Cole v Director General of Department of Youth and Community Services

enor in all matters) Representation: J Murphy of counsel (Applicant in IRC2011/1178 to 1198; 1236; 1237; Respondent in IRC2011/1159)

D Ravlich of ASMOF (Applicant in IRC2011/1159; Respondent in IRC2011/1178 to 1198; 1236; 1237)

T Craft of NSW Dept of Health (Respondent in all matters)

A Britt of counsel (Intervenor in all matters) Crown Solicitor's Office

Background 1On 2 February 2011, HSUeast filed an application to vary the 22 awards listed in Annexure A to this Decision by increasing rates of pay and/or allowances by 6 per cent operative from 1 July 2011 with a further 6 per cent to apply from 1 July 2012, 1 July 2013 and 1 July 2014 ( Matter No IRC 90 of 2011) . Directions were made by the Commission for the filing and serving of any evidence that the parties intended to rely upon and the application was listed for hearing on 26 to 30 September 2011 inclusive; 4, 10, 12, 17 and 18 October 2011; 21 to 25 November 2011 inclusive; and 12 to 15 December 2011 inclusive (these dates have subsequently been revised). The applicant's material was filed on 12 August 2011. 2On 1 July 2011, HSUeast filed new applications to vary the awards listed in Annexure A to increase rates of pay and certain allowances by 2.5 per cent and to provide for a "No Extra Claims" clause. The variations purported to extend the life of the awards by a further 12 months, until 30 June 2012. 3On 16 August 2011, HSUeast filed amended applications in respect of each of the awards. In the amended applications the Union sought an increase in rates of pay and allowances of 2.5 per cent to take effect from the first full pay period to commence on or after 1 July 2011. Notably absent from the amended application was a "No Extra Claims" clause. 4On 30 June 2011, the Australian Salaried Medical Officers' Federation ("ASMOF") made application to vary the Public Hospital Career Medical Officers (State) Award (this Award is also the subject of an application by HSUeast and is amongst the list of awards in Annexure A) by increasing rates of pay and allowances by 2.5 per cent to take effect from 1 July 2011. The variation purported to extend the life of the Award until 30 June 2012 and contained a "No Extra Claims" clause. The application was subsequently amended to reflect what was being sought in the HSUeast's amended applications, namely, an increase of 2.5 per cent from 1 July 2011 without a "No Extra Claims" clause. ASMOF adopted the submissions of HSUeast in the proceedings. 5The explanation for the multiple applications lies in two developments. First, on 17 June 2011, the Industrial Relations Amendment (Public Sector Conditions of Employment) Act 2011 ("the Amendment Act") was assented to and on 22 June 2011 the Industrial Relations (Public Sector Conditions of Employment) Regulation 2011 ("the Regulation") was promulgated. These two pieces of legislation had the effect of changing significantly the rules applicable to the fixation of wages for employees employed in the New South Wales Public Sector. 6The second development was the decision of the Full Bench on 10 August 2011 in respect of an application by the Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales ("the PSA") and counter applications by the Director of Public Employment ("DPE") and the Roads and Traffic Authority of NSW ("RTA"): see Re Crown Employees (Public Sector - Salaries 2011) Award (No 3) [2011] NSWIRComm 104. 7At the time of the filing of HSUeast's original application in February 2011 it would have been the expectation of the parties that the application would be heard and determined in accordance with the Commission's Wage Fixing Principles. In February 2011 those Principles were set out in the decision of the Full Bench in State Wage Case 2010 [2010] NSWIRComm 183; ; (2010) 201 IR 155. Those Principles were subsequently amended on 25 March 2011 and new Principles were to apply on and from 4 April 2011: State Wage Case 2010 (No 2) [2011] NSWIRComm 29. Those Principles provide for the granting of wage increases, inter alia , on work value grounds (Principle 8.2) or on the basis of improvements in productivity or efficiency (Principle 8.3). The Principles lay down stringent tests to be applied by the Commission in assessing claims, but the Principles do not place a limit on the amount of increase that could be awarded. 8The Amendment Act amended the Industrial Relations Act 1996 by, inter alia , inserting s 146C. This provision is set out in full later in this Decision. 9The Regulation referred to in s 146C declares, for the purposes of s 146C of the Industrial Relations Act , aspects of government policy that are to be given effect to by the Industrial Relations Commission when making or varying awards or orders. The Regulation in its entirety is Annexure B to this Decision. 10As a consequence of these legislative changes, HSUeast filed its new applications seeking to "provide for salary variations permitted in accordance with the NSW State Government's 'NSW Public Sector Wages Policy 2011'". In effect, what the HSUeast was seeking to achieve was an interim increase of 2.5 per cent pending the hearing and determination of its claim in Matter No IRC 90 of 2011. The reference to the 'NSW Public Sector Wages Policy 2011' is a reference to a government Policy underpinning the Amendment Act and Regulation. ASMOF, by its original application, was simply seeking the passing on of a 2.5 per cent increase, as it regarded as being permitted under the Regulation. 11Following the decision of the Full Bench on 10 August 2011 in the PSA Salaries Case, as we have indicated, HSUeast amended its applications to delete the reference to a "No Extra Claims" clause and to the provision extending the life of the awards to 30 June 2012. ASMOF did likewise. 12The circumstances considered by the Full Bench in the PSA Salaries Case were not dissimilar to the circumstances in the present proceedings in that the PSA had made application for new awards in March 2011, such applications being listed for hearing in August 2011. However, with the change in rules for wage fixation brought about by the Amendment Act and the Regulation, counter applications were filed by the DPE and RTA seeking to vary the relevant awards to provide for an increase in salaries and allowances of 2.5 per cent from 1 July 2011, subject to no extra claims commitments being included in the awards that would have the effect of precluding further claims in respect of salaries and employment conditions before 1 July 2012. 13In June 2011, the PSA signalled its intention to challenge the validity of the Amendment Act and the Regulation. That challenge was heard by the Full Industrial Court on 1 August 2011. The judgment in that matter is reserved. However, as the Full Bench in the PSA Salaries Case explained in its decision, if it were to make new awards in response to the counter-applications and include in those awards the no extra claims provisions that were sought, it would have the effect of precluding any consideration of the PSA's application, even in circumstances where s 146C and the Regulation were found invalid. 14In the PSA Salaries Case the Full Bench determined: (a) that further consideration of the PSA's application, which sought increases beyond 2.5 per cent permissible under the Regulation, be adjourned until such time as the validity questions had been determined; (b) that in considering the counter applications: (i) it was not contrary to the public interest to vary the relevant awards (which had passed their nominal expiry dates) to provide for a 2.5 per cent increase in salaries and allowances; (ii) the Industrial Relations Act did not permit the nominal term of an award to be extended where the award is merely varied after the expiry of its nominal term (see decision at [40]). Therefore, no term having the effect of extending the nominal life of the awards would be included as part of any variation; (iii) the issue of whether a no extra claims clause should be inserted into the awards would be further considered by the Full Bench in the course of determining the disposition of the PSA's application, but the variations would not include a no extra claims clause; and (iv) there were exceptional circumstances within the meaning of cll 6(1)(e) and 6(2) of the Regulation such that it was appropriate to apply an operative date of 1 July 2011 to the variations.

DPE - no jurisdiction to make interim award 15During the course of the hearing in the present proceedings an issue of significance arose concerning the proper construction and application of the Amendment Act and the Regulation. Counsel for the DPE, in summary, submitted that the effect of the newly inserted s 146C and the Regulation was such that it was not open, as a matter of jurisdiction, for the Commission to make an interim award whereby an initial 2.5 per cent would be paid to those covered by the various applications in circumstances where it was also sought to have a later hearing to determine the extent to which, if any, wages and salaries could be increased beyond 2.5 per cent. In this context it was noted that cl 6(1)(b) of the Regulation required increases beyond 2.5 per cent only to be awarded by the Commission if sufficient employee related cost savings had been achieved to fully offset the increases proposed to be granted. 16Counsel for the DPE submitted that the effect of s 146C and the Regulation was that only one award or order could be made by the Commission and that award or order had to deal with all issues that were the subject of the proceedings. Further, the provisions did not allow for any matter to be reserved to be dealt with at a later time and also required a provision excluding the making and/or granting of extra claims during the term of the award or order. The effect of that submission, if accurately reflecting the operation of the Amendment Act and Regulation, would require each application before the Commission to be either granted a 2.5 per cent final increase in salaries or wages and allowances, together with a no extra claims clause or, in the alternative, if the applicants wished to proceed with a case for an increase beyond 2.5 per cent, to adjourn that case so that the issue of the initial 2.5 per cent and any increase above that could be dealt with at the same time. It was submitted that such proceedings, as required by the Amendment Act and the Regulation, would finalise all the issues between the parties and leave no outstanding question or issue to be later dealt with and would also require the final award or order to contain a no extra claims clause. It was asserted that, if the Commission proceeded to make interim awards in the present applications, the requirement to insert a no extra claims clause would prevent a further hearing for increases above 2.5 per cent. 17Although some aspects of this argument had been raised in the PSA Salaries Case, the argument as to the power to make an interim award was not directly raised, in terms, in those proceedings. In the present proceedings, Mr T Craft, representing the Director-General, New South Wales Health, while raising similar issues to those raised by counsel for the DPE, accepted that the making of an interim award went to the exercise of discretion rather than the jurisdiction of the Commission to make such an award.

Section 146C 18In order to deal with this issue arising from the construction of the newly inserted s 146C of the Act, it is appropriate to set out its provisions in full and to refer to some aspects of the Regulation. Section 146C is in the following terms: 146C Commission to give effect to certain aspects of government policy on public sector employment (1) The Commission must, when making or varying any award or order, give effect to any policy on conditions of employment of public sector employees: (a) that is declared by the regulations to be an aspect of government policy that is required to be given effect to by the Commission, and (b) that applies to the matter to which the award or order relates. (2) Any such regulation may declare a policy by setting out the policy in the regulation or by adopting a policy set out in a relevant document referred to in the regulation. (3) An award or order of the Commission does not have effect to the extent that it is inconsistent with the obligation of the Commission under this section. (4) This section extends to appeals or references to the Full Bench of the Commission. (5) This section does not apply to the Commission in Court Session. (6) This section extends to proceedings that are pending in the Commission on the commencement of this section. A regulation made under this section extends to proceedings that are pending in the Commission on the commencement of the regulation, unless the regulation otherwise provides. (7) This section has effect despite section 10 or 146 or any other provision of this or any other Act (8) In this section: award or order includes: (a) an award (as defined in the Dictionary) or an exemption from an award, and (b) a decision to approve an enterprise agreement under Part 2 of Chapter 2, and (c) the adoption under section 50 of the principles or provisions of a National decision or the making of a state decision under section 51, and (d) anything done in arbitration proceedings or proceedings for a dispute order under Chapter 3. conditions of employment - see Dictionary. public sector employee means a person who is employed in any capacity in: (a) the Government Service, the Teaching Service, the NSW Police Force, the NSW Health Service, the service of Parliament or any other service of the Crown, or (b) the service of any body (other than a council or other local authority) that is constituted by an Act and that is prescribed by the regulations for the purposes of this section.

The Regulation 19The explanatory note to the Regulation states that the object of the Regulation is to declare the Government's public sector policies for the purposes of s 146C of the Act. The explanatory note states that the section requires the Commission to give effect to such policies when making or varying awards or orders relating to the remuneration or other conditions of employment of public sector employees. Central to the present argument is cl 6 of the Regulation, which is in the following terms:

6 Other policies (1)The following policies are also declared, but are subject to compliance with the declared paramount policies: (a) Public sector employees may be awarded increases in remuneration or other conditions of employment that do not increase employee-related costs by more than 2.5% per annum. (b) Increases in remuneration or other conditions of employment that increase employee-related costs by more than 2.5% per annum can be awarded, but only if sufficient employee-related cost savings have been achieved to fully offset the increased employee-related costs. For this purpose: (i) whether relevant savings have been achieved is to be determined by agreement of the relevant parties or, in the absence of agreement, by the Commission, and (ii) increases may be awarded before the relevant savings have been achieved, but are not payable until they are achieved, and (iii) the full savings are not required to be awarded as increases in remuneration or other conditions of employment. (c) For the purposes of achieving employee-related cost savings, existing conditions of employment of the kind but in excess of the guaranteed minimum conditions of employment may only be reduced with the agreement of the relevant parties in the proceedings. (d) Awards and orders are to resolve all issues the subject of the proceedings (and not reserve leave for a matter to be dealt with at a later time or allow extra claims to be made during the terms of the award or order). However, this does not prevent variations made with the agreement of the relevant parties. (e) Changes to remuneration or other conditions of employment may only operate on or after the date the relevant parties finally agreed to the change (if the award or order is made or varied by consent) or the date of the Commission's decision (if the award or order is made or varied in arbitration proceedings). (f) Policies regarding the management of excess public sector employees are not to be incorporated into industrial instruments. (2) Subclause (1)(e) does not apply if the relevant parties otherwise agree or there are exceptional circumstances.

Second reading speech 20A consideration of the explanatory note accompanying the Bill when it was before Parliament does not assist in determining the issue raised by the DPE. The second reading speech delivered by the Hon Greg Pearce MLC (Minister for Finance and Services and Minister for the Illawarra) provided background and more detail as to the intended operation of the amendment. The Minister's full speech on the second reading is Annexure C to this Decision, but the following matters have particular potential relevance for the issue under consideration: ... The Government is deeply committed to its core purpose of delivering the high-quality frontline services that New South Wales citizens deserve by a highly skilled and effective public sector. ... Employee-related costs are the largest component of government expenditure, accounting for almost half of government expenses . ... Underpinning the need for fiscal restraint is the government's wages policy. ... Our policy and legislative response will ensure that wage increases of 2.5 per cent are available each year to our hard-working public sector employees. Increases in excess of 2.5 per cent are available but will be required to be funded through employee-related savings. Key elements of the policy require that any increases to employee-related expenses exceeding 2.5 per cent per annum, including wages, allowances, superannuation and conditions of employment, must be funded through employee-related cost savings that have been achieved. Details of the savings measures used to fund increases in excess of 2.5 per cent are to be detailed in the award or agreement where that is appropriate. New awards or agreements should not predate the expiry of existing instruments, back-payment of wage increases is not to occur other than in exceptional circumstances, and awards and agreements must contain clear and comprehensive no extra claims clauses. ... The policy intention is to ensure an appropriate balance between public sector wage increases and the availability of funds for the delivery of the Government's commitments and value for money for New South Wales taxpayers. Where agencies and unions are able to identify agreed employee-related savings, these will be able to be passed on in higher wages. ... Presently, the Industrial Relations Act 1996 provides the Industrial Relations Commission with broad discretion to determine public sector wages outcomes that do not accord with government wages policy. ... The primary amendments to be made to the Industrial Relations Act is the insertion of a new section 146C containing the explicit requirement that when making or varying awards or orders the Commission must give effect to the Government's policy on conditions of employment for the public sector as declared under the regulations. The reference to the Government's policy on conditions of employment is intended to be broad enough to enable all relevant elements of the public sector wages policy to be included in the declaration made under the regulations. ... Under the current framework of the Industrial Relations Act, the Industrial Relations Commission is required to have regard to a range of matters in the exercise of its functions. These include the objects of the Act in section 3, the instruction in section 10 to make awards setting fair and reasonable conditions of employment for employees, the public interest provisions in section 146 and the statement of the economy of New South Wales and the likely effect of its decisions on that economy, also in section 146. That is already in the Act. The Commission also applies a set of wage fixing principles that set out the circumstances in which wage increases can be awarded. These are applied when the Commission deals with public sector awards, which are not affected by the minimum wage increase set in the general State Wage Case. As can be seen, the Commission exercises a broad-ranging discretion when it comes to wage fixing. This environment is conducive to submissions that the Government's wages policy should be disregarded or that other considerations are more significant than the wages policy. As outlined earlier, the Government's wages policy is designed to ensure fiscal discipline and to protect the budget bottom line, therefore ensuring that services and other commitments of the Government to the citizens of this State are able to be delivered. It is not a good outcome for New South Wales when government wages policy is disregarded. That is why the Bill includes the new requirement in s 146C(1) that in public sector matters the Industrial Relations Commission's prime objective is to give effect to the Government's wages policy. This will support the achievement of the Government's budgetary objectives. The objective is supported and strengthened by subsection (3) of proposed section 146C, which provides that any award that is inconsistent with the declared wages policy of the Government will be of no effect. The amendment also includes very specific words to ensure that its intention may not be subverted by reference to s 146 or any other provisions of the Act. This is found in proposed subsection (7). In order to make it clear to the Commission what the amendment requires it do, the relevant elements of the policy will be declared in the regulations. Proposed subsection (2) provides some flexibility in how the regulation may be made. ... The Commission will be left in no doubt about the matters to which it must give effect when it makes or varies awards or orders relevant to public sector employment. For example, where a public sector union has filed a wages claim in the Commission and seeks that the Commission conciliate and/or arbitrate to achieve an outcome, the Commission will be bound to ensure that, in accordance with the declared wages policy, any increase in excess of 2.5 per cent will only be awarded where employee-related savings sufficient to fund such an increase have been both identified and implemented. ... The requirement to give effect to government wages policy will only apply when the Commission is exercising its non-judicial functions of making or varying awards and orders. The definition of "award or order" in subsection (8) of proposed new section 146C makes clear the activities that will be subject to the requirement. These functions include setting remuneration and other conditions of employment and resolving industrial disputes. They include the consideration of whether to flow on national wage decisions or to make State-related based general decisions. They also include approving enterprise agreements, which set wages and conditions for particulars workplaces. These are precisely the kinds of functions that are likely to involve the need to give effect to the government wages policy. The intent of the amendment is to ensure that the wages policy or the Government's fiscal strategy is not rendered ineffective by decisions of the Industrial Relations Commission. The proposed amendments will ensure that the commission makes decisions that properly take account of and give effect to wages policy, so minimising pressure on the State's budget. ... When considering the proposed amendments to the Industrial Relations Act it is important to note that the Industrial Relations Commission will continue to play an important role in the ongoing need for public sector workplace reform, promoting efficiency and productivity in the economy of the State providing for the resolution of industrial disputes by conciliation and encouraging and facilitating co-operative industrial relations. ... The amendments in this bill will ensure that the Industrial Relations Commission of New South Wales has a central role in providing New South Wales public sector workers with fair and reasonable wage increases, while also ensuring that the New South Wales Government contains expenses, provides efficient service delivery and invests taxpayers' money wisely.

DPE's contentions 21In helpful written submissions prepared by counsel for the DPE, it was pointed out that there was no dispute between the parties that salaries and salary based allowances in the relevant awards should be increased by 2.5 per cent from the first full pay period commencing on or after 1 July 2011, but the issue that arose was the conditions under which that result could be achieved. The starting point was the amendment introduced by s 146C(1), namely, that the Commission must, in making or varying any award or order, give effect to any policy on conditions of employment of public sector employees. It was pointed out that, in sub-section (8), an award or order included an award as defined in the Dictionary. In turn, the Dictionary to the Industrial Relations Act defined award to mean an award made or taken to be made by the Commission under the Act and included any order of the Commission under the Act that sets conditions of employment. 22It was next noted that, under s 146C(3), an award or order of the Commission did not have effect to the extent that it was inconsistent with the obligation of the Commission under that section. At this point it might be observed that the applications presently before the Full Bench seek the varying of awards regarding salary and, therefore, the Commission is under an obligation to give effect to any relevant Government policy on conditions of employment of public sector employees. It is also clear that such a variation would not have effect if it were inconsistent with the obligations of the Commission under s 146C. Clearly enough, a variation is an order or award . 23The next step in the argument for the DPE involved consideration of the provisions of the Regulation. Under cl 6(1) a number of policies were declared but were to be subject to compliance with the declared paramount policies. Sub-clause 1(a) allowed increases in remuneration or other conditions of employment that did not increase employee-related costs by more than 2.5 per cent; under sub-clause 1(b), increases in remuneration or other conditions of employment that increased employee-related costs by more than 2.5 per cent could be awarded only if sufficient employee-related cost savings had been achieved to fully offset the increased employee-related costs. 24Emphasis was then placed upon the terms of cl 6(1)(d), namely, that awards and orders were to resolve "all issues the subject of the proceedings" and that there was not to be leave reserved for a matter to be dealt with at a later time or to allow extra claims to be made "during the term of the award or order", although that did not prevent variations made with the agreement of the relevant parties. Under sub-clause 1(e), changes to remuneration or other conditions of employment could operate only on or after the date the relevant parties "finally agreed to the change" if the award or order was made or varied by consent or the date of the Commission's decision if the award or order was made or varied in arbitration proceedings. This provision was subject to the operation of cl 6(2), namely, that a different date of operation may apply by agreement or in "exceptional circumstances." 25In compliance with cl 6(1)(d), the Commission was said to be obliged to resolve all the matters in issue in the proceedings. It was submitted that, allowing a party to "subsequently re-agitate matters" the subject of the proceedings, resulted in the award or order being contrary to this clause. It was submitted that the very notion of an interim award granting increases was clearly at odds with the requirements of cl 6(1)(d). The issue in the proceedings involved the salaries being paid to employees covered by the relevant awards. In making an interim increase the Commission would not be resolving "all issues" the subject of the proceedings but would leave a salary claim for more than 2.5 per cent for another day and in doing so, the Commission would be acting contrary to cl 6(1)(d). 26The next step in the argument revolved around the requirement for a no extra claims clause. As we noted earlier, s 146C(3) provides that an order or award of the Commission is ineffective to the extent that it is inconsistent with the obligations of the Commission under s146C. It was submitted that the operation of cl 6(1)(d) required a no extra claims clause to be inserted in any award or order made, as such a provision would resolve all issues the subject of the proceedings. The insertion of such a clause would prevent any new issue or matter being argued by way of further increases during the term of the award or order. 27It was submitted for the DPE that the issue of construction was to be determined by the ordinary and grammatical meaning of the words of the provision. Reference was made to the frequently cited cases laying down the proper approach to statutory construction such as K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd [1985] HCA 48; (1985) 157 CLR 309 at 315; (1985) 59 ALJR 658; (1985) 2 MVR289; (1985) 3 ANZ Ins Cas 60-653; (1985) Aust Torts Reports 80-323; BC8501100; Mills v Meeking [1990] HCA 6; (1990) 169 CLR 214 at 235 and 242-243; (1990) 91 ALR 16; (1990) 91 ALR 16; (1990) 64 ALJR 190; (1990) 10 MVR 257; (1990) 45 A Crim R 373; BC9002951 and Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 at 318-382; (1998) 153 ALR 490; (1998) 72 ALJR 841; [1998] 8 Leg Rep 41; BC 9801389. The submission accepted that, in accordance with the judgment in Project Blue Sky , the construction of the statute must be "purposive" and referred to the joint judgment of McHugh, Gummow, Kirby and Hayne JJ in the following terms: Conflicting statutory provisions should be reconciled so far as is possible [69] The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute. The meaning of the provision must be determined "by reference to the language of the instrument viewed as a whole". In Commissioner for Railways (NSW) v Agalianos , Dixon CJ pointed out that "the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed". Thus, the process of construction must always begin by examining the context of the provision that is being construed. [70] A legislative instrument must be construed on the prima facie basis that its provisions are intended to give effect to harmonious goals. Where conflict appears to arise from the language of particular provisions, the conflict must be alleviated, so far as possible, by adjusting the meaning of the competing provisions to achieve that result which will best give effect to the purpose and language of those provisions while maintaining the unity of all the statutory provisions. Reconciling conflicting provisions will often require the court "to determine which is the leading provision and which the subordinate provision, and which must give way to the other". Only by determining the hierarchy of the provisions will it be possible in many cases to give each provision the meaning which best gives effect to its purpose and language while maintaining the unity of the statutory scheme. [71] Furthermore, a court construing a statutory provision must strive to give meaning to every word of the provision. In C ommonwealth v Baume Griffith CJ cited R v Berchet to support the proposition that it was "a known rule in the interpretation of Statutes that such a sense is to be made upon the whole as that no clause, sentence, or word shall prove superfluous, void, or insignificant, if by any other construction they may all be made useful and pertinent". 28Reference was also made to the joint judgment of McHugh A-CJ, Gummow and Hayne JJ in Network Ten Pty Limited v TCN Channel Nine Pty Limited [2004] HCA 14; (2004) 218 CLR 273 at [11]; (2004) 205 ALR 1 at 11; (2004) 78 ALJR 585; (2004) 59 IPR 1; (2004) AIPC 91-973; [BC200400864]: In Newcastle City Council v GIO General Ltd [1997] HCA 53; (1997) 191 CLR 85 at 112, McHugh J observed: [A] court is permitted to have regard to the words used by the legislature in their legal and historical context and, in appropriate cases, to give them a meaning that will give effect to any purpose of the legislation that can be deduced from that context. His Honour went on to refer to what had been said in the joint judgment in CIC Insurance Ltd v Bankstown Football Club Ltd . (1977) 187 CLR 384. There, Brennan CJ, Dawson, Toohey and Gummow JJ said (at 408): It is well settled that at common law, apart from any reliance upon s15AB of the Acts Interpretation Act 1901 (Cth), the court may have regard to reports of law reform bodies to ascertain the mischief which a statute is intended to cure. Moreover, the modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses "context" in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as those just mentioned, one may discern the statute was intended to remedy. Instances of general words in a statute being so constrained by their context are numerous. In particular, as McHugh JA pointed out in Isherwood v Butler Pollnow Pty Ltd if the apparently plain words of a provision are read in the light of the mischief which the statute was designed to overcome and of the objects of the legislation, they may wear a very different appearance. Further, inconvenience or improbability of result may assist the court in preferring to the literal meaning an alternative construction which, by the steps identified above, is reasonably open and more closely conforms to the legislative intent.

Whether jurisdiction to make an interim award 29The Amendment Act and the Regulation are unusual. The Amendment Act imposes upon the Commission certain obligations and jurisdictional restrictions when dealing with applications for awards or orders that seek to increase salaries or wages and conditions of public sector employees involving employee-related costs. Those restrictions are imposed by way of a Government policy that is declared by regulation to be given effect to by the Commission when exercising its award making function. It is, therefore, the Regulation that declares the policies that, by force of s 146C, the Commission is required to apply when dealing with public sector wages and conditions claims. 30One matter explicitly dealt with by s 146C, as indicating the field of operation for the provision in terms of other sections of the Act, is the provision in sub-section (7) that s 146C has effect "despite s 10 or s 146 or any other provision of this or any other Act." As indicated in the Minister's second reading speech, s 10 provides that the Commission should make an award in accordance with the Act "setting fair and reasonable conditions of employment for employees." Section 146 deals with the general functions of the Commission and amongst those functions is the setting of remuneration and other conditions of employment. Sub-section (2) obliges the Commission to take into account the public interest in the exercise of its functions and to have regard to the objects of the Act and the state of the economy of New South Wales and the effects of its decisions on that economy. 31Clearly, those two provisions give a wide discretion to the Commission in exercising its wage fixing functions, but that discretion, when exercised now in relation to public sector employees, is confined to awarding 2.5 per cent increases in salaries or wages per annum with any further increase being required to be matched by costs savings, in effect, to pay for the increase granted above 2.5 per cent. It is of some interest, therefore, that sub-section (7) identifies the operation of s 10 and s 146 of the Act as not being available to overcome the restrictions imposed by s 146C, but no specific mention is made of s 16(4). Section 16, in general terms, deals with the term of an award and provides that an award applies for the period specified in it as its nominal term and after that period until rescinded by the Commission and further requires the nominal term to be not less than twelve months nor more than three years. Sub-section 4 then states: An award may in special circumstances be made on an interim basis. Any such award is to be expressed to be an interim award and applies only for the period (not exceeding twelve months) specified in it. 32While attention has focused on the specific reference to s 10 and s 146 in s 146C(7), that provision, however, does contain the following words: or any other provision of this or any other Act. 33The reason weight is to be given to why specific reference has not been made to s 16(4) in s 14C(7), is because that provision does not directly confer wage fixing discretion on the Commission, but operates on the basis that the broad wage fixing discretion is contained principally in s 10 and s 146. In that sense, s 16(4) merely provides a mechanism for the making of interim awards that otherwise must conform with the general wage fixing requirements of the Act. After the introduction of s 146C and the Regulation, s 16(4) must now operate in public sector cases to allow a first tranche increase of 2.5 per cent and to require any increase above that level to be met by equal cost off-sets. No inconsistency arises between s 16(4) and s 146C(7) of the Industrial Relations Act. 34Section 16(4) of the Act and the power to make interim awards (and similar powers under predecessor legislation) has proved to be a most useful tool in managing difficult industrial situations both in the public and private sectors and in allowing a minimum increase to be awarded that would not embarrass the final outcome of the proceedings. Such an award holds the parties to that interim position until the matter can be finally determined in contested proceedings, often in circumstances that require comparatively lengthy preparation and presentation before the Commission. It is not to be readily presumed that the amendments removed this valuable facility in the absence of clear words to that effect.

The "subject of the proceedings" 35The argument for the DPE, however, focused on the operation of cl 6(1)(d) of the Regulation. In applying that provision it may be accepted that an interim award is "an award" (as defined in the Dictionary of the Act) as referred to in s 146C(8). The "subject of the proceedings", however, is a claim by the applicant unions for increases above the 2.5 per cent available under the Government policy as referred to in cl 6(1)(b) of the Regulation. In the case of HSUeast, that claim is for an increase of 6 per cent per annum over the next four years. The Union has filed its evidence indicating the matters relied upon to obtain the increase above the 2.5 per cent allowed under the Government policy. The quantification of the off-sets identified in the Union's application has yet to be the subject of discussion between the parties; nor have the parties had an opportunity to place a value on those matters or to consider the extent to which those matters are available to found an increase beyond the 2.5 per cent cap payable under the Government policy. The costing of those matters is likely to involve complex issues that may take some time to consider and evaluate. The parties have secured hearing dates late into the law term to arbitrate any outstanding issues. 36Logically, the possibilities are: there will be a failure to agree as to the availability of all or some of the matters relied upon by the Union to justify a wage increase and/or as to their appropriate costings as an offset and an arbitration will be necessary; or that there will be a partial agreement only on those matters and to the extent that there is some amount available as an appropriate offset, the question will arise whether the Union settles for the amounts so identified or seeks to argue and justify a higher amount; or, that there is total agreement between the parties that either leads to the discontinuance of the claim or, on the other hand, leads to the granting of the claim. Whatever the outcome, the entirety of these matters, including the availability of the initial 2.5 per cent under cl 6(1)(a) of the Regulation, are to be regarded as the "proceedings" for the purposes of cl 6(1)(d) of the Regulation. 37The Regulation itself, nevertheless, contemplates the possibility of a two-stage process. The first stage is the availability of 2.5 per cent per annum for all public sector employees - these are the increases that the Minister referred to in his second reading speech as being assured under the amendment as being available. The second stage involves any claims seeking increases beyond that assured 2.5 per cent and requires sufficient employer-related cost savings to be achieved to fully offset the cost of the increase to be granted. A union seeking increases above the 2.5 per cent is not required to demonstrate or make available cost savings to cover the initial 2.5 per cent, which is assured and paid in accordance with cl 6(1)(a) of the Regulation. There are, therefore, no specified policy reasons for requiring these two elements of the proposed increase to be dealt with only in one hearing.

Leave reserved 38In relation to the next aspect of cl 6(1)(d), there is force in the HSUeast's submission that it does not seek any matter to be "reserved" and to be dealt with at a later time: there is no application for the insertion of Leave Reserved Clauses in the various awards. That submission is to be understood as a reference to the longstanding practice that an award might contain a specific leave reserved clause identifying a matter or issues that the parties do not wish to presently address, but simply reserve the right to do so during the term of the award. Under wage fixing principles requiring no extra claims clauses, leave reserved matters have dealt with issues other than salary/wages or other monetary payments and, therefore, may include a wide variety of matters, such as disciplinary processes and safety provisions. 39In the present case, in the normal sense in which leave reserved clauses are understood, there is no application in form or in substance before the Commission seeking to have the issue of increased salaries stand aside to be addressed as the parties are so advised and if they wish to exercise that availability under the leave reserved clause. In the present case, the Commission and the parties understand that a 6 per cent per annum wage increase is sought by HSUeast. Evidence has been filed and hearing dates have been set to arbitrate any matters over which the parties disagree. In addition, s 146C and the Regulation prevent the Commission from allowing extra claims that involve employee-related costs without equal costs offsets. An award made in breach of the new provisions, by s 146C(3), "does not have effect." The scheme and purpose of the amendments is, therefore, preserved even if a two-step approach to the Union's Amended Application is adopted. 40It should also be noted at this point that the interim award proposed would secure only the first tranche increase of 2.5 per cent. That amount would not be revisited in the second stage of the proceedings, as it is an assured increase for which no offsets are necessary. The only outstanding issue would be whether or not any further increase can be granted. The second stage would, therefore, include no "new issue" not otherwise raised in the application, nor would it involve the subsequent "re-agitation" of matters. These were the two matters identified by the DPE as demonstrating inconsistency with the policy and terms of the amendments, but clearly neither matter arises.

The effect of an award variation 41Another issue arises in the application of cl 6(1)(d) of the Regulation because, having passed their nominal term, the awards have all recently expired. As held by the Full Bench in the PSA Salaries Case , we would concur in the view that an award that has expired by passing its nominal date no longer has a term and any variation to that award (as distinct from the making of a new award to replace it) can have no term but the variation so made continues until further varied or replaced by a new award. It is in those circumstances that, in the present proceedings, a variation of expired awards by granting an interim increase of 2.5 per cent would have no term and, therefore, the completion of the proceedings in two stages would not allow other increases being granted "during the term of the award or order" as referred to in cl 6(1)(d).

Two stage process involving interim increase permissible 42One further matter should be mentioned in relation to the operation of cl 6(1)(d). The DPE has argued that an interim increase is beyond jurisdiction having regard to the terms of s 146C and the Regulation. Counsel, during argument, stated that the amendment prohibited parties having "a second bite at the cherry." This submission pays no regard to the last sentence of cl 6(1)(d), namely, that the restrictions regarding leave reserved and no extra claims being made during the term of the award or order "... does not prevent variations made with the agreement of the relevant parties." 43As shown below, the amendment allows agreements whereby any number of variations may be made - a "second bite" is not prohibited. In the present case, however, the applications seek a 6 per cent increase (in each of four years) involving the first tranche of 2.5 percent and a further 3.5 per cent supported by alleged cost offsets. On this analysis, such a course does not, in any relevant sense, involve a "second bite." The entire case will involve only one consideration, namely, whether there are cost offsets to support increases over 2.5 per cent. 44There is no reason why a variation of 2.5 per cent under cl 6(1)(a) cannot be made with the consent of the parties, allowing the proceedings to continue on the hearing dates already set for the arbitration of the amount above 2.5 per cent that might be available to employees covered by these applications. That course is clearly available to the relevant employer, here, the Department of Health, and there are no restrictions on the reasons why or basis upon which the parties may reach their agreement: the employer might reach such an agreement as a matter of industrial expediency or as a gesture of industrial goodwill or in recognition of what is perceived to be a fair or otherwise proper approach to industrial relations. 45A public sector employer, therefore, may agree to such an interim increase, including in the circumstances that arise in the present proceedings and there is nothing in the amended provisions that would operate to prevent or prohibit such a course being taken. In addition, there is no reason why industrial parties could not agree to a 2.5 per cent first tranche increase as finally resolving the issues, yet during the term of the award agreeing to further increases based on available cost off-sets identified much later (see cl 6(1)(d)). Even an early operative date for such increases may be agreed to by the parties, as permitted by cl 6(2). Once it is clear that a variety of such courses may be taken, it is difficult to discern any clear provision or policy issue that would prohibit the granting of a 2.5 per cent interim increase in recognition of the first stage of a two-stage process under the amendment. 46A further matter that tends against the submission for the DPE relates to the stated operation of cl 6(1)(e). Under this provision, changes to remuneration may only operate on or after the date the relevant parties "finally agreed to the change" where the award or order is made or varied by consent or from the date of the Commission's decision if the order or award is made or varied in arbitration proceedings. An applicant, seeking no more than the first 2.5 per cent and, therefore, not seeking any higher amount, is in a position to have consent and to agree to allow the award to operate immediately or shortly after the expiration of the previous award. On the approach of the DPE where an arbitration is to take place, a first tranche increase cannot be granted and the total granted at the conclusion of the arbitration can only be awarded as at the date of the decision of the Commission. Of course, as earlier pointed out, the 2.5 per cent for the first tranche increase could be granted by agreement with the employer. The DPE submission did not point to any policy issue identified in the amendments to the Act, the Regulation, the explanatory memoranda or the second reading speech, which in clear terms specified the result for which it contends. There is no clearly identified impediment to arbitration and it is difficult to see what is the policy basis for such a result.

Purpose of legislative changes 47These issues raise another aspect of statutory construction that may be of use in resolving the present issue. In Cole v Director-General of Department of Youth and Community Services and anor (1987) 7 NSWLR 541 at 546, Mahoney JA stated: It is, of course, proper to test a construction by the consequences of it: Dreyfus (Camille & Henry) Foundation Inc v Inland Revenue Commissioners [1956] AC 39; Inland Revenue Commissioners v Plummer [1980] AC 896 Pearce and Geddes, Statutory Interpretation in Australia, 4 th ed (1996) at 2.36 noted the caution that might attend such an approach, nevertheless, in Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation [1981] HCA 26; (1980-1981) 147 CLR 297 at 320-321, Mason and Wilson JJ were moved to state: 22. There is a similar problem with the related so-called "golden rule" of construction. There are statements of the rule which would confine the courts to the ordinary grammatical sense of the words used unless that produces an absurdity or inconsistency. It is to be noted that Dixon J. in Broken Hill South Ltd. v. Commissioner of Taxation (N.S.W.) [1937] HCA 4; (1937)l; 56 CLR 337 at p 371 observed that departure from the ordinary grammatical sense is not legitimate unless there is "some obscurity or some inconsistency", though it may be that "obscurity" was intended to be a reference to "absurdity". For the reason already given in the discussion of the literal rule, departure from the ordinary grammatical sense cannot be restricted to cases of absurdity and inconsistency. (at p320) 23. In some cases in the past these rules of construction have been applied too rigidly. The fundamental object of statutory construction in every case is to ascertain the legislative intention by reference to the language of the instrument viewed as a whole. But in performing that task the courts look to the operation of the statute according to its terms and to legitimate aids to construction. (at p320) 24. The rules, as D. C. Pearce says in Statutory Interpretation, p. 14, are no more than rules of common sense, designed to achieve this object. They are not rules of law. If the judge applies the literal rule it is because it gives emphasis to the factor which in the particular case he thinks is decisive. When he considers that the statute admits of no reasonable alternative construction it is because (a) the language is intractable or (b) although the language is not intractable, the operation of the statute, read literally, is not such as to indicate that it could not have been intended by the legislature. (at p230) 25. On the other hand, when the judge labels the operation of the statute as "absurd", "extraordinary", "capricious", "irrational" or "obscure" he assigns a ground for concluding that the legislature could not have intended such an operation and that an alternative interpretation must be preferred. But the propriety of departing from the literal interpretation is not confined to situations described by these labels. It extends to any situation in which for good reason the operation of the statute on a literal reading does not conform to the legislative intent as ascertained from the provisions of the statute, including the policy which may be discerned from those provisions. (at p320) 26. Quite obviously questions of degree arise. If the choice is between two strongly competing interpretations, as we have said, the advantage may lie with that which produces the fairer and more convenient operation so long as it conforms to the legislative intention. If, however, one interpretation has a powerful advantage in ordinary meaning and grammatical sense, it will only be displaced if its operation is perceived to be unintended. (at p321) That statement of principle may be read with the statements as to a purposive construction made in Project Blue Sky Inc as referred to in [11] and in the Network Ten Pty Ltd case. 48In State of New South Wales v Macquarie Bank Ltd (1992) 30 NSWLR 307 at 319, Kirby P dealt with the principles of general application to the construction of legislation. In the course of reciting those principles, his Honour stated: The Court will not lightly ascribe to Parliament an intention to produce a clearly unjust result by the operation of legislation; see Tickle Industries Pty Ltd v Hann (1974) 130 CLR 321 at 333. In fact, courts will generally impute to Parliament a purpose of acting fairly. 49The approach encapsulated in these decisions necessarily leads to a consideration of the policy and purpose of the amendment and how that may assist in the determination of the operation of cl 6(1)(d) of the Regulation. Reference to the Minister's second reading speech demonstrates a Government concern, in the prevailing economic conditions, for the level of its public sector wages bill and how a "highly skilled and effective public sector" can be built with wage increases made available each year to "hard-working public sector employees" while maintaining "fiscal restraint" via the Government's wages policy. At the heart of the provisions to give effect to that policy is the availability of 2.5 per cent per annum as a reflection of the median point of expected cost of living increases and the requirement that anything over 2.5 per cent requires costs off-sets equal to the increases sought before any increase can be granted by the Commission in salaries, wages, allowances and conditions involving employee-related costs. 50Adopting the approach of the DPE, "hard-working public sector employees" would be denied the assured first tranche increase of 2.5 per cent until the entire matter was completed when they wished to claim or arbitrate a higher level of increase. It is unlikely that this result was intended under the Regulation. The approach of the DPE also leads to the unusual circumstance that if an applicant wishes to arbitrate more than the first tranche of 2.5 per cent, but accepts an award of 2.5 per cent and persuades the Commission to grant the first tranche separately, then that event would prevent the proposed arbitration. This follows, firstly, because such an order or award would have to finally determine the whole proceeding and, on the argument of the DPE, would require the insertion of a no extra claims clause that would itself prevent the second tranche being dealt with by the Commission or render ineffective any further award or order made by the Commission in excess of the initial 2.5 per cent. 51The remaining provisions of cl 6 are mechanisms to ensure adherence to the primary policy. Government policy has committed itself to making available a 2.5 per cent increase in salaries each year for public sector employees: it can matter nought to the Government nor its policy when an arbitration is conducted for higher rates than the 2.5 per cent base allowable each year. This is because the employees themselves, by means of cost offsets equal to the increases that may be granted, must pay for any increases over 2.5 per cent. The policy operates in such a manner that it matters little, if anything, to the Government and its requirement for fiscal restraint in public sector wages, whether small or very large additional increases are granted, as all such increases shall be paid for by the employees by way of equal off-sets. 52It is in that context that the mechanical provisions address issues such as leave reserved clauses and no extra claims provisions as well as limitations on back-pay and the circumstances in which the operative date of an award finalising a proceeding may be made. Understood in this way, nothing in those essential policy provisions and supporting mechanisms requires a prohibition on the granting of an interim increase of 2.5 per cent as a first tranche when an applicant in the proceedings seeks increases over and above the initial 2.5 per cent: such an interim increase in no way strikes at the heart of these policy provisions and in many circumstances may represent an industrially fair and proper way to deal with a particular application. 53These examples, highlighted by the submissions for the DPE, do not appear to be the intention of the legislature nor would such results satisfy the purposive approach to statutory construction. On one view, the approach urged by the DPE would frustrate the Government's policy to ensure that public sector employees would be entitled to a 2.5 per cent increase each year by delaying such increases, potentially for very substantial periods. The approach of the DPE would also act as a disincentive to arbitration when the policy provision itself permits arbitration in relation to higher amounts that will be, in any event, paid for by public sector employees agreeing to equal cost off-sets to the amount of increased granted. Viewed as either a disincentive to arbitration on the one hand or a penalty for going to arbitration on the other, there is nothing in the statutory provisions declaring the Government policy, the Regulation, the explanatory note nor in the Minister's second reading speech that discloses such an intention. 54Finally, it may be stated that an analysis of the Amendment Act and Regulation and the Minister's second reading speech discloses no intention to prohibit the granting of interim increases up to 2.5 per cent where the full claim envisages obtaining increases above 2.5 per cent, but in accordance with the wage policy. The following matters appearing in the Minister's second reading speech support this conclusion:

Conclusion 55In considering this matter the Commission has analysed many scenarios in testing the contentions of the parties and has had regard to long established principles governing statutory construction. At the conclusion of that exercise the Commission is unable to discern any impediment to the implementation of the Government's public sector wages policy that would arise from the granting of interim increases no higher than the 2.5 per cent available as the first tranche. Section 16(4) remains available in appropriate cases and is not denied operation because of any provision found in s 146C or the Regulation. 56It follows from our reasons that the awards listed in Annexure A may be varied by increasing wages, salaries and wage/salary-related allowances by 2.5 per cent as proposed in each of the applications. As to operative date, cl 6(2) of the Regulation allows the Commission to determine an operative date earlier than the date of decision where there are exceptional circumstances. It is our opinion that the exceptional circumstances that led the Full Bench in the PSA Salaries Case to adopt an operative date of 1 July 2011 similarly apply to the present applications (see [49]-[50] of the decision in that Case). Further, there was no submission by the respondents that the Commission was precluded from awarding an operative date of 1 July 2011 because the exceptional circumstances required by cl 6(2) of the Regulation did not exist.

Orders 57The Full Bench makes the following orders: (1)Each of the Awards listed in Annexure A to this Decision is varied in the terms of the relevant amended application filed by HSUeast on 16 August 2011. (2)The variations shall take effect from the beginning of the first pay period to commence on or after 1 July 2011.

Annexure A | Annexure B | Annexure C DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 27 September 2011