Jurisdictional error
49For the above reasons the Full Bench misconstrued the clause. However, the only orders made were to refer the proceedings to Boland P to dispose of them in accordance with their decision. Whatever be that reasoning, there was no error in the making of the order itself. Judicial review is concerned with the validity of the exercise of the power (or in this case the order made) not the reasoning which led to it. However it may be necessary to consider such reasoning to determine the validity of the exercise of the power: Attorney General for the State of New South Wales v Quin [1990] HCA 21; (1990) 170 CLR 1 at 26.
50However, in reaching his decision Boland P proceeded (at [3] and [4]) on the basis that the decision of the Full Bench was correct.
51The order made by Boland P granting a 2.5% increase in remuneration thus did not take into account the increase in employee-related costs arising as a result of the increased superannuation charge percentage, something which he was required to consider. In this respect Boland P fell into error. The question is whether the error can be classified as a jurisdictional error.
52In Craig v The State of South Australia [1995] HCA 58; (1995) 184 CLR 163 (Craig) the High Court referred to the different considerations arising when examining whether an administrative tribunal or an inferior court have fallen into jurisdictional error. The Court stated at [179] that if an administrative tribunal falls into an error of law which causes it to identify a wrong issue, to ask itself a wrong question, to ignore relevant material or to rely on irrelevant material and a tribunal's exercise of power is thereby affected, it exceeds its authority or powers. The Court stated that such an error constituted jurisdictional error.
53In the present case the Commission was not sitting as the Industrial Court and the above basis for intervention (with respect to administrative tribunals) may apply. That was a tentative view reached by Spigelman CJ in Director General, NSW Department of Health v Industrial Relations Commission of NSW [2010] NSWCA 47; (2010) 77 NSWLR 159 at [23]-[24]. If this basis of intervention was to apply then there was in my view jurisdictional error.
54However, as was pointed out in Craig (at 176-177), the broader basis for intervention in the case of administrative tribunals, as distinct from inferior courts, was justifiable in part, first, on the fact that administrative tribunals are commonly constituted by members without formal legal qualifications or legal training and are not part of the ordinary hierarchical judicial structure. Second the Court noted in Craig at 179, that the doctrine of separation of powers may preclude legislative competence to confer judicial power upon administrative tribunals.
55Having regard to the structure of the Commission, the first of these considerations does not apply to the Commission with the same force as it may do to other administrative tribunals. Further as was pointed out in Kirk and Another v Industrial Court of NSW and Another [2010] HCA 1; (2010) 239 CLR 531 (Kirk) at [69], the distinction between a court and an administrative tribunal may not be drawn so easily at a State level where there is not the same constitutional requirements for the separation of powers as there is at a Federal level.
56However, it is unnecessary to reach a firm conclusion on the matter. This is because, in my opinion, even if the question of whether there was jurisdictional error is to be determined by reference to the standard applicable to inferior courts, that conclusion should be reached. Proceeding upon the assumption that the increased superannuation charge percentage could be ignored, Boland P misconstrued the relevant regulation, thereby misconceiving the extent of his powers to grant the variation of the Award sought. In those circumstances, his Honour fell into jurisdictional error (Craig at 177-178; Kirk at [72]).
57In the circumstances, the appropriate order is to quash the orders of Boland P and remit the matter to the Commission to be determined according to law. The parties indicated at the hearing that it had been agreed amongst them that there should be no order as to costs.
58Since writing the above, I have had the advantage of reading in draft the reasons of Meagher JA. I agree with those reasons.
59The orders I would make are as follows:
(3)Order that the order of Boland P in Re Crown Employees Wages Staff (Rates of Pay) Award 2011& Ors (No 3) [2013] NSWIRComm 109 be quashed.
(4)Remit the matter to a member of the Industrial Relations Commission to be dealt with according to law.
60BEAZLEY P: I have had the advantage of reading in draft the reasons of the Chief Justice and Meagher JA in this matter. I agree with their Honours' respective judgments and with the orders proposed by the Chief Justice.
61MEAGHER JA: I have had the benefit of reading in draft the reasons of the Chief Justice. I agree with his conclusion as to the proper construction of cl 6 of the Industrial Relations (Public Sector Conditions of Employment) Regulation 2011 (NSW).
62By s 10 of the Industrial Relations Act 1996 (NSW), the Industrial Relations Commission may make an award "setting fair and reasonable conditions of employment for employees". Such an award comes into force on the day, and applies for the period, specified by the Commission. The nominal term of the award may be not less than 12 months nor more than 3 years: ss 15, 16. The Commission may also vary or rescind an award: s 17.
63The statutory provisions with respect to which this application is concerned, and the circumstances in which the issue as to the construction of cl 6(1) arises, are set out in the judgment of the Chief Justice.
64Clause 6(1) provides:
"6(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."
65The Regulation was made under s 407 of the Industrial Relations Act 1996 (NSW). Section 146C(1) of that Act requires that when making or varying any award or order, the Commission "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". The validity of that provision was upheld in Public Service Association v Director of Public Employment [2012] HCA 58; 87 ALJR 162.
66The text of cl 6(1) makes clear that its purpose is to impose a limit on the exercise of the power of the Commission to make or vary an award that increases the remuneration or other conditions of employment of "public sector employees". That limit adopts as its reference point the costs to the employer of employing those employees and those costs are defined as "employee-related costs". They are costs to the employer related to the salary or other remuneration payable to the employee or to benefits, including superannuation, which may be payable to or in respect of the employee.
67Those costs include costs that are not imposed directly on the employer by an award. The superannuation guarantee shortfall payable to the Commonwealth under s 16 of the Superannuation Guarantee (Administration) Act 1992 (Cth) is an example. The obligation to pay that charge is imposed by statute and the amount payable is calculated by reference to the salary or wage paid to the employee. It follows, all other matters remaining constant, that an increase in that salary or wage will result in an increase in that cost to the employer.
68Clause 6(1)(a) permits the Commission to award increases in remuneration or other conditions of employment "that do not increase employee-related costs by more than 2.5% per annum". Clause 6(1)(b) permits it to award increases "that increase employee-related costs by more than 2.5% per annum" but only if sufficient "employee-related costs savings" (also a defined term) have been achieved to "fully offset the increased employee-related costs". To decide whether that limit will be exceeded it is necessary to determine the employee-related costs for the annual period before the commencement of the proposed award and the increases in those costs for the following period.
69The issue between the parties is whether, in relation to the period following the commencement of the award, increases in employee-related costs that are not directly imposed by the award are to be taken into account in determining whether the award increases those costs by more than 2.5% per annum. The answer to that question must depend upon the construction of the clause and whether the words "that do not increase employee-related costs by more than 2.5% per annum" (cl 6(1)(a)) and "that increase employee-related costs by more than 2.5% per annum" (cl 6(1)(b)) describe the outcome of the proposed award increase considered alone or after taking into account any other increases in employee-related costs that it is established will also apply during the period following the commencement of the award.
70The respondent unions submit that when applying cl 6(1) to their applications to vary the awards in question, it is only the remuneration increase sought which is to be taken into account in determining whether there will be an increase in employee-related costs in excess of the limit. They argue that any other increases in those costs that will apply during the period of the award, including those that are an indirect consequence of the award but not "awarded" by it, are not to be taken into account for that purpose. That is said to follow, as a matter of construction, from the language of cl 6(1). That clause refers to "awarded increases" that "do not increase" those costs by more than 2.5% per annum and to awarded increases that increase those costs by more than that percentage. That argument was accepted by the Full Bench of the Commission: Re Crown Employees Wages Staff (Rates of Pay) Award 2011 [2013] NSWIRComm 53, esp at [25], [54].
71The respondent unions' application to the Commission was to increase wages and salaries under existing awards by 2.5% for the 12 months from 1 July 2013. On the same date, the superannuation guarantee shortfall payable to the Commonwealth increased from 9% to 9.25% of an employee's wage or salary. That increase was made by the Superannuation Guarantee (Amendment) Act 2012 (Cth) and arose entirely independently of the respondent's application.
72The respondent unions' construction of cl 6(1) excludes from consideration any increases in employer-related costs other than those which are "awarded". Here, those other costs include the additional component of the superannuation charge calculated at 9.25% which is referable to the proposed 2.5% increase in remuneration. They also include the additional component referable to the increase in the charge rate from 9% to 9.25% as applied to the existing, as distinct from varied, remuneration. The former would be a direct and necessary consequence of the proposed award. The latter is a consequence of the change in the charge rate from 9% to 9.25% and would occur in any event.
73The applicant Secretary, who represents the various public sector employers, submits that cl 6 is concerned with the effect of the proposed award or variation and whether after taking into account all other increases in employee-related costs it will result in those costs increasing by more than 2.5% from the previous year. It is not necessary that those other increases in costs be a consequence of the proposed award. They may be due to the terms of an existing award, which provides for annual increases in remuneration or other conditions, or, as in this case, to external factors such as legislative changes.
74At this point it is necessary to consider the operation of cl 6(1)(b) which permits "awarded" increases that increase costs by more than the prescribed limit where there are sufficient employee-related cost savings "to fully offset the increased employee-related costs".
75Adopting the construction propounded by the respondent unions', cl 6(1)(b) will be engaged only where the proposed award or variation, considered alone, increases employee-related costs by more than 2.5% per annum. In that event, any increase in excess of 2.5% is permitted to the extent that it is fully offset by employee-related cost savings.
76Because, on the respondent's construction, increases in employee-related costs that are not "awarded" are not to be taken into account, all relevant cost savings are available to be offset against those "awarded" increases. This has the result that where there are such savings those increases, because they are to be considered alone, are permitted to exceed the 2.5% limit notwithstanding that there are other employee-related cost increases against which those savings could be offset.
77On the Secretary's construction, cl 6(1)(b) will be engaged if, after taking into account any other cost increases which it is established will also apply, the award results in increases above the 2.5% limit. In that event the only increases above the limit which are permitted are those that are fully offset by employee-related cost savings. The consequence of this construction is that, subject to one qualification, increases in remuneration or other conditions of employment cannot be awarded if they have the consequence, taking into account other cost increases, that employee-related costs for the period in question increase above the 2.5% limit. The qualification is that those increases are permitted if they are fully offset by cost savings.
78The purpose of the policies declared by cl 6(1) is tolerably clear. It is, where possible, to keep annual increases in employee-related costs at or below 2.5% per annum. They do that by providing that awarded increases cannot produce increases in excess of the limit unless they are offset by cost savings - the premise being that all increases in employee-related costs will be taken into account in assessing whether the proposed award will result in increases in excess of the limit. The clause addresses the effect of the award increases at the "margin", which is the point at which increases in employee-related costs exceed the limit, and the offset provision ensures that award increases do not result in increases above the 2.5% limit unless there are equivalent cost savings.
79The construction urged by the Secretary gives effect to that purpose and for that reason is clearly to be preferred. It does not guarantee that employee-related costs may not increase by in excess of 2.5% per annum. That is because those costs may increase for reasons unrelated to the making or variation of an award. It does ensure, however, that there will not be increases in employee-related costs in excess of the 2.5% per annum limit that are the result of the making or variation of an award, except where increases in excess of 2.5% are fully offset by employee-related cost savings.
80There is one further argument which must be addressed. The respondent unions also submit that if the Commission was otherwise required by the provisions of cl 6(1) and s 146C(1) to take into account other increases in employee-related costs when addressing the effect of a proposed award, the introductory words to cl 6(1) nevertheless require that it not take into account any increases in costs that are incurred in giving effect to guaranteed minimum conditions of employment.
81Those introductory words provide that the policies declared in cl 6(1) are "subject to compliance with the declared paramount policies". The paramount policies referred to include the employees' entitlement to the guaranteed minimum conditions of employment in cl 7 which in turn include the making of employer payments to employee superannuation schemes or funds.
82The effect of those introductory words is not that any increases in such payments are not to be taken into account in calculating whether the 2.5% limit in cl 6(1) has been exceeded. Those words are only enlivened if the policies in that clause are inconsistent with compliance with that guaranteed minimum condition of employment. That is not this case. The position would have been different if the proposed award increase was to give effect to a guaranteed minimum condition of employment and resulted in employee-related costs increasing by more than the 2.5% limit. In that event compliance with the guaranteed minimum condition of employment would prevail.
83The proceedings before this Court are brought in its supervisory jurisdiction. The order sought by the Secretary is that the decision and orders of the Full Bench and of Boland J (Re Crown Employees Wages Staff (Rates of Pay) Award 2011 (No 3) [2013] NSWIRComm 109) be quashed.
84It was not contested that if the Secretary's argument was accepted, there was jurisdictional error because the Full Bench, and Boland J in giving effect to its ruling, misapprehended the Commission's power to make an award in a case where it was otherwise correctly recognised that jurisdiction existed: Craig v South Australia [1995] HCA 58; 184 CLR 163 at 177; and Kirk v Industrial Court (NSW) [2010] HCA 1; 239 CLR 531 at [72]. It was not argued before this Court that s 179 of the Industrial Relations Act precludes the grant of an order in the nature of certiorari for jurisdictional error.
85I agree with the Chief Justice that in the circumstances the orders made by Boland J on 20 December 2013 should be quashed and the matter remitted to the Industrial Relations Commission to be dealt with according to law. The respondents should pay the Secretary's costs of these proceedings.