Validity of regulation
94It remains to consider the validity of paragraph (f). The narrow point of construction turns on whether the phrase "any policy on conditions of employment", in the chapeau to s 146C(1), can extend beyond policies addressing the substance of the conditions to a metapolicy that some aspects of employment are not to be governed by conditions of an award at all. The broader point involves the proper approach to construing what are described as "Henry VIII clauses", that is, statutory provisions which permit the statute to be varied by delegated legislation by giving the latter the status of an enactment.
95Because this issue was only raised in the course of argument, it is not unfair to the parties to say that the basis for such a contention was not clearly articulated. The argument for invalidity grew out of a submission that the Court should not read expansively a provision which had the effect of limiting the jurisdiction of the Commission, namely paragraph (f) in the Regulation. That submission was translated to the construction of s 146C. The argument was, in substance, that a policy "on conditions of employment" should be read conservatively so as not to include a policy that no conditions of a particular kind be included in an award.
96Support for that approach was sought to be derived from the "well-established principle that a power vested in a court should not be construed as subject to limitations not clearly to be seen", a principle identified by this Court in Speirs v Industrial Relations Commission of New South Wales [2011] NSWCA 206; 81 NSWLR 348 by Giles JA (Allsop P and Hodgson JA agreeing) at [89], referring to a number of supportive authorities: see also The Owners of the Ship "Shin Kobe Maru" v Empire Shipping Company Inc [1994] HCA 54; 181 CLR 404 at 421. Speirs and the authorities referred to in it were somewhat different from this case. Speirs itself concerned the power of the Industrial Relations Commission to reinstate an injured worker in his or her previous employment, pursuant to s 242 of the Workers Compensation Act 1987 (NSW). In fact, the general principle may have had a muted application in that case which involved not so much a denial of jurisdiction, as a question concerning the distribution of powers, in particular to determine the existence of an entitlement to compensation.
97The Commission, for present purposes, is not a court: in making an award it is not exercising the jurisdiction of the Commission in Court Session, as identified in s 153 of the Industrial Relations Act. The argument was therefore one step removed from the usual operation of the established principle. Reformulated to allow for that point of distinction, the question was whether s 146C extended to a policy which excluded from the scope of an award particular matters, so that they did not become legally enforceable by a court. (This argument did not turn on whether particular conditions should form part of the contract of employment or should merely be enforceable as terms of an award: cf Byrne v Australian Airlines Ltd [1995] HCA 24; 185 CLR 410.)
98The reformulated submission should not be accepted. It is one thing to read a conferral of jurisdiction on a court or tribunal responsible for enforcing legal rights as not being subject to implied limitations; it is quite another to read the powers conferred on a body capable of creating legal rights in the same way. There is no reason in principle why the legislature cannot limit the power of such a body in any way it thinks fit, without the need to identify limitations expressly and with clarity. It will usually be the case, as it is with terms or conditions of employment, that the power to confer rights on one party will involve the power to impose obligations on another. Whether a presumption in favour of one party or the other may arise will depend upon the particular circumstances of the case: often there will be no presumption. The conferral of jurisdiction on a court is not subject to similar considerations.
99There is no obligation on an employer to include in any contract of employment conditions dealing with possible redundancies. Nor is there any requirement that such terms be included in an award. That is illustrated by the present case: until the question of possible redundancies amongst school staff was expressly raised by the government, the relevant award contained no protections for school staff facing redundancy. Furthermore, there is no constitutional or legal requirement that the government submit all or any part of its dealings with persons in public sector employment to a particular body, such as the Commission. Ultimately, the argument on the construction of s 146C depended on the proposition that some policies may not be "on conditions of employment" and could not, therefore, govern the functions of the Commission, pursuant to that section. On that approach, the policy identified in cl 6(1)(d), imposing a requirement that an award resolve all issues before the Commission in a particular proceeding, without permitting some matters to be reserved for the future or extra claims to be made during the term of the award, may also be invalid, or else one must allow a more expansive view of policies "on conditions of employment".
100The narrow argument for invalidity must focus on the scope of the term "on", which requires a relevant relationship between the policy and conditions of employment. The relevant linkage could have been expressed in terms such as "with respect to" or "relating to". Such phrases take their colour and scope from their context: Technical Products Pty Ltd v State Government Insurance Office (Qld) [1989] HCA 24; 167 CLR 45, at 47 (Brennan, Deane and Gaudron JJ) and 51 (Dawson J). It is not clear that "on" has any particular colour or scope which similar prepositional phrases would not have. It must take its meaning from its context. It is undoubted that terms which relate to redundancy would be terms which could form part of the conditions of employment. A policy with respect to such terms would therefore be a policy "on conditions of employment".
101However, there is a broader argument. A policy which purports to deny the Commission the power to make an award with respect to "the obligations and rights of an employer and an employee on the termination or proposed termination of employment" contradicts the statutory obligation on the Commission, "on application, to make an award setting" such terms, known as "employment protection provisions": ss 21(1)(c) and 24. Whilst a policy may impose limits on the substantive rights and obligations to be included in the award, it is less clear that s 146C permits the declaration of a policy which contradicts the statutory obligation imposed by s 21.
102There is no doubt constitutionally that a state legislature, acting with respect to a matter within its constitutional powers, can delegate legislative authority: D Pearce and S Argument, Delegated Legislation in Australia (4th ed, 2012), [23.2]; cf in the federal sphere - a tentative assumption as to constitutionality noted by Brennan CJ and Dawson J in De L v Director-General Department of Community Services (NSW) (No 2) [1997] HCA 14; (1997) 190 CLR 207 at 212; D Meyerson, "Rethinking the constitutionality of delegated legislation" (2003) 11 A J Admin L 45; G Ng, "Slaying the ghost of Henry VIII: A reconsideration of the limits upon the delegation of Commonwealth legislative power" (2010) 38 Fed L Rev 205; S Bottomley, "The notional legislator: The Australian Securities and Investments Commission's role as a law-maker" (2011) 39 Fed L Rev 1. Delegation to the executive by the inclusion of a power to make regulations is a common feature of most statutes. In that tradition, the Industrial Relations Act contains a provision permitting the Governor to make regulations "not inconsistent with this Act ... for carrying out or giving effect to this Act": s 407(1).
103What is less common, indeed uncommon in the State sphere, is an express power to make regulations which may be inconsistent with, or amend, the statute by which the power is conferred. Because such powers are said to be "exceptional", the boundaries of the power will be construed "narrowly and strictly", rather than expansively: R v Secretary of State for Social Security, Ex parte Britnell [1991] 1 WLR 198 at 204, Lord Keith of Kinkel (with whom other members of the House agreed) referring to McKiernon v Secretary of State for Social Security (1989-1990) 2 Admin LR 133, (EWCA (Civ)). That approach was affirmed by Lord Bingham of Cornhill in R v Secretary of State for the Environment, Transport and the Regions; Ex parte Spath Holme Ltd [2001] 2 AC 349 at 382, although Lord Bingham was at pains to emphasise that such an approach was "only appropriate where there is a genuine doubt about the effect of the statutory provision in question."
104A similar approach was adopted by Woodhouse P in Combined State Unions v State Service Co-ordinating Committee [1982] 1 NZLR 742 (NZCA) at 745:
"It is an important constitutional principle that subordinate legislation cannot repeal or interfere with the operation of a statute except with the antecedent authority of Parliament itself. It is a constitutional principle because it gives effect to the primacy of Parliament in the whole field of legislation. And as a corollary a rule of construction springs from it that the Courts will not accept that Parliament has intended its own enactments to be subject to suspension, amendment or repeal by any kind of subordinate legislation at the hands of the Executive unless direct and unambiguous authority has been expressly spelled out to that effect, or is to be found as a matter of necessary intendment, in the parent statute."
105That passage was adopted by Kirby P in considering the scope of a power conferred on the executive to close a superannuation scheme established by statute by amending a schedule to the Act: State of New South Wales v Law (1992) 45 IR 62 at 75. The approach appears to have been rejected by Mahoney JA, in dissent, at 87; the other member of the majority, Priestley JA, defined the scope of the power by reference to the purpose of the statute: at 89.
106In the United States of America, the power of federal authorities to implement the provisions of legislation are understood to extend to providing interpretations of ambiguous or uncertain statutory provisions: Chevron USA Inc v Natural Resources Defense Council, Inc, 467 US 837 (1984). If the intent of Congress is clear, the agency (and the court) is bound to give effect to that intention; however, "if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute": Chevron at 843. As the Supreme Court recently noted, "Congress knows to speak in plain terms when it wishes to circumscribe, and in capacious terms when it wishes to enlarge, agency discretion": City of Arlington, Texas v Federal Communications Commission, 133 S Ct 1863 at 1868; 81 USLW 4299 (2013) (Scalia J speaking for the Court).
107Chevron has not been adopted in Australia, in its terms, as understood in 2000: Corporation of the City of Enfield v Development Assessment Commission [2000] HCA 5; 199 CLR 135 at [40]-[42]. It follows that there can be no reason in principle not to follow the English approach of caution with respect to the scope of Henry VIII clauses. However, the need to allow a degree of flexibility in relation to administrative schemes which operate in a complex and fast-changing market-place may support particular reliance on the purpose of the regulation-making power: see in relation to the 'exemption and modification' power under the former Corporations Law (NSW), Australian Securities and Investments Commission v DB Management Pty Ltd [2000] HCA 7; 199 CLR 321. Indeed, that was the approach which proved decisive in Spath Holme, at 390B-391B (Lord Bingham), 400E-F (Lord Cooke of Thorndon) and 407A-D (Lord Hope of Craighead); it is also the approach adopted by Priestley JA in Law.
108Although Lord Bingham in Spath Holme referred to the need for "genuine doubt about the effect of the statutory provision", it would seem that he was referring to the need for Parliament to express itself clearly, rather than imposing any requirement of ambiguity. The outer boundaries of a power will often be uncertain in this sense. How the Court should approach the question of uncertainty will depend upon the nature of the power involved.
109In the present case, the power in question involves the scope of the Industrial Relations Commission, as an independent arbiter, to establish the conditions of employment for workers in the public sector. Section 146C provides that it "has effect despite section 10 or 146 or any other provision of this or any other Act": subs (7). That provision is not designed to confer a carte blanche to overrule other statutory provisions, but to confer paramountcy on s 146C to the extent that it conflicts with other provisions. The particular references to s 10 and s 146 are instructive. Section 10 empowers the Commission to make an award "setting fair and reasonable conditions of employment". Section 146 confers functions on the Commission, including "setting remuneration and other conditions of employment" and "resolving industrial disputes": s 146(1)(a) and (b). Section 146(2) requires that, in exercising its functions, the Commission must have regard to, amongst other matters, the state of the economy of New South Wales and the likely effect of its decisions on that economy: s 146(2)(b). Those sections impose powers and functions in general terms and subject to broad qualifications: they do not impose on the Commission specific obligations.
110Section 146C assumes that the powers and functions of the Commission are engaged, so that it operates only when the Commission is "making or varying any award or order": subs (1). In exercising those functions, the Commission must give effect to any policy on conditions of employment, in so far as the function involves public sector employees. Viewed in the abstract, the government policies which the Commission must give effect to might be expected to regulate, by imposing limits on, the capacity of the Commission to provide particular conditions of employment to particular groups of public sector employees. In the context of the present case, the question is whether, in declaring a policy to which the Commission must give effect, the government can prohibit an award setting out any employment protection provisions at all, despite the terms of the statute requiring the Commission to include such terms and conditions, if sought.
111The permissible scope of a regulation must be determined by reference to the scope of permissible policies, identified by reference to s 146C(1). It is not extended by subs (7), the purpose of which may be described, variously, as (a) giving the section paramountcy over any inconsistency in the Act, or (b) removing from judicial scrutiny the possibility of inconsistency with the Act, or (c) as s 146C does not, in terms, confer power to make a regulation, removing from s 407(1) the requirement that a regulation be "not inconsistent with this Act". The descriptions depend on one's perspective, but identify a single purpose. That purpose is effectuated by reference to a valid regulation; it does not purport to validate a policy which is beyond the scope of the policies permitted under subs (1).
112Because s 146C(1) envisages policies which will confine the scope of the Commission's powers to set conditions of employment, it is thus regulatory in form, rather than prohibitory: cf Shanahan v Scott [1957] HCA 4; 96 CLR 245 at 253 (Dixon CJ, Williams, Webb and Fullagar JJ). Such a provision does not authorise a regulation (or policy) transforming an obligation imposed on the Commission by statute (under s 21) into a prohibition.
113Accepting that there is a fine line between a regulation which imposes restrictions on a power of the Commission and a regulation which prohibits the exercise of a power of the Commission, nevertheless in the present case the policy in question falls on the wrong side of that line. That conclusion depends on three propositions. First, the power conferred by s 146C(1) assumes the continued operation of the powers and functions of the Commission. Secondly, there is nothing in that provision which contemplates a regulation (or policy) prohibiting the exercise of a mandatory power, rather than regulating the exercise of a permissive power. Thirdly, if there be doubt as to which side of the line the policy falls, the section being in the nature of a Henry VIII clause, the court should prefer the more restrictive option.
114I therefore agree with the Chief Justice, that cl 6(1)(f) of the Regulation is invalid.