Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales

LEGISLATION CITED: Industrial Relations Act 1996

Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 Commonwealth of Australia v Verwayen (1990) 170 CLR 394 Crown Employees (New South Wales Fisheries Salaries and Conditions of Employment) Award 2004 [2003] NSWIRComm 405 Crown Employees (Teachers in Schools and Related Employees) Salaries and Conditions Award and Crown Employees (Teachers in TAFE and Related Employees) Salaries and Conditions Award [2008] NSWIRComm 209 Elura Mine Enterprise (Consent) Award 2001 [2003] NSWIRComm 218 Finance Sector Union of Australia v Commonwealth Bank of Australia [2004] FCA 187 CASES CITED: Fox v GIO Australia Ltd (2002) 120 IR 401 Iron and Steel Works Employees (Australian Iron and Steel Limited - Port Kembla) and other awards (1945) 44 AR 64 Payne v Howison (unreported) (Cahill V-P, Hill, Marks JJ) (26 September 1997) re Brack; ex parte Operative Painters and Decorators Union of Australia (1984) 51 ALR 731 Staff Specialists (State) Award, Re [2006] NSWIRComm 124 Staff Specialists (State) Award, Re [2007] NSWIRComm 191 Waltons Stores (Interstate) Ltd v Maher (1987-1988) 164 CLR 387

APPLICANT: Mr J Nolan of Counsel Australian Salaried Medical Oficers' Federation (New South Wales) Mr S Mead LEGAL REPRESENTATIVES: RESPONDENT: Mr M Kimber of Senior Counsel Director General, New South Wales Department of Health Mr T Craft

DECISION: INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES

Application by Australian Salaried Medical Officers' Federation (New South Wales) for variation re salary packaging

1 This matter concerns an application by the Australian Salaried Medical Officers' Federation (New South Wales) ("ASMOF") for a variation of the Staff Specialists (State) Award ("the Award") pursuant to the provisions of s.17 (3)(c) of the Industrial Relations Act 1996. 2 The application was filed on the 24 April 2008 and initially allocated to Commissioner McLeay. However pursuant to s173 of the Act, the matter was reallocated to the Commission as currently constituted. Directions were then issued as to the filing and exchange of contentions and the matter set down for hearing on the 9 July 2008. 3 At the hearing Mr J Nolan, of Counsel, appeared on behalf of ASMOF and Mr M Kimber, of Counsel, appeared on behalf of the New South Wales Department of Health 4 The application filed by ASMOF sought to vary the Award in the following terms: · By deleting clause 7(a) and substituting:

(a) Subject to the other provisions of this clause, Staff Specialists may salary sacrifice from the range of benefits which the Director-General of the NSW Department of Health offers to all staff of NSW Health who are covered by the 'general' salary packaging scheme, or otherwise as may be agreed to by the Federation from time to time. · By deleting clause 7 (b) and substituting:

(e) The Fringe Benefits Tax on the benefits chosen by the Staff Specialist that would have been payable except for the Public Benevolent Institution status of the hospital will be calculated for each Staff Specialist who enters into a salary sacrifice arrangement. This amount will be divided equally between the employer and the Staff Specialist. To avoid any doubt, where salary sacrifice involves a benefit which is Fringe Benefits Tax exempt, no sharing arrangements will apply. 5 The grounds and reasons for the application were given as follows: a) the variation makes express, the agreement between ASMOF and NSW Health regarding the application to staff specialists employed under the Staff Specialists (State) Award of the right to avail themselves of salary sacrifice from the range of benefits which the Director-General of the NSW Department of Health offers to all staff of NSW Health who are covered by the 'general' salary packaging scheme; b) the agreement regarding the basis upon which staff specialists would be offered the same range of package benefits as would be offered to employees within NSW Health was expressed in a letter to ASMOF from NSW Health dated March 15, 2002 ['the 2002 agreement']. It was upon the faith of this agreement and against that background, that the present Award was settled; c) by letter dated 3 October 2007, NSW Health reneged on the 2002 agreement; d) it would be inequitable were NSW Health be permitted to renege on an agreement which it had freely made with ASMOF in the absence of compelling reasons; e) the Commission would not lend itself to the breaking of industrial arrangements which were clear and well settled and against which the relevant Award clause was crafted. f) NSW Health should be held to its commitment by the making of the proposed variation which would put the matter beyond doubt; g) the making of the proposed variation would be fair and just in the circumstances and do no more than re-instate the position regarding salary sacrifice agreed upon between the parties. 6 An Affidavit of Simeon Mead, Executive Director of ASMOF, was filed on the 24 April 2008 (Exhibit 1). The Outline of Submissions of ASMOF were filed on the 19 June 2008 (Exhibit 2) and the Outline of Submissions of ASMOF in Reply were filed on 7 July 2008 (Exhibit 4). 7 An Affidavit of Trevor Craft, Acting Director, Workforce Relations and Management Branch of the NSW Department of Health ("the Department"), was filed on the 2 July 2008 (Exhibit 3) together with the Outline of Contentions for the Department (Exhibit 4).

8 Neither Mr Mead nor Mr Craft were required for cross-examination. 9 The Department however sought an alternative variation to the Award and an amended Schedule A was tendered, (Exhibit 6), which sought as follows: Staff Specialists (State) Award 1. Change the title of Clause 6 'Salary Sacrifice Definition' to 'Salary Packaging Definition', and substitute 'salary packaging' in lieu of 'salary sacrifice' in this clause. 2. Rename Clause 7 'Salary Sacrifice' as 'Salary Packaging'. 3. In Clause 7, wherever the term 'salary sacrifice' or 'sacrificed' appears in this clause, substitute with the terms 'salary package' or 'salary packaging' or 'packaged' as the case may be. 4. Delete Clause 7 (a) and substitute with: a. Subject to the other provisions of this clause, staff specialists may salary package from the range of benefits the Director-General NSW Department of Health determines from time to time. 5. Delete Clause 7 (e) and substitute with the following: (i) Subject to (ii), (iii) and (iv) below, the fringe benefits tax on the benefits chosen by the Staff Specialist that had been payable except for the public hospital fringe benefit exemption status, will be calculated for each Staff Specialist who enters into a salary packaging arrangements. This amount will be divided equally between the employer and the Staff Specialist. (ii) In respect of salary packaging benefits available to Staff Specialists prior to 3 October 2007, the savings calculation as based on the fringe benefit tax value of the benefits packaged, will continue to be calculated in accordance with (i) above. (iii) The 'General' Salary Packaging Scheme applicable to NSW Health Service employees other than Staff Specialists, provides for the 50/50 sharing between the employee and employer to be calculated on the income tax saving derived from the pre-tax salary packaging deductions from the employee's salary, including salary packaging benefit items regardless of whether those benefits attract full FBT or are FBT- exempt. (iv) This method of calculating the 50/50 sharing of income tax savings in (iii) above, is to be applied to the 'meal entertainment' salary packaging benefit and to any other new salary packaging benefit introduced on and from 3 October 2007. 6. Substitute the word 'sacrificed' with 'packages/sacrifices' in Clause 9 "Limitation on the Amount to Be Sacrificed." Background and Chronology Based on the transcript and the Affidavits filed by the parties. 10 In 1998 the Department and ASMOF entered into a Memorandum of Understanding ("the MOU") (Exhibit 3 - TCI) to provide for salary packaging arrangements for Senior Medical Officers ("SMPs"). Some 11 specified benefits could be salary sacrificed up to the FBT exemption cap without incurring any FBT liability that would otherwise have been passed on in full and incurred by those SMPs. The agreement reached was that the FBT deduction benefit was to be shared on a 50/50 basis as between the employer and employee. 11 The MOU contained no express agreement, one way or the other, concerning the treatment of any income tax savings that might become available to SMPs who took advantage of the salary sacrificing arrangements. 12 In 1999, the salary sacrificing provisions of the MOU were incorporated in the Staff Specialists Award (315 I.G. 1460) effective as from 30 July 1999 (Exhibit 3 - TC3). 13 Clause 4B, Salary Sacrifice, of the Staff Specialists Award relevantly provided as follows: a) "............................... n.a. b) Subject to the other provisions of this clause Senior Medical Practitioners may salary sacrifice from the range of benefits the Corporation and Federation agree upon from time to time. c) Salary sacrifice arrangements must be formalised by an agreement between the Senior Medical Practitioner and the Senior Medical Practitioner's employer. d) ................................ n.a. e) ................................ n.a. f) The Fringe Benefits Tax on the benefits chosen by the Senior Medical Practitioner that would have been payable except for the Public Benevolent Institution status of the hospital will be calculated for each Senior Medical Practitioner who enters into a salary sacrifice agreement. This amount will be divided equally between the employer and the senior medical practitioner g) ................................. n.a. h) The administration cost of each salary sacrifice agreement will be shared equally by the employer and the participating Senior Medical Practitioner. The employee's share will be deducted from the total amount sacrificed in that Senior Medical Practitioner's salary sacrifice agreement." 14 The Award also made no reference, one way or the other, concerning the treatment of any income tax savings that might become available to SMPs who took advantage of the salary sacrificing arrangements. 15 In 2002, following negotiations between the Department and the Health Unions, agreement was reached on the introduction of a "General" Salary Packaging Scheme which commenced operation from 1 January 2002. This Scheme applied to all New South Wales Health Employees (other than Staff Specialists). It provided for 22 benefit items to be packaged, with all income tax savings associated with participation in the Scheme (irrespective of whether the benefits sought to be packaged were subject to FBT or were "FBT exempt") to be shared on a 50/50 basis as between the employer and employee. Participation in the scheme is on a voluntary basis. The combined amount of any salary packaging/sacrificing shall not exceed 50% of salary. 16 As a consequence of the agreement reached, salary packaging provisions were inserted in the Health Employees Conditions of Employment (State) Award (IRC 8219 of 2001) as well as number of other health awards (but not the SMP's Award). (Exhibit 3 - TC4) 17 The procedures applicable to the salary sacrificing provisions in those various health awards are contained in the New South Wales Health Services Salary Packaging Policy and Procedures Manual (Exhibit 3 - TC5). The salary sacrificing provisions contained in the various health awards provide that the employer and employee shall comply with the procedures set out in the Manual "as amended from time to time". 18 In early 2002 there was an exchange of correspondence and subsequent discussions between ASMOF and the Department concerning a proposal by ASMOF that SMPs withdraw from the 50/50 FBT sharing arrangement with Health Services (as outlined in paragraph 10 above), to be offset by forgoing their annual leave loading. ASMOF also sought to align the scheme applicable to SMPs with some of the features of the "general" salary sacrificing scheme available to other Health Services employees. 19 In correspondence dated 15 March 2002 (Exhibit 1 - SM3) the Department advised ASMOF that its proposal to abolish the 50/50 FBT share arrangement in exchange for the forfeiture of the SMP's annual leave loading was rejected. The letter indicated the reason for the rejection was that the view was taken that there would be a potential loss of revenue to Health Services in any such proposed changeover. 20 The letter went on to note that: "Almost all responses from Health Services indicated a concern with the negative impact of a 100% saving for SMPs would have on the take-up rate by other employees who are packaging under the 'general' scheme, and who are required to share 50/50 with their employer. There was also a concern over equity, with a general belief there should be the same 50/50 sharing arrangement applicable to all classifications of employees."

21 The letter further indicated as follows: "2. Alignment with Features of the General Scheme. The SMPs' scheme is to be aligned with the following features of the general scheme: · the same range of package benefit items will be offered, · the maximum amount of salary that can be packaged will be increased to 50% (including superannuation sacrificing), and · the salary sacrifice to superannuation will remain a segregated arrangement per the award clause, free of any administration fees as is the case under the general scheme."

22 The letter also indicated that the Department had "agreed" to a new range of administrative arrangements (as listed in the letter) in relation to salary packaging for SMPs. 23 The Department also sent out correspondence, (Exhibit 1 - SM2) to the Chief Executive Officers of the various Area Health Services as well as other relevant Health Services concerning the position reached as detailed in its letter to ASMOF. 24 On the 26 March 2002, ASMOF responded to the 15 March letter from the Department (Exhibit 1 - SM4) relevantly as follows: "As discussed, the Federation has considered whether the formula used to calculate the employer share in the SMP scheme should be made consistent with the formula used in the general scheme. Unfortunately, the Federation is unable to agree to this proposal. If the Federation's understanding of the general scheme is correct, SMPs would be disadvantaged compared to the existing arrangements." 25 On the 5 April 2002, The Acting Director-General of the Department replied to the correspondence from ASMOF (Exhibit 1 - SM5) and relevantly stated as follows: "Your preference is noted, and it is agreed that the SMPs salary packaging continue to be administered in terms of the notional FBT formula per the Senior Medical Practitioners Award."

26 In correspondence dated 3 December 2002, Health Services were advised of Premier's Department and Treasury approval to expand the salary packaging benefits list by 10 additional items for both the 'general' and the SMPs' salary packaging schemes. "The additional items were designed to improve the range of choices and the overall take-up rates in both schemes." (see Exhibit 2 - A).

27 The salary packaging arrangements between the parties continued unchanged until 2006. 28 By correspondence dated 10 February 2006 (Exhibit 2 - A), The Deputy Director-General, Health Support, advised Chief Executives of the various Area Health Services and other relevant Health Services, that following a further approach to Premier's Department and Treasury, approval had been given for an additional benefit to be added to both the 'general' and the Staff Specialists (as they were now known) schemes, namely 'Relocation/Living-Away-From-Home Expenses'. The benefit was an FBT exempt item. The correspondence did not propose any change to the existing arrangements applicable to salary sacrificing packaging by Staff Specialists.

29 By correspondence dated 23 July 2007 (Exhibit 2 - SM6), Mr Craft advised ASMOF that consideration was being given by the Department of Health to the addition to salary packaging arrangements of a new benefit item of "meal entertainment" that was FBT exempt. The correspondence went on to indicate: "The Department has decided that this benefit and any future approved benefits only be made available strictly on the basis of a 50/50 sharing of the income tax saving between employer and employee - irrespective of the employee's classification - in the interests of consistent treatment and parity across the NSW Health Service". 30 The letter went on to indicate that discussions on the matter were sought. 31 By correspondence dated 10 September 2007 (Exhibit 3 - TC11) ASMOF advised of their preparedness to meet to discuss the issues but indicated: "However, it is unlikely that we will be willing to agree to reduce the benefits available to staff specialists under the Award. The suggestion that certain benefits will not be made available until ASMOF agrees to amend the Award is obviously unacceptable." 32 By further correspondence dated 13 November 2007 (Exhibit 3 - TC12) ASMOF advised inter alia as follows: "I confirm that ASMOF regards the NSW Health approach to this matter as a breach of the "no extra claims" provision of the Award. It is not in dispute that staff specialists currently have a salary packaging scheme that is different to the general scheme in that FBT savings (but not other tax savings) are shared between the employee and the employer. This reflects Clause 7(e) of the Staff Specialists (State) Award. The NSW Health policy that staff specialists will only be able to access the "meal entertainment" benefit is clearly contrary to the Award and can only legitimately occur if the Award is varied. ASMOF does not agree to such a variation and therefore the NSW Health position is in breach of the "no extra claims" clause." 33 By correspondence dated 11 October 2007 (Exhibit 3 - TC14), the Department advised ASMOF of the amendments that had been made to the New South Wales Health Salary Packaging Policy and Procedure Manual for the General Salary Packaging Scheme ( Exhibit 3 - TC15) and reiterated the availability of the new "meal entertainment" benefit to staff specialists on the terms as set out in the Department's correspondence of 23 July 2007. That policy had been "relaunched" by correspondence dated 3 October 2007 from the Department to the Chief Executive Officers and Directors of Corporate Services in all the Health Services within New South Wales. 34 The Department also responded to the correspondence from ASMOF on 6 December 2007 (Exhibit 3 - TC13) and refuted the contention that the proposal was a breach of Clause 7(e) of the Award or that it was a breach of the no extra claims clause of the Award. The Department further indicated that it did not seek to vary the Award to alter the existing sharing arrangements. The correspondence went on to indicate: "It is the Department's view that the new benefit 'meal entertainment' being fringe benefit exempt, by definition, does not give rise or have relevance to, any fringe benefit tax saving. The only saving that will arise with the introduction of this benefit will be income tax saving which is not dealt with under that subclause. Moreover, the Department does not see this proposal as taking anything away from current benefits and the calculation of sharing arrangements of the benefits available to date. The income tax sharing condition accompanying the introduction of this and other new optional benefits, is intended to place staff specialists on an equal footing with other staff in terms of future benefit items."

35 The Commission was advised that as at the date of the hearing of this matter, discussions between the parties on a new Staff Specialists (State) Award to replace the current Award, were to commence and an application for a new Award had just been listed before the Vice President. The Evidence

36 Both Mr Mead and Mr Craft deposed as to the relevant history of salary packaging for staff specialist which forms the basis of the Background and Chronology above. 37 In relation to the application to vary the Award Mr Mead also deposed that as far as ASMOF is concerned, NSW Health had abrogated an agreement with respect to salary packaging which dated back to March 2002 and which had been consistently applied since then. It was the letter from NSW Health, in July 2007, which unilaterally abandoned the previous agreement.

38 He went on to depose that ASMOF was of the view that NSW Health could not be permitted to walk away from an agreement which had been well settled for many years. The present Award was crafted against the background of relevantly, the 2002 agreement. It would be inequitable for NSW Health to suggest otherwise. 39 As a major public sector employer it behoved NSW Health to abide by, and to be seen to be abiding by, all relevant industrial arrangements and agreements which had been entered into in good faith. In the event that NSW Health was dissatisfied with the continued application of the 2002 agreement, the appropriate course was for it to raise such dissatisfaction in the next round of Award discussions. 40 Mr Mead concluded by deposing that NSW Health had "abused the goodwill" of ASMOF by its unilateral change of position in this matter and its apparent reliance upon the fact that the relevant award provisions do not spell out the 2002 agreement in unambiguous terms. This should be remedied. The variation sought in the application did no more than give expression to the 2002 agreement and the Commission was respectfully requested to make the variation. 41 Mr Craft deposed that in 2002, whilst the Department was hoping to achieve the maximum possible alignment between the two schemes, it resolved not to insist at that time that SMPs gaining access to the additional benefits under the General Scheme was conditional upon ASMOF agreeing to the same 50/50 income tax sharing arrangements as applicable in the General Scheme. 42 He deposed that, taking into account a number of factors, (including that the large majority of the additional benefits were all full FBT exempt items), the Department "acquiesced" to the continuation of the status quo even though there was no "objectively defensible basis" (that is, a basis with any industrial merit), to warrant SMPs being treated more favourably than all other New South Wales Health employees vis a vis salary packaging sharing arrangements. 43 Mr Craft deposed that the Department did not, either at that time in 2002 or any time before or since 2002, provide ASMOF with any undertaking that SMPs would always have the benefit of a different (and more favourable) 50/50 sharing arrangement to that enjoyed by all other New South Wales Health employees, either with respect to existing salary packaging benefits or with respect to any new benefits that might be introduced at any time in the future. Mr Craft maintained that the Department did not ever enter into a legally enforceable agreement with ASMOF about the sharing or non- sharing of income tax savings arising from the packaging of the FBT exempt benefit items. 44 He went on to depose that, given that the Award only dealt with the issue of notional FBT savings on salaried packaged benefits that were subject to FBT (as opposed to having an FBT exempt status), "the Department considered (and still considers) that it was always at liberty to insist that any new FBT benefits that it was prepared to add to the list of available benefits, would only be accessible by SMPs on exactly the same terms that such new benefits were made available to all other New South Wales Health employees". 45 Therefore the correspondence from the Department to ASMOF in July 2007, concerning the new item of meal entertainment (an FBT exempt item) that was to be made available to staff specialists, was consistent with this view. 46 Mr Craft deposed that the Department's position was that if there was to be any variation to the award it should "in essence, capture the notion that all new salary packaging benefits offered by the Department on or after 1 October 2007 (i.e. hence picking up the meal entertainment benefit and any future benefits) shall be offered to all New South Wales Health employees on the same basis, namely that all income tax savings generated by the salary packaging of any new such benefits will be shared between the employer and the employee on a 50/50 basis". 47 In conclusion Mr Craft deposed that the Department believed that this was "the only fair and reasonable outcome" in view of the following considerations: a) The more advantageous treatment of SMPs from 1999 through to October 2007 was not based upon the existence of any industrially meritorious distinction between staff specialists and all other New South Wales Health employees in the context of salary sacrificing and sharing arrangements; b) accordingly, when the 50/50 income tax saving formula was included in the General Scheme from its inception on 1 January 2002, there was no proper basis for the participants in the SMPs scheme to be treated more favourably and, indeed, all notions of parity and equity suggested that from that time forward SMPs seeking to take advantage of repackaging benefits should have only been entitled to do so on the same terms as were then available to all other New South Wales Health employees; c) whilst it is true that the Department acquiesced in permitting participants in the SMP Scheme being treated more favourably in the period from 1 January 2002 until October 2007, such acquiescence was not based upon any legal and legally enforceable agreement, and certainly not on the existence of any legitimate difference between staff specialists and all other New South Wales Health employees such as would warrant more favourable treatment of staff specialists in the context of salary packaging arrangements (either permanently or even for a period of time); d) the Department has not and does not propose to impose on Staff Specialists the General Scheme income-tax 50/50 sharing arrangement with respect to any of the benefits that were readily available to be packaged prior to October 2007 (i.e. so the new sharing arrangement will only apply to benefits introduced after that date); e) the salary packaging of the meal entertainment benefit and of any other new benefit will remain optional, so that Staff Specialists will not be compelled to package any such new benefit if they do not want to share income tax savings associated with the packaging of such benefits in accordance with the General Scheme formula; f) the Department did not, at any time, agree or otherwise represent or undertake, that the more favourable treatment of Staff Specialists would continue in perpetuity either with respect to the then existing available salary packaging benefits all, more significantly, with respect to any new benefits that the Department may decide to make available at any time in the future; g) there is nothing in the existing Staff Specialists Award that is inconsistent with the proposal now being implemented by the Department in connection with the meal entertainment benefit and as proposed by the Department to operate with respect to any future new salary packaging benefits that may be offered; h) given that the Staff Specialists Award does not deal with (either by way of prohibition or otherwise) the prospect of income-tax saving sharing arrangements with respect to FBT exempt salary packaging benefit items, ASMOF's asserted entitlement to be exempt from any such arrangements is based on the asserted general agreement alone (being based purely on the Department's letter of 8 April 2002 -- see a nature "TC9" hereto). Even if that was a legally enforceable agreement (which is denied), it could and would have been terminated by the provision of reasonable notice. 48 The Department opposed the variation sought by ASMOF and in the alternative sought variation to the Award in terms of Exhibit 6.

Submissions 49 Mr Nolan for ASMOF, relied on the material contained in the affidavit of Mr Mead (Exhibit 1) and took the Commission to relevant correspondence and the chronology of events. It was submitted that the material demonstrated beyond argument that the only relevant event that had led to the dispute between the parties and to ASMOF's application to vary the Award, had been the unilateral change of position by NSW Health. 50 Since the agreement was made in 2002, the parties had acted upon the faith of the agreement up until the October 2007 letter from the Department. In February 2006, an additional salary packaging benefit was introduced (Relocation/Living Away from Home Expenses) to both the ASMOF and the general schemes. There was no suggestion at all that the treatment of this benefit would be in any way different to or at variance with the 2002 agreement. 51 It was submitted that the introduction of this benefit demonstrated that the parties had no doubt about the clear meaning and the intention of the 2002 agreement. 52 Varying the Award was the most suitable vehicle for resolving the dispute between the parties on this issue. NSW Health was endeavouring to treat the Award provision as being unrelated to the 2002 agreement in order to avoid its clear obligations which were recorded in the correspondence and which underpinned the Award clause. The only alternatives facing ASMOF were prosecution for breach of the Award or an application for a declaration as to the true meaning of the current provision. Neither course permitted a speedy resolution of the dispute and it was submitted that was preferable that the position be put beyond doubt. 53 It was submitted that there could be little doubt, when ascertaining the intent behind the making of the clause, that the construction advanced by ASMOF was correct. NSW Health only faintly disagreed and appeared to take the view that it could unilaterally repudiate its earlier agreement on the grounds that it has had "a change of heart". 54 The scope of the clause in question, as understood in the context of its adoption, was clear. The proper meaning of the clause was to be ascertained by an examination of the words used, the structure of the clause and the context in which it was adopted. Reliance was placed on Sydney Tower Restaurants Pty Ltd v Zhang & Anor [2004] NSWIRComm 250 (at para.17), which in turn noted the observations of Vice President Walton in Fox v GIO Australia Ltd (2002) 120 IR 401 (at 46). 55 Attention was also drawn to the distinction observed by the High Court between the "expressed intention" and whatever might have been the "actual intention" as per re Brack; ex parte Operative Painters and Decorators Union of Australia (1984) 51 ALR 731 at 732; Finance Sector Union of Australia v Commonwealth Bank of Australia [2004] FCA 187. It was submitted that the Commission would ensure that the actual intention is expressed in the Award even where an initially drafted clause turns out, on later examination, not to have carried that intention into effect. 56 Where appropriate, antecedent documents which led to the adoption of a clause would be relevant. In this regard see Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 per Mason J [at 352-353]. 57 It was submitted that it was beyond argument that the correspondence set out in the attachments to Mr Mead's affidavit provided the rationale for the clause. 58 The conduct of NSW Health had been "unconscionable". The Commission was charged with acting with equity and good conscience and would therefore view that conduct as wholly "unmeritorious". NSW Health had conducted itself at all times in a manner which was consistent with its acceptance of the position put by ASMOF until its 2007 correspondence which marked a radical change of position by the Department. 59 It was also submitted that it was not open to NSW Health to assert, as it did, that the Award clause had not operated, and was not intended to operate, in the manner as suggested by ASMOF and as clearly set out in the correspondence. Further NSW Health should be estopped from making such assertion. The applicability of estoppel in an appropriate case was dealt with by the Full Bench in Payne v Howison (unreported) (Cahill V-P, Hill, Marks JJ) (26 September 1997). The Full Bench discussed the relevance of the High Court decisions in Waltons Stores (Interstate) Ltd v Maher (1987-1988) 164 CLR 387 and Commonwealth of Australia v Verwayen (1990) 170 CLR 394 60 Mr Nolan submitted, paraphrasing Deane J in Verwayen, that whether such a departure would be unconscionable related to the conduct of the allegedly estopped party in all the circumstances. That party must have played such a part in the adoption of, or persistence in, an agreed state of affairs, the assumption would be that it would be guilty of unjust and oppressive conduct if it were now to depart from it. 61 In this matter ASMOF had entered into an agreement with NSW Health on the basis outlined in the material and NSW Health knew that ASMOF acted under that assumption and refrained from correcting it when it was its 'duty in conscience' to do so. The way in which that could have been approached was when the next round of award discussions occurred (and they were commencing at the moment). The Department could have come to ASMOF and indicated that it considered that the benefit that ASMOF had under the agreement was inappropriate and they wanted to alter that arrangement and get involved in the bargaining process in the next round of Award discussions. Instead ASMOF was presented with a fait accompli whereby the Department unilaterally decided this new benefit could not be given under the terms of the earlier agreement because ideally it would be equitable to have parity with the two schemes. 62 If that was the basis upon which a decision could be made to repudiate a previous agreement, it established a wonderful precedent. If ASMOF had sought to say that industrial arrangements that were in place as a result of a specific and express agreement for many years no longer suited and they were not going to do it, then NSW Health would be complaining long and loudly about ASMOF reneging on an agreement. They would be asking the Commission to intervene and make sure this terrible injustice was undone because industrial parties, when they entered into these agreements, were expected to abide by them. 63 ASMOF expected no more than that, and it was simply not good enough for the Department to suddenly decide to repudiate an agreement that it had entered into. 64 It was submitted that in exercising its discretion, the Commission should give effect to the agreement that was made by the parties. To the extent that there was any room for argument that the Award clause as expressed did not give effect to that intention (a position which was rejected by ASMOF) then the position should be put beyond doubt by the making of the variation as sought by ASMOF. 65 The Commission had the power to vary an award pursuant to s.17 of the Act and the circumstances in which such a variation may be made were many and varied see: Elura Mine Enterprise (Consent) Award 2001 [2003] NSWIRComm 218; Crown Employees (New South Wales Fisheries Salaries and Conditions of Employment) Award 2004 [2003] NSWIRComm 405 and Iron and Steel Works Employees (Australian Iron and Steel Limited - Port Kembla) and other awards (1945) 44 AR 64. 66 The material submitted by ASMOF spoke for itself. The dispute between the parties had been brought about by the unilateral change of position by NSW Health and that change of position represented nothing less than a reneging on the 2002 agreement. That conduct was unconscionable and represented an egregious departure by NSW Health from an agreed state of affairs that had been relied upon by ASMOF. The Award was negotiated against the background (inter alia) of the agreement. The additional benefit extended by the correspondence of February 2006 was positive confirmation of that 2002 agreement. 67 It was contended in the strongest possible terms that it would be inequitable if NSW Health were to be permitted to renege on an agreement which it made with ASMOF when it had been unable to point to any compelling reason which would permit it to be released from its agreement. The variation as sought should be made in order to hold NSW Health to its agreement. 68 Mr Kimber for the Department, during the course of his submissions, took the Commission in some detail through the chronology of events and the relevant documentation contained in the Affidavit of Mr Craft (Exhibit 3), but from the perspective of the Department. 69 That chronology of events has been traversed in detail in the Background and Chronology above. 70 Mr Kimber also expanded in some detail on the written contentions filed on behalf of the Department (Exhibit 4). 71 The filed contentions usefully summarise the position of the Department as follows: a) The MOU entered into by the parties in 1998 about salary sacrificing did not deal with the issue of sharing of income tax savings on FBT exempt items. There was no basis for suggesting that this issue was the subject of negotiations leading up to the MOU such that it could be said that it was considered but rejected. It was also significant that ASMOF did not seek to suggest that. b) The salary sacrificing provisions that were inserted into the Award, by consent, in 1999 did not deal with the issue of sharing of income tax savings at all, only sharing of FBT savings. This is evidence of the absence of any active consideration let alone agreement on this issue. c) Contrary to ASMOF's contentions nothing in the award prohibits the Department from offering new FBT exempt benefits (such as the meal entertainment allowance benefit) on the basis that such new benefit can only be accessed if staff specialists agree to share associated income tax savings. There was also nothing in any "antecedent documents" supporting ASMOF's construction of clause 7 of the award. ASMOF relies solely on documentation generated more than two years after the relevant clause was added to the Award. d) ASMOF was not firm in its view that there had been a breach of the award otherwise a prosecution for such breach would have been the quickest and most appropriate way of bringing this issue to a head rather than lodging firstly, a dispute notification, and then, this Award variation application. e) As there was no evidence whatsoever that the issue of income tax savings (whether on FBT exempt items or otherwise) was the subject of any discussion, negotiation and agreement prior to the Award variation in 1999, it would be impossible for the Commission to conclude that a prohibition on the sharing of any such income tax savings is somehow an implied feature/term of the Award and thus provide the foundation either for the asserted breach of Award by the Department or for the proposed variation, which ASMOF says is to make explicit what is already implicit. f) From the limited material available it appears this issue only arose for the consideration for the first time when the "General" salary packaging scheme for other NSW Health employees was being put together in 2001 (operative 1 January 2002). It appears by then that more comprehensive advice was provided, from its then advisers (McMillan Shakespeare), to the effect that it made more sense to focus on the sharing of income tax savings arising from salary sacrificing arrangements (whether full FBT/FBT exempt, either completely/partially). Hence the 50/50 sharing of income tax savings became one of the "cornerstones" of the General Scheme as did the provision of 11 more benefit items than were currently available under the SMP's Scheme. g) The subsequent agreement between the Department and the other health unions concerning the 'general' Salary Sacrificing Scheme resulted in approximately 97000 health employees being covered by the General Scheme, and salary sacrificing certain benefits on the basis that there was a 50/50 sharing of the income tax savings associated with those arrangements. That agreement was then incorporated by consent award variations into a number of public sector health awards. The Staff Specialists (approximately 3000) were able to salary sacrifice on a more beneficial basis namely that they only had to share the FBT savings associated with salary sacrificing under the SMP scheme. h) It was significant that other than repeatedly stating that the Department "agreed" to treat staff specialists more favourably vis a vis salary sacrificing arrangements, ASMOF has not asserted, (either in evidence or contentions), that there was any proper industrial basis for such more favourable treatment. That is there was:- i. No suggestion that there was an industrial negotiation involving some trade-off to secure the benefit of avoiding sharing income-tax savings. ii. No suggestion that the more favourable salary sacrificing arrangement arose out of settlement of an industrial dispute or a claim for wages and conditions so that this issue was part of an overall industrial "package" that could not/should not now be "unpackaged". iii. No suggestion that there was any "consideration" and by ASMOF/Staff Specialists in exchange for participation in the scheme without having to share income-tax savings arising from that participation. iv. No suggestion that either ASMOF and/or any of its members have acted to their "detriment" as a consequence of their "reliance" on the existence of the said agreement. i) ASMOF simply asserted that they were lucky enough to have "got in first" and before sharing of income tax savings arose for consideration and that on this basis alone the more beneficial treatment they gained in 1999 should be retained in perpetuity, even though there was no objectively defensible reason for Staff Specialists to be treated more favourably than all other NSW Health employees. Proper industrial principles of "equity and parity" undoubtedly favoured Department's position rather than ASMOF's position on this issue. j) ASMOF relied on the exchange of correspondence in 2002 as demonstrating that the Department agreed to allow the difference between the two salary sacrificing respective schemes to continue and such a view of the correspondence cannot be refuted. The Department denied and refuted the notion that such agreement (regardless of its status) could never thereafter be varied or terminated at all, let alone with a view to ensuring equity and parity between all NSW health employees. 72 Mr Kimber sought to make submissions on the issue of whether there had been any intention to either create legal relations or a legally enforceable agreement ever came into effect. This issue was also canvassed in the contentions as filed and the various relevant cases cited. 73 Mr Nolan acknowledged on behalf of ASMOF, that for its part, it only sought to characterise that "there's been an agreement made sufficient for the ordinary, usual understanding of industrial agreements and arrangements in this context. We don't need to take that next step it's an industrial arrangement and it's been admitted as such.....". 74 Given that concession by ASMOF I do not consider it necessary to traverse the submissions/contentions made on behalf of the Department concerning whether or not there was in existence a legally enforceable and binding contract.

75 It was also submitted and contended on behalf of the Department that in addition to issues of equity and parity it was important to stress the following: i. Staff Specialists were not obliged to salary sacrifice with respect to any benefits including the new meal entertainment benefit or any future benefits that might become available. If they were not prepared to share the income-tax savings arising from seeking to access any new benefits as and from October 2007 then they could simply elect not to salary sacrifice in connection with those new benefits. ii. The Department had not sought to impose income tax saving sharing arrangements on Staff Specialists on a retrospective basis. They would continue to retain their more beneficial position in respect of any items available to them under the salary sacrificing arrangements prior to October 2007. The Department was only seeking to ensure maximum equity and parity between all NSW health employees as and from October 2007 and then only with respect to new benefits becoming available as and from that date. iii. Since October 2007, some 400 staff specialists had sought to access the meal entertainment benefit even though they were made aware that this could only be done on the basis of their acceptance of the 50/50 tax sharing arrangement. iv. There was no proper basis for the Commission to now vary the Staff Specialists Award so as to overcome the force and effect of the agreements voluntarily reached between those 400 Staff Specialists and the Department. v. Enshrining a prohibition on Staff Specialists having to share income tax savings with the Department in the context of salary sacrificing arrangements would only serve to exacerbate what had already been identified as "the level of resentment" on the part of other NSW Health employees to the more favourable treatment received by Staff Specialists in relation to salary sacrificing arrangements. 76 It was submitted in conclusion that the Award should be varied in terms of Exhibit 6 as sought by the Department. 77 Mr Nolan, in reply, elaborated on the Outline of Submissions in Reply (Exhibit 5) which generally rejected the submissions of the Department and further contended that those submissions failed to come to grips with the central issue in the application, that being, that the Department had reneged on a long-standing agreement with ASMOF and as a matter of industrial merit it would not be permitted to do this by the Commission. 78 Mr Nolan emphasised that the agreement ASMOF relied on was contained in the letter of 15 March 2002 dealing with the alignment of the features of the general scheme. Attention was drawn to the first dot point that the same range of packaged benefit items will be offered. That was the agreement and nothing could be clearer. Going forward, any one from a staff specialist or hospital cleaner reading that, would know immediately that if the packaged benefit item was going to be offered to the other health unions it would also be offered to the senior medical practitioners because that was what it said. It was as simple as that. 79 The Health Department had decided that it didn't like that deal, but it was the deal that it made. They knew exactly what they were agreeing to at that time and if they weren't completely happy with what they agreed to, that was just bad luck, because that applied in both directions. 80 There were many things that ASMOF had agreed to over the years that probably, in retrospect, it could have done a better deal or it may not have been really comfortable about, that it in the scheme of things it had agreed to. The agreements that it had made, it was expected to uphold, just in exactly the same way the as agreements made by the Department were expected to be abided by. 81 It should be noted that superannuation could be salary sacrificed without any sharing of income tax savings and this applied to all public sector employees. Other FBT exempt items are treated in the same as superannuation. 82 It was explicitly acknowledged in negotiations that FBT exempt items would involve no tax sharing and this was spelt out in the example given in the manual (Exhibit 3 - TC2). It should be noted that there were significant problems, in any event, with sharing income tax savings on otherwise deductible items. There was significant potential for detriment to employees who were not properly advised (for example in relation to packaging a laptop). The income tax saving is shared with the employer, even though the alternative is for the employee to claim a tax deduction, and retain all the savings. Laptops and otherwise deductible items were on the list of benefit items set out in the general scheme (Exhibit 3 - TC5). Page 18 noted that there may be no financial advantage, but it did not note that there was in fact a disadvantage. 83 It was submitted that it was not correct to say that the Award did not deal with income tax sharing. The Award provided for FBT sharing, not income tax sharing. The provision is clear about what happens when salary packaging occurs. 84 If the Department was now suggesting that there should be no difference between ASMOF conditions and those of other health unions, (for example nurses/HSU conditions), then how did the Department explain the continuing differences in health awards on topics such as the 38 hour week, the payment of overtime, the HSU Status of Employment Award, Nurses' 12 hour shifts, etc, etc. An example was given of an occasion when HSU wages increased in 1998 under the then MOU by 18% compared to ASMOF's 14% increase. 85 The argument that ASMOF could not have a more favourable condition for Staff Specialists was nonsense. On the contrary, equity and parity suggested that the Department should have offered the ASMOF deal to Nurses and the HSU. 86 The Commission was referred to the "key letter" from ASMOF of 26 March 2002 (Exhibit 3 - TC8) which explicitly rejected income tax sharing. In that correspondence the Department accepted that the scheme for the Staff Specialists would continue and accepted that the two schemes were different. 87 That letter also expressed concern that the general scheme had the potential to disadvantage employees in relation to "otherwise deductible" items (see above). 88 It was submitted that the legal submissions advanced on behalf of the Department were misconceived. The terms of the agreement were, and are, clear. ASMOF were put at a disadvantage, because it was on the basis of that agreement that ASMOF settled subsequent awards. 89 The Department had in effect breached the no extra claims provision of the award because there had been this attempt to change circumstances mid term. 90 Further it was absurd to suggest that these arrangements could never be varied. The occasion for any variation was the next round of award discussions which were due to commence shortly. There was no basis for unilateral change to the conditions at issue. 91 The Department's submissions should be rejected by the Commission and it should be held to its bargain, notwithstanding that it now complains, years later that it apparently made a bad bargain. 92 The Commission should vary the award in terms of the application as sought by ASMOF. Consideration

93 I have carefully considered the evidence and submissions of the parties in this matter. 94 The parties acknowledged that the Commission had the power to vary the Award pursuant to s.17 of the Act and indeed each side has submitted the form of the Award variation considered necessary to reflect their respective and opposing positions.

95 The relevant provisions of Section 17 Variation or Rescission of Award, are as follows: 17 (3) [Circumstances for variation or rescission] An award may be varied or rescinded in any of the following circumstances only: a) at any time with the mutual consent of the parties to the b) making of the original award, c) at any time to give effect to a decision of the Full Bench of the Commission d) under section 50 or 51 (National and State decisions), e) during its nominal term if the Commission considers that it is not contrary to the public interest to do so and there is a substantial reason to do so, f) after its nominal term in the Commission considers that it is not contrary to the public interest to do so.

96 The Staff Specialists (State) Award published 25 May 2007 (362 IG 666), expired on the 30 June 2008. Therefore pursuant to s.17 (3) (f), I may vary the Award, if I consider that it is not contrary to the public interest to do so. 97 I have also considered the cases cited by Mr Nolan as to some of the many and varied circumstances in which such a variation could be made, such as Elura Mine Enterprise (Consent) Award 2001 [2003] NSWIRComm 218; Crown Employees (New South Wales Fisheries Salaries and Conditions of Employment) Award 2004 [2003] NSWIRComm 405, and Iron and Steel Works Employees (Australian Iron and Steel Limited - Port Kembla) and other awards (1945) 44 AR 64. I am satisfied that I have the power to vary the Award with the issue for determination being whether the award should be varied in terms as sought by ASMOF or as sought by the Department, or in such other terms as might be considered appropriate by the Commission.

98 In assessing the merits of the competing claims of the parties concerning the appropriate variation to the Award, it is necessary to return to a consideration of the history of salary packaging arrangements for Staff Specialists commencing with the MOU entered into between the parties in 1998. 99 The 1998 MOU was clearly the result of the usual and commonplace traditional industrial negotiations between an employer and a union on behalf of its members. Those negotiations resulted in a range of financial benefits and conditions flowing to ASMOF's members, including two percentage increases in salaries for 1998/99, as well as benefits to the employer, such as productivity savings and a "commitment to cooperation to achieve mutually beneficial outcomes in terms of more effective and efficient service delivery". 100 Whilst the MOU itself does not refer to the salary increases, it seems reasonably clear to the Commission, from the Department's 8 December 1998 letter to ASMOF concerning the signing of the MOU, that agreed salary increases were part and parcel of those negotiations in 1998 between the parties which resulted in the agreement encapsulated in the MOU and which included the scheme to provide for 11 benefit items that were available to be salary sacrificed by SMP's on the basis of the 50/50 sharing of any FBT benefit available. There was no reference in the MOU to sharing of income tax savings. 101 The 1999 variation to the Award inserting the new salary sacrificing provisions also provided for two percentage salary increases that had been agreed as part of the negotiations (see page 1462 of the Gazetted variation - Exhibit 3 - TC 3). 102 It should also be noted that the 1999 Award variation only provided for the sharing of the FBT deduction benefit between employees and the employer. There was no provision for, nor any express mention of, the sharing of any income tax savings arising from salary sacrificing. That this was the case clearly reflects the agreement between the parties in relation to the salary sacrificing provisions at that time. 103 However it must be said that in my view for there to be the introduction of any concept of sharing of income tax savings arising from the salary sacrificing of any benefit there would have to be an appropriate Award variation to insert such a provision. 104 To that extent I consider that there has been a breach of the Award by the Department since 2007 when the introduction of the change to the previous agreement and arrangements took place. 105 That also raises the question of whether or not there was a breach of Clause 30, No Extra Claims, of the Award. It would appear to follow that if I consider the Award provisions concerning salary sacrificing were breached by the Department's unilateral actions of 2007, then the Department has also breached the No Extra Claims provision. 106 I note that the issue of "No Extra Claims" provisions in awards has recently been considered by the Full Bench in Crown Employees (Teachers in Schools and Related Employees) Salaries and Conditions Award and Crown Employees (Teachers in TAFE and Related Employees) Salaries and Conditions Award [2008] NSWIRComm 209. 107 However those issues were not the substantive issues before me nor were substantive submissions put to the Commission. Mr Nolan certainly flagged both issues very briefly during the course of his submissions but not on the basis of requiring the Commission to make any findings as such. Similarly Mr Kimber, not surprisingly, rejected those issues as flagged, but again not in any substantive way. Those were not the issues the parties sought to agitate before the Commission. 108 The Commission merely makes observations rather than findings. 109 Returning to the 1998 MOU, the section concerning 'Salary Packaging' noted at page 5:- v "in respect of the range of benefits approved from time to time by the Premier's Department the Department notes that the Federation will progress its claim for a wider range of benefits to be made available to staff specialists within the context of the salary packaging review currently being undertaken by the Premier's Department." 110 There was no evidence before the Commission as to whether that 'salary packaging review' resulted in the subsequent 'General' Salary Packaging Scheme' of the 22 benefit items (but with a 50/50 sharing of the income tax saving) that was introduced and operated for Health Services employees as from 1 January 2002. But I consider that it is logical that that was indeed the case. 111 The Department was therefore "on notice" that ASMOF would be seeking to pick up any future extension or enhancement to salary sacrificing provisions that might be introduced in the sector. 112 It is clear that the introduction of the particular salary packaging provisions applicable to ASMOF's members arose as a consequence of an agreement reached between the parties as a consequence of negotiations concerning new industrial arrangements to be implemented to the benefit of both sides. 113 Similarly it is clear that the introduction of the 'General' Salary Packaging Scheme did not happen in a vacuum but as part and parcel of negotiations between the NSW Government and a major Health Unions which also included agreement on wage increases for the various employees concerned. 114 It is also clear from both the submissions of the parties as well as my own knowledge of the health industry in New South Wales over recent years, that there are a number of areas in which there is not strict comity or parity of conditions as between Staff Specialists and the various other groups of Health workers, not to mention that there have been differential wage increases operating from time to time as a result of negotiations between the various parties. 115 Mr Nolan referred in his oral submissions to matters such as differential percentage wage outcomes, shift rosters and weekly hours of work. There may well be other matters of greater or lesser significance and import. 116 However there has been no specific and detailed evidence provided to the Commission on the nature and range of those differences, any comparison as to the number of employees affected or any detail as to the cost implication to the employer. The Department's contentions indicated that there were 3000 Staff Specialists as compared to 97000 health workers (covered by the general scheme). I assume that those are approximate figures. That was the only comparative detail or information to come out of the evidence. 117 However if one were to embark seriously on any consideration of whether or not there ought to be a greater degree of parity as between Staff Specialists and other public sector health workers, it may also be relevant to consider whether any issues of attraction and retention of Staff Specialists in the New South Wales health system ought to be considered in any context of examining any differential conditions applicable. 118 Moving to the events of 2002. Neither side have provided precise details of how or when the ASMOF proposal concerning abolition of the 50/50 FBT sharing arrangement/annual leave loading offset, arose. The Department's 14 March 2002 letter (Exhibit 3-TC2) refers to its earlier letter of 29 January 2002 seeking views on the ASMOF proposal. A proposal that was obviously raised with the Department prior to that date. However just how much prior and in what circumstances (i.e. whether in any context of broader industrial negotiations) is not known, nor was any clarification provided by the parties. 119 I consider that the circumstances and the context of the ASMOF proposal put forward would be relevant as it could assist in clarifying beyond doubt that the ensuing discussions/exchanges formed what could only be described, in my view, as negotiations resulting in new "industrial arrangements" (to use Mr Nolan's characterisation of the relationship) arising between the parties. 120 That letter of 14 March, together with the Department's 15 March letter to ASMOF (Exhibit 3-TC3) make it clear that the ASMOF proposal was rejected. Further the letters noted: "Almost all responses from Health Services indicated a concern with the negative impact of 100% saving for SMPs would have on the take-up rate by other employees who are packaging under the 'general' scheme, and who are required to share 50/50 with their employer. There was also a concern over equity, with a general belief there should be the same 50/50 sharing arrangement applicable to all classifications of employees." 121 Notwithstanding these widely held views concerning the issue of equity arising from the disparity between the two schemes, when ASMOF subsequently rejected, by its letter of 26 March 2002 (Exhibit 1-SM4), the proposal that SMPs arrangements be amended to reflect the sharing arrangements under the 'general' scheme, the Department simply agreed to that position. 122 The extension to the SMPs of the provisions arising under the general scheme arose as a consequence of the cancellation of the McMillan Shakespeare salary packaging contract which had administered the SMPs scheme and the transfer of the scheme's administration to the Health Services scheme administration which would pick up the additional 22 benefits available but on a 50/50 income-tax sharing arrangement. 123 The only evidence as to any negotiations between the parties on that extension appears in ASMOF's 26 March letter as follows: Salary packaging arrangements for Senior Medical Practitioners (SMPs) Thank you for your letter of 15 March 2002 confirming the agreed arrangements for salary packaging for SMPs from 1 April 2002. I note that we have agreed in subsequent discussions that school fees will continue to be available to SMPs as a benefit item, even though it is not currently on the list of benefit items in the general scheme.

As discussed, the Federation has considered whether the formula used to calculate the employer share in the SMPs scheme should be made consistent with the formula used in the general scheme. Unfortunately, the Federation is unable to agree to this proposal. If the Federation's understanding of the general scheme is correct, SMPs would be disadvantaged compared to the existing arrangements.

The Fringe Benefits Tax on the benefits chosen by the Senior Medical Practitioner that would have been payable except for the Public Benevolent Institution status of the hospital will be calculated for each Senior Medical Practitioner who enters into a salary sacrifice arrangement. This amount will be divided equally between the employer and the Senior Medical Practitioner.

Consequently, where no FBT would have been payable (e.g. FBT-exempt items; otherwise deductible items) there is no employer share. In contrast, under the general scheme, the Federation understands that the income tax saving is shared and therefore a share is paid to the employer even when the benefit items are FBT-exempt or otherwise deductible. For this reason, the Federation cannot agree to the SMP arrangements being amended to reflect the general scheme. 124 The letter then goes on (in the remaining two paragraphs), to spell out in more precise terms the nature of the disadvantage arising and to raise issues concerning items that attract GST. 125 I also note from that letter that the discussions referred to in paragraph 2 record agreement being reached on a benefit item (school fees) to continue to be made available even though it was not currently on the list of benefit items in the general scheme. It would appear that this may be the only written record of the agreement between the parties about that particular benefit item continuing to be available to SMPs notwithstanding the list of benefits then applicable under the general scheme. 126 The Department replied to ASMOF's letter on the 8 April 2002 (Exhibit 1-SM5) as follows: Senior Medical Practitioners' Salary Packaging Scheme - Savings Calculation I refer your letter of 26 March 2002 where following the cancellation of the McMillan Shakespeare salary packaging contract and transfer of the scheme's administration to the Health Services scheme administrations, you expressed a preference to continue using the formula for the calculation of the 50/50 share arrangement for employers' and employees' savings under the Senior Medical Practitioners (SMPs), Salary Packaging Scheme, rather than the formula from the 'general' salary packaging scheme.

Your preference is noted, and it is agreed that the SMPs' salary packaging continue to be administered in terms of the notional FBT formula per the Senior Medical Practitioners' Award. (Emphasis added).

For the record, the 'general' salary packaging scheme emphasises savings achieved from income tax, whereas the SMPs' scheme is based on the notional FBT calculation of benefit items (excluding FBT exempt and otherwise deductible items). The savings achieved under both schemes will vary depending on the individual staff member's tax rate and choice of benefit items. The potential maximum saving achievable for both parties under each scheme will be the same provided the employee is on the marginal tax rate and packages full FBT items. It is correct that savings under the 'general' scheme are calculated on the value of all benefits packaged regardless of FBT status, but the notion that the Department has misled employees is rejected. The two schemes were negotiated at different points in time, based on different financial advice, and with different sets of officers and unions involved. The 'general' scheme is voluntary, the choice of benefits is at the discretion of the individual, and every employee is encouraged to obtain their own independent financial advice as to how packaging will affect their own financial and tax situation. The letter went on to respond to the issue raised by ASMOF about GST. 127 Although the wording is somewhat curious "your preference is noted", it is quite clear from this correspondence that the Department agreed to extend the additional benefit items available under the 'general' scheme but applying the formula applicable under the ASMOF Award which meant that there was no sharing of the income tax saving arising from any individual SMP electing to salary sacrifice any of the 22 new benefits to be available. 128 It appears from the evidence that this correspondence is the only written confirmation of any discussions on this issue. 129 Mr Craft deposed that "there was not then, and there is not now, any sound industrial reason why SMPs should have the benefit of a more generous salary packaging scheme than all other New South Wales Health employees" but acknowledged that this was the reality that had been in place since January 2002. (He further indicated that there were no off sets given in return.) 130 That may well be the case. In the absence of any further detail or evidence concerning the discussions referred to in the ASMOF letter it is impossible to conclude just what was the industrial reason that resulted in the agreement that was reached between the parties and applied until 2007. 131 Mr Craft also deposed as to the Department's letter to ASMOF of 15 March 2002 and its concern about the feedback from "Health Service employees" (Mr Craft's terminology) of "inequity" between the two schemes "with a general belief [that] there should be the same 50/50 sharing arrangements applicable to all classifications of employees". 132 I don't know if it is a typographical error on Mr Craft's part in referring to "Health Service employees". The letter itself refers to "Health Services" and that must be taken to mean the parties to whom the letters had been directed namely: "Chief Executive Officers Area Health Services Corrections health Service The Children's Hospital at Westmead." 133 The way Mr Craft makes that reference would suggest that there was some broader canvassing of employees generally. The letters certainly don't indicate whether that had indeed happened or the manner in which such canvassing of views (and from whom) might have taken place. 134 I have taken the references in the letter to mean "feedback" coming from the employers to whom the letters were addressed. 135 Mr Craft went on to depose that ..."hence the Department resolved, at an appropriate time in the future, to have the terms of the SMPs' scheme more "aligned" with the general scheme to the extent that this could be achieved by agreement with the ASMOF". 136 That "resolve" appears not to have been communicated to ASMOF in the correspondence exchanged, which is acknowledged by Mr Craft. However he also deposed that "that desire was thereafter expressed by the Department in the meetings that took place with ASMOF in the period between 15 March 2002 and 26 March 2002." 137 There is no evidence from ASMOF as to whether that "desire" of the Department was indeed so communicated to ASMOF in the meetings that took place in that period in 2002 and in what precise terms that communication may have occurred.

138 Thus the situation that existed between the parties as at the conclusion of the correspondence exchanged in early 2002 was that there was an agreement between the parties, albeit one that was not formalised in any award/agreement/MOU documentation, that provided for SMPs to gain access to the additional 22 benefit items available to be salary sacrificed but without the 50/50 income tax sharing arrangement applicable to all other Health Services employees. 139 Mr Nolan characterised that agreement as an " agreement made sufficient for the usual understanding of industrial agreements and arrangements in this context.......". 140 That was not seriously disputed by the Department. 141 Moreover the Department clearly understood the implications of the agreement reached and the differential treatment arising between SMPs and other Health Services employees. Although Mr Craft sought to characterise this merely as the Department "acquiesced to the continuation of the status quo" for a range of reasons (as he then deposed to). 142 That frankly is playing with words. The fact is that the Department agreed with the proposal put forward by ASMOF, and introduced the 'general' Scheme for Staff Specialists on the basis sought by ASMOF and acted on that agreement until 2007. 143 It would also appear from Mr Craft's evidence that any proposed future alignment of the two schemes by the Department would on the basis of "to the extent that this could be achieved by agreement with ASMOF" (emphasis added). 144 However the subsequent actions of the Department in seeking to initiate a realignment of the two schemes was undertaken without any action whatsoever to seek such agreement with ASMOF before taking the decision to apply the "meal entertainment" benefit and future benefits on the basis of a 50/50 sharing of the income tax savings. 145 Between 2002 and 2006 there was no change to the agreement between the parties concerning salary sacrificing for Staff Specialists and its application or implementation. 146 In spite of Mr Craft's claim that the Department always considered itself "at liberty" to insist any new FBT-exempt item be introduced on the same basis as applicable in the 'general' scheme, the fact that it took no action to do so between 2002 and 2006 would have entitled ASMOF to consider that the agreement as to the arrangements applicable to Staff specialists would continue to apply. 147 I consider that ASMOF would have been entitled to act on the faith of the agreement in existence between the parties between 2002 and 2006 and that no dramatic or substantial change would take place without the appropriate negotiations and further agreement being reached. That view would then have been reinforced by the actions of the Department in 2006.

148 There was a further significant development, in the Commissions view, in relation to the making of a new Staff Specialists (State) Award in 2006. Neither party drew the Commission's attention to these proceedings and the resulting Full Bench decision. 149 However, the Commission may, pursuant to s.162 (2) (j) of the Act "on its own initiative, inquire into any industrial matter." I have therefore enquired as to the making of the new Award in 2006. 150 In 2006 the Full Bench issued an extensive decision dealing with applications by both ASMOF and the Health Administration Corporation (the HAC as it then was) for a new Staff Specialists (State) Award, see Staff Specialists (State) Award, Re [2006] NSWIRComm 124. 151 There were some 14 days of hearing with the decision handed down on 28 April 2006. It was a major industrial case that had commenced with an application by ASMOF in 2004 with a further application by HAC in 2005. The Full Bench decision refers to lengthy conciliation proceedings in 2005 before Boland J which resulted in an agreement on salaries between the parties embodied in a Memorandum of Understanding tendered in proceedings. Other claims were also the subject of agreement between the parties. The claims left to be determined by the Full Bench in accordance with the Commission's Work Value and Special Case Principles related to a claim by ASMOF for further salary increases from July 2005 and claims relating to managerial allowances for Staff Specialists from July 2005. 152 It is clear that this was a major case involving conciliation, then inspections, with detailed submissions by the parties. The outcome of the Full Bench deliberations is not relevant to this matter save that there is no mention anywhere of any issue arising from any disparity between the two salary sacrificing schemes that have been referred to in these proceedings. 153 I would have thought that if the Department harboured ongoing concerns about the disparity between the two salary sacrificing schemes in operation then these Award proceedings would have been the opportunity to ventilate such concern and address the issue. It is apparent that no such action took place. 154 The Full Bench made a new Staff Specialists (State) Award incorporating the agreements reached between the parties and the matters determined by the Full Bench decision to operate from the beginning of the first full pay period to commence on or after 28 April 2006 and to remain in force until 30 June 2008. 155 It seem to me that this is also a further strong indication that ASMOF were entitled to continue to rely on the faith of the agreement it had reached with the Department in 2002 on salary sacrificing for its members. 156 I also note that the same applications concluded before the Full Bench in 2006 in NSWIRComm 124, were the subject of further consideration in 2007 by Boland J (as he then was) in dispute proceedings concerning a claim by ASMOF for a Special Service Allowance for Emergency Physicians in public hospitals, see Staff Specialists (State) Award, Re [2007] NSWIRComm 191. The matter was heard on 28 June 2007 and the date of judgement was the 6 August 2007. 157 Again this would appear to have been an opportunity for the Department to raise any issue it had with disparity between the two schemes. And again the absence of any such action would have entitled ASMOF to continue to rely upon the faith of the agreement it had reached with the Department. 158 Moving back to events specifically concerning the salary sacrificing provisions being applied to Staff Specialists. In February 2006, advice was circulated by the Department that approval had been given for an additional benefit - "relocation/living away from home" - to be added to both the 'general' and the Staff Specialists schemes (Exhibit 2A). The letter indicated that "the additional items were designed to improve the range of choices and the overall take-up rates in both schemes". There were no issues raised in that letter concerning any desire to align the two schemes in any way. 159 It seems reasonably obvious that a relocation expense would not be the type of expense encountered on a regular and systematic basis such as mortgage payments or child care fees. Even living-away-from home expenses (which the letter indicated could cover the cost of rent involved in a move of residence) would also not appear to be the type of expense that would be regularly expended and likely to be the subject of any appreciable move to salary sacrifice this benefit. 160 I do not imagine that this benefit would have attracted much of a take-up rate for Staff Specialists and maybe for that reason the Department appears to have been content to let the existing agreement between the parties continue undisturbed. 161 Indeed apart from that additional benefit advised in February 2006, it is apparent that the original 22 benefit items in the 'general' scheme were added to at some stage in the intervening years since 2002 by a further 10 benefit items, (11 if you include "relocation/living away from home") such as credit card and school fees (see Exhibit 1-SM6). This appears to have occurred without the Department seeking to have any reconsideration of the disparity between the two schemes or seeking to have the Staff Specialists scheme "re-aligned". 162 Somewhat understandably that was not the case when the next benefit loomed on the horizon namely "meal entertainment" A benefit far more likely, in my view, to be relevant to (and therefore attractive to) Staff Specialists than most Health Services employees. I can't imagine, for example, the average employee covered by the Health Employees Conditions of Employment (State) Award having occasion to regularly sustain expenses for meal entertainment in the normal course of their employment and hence be interested in taking up this benefit. The figures given by Mr Craft would seem to bear this out. 163 Mr Craft deposed that "over 400 Staff Specialists", (which he described as a "significant number") had taken up the new benefit as had some 6000 other Health employees. Whilst the first number could certainly be considered to be of some significance, given an estimated total of 3000, the second is clearly not, given the estimated total of 97000 such employees. 164 The Department's letter of 23 July 2007 (Exhibit 1- SM6) raised the issue of the disparity between the 2 schemes and went on to say: .........after representations by ASMOF, the Department agreed to align the same range of benefits under the 'general' scheme to the Staff Specialists' scheme so that Staff Specialists could enjoy the same choice of benefit opportunities.

This was done in good faith by the Department, even though Staff Specialists continued to derive a more favourable tax saving whenever FBT-exempt benefits are packaged. Ideally, it would be equitable to have parity with the two schemes. The ability of Staff Specialists to select FBT-exempt items on offer under the expanded list of benefits provides a skewed result in their favour in terms of tax savings, compared to the 'general' scheme.

An additional new benefit item titled 'meal entertainment' which is FBT-exempt, is being considered by the Department of Health. As an FBT-exempt item, it has the added attraction of being excluded from the $17,000 pa grossed-up FBT-exemption cap, thus providing employees with more scope to select other benefit(s) within the exemption cap. (Emphasis added)

The Department has decided that this benefit and any future approved benefits only be made available strictly on the basis of a 50/50 sharing of the income tax saving between employer and employee - irrespective of the employee's classification - in the interests of consistent treatment and parity across the NSW Health Service. (Emphasis added).

I would like the opportunity to discuss this matter further with you at your earliest convenience........." 165 ASMOF in its 10 September response to that letter (Exhibit 1-SM7), raised the provisions of the Award as being the basis for the arrangements between the parties going on to say: .... ASMOF understands that the general scheme was negotiated between NSW Health and other Health unions some time after the staff specialists arrangements were put in place. The principles of "consistent" treatment and parity" might have been useful at that stage to ensure that the general scheme was consistent with the existing staff specialist scheme.

As noted, we are happy to meet to discuss the issues. However it is unlikely that we will be willing to agree to reduce the benefits available to staff specialists under the Award. The suggestion that certain benefits not be made available until ASMOF agrees to amend the Award is obviously unacceptable." ........ 166 There was no agreement subsequently reached between the parties hence the applications currently under consideration. 167 At that stage in 2007 the Award had not expired. It was not due to expire until 30 June 2008. 168 I am of the firm view that there was in existence an agreement between the parties as to the salary sacrificing arrangements applicable to Staff Specialists and had been so in that form since 2002. 169 I acknowledge that that agreement was not a legally enforceable agreement as might be contemplated by a formal contract between the parties. However in my view it may be enforceable as an Award entitlement.

170 However there is no reason why that agreement could not have been re-visited at any subsequent stage and been the subject of negotiation as to proposed change or alteration.

171 The Department certainly has the right to make changes it considers appropriate to policies and matters affecting employees. However the appropriate context for proposed changes to matters pertaining to wage rates and conditions of employment (whether formally enshrined in awards/other formal instruments or informal industrial arrangements) is in the context of appropriate award discussions where both sides have the opportunity to put items on the bargaining table and participate in negotiations. Agreement may or may not be reached on all matters and the assistance of the Commission may be required. However I consider that it was entirely inappropriate for the Department to walk away from and indeed, to use Mr Nolan's term, "renege" on the agreement that had been in place between the parties since 2002. 172 Indeed, I share Mr Nolan's view that had it been ASMOF that had sought to walk away from, or renege on, some longstanding arrangement/practice/ agreement (and one not necessarily enshrined in any formal document) or indeed simply withdraw from a written agreement, then I am sure the Department would have swiftly sought the assistance of the Commission so as to restore the status quo. 173 There may be other such practices/arrangements/agreements between the parties that affect or impact on the working arrangements/conditions of Staff Specialists in the NSW Health system that the parties should perhaps give consideration to regularising by way of appropriate documentation. 174 I do not propose to deal in more detail with the submissions of the parties and the authorities cited as I would otherwise do. As indicated above the Staff Specialists (State) Award has now expired and as I indicated earlier Mr Nolan advised the Commission on the day of the hearing that an application for a new Award had been lodged by ASMOF and was about to come before the Vice President. 175 From enquires I have made of the Registry records it is apparent that that application (IRC 08/1019) is currently before the President, has been listed on more than one occasion and is again listed before the President on the 28 November 2008. 176 I consider that it would be more appropriate and desirable for issues as to any parity of the two respective schemes to be dealt with by the parties in the context of the current round of negotiations for and proceedings related to that application for a new Award. 177 On that basis and in the light of the views I have formed, as outlined above, it seems to me that it would be only be appropriate to vary the Award in the terms as sought by ASMOF. This would, as ASMOF submits, put beyond doubt what should operate between the parties on the basis of the agreed arrangements that have existed and should have continued to exist until negotiations had taken place on any replacement agreement or arrangements. 178 I agree that the form of variation as proposed by ASMOF does nothing more than give effect to the agreement reached between the parties and restores the parties to the position operating prior to July 2007. Where the parties take the matter in the future should be the subject of appropriate negotiation between the parties in the normal course of the proceedings arising from the application for the new Award ( IRC 08/1019). 179 Having formed that view, I also consider that it is in the public interest that I vary the award in terms as sought by ASMOF to ensure that such a significant employer as the Department complies with the agreement it reached with ASMOF covering a significant section of its workforce as it would expect in turn ASMOF to so do (and indeed other Health Unions generally). 180 The Department clearly retains the right to seek to make such changes and amendments to the agreements it enters into as it considers necessary and appropriate from time to time but that should take place in the usual way through negotiations with the appropriate Union with recourse to the Commission if assistance is required.

181 The issue of the consequences for the (at least) 400 Staff Specialists that have taken up the new benefit and how to address that issue is of concern. There are clear cost implications to the Department and a fairness issue for the employees in question, although I note that the take up of the new meal entertainment benefit was purely on a voluntary basis. There were no submissions from the parties about that issue or any potential consequences arising from any form of the variation the Commission might make. 182 This may be an issue that requires further discussion/negotiation between the parties as to alternative administrative action that could be taken. 183 Neither side addressed the Commission on an appropriate operative date for any variation as sought nor was any proposed operative date included in either form of the variation sought. The commencement of awards and variations is covered by s.15 Commencement of Award of the Act, with the relevant provisions being s.15 (1) and (3) as follows: 15 (1) [Date specified by Commission] An award comes into force on the date specified by the Commission. 15 (2) ............. n.a. 15(3) [Retrospective commencement] An award may be expressed to apply retrospectively , but not earlier than the date on which: a) application for the award was lodged with the Industrial Registrar, or b) The Commission itself initiated proceedings for the award, or c) the industrial dispute giving rise to the award was notified to the Commission. 184 Whilst there were s.130 dispute proceedings before Commissioner McLeay (IRC 08/108) on the issue of the Department's actions, that matter was not joined to the application before me and therefore could not be said to give rise to this variation. 185 This matter was filed with the Industrial Registrar on the 24 April 2008. I do not consider that it is appropriate to backdate the variation I propose to make given the practical problems that would obviously arise (notwithstanding any possible unfairness that may impose on any of the 400 employees affected). 186 The only option that appears appropriate to me in all the circumstances is the vary the Award in the terms set out in the Orders below with such variation to operate from the first full pay period to commence on or after the date of this decision. ORDERS:

187 The Commission therefore varies the Staff Specialists (State) Award in the following terms. Staff Specialists (State) Award Variation 1. Delete clause 7(a) of the Staff Specialists (State) Award published 25 May 2007 (362 IG 666) and insert in lieu thereof the following: (a) Subject to the other provisions of this clause, Staff Specialists may salary sacrifice from the range of benefits which the Director-General of the NSW Department of Health offers to all staff of NSW Health who are covered by the 'general' salary packaging scheme, or otherwise as may be agreed to by the Federation from time to time. 2. Delete clause 7 (b) of the said Award as published and insert in lieu thereof the following: (e) The Fringe Benefits Tax on the benefits chosen by the Staff Specialist that would have been payable except for the Public Benevolent Institution status of the hospital will be calculated for each Staff Specialist who enters into a salary sacrifice arrangement. This amount will be divided equally between the employer and the Staff Specialist. To avoid any doubt, where salary sacrifice involves a benefit which is Fringe Benefits Tax exempt, no sharing arrangements will apply.

3. This variation shall take effect from the first full pay period to commence on or after 25 November 2008. 188 This matter is concluded.

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.