.)
101 Importantly, for this case, the majority also dealt with the prosecutor's argument that the implied limitation also applied in relation to the exercise of the Commission's powers in granting consent to the amendment to the rules of the Australian Federal Police Association. At 241, the majority observed:
The prosecutor argued that the implied limitation precludes the exercise of the Commission's powers with respect to a dispute between a State and its police officers and that such a dispute cannot amount to an industrial dispute within the meaning of s 51(xxxv). The prosecutor's argument was an extension of its principal contention relating to governmental functions on the footing that the police discharge a primary and inalienable governmental function.
The short answer is that the granting of consent by the Commission to an alteration of the eligibility rules of the Australian Federal Police Association would not in itself work any impairment of the capacity of the prosecutor to function as a government. Further, having regard to conclusions earlier stated in these reasons, there is no basis for holding that the Commission is precluded from exercising some powers in relation to the fixing by award of minimum wages for State police officers.
102 The applicants' primary argument is that policing is a core and essential function of government and that the Melbourne Corporation principle will, accordingly, operate to invalidate the Commonwealth legislation which seeks to impair the arrangements which the State wishes to make for the remuneration of commissioned officers who perform this core governmental function. Further support for the unique position of the members of the police force in the apparatus of the State, said the applicants, was reflected in the fact of their independence and that the State was not vicariously liable for their negligent acts and omissions.
103 For the following reasons, I accept the Taxation Commissioner's argument that the fact that the maintenance of a police force is a core function of government, will not in itself mean that the Melbourne Corporation principle will operate to invalidate Commonwealth law which seeks to impact upon the arrangements made by a State for the remuneration of the commissioned officers of the police force.
104 An argument based on the essential role of policing to the State as attracting the Melbourne Corporation principle, was also made by the prosecutor in the AEU case. More specifically, in support of its contention that the Melbourne Corporation principle operated to invalidate the Commission's consent to the amendment of the rules of the Australian Federal Police Association, the prosecutor argued that the maintenance of the Victorian police force was "an important, or a primary and inalienable government function" (see the summary of the prosecutor's argument at 195 of AEU). It is instructive that, in support of that proposition, the prosecutor relied upon the same observations in the case of Richard Coomber (Surveyor of Taxes) v The Justices of the County of Berks (1883) 9 App Cas 61 as were cited by Viscount Simonds in Perpetual Trustee and were relied upon by the applicants in support of their primary proposition (see [34] above).
105 As already mentioned, the majority in AEU found that the implied limitation operated in respect of Commonwealth awards that purported to regulate certain aspects of the employment relationship between the State and its employees. However, save for those at the higher level of government, the majority found that the implied limitation did not preclude a Commonwealth award from regulating remuneration payable by the State to its employees, including to members of the police force. It is apparent, therefore, that the majority in AEU did not accept the prosecutor's submission that the Melbourne Corporation principle invalidated this exercise of the Commission's power on the basis that the maintenance of a police force was a core or "primary and inalienable" governmental function.
106 In other words, despite being asked to do so, the majority in AEU did not find that there was a special quality inherent in the role of policing to the functioning of a State such as to cause policing to be treated differently from other government functions, insofar as the application of the Melbourne Corporation principle was concerned.
107 Accordingly, in my view, the majority reasoning in AEU precludes the applicants from succeeding on their primary argument. The majority reasoning in AEU also applies to the submissions made by the Solicitor General, insofar as the Solicitor General sought to rely upon the special role of policing as being critical to the capacity of the State to function as a government.
108 I turn now to consider the applicants' alternative argument. This argument relies upon the observations of the majority in AEU to the effect that, "critical to a State's capacity to function as a government is its ability, not only to determine the number and identity of those whom it wishes to engage at the higher levels of government, but also to determine the terms and conditions on which those persons shall be engaged".
109 The difference between the parties on this issue was the basis upon which a person would be included within the category of being at the higher levels of government.
110 The Taxation Commissioner construed the reference by the majority in AEU to the implied limitation applying in respect of the impairment of the capacity of a State to function as a government, as precluding the exercise of legislative power which undermined the continued existence of the essential organs of government by which the State exercised its constitutional functions. It followed, said the Taxation Commissioner, that the implied limitation applied to preclude the impairment of the State's capacity to remunerate as it saw fit, those persons who were critical to the discharge of the functions of each of the organs of government of the democratic system of government embodied in the constitutional framework of Australia. Insofar as the executive organ of government was concerned, consistent with the doctrine of responsible government reflected in the constitutional framework, the implied limitation would apply to preclude impairment of the State's capacity to remunerate as it saw fit, those persons who are directly responsible to Parliament, or directly associated with, and responsible, to those persons.
111 The applicants, however, took a broader view of the ambit of persons included within the category of those at the higher levels of government. The true test, said the applicants, flowed from certain of the observations which were made in Melbourne Corporation: "activities which are essential to the very existence of a Government" (per Latham CJ at 52-53) and "normal and essential functions of government" (per Rich J at 66). The applicants' contention was that the question was to be determined by an assessment of the importance of that person's function to the State, rather than by reference to whether it was "constitutional".
112 For the following three reasons, there is, in my view, a greater degree of congruity in the submissions of the Taxation Commissioner, than those of the applicants, with the tenor of the majority judgment in AEU. Accordingly, I prefer the submissions of the Taxation Commissioner.
113 First, the majority in AEU found that implied limitation operated to preclude impairment of a State's capacity to choose the means of remunerating those at the higher levels of government on the basis that implied limitation operated to preserve the "integrity" or "autonomy" of a State within the constitutional framework. At 232, the majority, referring to those concepts of "integrity" and "autonomy" said:
Although these concepts as applied to a State are by no means precise, they direct attention to aspects of the State's function which are critical to its capacity to function as a government.
114 Some guidance as to the nature of the impairment which the majority in AEU perceived might threaten the "integrity" or "autonomy" of a State, is to be discerned from the following observations the majority made (to which I have already referred) as to what was said about the implied limitation in the Tasmanian Dam Case:
Mason J, Brennan J and Deane J considered that the prohibition, in its relevant aspect, was directed against the exercise of Commonwealth legislative powers in a manner which would be inconsistent with the continued existence of the States and their capacity to function. Mason J and Brennan J considered that this aspect of the limitation was directed against the impairment of a capacity of a State to function as a government, rather than against interference with or impairment of any function which a government undertakes. (Footnotes omitted.)
115 In my view, it is also, informative that the majority included in a footnote (citing the abovementioned references to the Tasmanian Dam Case) the following reference:
…Koowarta v Bjelke-Petersen (1982) 153 CLR 168 at 216, where Stephen J referred to the implied limitations "which will serve to protect the structural integrity of the State components of the federal framework, State legislatures and State executives".
116 These observations, which refer to the structural integrity of the State by reference to the organs of government and draw a distinguish between the capacity of a State to function as a government and the functions which a government performs, are more compatible with the submissions of the Taxation Commissioner than with those of the applicants.
117 Secondly, there is a resonance between the applicants' argument based, as it is, on policing being a core and essential function of government, and the prosecutor's argument to similar effect which was rejected in AEU.
118 The majority in AEU observed that in Victoria v The Commonwealth (1971) 122 CLR 353 (Pay-roll Tax Case), Windeyer J was not prepared to accept that there was a satisfactory distinction between essential functions of government and other functions undertaken by government; and that Barwick CJ, Walsh and Gibbs JJ shared that view. The majority did not, accordingly, accept a distinction between essential and other functions of government (which is relied upon by the applicants) as a sufficient basis upon which to found the guiding principle for determining the scope of the Melbourne Corporation principle. Nor, as I have already noted, did the majority accept that the impairment to the capacity of the State to function as a government extended to any impairment of the capacity to exercise government functions.
119 Further, as I have also already noted at [101] above, it is apparent that the majority did not consider that the exercise of the State's constitutional power to maintain a police force, was so critical for the capacity of the State to function as a government, as to attract the implied limitation.
120 Accordingly, in my view, the tenor of the majority decision in AEU does not support the applicants' contention that it would be a sufficient condition for a person to be regarded as being at the higher levels of government, that the person perform an essential government function.
121 Thirdly, in my view, the Taxation Commissioner's submissions derive support from an examination of the categories of the office holders which the majority in AEU chose to identify as clearly being at the higher levels of government. In my view, it is significant the majority chose to include judges within that category.
122 The question of pay and conditions of judges was not in issue before the High Court in AEU, but nevertheless, judges were referred to by the majority as being within the category. In my view, the reference to judges within that category is consistent with the Taxation Commissioner's contentions that the majority in AEU had in mind that the implied limitation was directed to protecting from impairment the continuing existence of the essential constituent organs of State government; and so, consistent with the observations of Brennan J in The Second Fringe Benefits Tax Case (see [21] above), protecting from impairment the capacity of a State to engage those persons who directly discharge the functions of the essential organs of government, on such terms as it may decide.
123 There are also a number of other reasons why, in my view, the submissions of the Taxation Commissioner should be accepted.
124 First, the High Court in Austin held that the Protected Funds Acts infringed the implied limitation in that it impaired or curtailed the capacity of the State to remunerate a member of its judiciary on such terms as it chose. The High Court came to the same conclusion as to the impact of the legislation in Clarke, where the appellant was a member of the legislature of the South Australian parliament. In each case, the appellant was a person who was engaged in performing duties which directly discharged the functions of an essential organ of government. In Brennan J's words in The Second Fringe Benefits Case, each was an "officer of the essential organs of government".
125 The decisions in Austin and Clarke are consistent with the Taxation Commissioner's submissions, but not, of course, inconsistent with the applicants' submissions. However, the applicants did not point to any decision which was inconsistent with the Taxation Commissioner's submissions. Further, the recognition of the importance of the impairment to the State's exercise of its constitutional, as opposed to the governmental, function in relation to the operation of the implied limitation, is recognised in the following observations of French CJ in Clarke at [32]:
[T]he Commonwealth cannot, by the exercise of its legislative power, significantly impair, curtail or weaken the capacity of the States to exercise their constitutional powers and functions (be they legislative, executive or judicial) or significantly, impair, curtail or weaken the actual exercise of those powers or functions. The Constitution assumes the existence of the States as "independent entities". This implies recognition of the importance of their status as components of the federation.
126 Secondly, the Taxation Commissioner's submissions propose a principled approach to determining which office holders or employees are to be regarded as being at the higher levels of government for the purpose of determining the ambit of the application of the Melbourne Corporation principle. By contrast the test proposed by the applicants founded on the "importance" of the functions performed by the office holder or employee in question, whilst having the virtue of flexibility, suffers from the vice of imprecision. The adoption of the applicants' argument would require the formulation of further criteria by which to adjudicate the importance to the State of the function performed by the officer holder or employee in question; and then the application of those criteria to persons performing a wide range of government functions in many different fields of endeavour.
127 It is the case, as the applicants contended, that the Taxation Commissioner's contentions give rise to at least one apparent anomaly. The anomaly referred to by the applicants was that, on the Taxation Commissioner's contention, relatively junior level employees within the public service such as ministerial advisers and assistants, would be at the higher levels of government, but a very senior officer such as a deputy head of a major department of government would not fall within that characterisation.
128 Whilst, it is the case that the Taxation Commissioner's approach does give rise to this apparent anomaly, it is an anomaly explicable by reference to the rationale advocated by the Taxation Commissioner. However, the fact of this apparent anomaly, does not, in my view, dictate an acceptance of the applicants' test. This is because that test entails the inherently complex and invidious task of trying to assess the relative importance of a particular officer holder's or employee's function to the State. The test would be uncertain in application, and on that account would be as likely, if not more likely, to give rise to apparent anomalies as would the Taxation Commissioner's test.
129 It follows that the appeal of each of the applicants, other than Mr Atherton, is dismissed.
130 As to Mr Atherton, his appeal is allowed in part to reflect the period when he served as the Acting Commissioner of Police. I will order that the parties confer, and within 7 days, file a minute of orders which reflects this result.
131 The applicants are to pay the respondent's costs.
I certify that the preceding one hundred and thirty one (131) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis.