Taudevin v Egis Consulting Australia Pty Limited and the Commonwealth - [2001] NSWIRComm 340 - NSWIRComm 2001 case summary — Zoe

NSWNSWIRComm

Taudevin v Egis Consulting Australia Pty Limited and the Commonwealth

[2001] NSWIRComm 340

Industrial Relations Commission (NSW)|2001-07-01|Before: Wright J, Walton J, Hungerford J

View original source

At a glance

Source facts

Court

Industrial Relations Commission (NSW)

Decision date

2001-07-01

Before

Wright J, Walton J, Hungerford J

Source

Original judgment source is linked above.

Judgment (37 paragraphs)

[1]

The applicant also claimed orders that the respondents pay his costs of the proceedings and that they be jointly and severally liable for any costs awarded in his favour. The questions referred to the Full Bench 16 Three notices of motion have been filed in these proceedings. Egis has filed a notice of motion pursuant to Rule 82 of the Industrial Relations Commission Rules ("the Rules"), seeking an order that the summons for relief filed be set aside as against Egis, a declaration that the Commission has no jurisdiction over Egis in respect of the subject matter of the proceedings, and an order dismissing the summons. The notice of motion sought orders, in the alternative, that the summons be set aside to the extent of Part A of the summons which dealt with the arrangement to provide information which was said to exist whilst the applicant was working in East Timor. The grounds advanced in support of this notice of motion allege that the Commission has no jurisdiction to determine the application because the contracts or arrangements with the applicant do not have sufficient connection with New South Wales. 17 The Commonwealth filed a notice of motion seeking an order that the summons for relief be set aside as against the Commonwealth, a declaration that the Commission has no jurisdiction over the Commonwealth in respect of the subject matter of the proceedings and an order dismissing the summons. The grounds advanced in support of the notice of motion are as follows: The Industrial Relations Commission of NSW lacks jurisdiction under s 106 of the Industrial Relations Act 1996 (NSW) ("the NSW Act") or otherwise, to entertain Mr Taudevin's application, or to grant the relief sought by him, as against the Commonwealth, for one or more of the following reasons: (a) The NSW Act does not bind or apply to the Commonwealth either: (i) as a matter of construction; or (i) because the Commonwealth is immune from any exercise of the power in the NSW Act to declare void or to vary any arrangement entered into by the Commonwealth. (b) Alternatively, to the extent that the applicant seeks a declaration that an alleged arrangement between him and the Commonwealth or some collateral arrangement involving the Commonwealth should be the subject of a declaration under s.106 of the Act, the exercise of such a power in relation to the Commonwealth would be contrary to Chapter III of the Constitution as not involving the exercise of judicial power. 18 The Commonwealth's motion seeking the summons to be dismissed or set aside is filed pursuant to Rule 82 of the Rules and in particular, Rule 82(1)(b), which enables the Court, on a notice of motion by a respondent, by order, to set aside the service of the originating process on the respondent. The making of an application under the rule is not to be treated as a voluntary submission to jurisdiction. 19 Subsequently the Commonwealth filed a notice of motion seeking orders that three questions be referred pursuant to s 193 of the Act for decision by a Full Bench of the Commission. During the hearing of the application for referral to the Full Bench the Commonwealth pressed the referral of only two of the issues raised and accordingly the reference of these two questions was made: (1) Whether the second respondent is immune from any exercise of the power in s 106 of the Act in the circumstances set out in the applicant's amended summons filed 10 March 2000 as supplemented by the particulars given on 30 March 2000 on the basis that in respect of those circumstances, so far as they involve the second respondent, the New South Wales parliament is not constitutionally capable of affecting the Commonwealth in the manner otherwise permitted by the section. (2) Whether the second respondent is immune from any exercise of the power in s 106 of the Act in these proceedings on the basis that the New South Wales parliament is not constitutionally capable of conferring on the Commission power to grant the relief sought by the applicant against the second respondent as this would involve the conferral of non-judicial power on a court exercising federal jurisdiction, contrary to Chapter III of the Constitution. The statutory scheme relevant to s 106 20 The Commission has jurisdiction to make orders in relation to unfair contracts under Part 9 of Chapter 2 of the Industrial Relations Act. The relevant provisions are ss 105 and 106 which provide:

[9]

(5) In making an order under this section, the Commission may make such order as to the payment of money in connection with any contract declared wholly or partly void, or varied, as the Commission considers just in the circumstances of the case. Submissions on behalf of the Commonwealth 21 The Commonwealth relies on three major submissions as to why the Commission in Court Session does not have jurisdiction to deal with the amended summons so far as it is directed to it. First, it is submitted that s 106 of the Industrial Relations Act does not as a matter of construction apply to the Commonwealth. The Commonwealth concedes that s 404 of the Industrial Relations Act appears to displace the presumption that a statute which regulates the conduct and rights of individuals does not apply to executive government: Commonwealth v Western Australia (1999) 196 CLR 392 at 409 - 412. Section 404 provides that the Act binds the Crown in all its capacities so far as the legislative power of the New South Wales Parliament permits. It is submitted that it is still necessary, however, and although not a matter raised by the questions referred, to show that the relevant provisions are capable, as a matter of construction, of applying to the Commonwealth. 22 It is submitted that even if s 106 of the Act is capable in its terms of applying to the Commonwealth it is not capable of doing so because constitutionally the Commonwealth is immune from its application. Parliament has not conferred a right to proceed in relation to a cause of action such as is created under s 106 of the Act and the Constitution does not itself remove the immunity from suit in this type of case: cf Commonwealth v Mewett (1997) 191 CLR 471 which was only concerned with claims in tort. In that case, Gaudron J (at 531) and Gummow and Kirby JJ (at 551) considered the Constitution removes immunity from suit against the Commonwealth for certain types of claims. Their Honours do not, however, deal with a claim like the present, which is a pure creature of a State statute. Although Brennan CJ does not deal with this issue in a final way (at 491), Dawson , Toohey and McHugh JJ considered it necessary to find some statutory waiver of immunity. 23 The States, it is said, have no power to modify or interfere with the ability of the Commonwealth executive to enter into arrangements. Any law which purports to do so affects the executive capacities of the Commonwealth: Re Residential Tenancies Tribunal of New South Wales; Ex parte Defence Housing Authority (1997) 190 CLR 410. It is emphasised that s 106 is a law conferring a broad power on a State to control a transaction by imposing legal consequences where there were previously none and involves a power to modify a transaction after the event. Section 106 is not merely a law imposing consequences on rights and duties flowing from ordinary legal transactions, but if construed in the manner asserted, it is an interference in the capacity of the Commonwealth to conduct its affairs. 24 In addition, it is submitted that the Commonwealth enjoys immunity from suit unless waived or as provided in s 78 of the Constitution . It is submitted that the only possible authorisation to proceed against the Commonwealth is s 64 of the Judiciary Act 1903 (Cth) as s 39 and s 56 of the Judiciary Act have no application in relation to s 106. Section 56 of the Judiciary Act is not such a waiver as this is not a claim in contract or tort. Section 64 of the Judiciary Act only provides that in a suit against the Commonwealth the rights of an individual shall "as nearly as possible" be the same as those in a suit between subject and subject. It was thus submitted that s 64 does not apply to overcome immunity which would otherwise exist where the transaction was done for or in the exercise of a function peculiar to government or where its application would be incompatible with the position of the Commonwealth - in this case, its ability to enter into an arrangement for the collection of information overseas in the circumstances alleged: Commonwealth v Evans Deakin Industries Limited (1986) 161 CLR 254 at 264-265 and Commonwealth v Western Australia at 439. Evans Deakin , it was submitted, does not compel a contrary conclusion. The Commonwealth also made a formal submission that the last mentioned case was wrongly decided, observing however that this Court was bound by it. 25 It was also submitted that, because of the words of s 78 of the Constitution and by reason of Chapter III generally, s 64 cannot in any event, amount to a conferral of a right to proceed against the Commonwealth in this case if the claim does not involve the exercise of judicial power within Chapter III of the Constitution . 26 Finally, it is submitted that s 106 does not involve the exercise of judicial power and its provision cannot be invoked in a "suit" to which the Commonwealth is a party. The Commission in Court Session, although having the status of a superior court, is not exercising judicial power within the meaning of Chapter III of the Constitution when making orders under s 106 in relation to the alleged arrangement and any exercise of jurisdiction over the Commonwealth would, therefore, be beyond constitutional power. A court exercising jurisdiction over the Commonwealth is exercising federal jurisdiction and the judicial power of the Commonwealth under s 75(iii) and s 77(iii) of the Constitution and s 39(2) of the Judiciary Act . When exercising federal jurisdiction State courts are bound by the requirements of Chapter III of the Constitution and may only exercise judicial power: Queen Victoria Memorial Hospital v Thornton (1953) 87 CLR 144 and Insurance Commissioner v Associated Dominions Assurance Society Pty Ltd (1953) 89 CLR 78 at 85. It was submitted in the alternative that whether Chapter III constrains the powers of State courts in exercise of federal jurisdiction in matters not involving the Commonwealth does not need to be determined. Where the Commonwealth is a party, the relevant federal "matter" includes the whole of the action, and the limitations of Chapter III apply: cf Australasian Memory Pty Ltd v Brien (1997) 149 ALR 393, 426 - 433 ( Santow J); and on appeal, Australasian Memory Pty Ltd v Brien (1998) 45 NSWLR 111, 148 - 151 (the subsequent proceedings in the High Court did not deal with that issue: Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270 at 278). 27 The last contention was also put in this slightly modified way. It was submitted that it is not necessary to determine if Chapter III constrains State courts in the exercise of federal jurisdiction in matters not involving the Commonwealth. Rather, it is argued that the Commonwealth Parliament (by s 64 of the Judiciary Act or otherwise) cannot confer a right to proceed against the Commonwealth in this case because the claim does not involve the exercise of judicial power within Chapter III of the Constitution . Thus, whether or not a non-judicial power may be exercised generally by a State court exercising federal jurisdiction (cf Re Australasian Memory Pty Ltd ) it may not do so in proceedings against the Commonwealth. 28 It was argued that the exercise of the power under s 106 is not the exercise of judicial power. The Commonwealth distinguished s 106 from the current form of s 127A of the Workplace Relations Act 1996 (Cth) and submitted that s 106 is similar to the former provisions of s 127A of the Industrial Relations Act 1988 (Cth) which were held in Re Dingjan; Ex parte Wagner (1995) 183 CLR 323 not to involve judicial power. Section 106 involves the consideration of non-judicial criteria such as public interest and enables the consideration of events subsequent to the date of the contract in determining unfairness. These factors were said to indicate that s 106 involves the exercise of a non-judicial power: Finch v Herald and Weekly Times Ltd (1996) 65 IR 239 at 242-244, 250-251 and Minister for Youth and Community Services v Health and Research Employees' Association of Australia, NSW Branch (1987) 10 NSWLR 543. The first question 29 The first question referred to the Full Bench concerns whether s 106 of the Act is capable of applying to the Commonwealth or whether it is beyond State legislative power. This submission has two limbs. First, the Commonwealth submits that it is immune from the substance of s 106 because the State has no legislative power to interfere with the capacities of the Commonwealth. Second, the Commonwealth submits that, in any event, it enjoys immunity from suit except as waived or provided for in the Constitution . It was made clear that this submission was made on the assumption the Act applies to the Commonwealth, a matter not raised by the questions referred. Further, that a law like s 106 affects the executive capacities of the Commonwealth and alters rights. It does not merely attach consequences to transactions of a traditional kind into which the Commonwealth chooses to enter. Such a provision is beyond State legislative power to the extent it extends to the Commonwealth: Re Residential Tenancies Tribunal at 454 - 455 (per McHugh J). Immunity from the substance of the law 30 The Commonwealth's submission relating to the application of s 106 to the Commonwealth raises the question of whether the Commonwealth enjoys immunity from State law and, if so, the extent and nature of any such immunity. A useful starting point for the consideration of the issue as to immunity relied on by the Commonwealth, which it submits it enjoys from s 106, is the judgment of the High Court in Jacobsen v Rogers (1995) 182 CLR 572 where Mason CJ, Deane , Dawson , Toohey and Gaudron JJ said, at 591: The question of Commonwealth immunity from State legislation is a difficult one which has not yet been fully resolved, but it is clear that the States, acting pursuant to the powers which they possess under the Constitution, are not subordinate to the federal government (see Melbourne Corporation v The Commonwealth (1947) 74 CLR 31 at p 50 per Latham CJ). Of course, the Commonwealth in the exercise of the paramount legislative power may restrict the effect of State legislation upon its operations. But it has always been recognized that the Commonwealth may be affected by State laws of general application (see eg, Federal Commissioner of Taxation v Official Liquidator of E O Farley Ltd (1940) 63 CLR 278 at p 308; The Commonwealth v Bogle (1953) 89 CLR 229 at p 260). 31 The reference to the Commonwealth's "paramount legislative power" is of course a reference to the effect of s 109 of the Constitution on State laws in the event of the enactment of valid Commonwealth law in the relevant field. No such Commonwealth law is relied on in these proceedings. 32 A number of early cases indicated that the Commonwealth does not enjoy any general immunity from State law. In Pirrie v McFarlane (1925) 36 CLR 170, for example, the High Court found that a member of the Royal Australian Air Force was subject to State traffic laws prohibiting a person from driving without a licence even during the execution of his duties. In Re Richard Foreman & Sons Pty Ltd; Uther v The Federal Commissioner of Taxation (1947) 74 CLR 508, the majority of the High Court determined that a New South Wales law could validly regulate the payment of creditors upon the winding up of the company by overriding the priority otherwise given to debts owed to the Crown in right of the Commonwealth. 33 However, in Commonwealth of Australia v Cigamatic Pty Ltd (1962) 108 CLR 372, the High Court by majority reversed the holding in Uther . It was held that the Commonwealth was entitled to the benefit of an implied immunity from State laws such that the New South Wales law was incapable of extending to one of the prerogatives of the Crown in right of the Commonwealth or to "a federal fiscal right". Dixon CJ said at 376 - 377: In the first instance the Commonwealth rests its claim on the right at common law of the Crown to priority of payment when in any administration of assets debts of equal degree due to the Crown and due to subjects of the Crown come into competition. This right arose from the sovereignty of the Crown and was accordingly expressed in terms of prerogative but it is today one of the fiscal rights of government and of course it clearly attaches to the Commonwealth. The claim of the Commonwealth in the present case resting on this right is, however, denied on the ground that by force of the State Companies Act it is excluded. This conclusion is doubtless supported, if not completely at all events to no inconsiderable degree, by the judgments of the majority in Uther v Federal Commissioner of Taxation (1947) 74 CLR 508 but it seems to me now as it seemed to me then to imply a fundamental proposition about the power of legislatures of the States which ought not to be entertained. The proposition that is implied is that an exercise of State legislative power may directly derogate from the rights of the Commonwealth with respects to its people. It is a proposition which must go deep in the nature and operation of the federal system. There can be no doubt as to the nature or the source of the right of the Commonwealth in an administration of assets to be paid in preference to subjects of the Crown if there is a competition among debts of equal degree. It springs from the nature of the Commonwealth as a government of the Queen. Therefore, to treat those rights as subject to destruction or modification or qualification by the legislature of a State must mean that under the Constitution there resides in a State or States a legislative power to control legal rights and duties between the Commonwealth and its people. Indeed, in Uther's Case (1947) 74 CLR 508 at p 523 Rich J actually says: "In so far as the right of the Crown in the right of the Commonwealth to rank as a preferential creditor is based merely on the prerogative of the Crown as such, I see no reason why the State legislature cannot validly abridge or abolish it just as it could any other Crown prerogative of this sort". Except by adopting such a doctrine I cannot see how it could be thought that State legislative power could directly deprive the Commonwealth of the priority to which it is entitled under the law derived from the prerogative. Believing, as I do, that the doctrine thus involved is a fundamental error in a constitutional principle that spreads far beyond the mere preference of debts owing to the Commonwealth, I do not think we should treat Uther's Case as a decisive authority upon that question which we should regard as binding. 34 The Cigamatic principle results in the Commonwealth enjoying a degree of immunity from the operation of State laws. The extent of that immunity has not been precisely defined in the relevant authorities. The immunity extended at least to the fiscal or prerogative rights of the Commonwealth, but may have extended as far as the "legal rights of the Commonwealth in relation to its subjects": see per Dixon J in Uther at 528 and in Cigamatic at 378. 35 The Cigamatic principle was subject to a deal of criticism, both academic and professional. For example, in the important article by R P Meagher QC and W M C Gummow entitled "Sir Owen Dixon's Heresy" (1980) 54 Australian Law Journal 25, the learned authors conclude with the following observations: (j) There is nothing inherent in the nature of any prerogative right which places it in any special class so as to suggest it is given special immunisation from infection by any State legislation; the "prerogative" is no more than a general term used to identify a wide range of executive powers. As Sir Frederick Pollock explained long ago, "prerogative is nothing more mysterious than the residue of the King's undefined powers after striking out those which have been taken away by legislation or fallen into desuetude" 34 LQR 152 at 159. See also A-G (NSW) v Butterworth & Co (Aust) Ltd (1938) 38 SR (NSW) 195 at 226; Farley's case (1940) 63 CLR 278 at 320. Of course, some aspects of the prerogative, for example, those in relation to the operation of Commonwealth responsible parliamentary government, are beyond the reach of the State legislatures, but this is because such legislation would not be for the peace, welfare and good government of the States; on the other hand, the regulation of priorities as to debts in the winding up of the New South Wales company would pre-eminently be a matter for the peace, welfare and good government of New South Wales. (k) In truth, the Cigamatic doctrine, in its various formulations, is but a revival in fresh garb of one aspect of the immunity of instrumentalities doctrine, which in both of its operations was discarded in the Engineers' Case . So much is apparent from the comments of Jacobs J in Maguire v Simpson (1977) 52 ALJR 125 at 140, wherein he spoke of the "question whether the reasoning in Cigamatic involves revival of the doctrine of implied immunity of instrumentalities and whether it is essentially consistent with the Engineers' Case ". It is to be hoped that the High Court will at the earliest opportunity be invited to reconsider, and reconsider, the correctness of the decision in Cigamatic . 36 Nevertheless, after Cigamatic , it was accepted that the Commonwealth could be affected by State laws of general application either incidentally or when it enters into a transaction: see Cigamatic at 378; and per Dixon J in Uther at 528 and Federal Commissioner of Taxation v Official Liquidator of E O Farley Ltd (1940) 63 CLR 278 at 308. The extent of uncertainty in this area is exemplified by the judgment in Commonwealth v Western Australia where Hayne J observed, at 471 - 472: The States, on the other hand, do not have specific legislative powers and do not have power to affect the capacities of the Commonwealth executive: Re Residential Tenancies Tribunal (1997) 190 CLR 410 at 440, per Dawson , Toohey and Gaudron JJ. The content and application of these principles has been controversial ( The Commonwealth v Bogle (1953) 89 CLR 229 at 259 per Fullagar J; cf The Commonwealth v Cigamatic Pty Ltd (In liq) (1962) 108 CLR 372) and it may well be that there is still room for doubt about them. But it is clear that whatever the content or application of these principles, it is not right to say that State laws cannot by their own force bind the Commonwealth. A submission to that effect was expressly rejected by the majority in Re Residential Tenancies Tribunal (1997) 190 CLR 410 at 438 per Dawson , Toohey and Gaudron JJ and it is a proposition that cannot be supported in principle. The contrary view expressed by Fullagar J in The Commonwealth v Bogle (1953) 89 CLR 229 at 259: "[t]o say that a State can enact legislation which is binding upon the Commonwealth in the same sense in which it is binding upon a subject of the State appears to me to give effect to a fundamental misconception" should be rejected for the reasons given by the majority in Re Residential Tenancies Tribunal . No doubt, if State legislation contains no provision dealing with its effect on the Commonwealth, deciding whether a State law is intended to bind the Commonwealth may be difficult. Further, if the State law is intended to bind the Commonwealth, there may be a difficult issue about whether it is a law that affects the capacities of the Commonwealth executive (as distinct from the particular exercise of those capacities): Re Residential Tenancies Tribunal (1997) 190 CLR 410 at 438 - 439, per Dawson , Toohey and Gaudron JJ. But the first question is whether the State law, in this case the Mining Act , is to be construed as intending its operation to affect the Commonwealth.

[10]

McHugh J, in concurring with the judgment of Hayne J, albeit subject to number of reservations, said at 421: The first matter to which I refer is his Honour's discussion of the capacity of the States to bind the Commonwealth. I have expressed my views on that subject in my judgment in Re Residential Tenancies Tribunal (NSW); Ex parte Defence Housing Authority (1997) 190 CLR 410 in terms which do not fully accord with the discussion of Hayne J in this case. No doubt it will some day be necessary to determine whether the views expressed by Dawson , Toohey and Gaudron JJ in Re Residential Tenancies (1997) 190 CLR 410 to which Hayne J refers have finally settled the question of the States' capacity to bind the Commonwealth. But it is not necessary to do so for the purposes of this case. 37 The High Court had shortly before deciding that case given further consideration to the issue of Commonwealth immunity from State laws in Re Residential Tenancies Tribunal of New South Wales; ex parte Defence Housing Authority . In those proceedings, the Defence Housing Authority leased a home unit for the purpose of sub-leasing the premises to defence personnel. The owner of the unit sought to enter and inspect the unit pursuant to s 24 of the Residential Tenancies Act 1987 and, upon being refused, sought orders from the Residential Tenancies Tribunal. The Defence Housing Authority argued that the New South Wales law had no application to the Commonwealth. All members of the High Court concluded that the Cigamatic doctrine did not prevent the New South Wales law applying to the Commonwealth, although Kirby J dissented on a basis not presently relevant. 38 Dawson , Toohey and Gaudron JJ observed that a distinction may be drawn between the capacities of the Commonwealth and the exercise of those capacities. Their Honours held, at 438 - 439: It is necessary at the outset to observe a distinction between the capacities of the Crown on the one hand, by which we mean its rights, powers, privileges and immunities, and the exercise of those capacities on the other. In referring to the capacities of the Crown so defined, we are speaking of the same thing of which Dixon J spoke when he used the words "capacity or functions" in West v Commissioner of Taxation (NSW) (1937) 56 CLR 657 at 682 in quoting from the dissenting judgment of Isaacs J in Pirrie v McFarlane (1925) 36 CLR 170 at 191. Elsewhere he used other expressions to convey essentially the same meaning, such as the "governmental rights and powers belonging to the Federal executive as such" or "the rights or privileges, duties or disabilities, of the Commonwealth in relation to the subjects of the Crown". In Cigamatic (1962) 108 CLR 372 at 378, Dixon CJ also spoke of the "legal rights of the Commonwealth in relation to its subjects" and that expression is, as shall appear, of some use in applying the principle which he expounded. The purpose in drawing a distinction between the capacities of the Crown and the exercise of them is to draw a further distinction between legislation which purports to modify the nature of the executive power vested in the Crown that is, its capacities, and legislation which assumes those capacities and seeks only to regulate activities in which the Crown may choose to engage in the exercise of those capacities. 39 Their Honours saw the decision in Cigamatic as meaning that a State legislature could not impair the capacities of the Commonwealth executive, but at the same time that the Commonwealth might be regulated by State laws of general application in those activities which it carried on in common with other citizens. Their Honours' consideration continued (at 440): The States … do not have specific legislative powers which might be construed as authorising them to restrict or modify the executive capacities of the Commonwealth. The legislative power of the States is an undefined residue which, containing no such authorisation, cannot be construed as extending to the executive capacities of the Commonwealth. No implication limiting an otherwise given power is needed; the character of the Commonwealth as a body politic, armed with executive capacities by the Constitution, by its very nature places those capacities outside the legislative power of another body politic, namely a State, without specific powers in that respect. Having regard to the fundamental principle recognised in Melbourne Corporation v The Commonwealth , only an express provision in the Constitution could authorise a State to affect the capacities of the Commonwealth executive and there is no such authorisation. 40 McHugh and Gummow JJ also held that the Defence Housing Authority was not entitled to the protection of the Cigamatic doctrine, as the doctrine has no application to legal rights which are sourced in or the immediate product of federal statute as, except to the extent that the rights are protected by s 109 of the Constitution , State law applies to them (see Residential Tenancies Tribunal at 458 - 459 and 469 - 470, respectively). Their Honours, however, did not consider the distinction between the capacities of the Commonwealth and the exercise of those capacities pertinent. McHugh J concluded that a State law could regulate a relationship created between the Commonwealth and a subject, but once the Commonwealth in the exercise of its executive power under s 61 of the Constitution entered a relationship creating rights and duties, a State could not change the nature and effect of the legal rights. His Honour specifically referred to the question of whether a State law can prevent the Commonwealth from using its right to forfeit a lease or terminate an employment. His Honour held, at 454 - 455: The executive capacity of the Commonwealth can only mean its legal right or power to do or refrain from doing something. I cannot see any constitutional rationale for a doctrine that would hold, for example, that the States cannot prevent the Commonwealth from entering into a specific class of contract but can alter the legal rights and obligations of the Commonwealth and the subject once they have entered into a contract of that class. Moreover, the distinction between a capacity of the Commonwealth and its exercise is not easily drawn. If a State law prevents the Commonwealth from using its contractual right to forfeit a lease or terminate an employment, is the State law fettering a Commonwealth capacity or only the exercise of it? In most cases, State law including the common law will govern the creation of a relationship between the Commonwealth and a subject even when the creation of the relationship arises from the Constitution's grant of executive power. If the Commonwealth chooses to enter into the relationship without negating the consequences of relevant State law, it necessarily submits to the State law governing the incidents of the relationship. But, for the reasons given by Dixon CJ in Cigamatic , once the Commonwealth has entered into such a relationship and created legal rights and duties in accordance with that State law, it is not open to the State to change their nature or effect. If the Commonwealth enters into a contract relying on the grant of executive power conferred by s 61 of the Constitution , a State has no power to change the consequences of that contract even by a law of general application. 41 His Honour later (at 457 - 458) said: If a State law attempted to discriminate against the exercise of an executive activity arising from the operation of s 61 of the Constitution, it would be plainly invalid for the reasons given by Dixon J in West v Commissioner of Taxation (NSW) (1937) 56 CLR 657 at 681 - 682. On the other hand, a general law that merely regulates the manner or mode of performing an activity which a servant or agent of the Commonwealth carries out in the course of executing functions and duties arising from the operation of s 61 of the Constitution is unlikely to constitute an infringement of those extraordinary capacities or powers of the Commonwealth to which I have referred. Such laws are to be contrasted with State laws that purport to bind the Commonwealth itself in exercising the capacities and powers conferred by s 61 of the Constitution alone or in conjunction with other powers of the Commonwealth. State laws purporting to have that effect can only operate as interpretation clauses. They show that the State law is intended to apply to the Commonwealth. However, they can do so only to the extent that the Commonwealth submits to the law by express words or conduct or by inference from its silence. But that is all. 42 The issue in these proceedings is whether, in light of the judgment in Re Residential Tenancies Tribunal , the application of s 106 impairs or interferes with the executive capacities of the Commonwealth, or whether it merely regulates the exercise of those capacities. The Commonwealth submitted that s 106 does interfere with the capacities of the Commonwealth. The Commonwealth pointed out that s 106 confers a broad discretion on the Commission to modify a transaction entered into by the Commonwealth and to impose legal consequences where previously there had been none. It was submitted that s 106 was not merely a law which regulated transactions entered into by the Commonwealth. 43 It has been suggested that the distinction between "capacity" and the "exercise of capacity" suggests "that the Commonwealth and its instrumentalities are subject to State laws of general application, such as planning and environmental laws, and laws relating to employment such as anti-discrimination legislation and even occupational health and safety law": see G Williams, Labour Law and the Constitution (Sydney, The Federation Press, 1999) at p21. Mescher in his article "Whither Commonwealth Immunity" (1998) 17 Australian Bar Review 23 also observed that, as a result of the decision in Re Residential Tenancies Tribunal , the general principle of total immunity of the Commonwealth from State laws has been jettisoned. Mescher continues (at 40): At a practical level, the proposition extracted from a majority of the court is Re Residential Tenancies Tribunal would not be easy to apply. It is, in many ways, not unlike the "affected by" doctrine which had its logistical ( sic ) problems even in pre- Cigamatic days. A provision of a state law which affects the capacities of the Commonwealth executive rather than one which, via a process of statutory construction, regulates activities engaged in by the Crown and its subjects, is a difficult distinction to draw. State legislation rarely, if ever, expressly state "This Act is intended to affect the capacity of the Commonwealth executive". Where the line is to be drawn between state laws which regulate activities and, as a matter of construction, extend to the Crown in right of the Commonwealth, and laws which affect the capacity of the Commonwealth executive is, to say the least, difficult to ascertain. 44 The nature of the jurisdiction of the Court under s 106 and the relief thereby available was authoritatively considered in the Full Bench judgment in Beahan v Bush Boake Allen Australia Limited (1999) 47 NSWLR 648 at 679 - 685; (1999) 93 IR 1 at 28 - 35. The analysis concluded with the following epitome: What emerges from the above authorities, we think, is the now settled view that s.106 (as with the previous s.88F of the 1940 Act and s.275 of the 1991 Act) is directed to an impugned contract of employment, whether existing or terminated, as to the fairness of its express or implied terms. Such unfairness will depend upon the facts of each particular case by focusing attention on the contractual relationship between a particular employer and employee and where the unfairness may arise from the terms of the contract itself, the surrounding circumstances and/or the manner of performance or operation of the contract. The section, we emphasise, is not concerned with re-establishing an employment relationship which has ended nor with compensating an employee for the loss of his employment contract. In other words, the section is properly concerned with the fairness of the terms of a contract of employment in its various respects and, if relevantly found to be unfair, to provide remedial relief by avoiding or varying the terms of that contract and to order the payment of money in connection with any contract so avoided or varied as is considered just in the circumstances of the case. 45 The nature of the orders which might be made for the payment of money in connection with the contract or arrangement avoided or varied, as Barwick CJ said in Brown v Rezitis (1970) 127 CLR 157 at 164, "will of necessity cover a wide field" and "the power to order the payment of money is not limited to the making of an order for the payment of money by one of the parties to the contract or arrangement varied or avoided": Brown v Rezitis at 164 - 165; Visalli v Southwell (1988) 12 NSWLR 502 at 511. The power, as with the section in its entirety, is not to be construed narrowly and permits, in an appropriate case, money orders to be made as between respondents, and the power to make monetary orders may be exercised at a subsequent stage some time after the relevant contract or arrangement has been dealt with: Bush Boake at 13; Hoffman v Industrial Commission of New South Wales (1990) 33 IR 139 at 142. 46 However, in our opinion s 106, to the extent that it may permit variation or avoidance of the arrangement pleaded by the applicant, so far as it existed between the Commonwealth and himself, or at least so far as there is presently evidence of it in these proceedings, could not be said to derogate impermissibly from the Commonwealth's legitimate immunity from the reach of State legislative power. It is relevant to this aspect of our consideration to refer to the nature or subject matter of the relationship or dealings between the applicant and the Commonwealth. It was limited to the passing on of information in his possession; that is, the provision of information, including information as to political and military developments, which became available to him in the course of his employment with Egis. The information was provided to both Egis and the Commonwealth. 47 As was observed in the judgment of the High Court in A v Hayden (1984) 156 CLR 532, the passing on of information in one's possession is what any citizen might ordinarily do. Gibbs CJ said in that case, at 543: Of course any contract which obliges the government or an agency of the government to take or refrain from taking action of any kind operates to some extent to fetter executive power, but, as Aickin J said in Ansett Transport Industries (Operations) Pty. Ltd. v. The Commonwealth (1977) 139 CLR 54, at p 113, "It is plain that even without statutory authority the Commonwealth in the exercise of its executive power may enter into binding contracts affecting its future action". The suggestion made by Rowlatt J in Rederiaktiebolaget Amphitrite v. The King [1921] 3 KB 500, at p 503, that the government cannot by contract fetter its executive action in matters which concern the welfare of the State is too wide. It is true that speaking generally the government cannot by contract disable itself or its officers from performing a duty cast on it by statute or from freely exercising a statutory power or discretion: see per Mason J in Ansett Transport Industries (Operations) Pty. Ltd. v. The Commonwealth , at pp 74 - 75. The same principle may apply when the Crown is entrusted with powers under the prerogative: Commissioners of Crown Lands v. Page [1960] 2 QB 274, at p 291. However this principle has no application to the present case, where there exists no relevant power or duty granted or imposed by statute or available under the prerogative, and the Commonwealth seeks to do what any citizen might ordinarily do, i.e., pass on information in its possession. 48 This passage has another importance. It demonstrates that, outside the area of duties imposed by statute, or those involving the exercise of a statutory discretion or a prerogative power, the Commonwealth may enter into contracts affecting its future conduct. The corollary is that such contracts are enforceable against the Commonwealth. Similarly, where the Commonwealth is in a legal relationship with another person, that is a relationship which gives rise to legal rights and duties inter se , and whether or not the relationship arises from contract, conduct of the Commonwealth may lead to binding estoppels against it in favour of the other party: see Commonwealth of Australia v Verwayen (1990) 170 CLR 394 at, for example, 454 - 456. 49 The Federation of Australia is a complex legal and social polity. The Constitution in its terms displays the continuing recognition of this situation, subject of course to the role of the Courts, particularly the High Court, in the interpretation and evolution of the scope of the Constitution. The Constitution , in ss 106 to 108 ensured the saving of State Constitutions and State laws, and the saving of the powers of their Parliaments. Less explicitly perhaps, the recognition of the role of the States was emphasised by the fact the powers provided to the Commonwealth by the Constitution were not plenary but rather enumerated or specified, both as to powers exercised concurrently with the States (for example, under s 51 of the Constitution ) and those exercised exclusively by the Commonwealth (such as ss 52 and 122). Indeed, the importance of s 109 of the Constitution may only be fully appreciated in terms of its inter-relationship with the constitutional provisions as to concurrent enumerated powers and those which preserve the roles and laws of the States. As Latham CJ said in Uther at 521: The Commonwealth of Australia was not born into a vacuum. It came into existence within a system of law already established. To much of that law the Commonwealth is necessarily subject; for example, the Commonwealth has no general power to legislate with respect to the law of property, the law of contract, the law of tort. In relation to those subjects, speaking generally, it lives and moves and has its being within a system of law which consists of the common law (in the widest sense) and the statute law of the various States.

[11]

having earlier observed: The Commonwealth Parliament has the means of protection in its own hands, and by suitable legislation can prevent the application of inconsistent State legislation. I do not suggest, however, that, because the Commonwealth has an extensive power of protecting itself in relation to its governmental functions against State legislation, the result is that any State legislation with respect to the Commonwealth should be held to be valid unless the Commonwealth Parliament produces counter-legislation. There are some subjects which are completely beyond State legislative power; for example, the functions of the Governor-General in relation to the summoning and the dissolution of the Commonwealth Parliament are matters with respect to which State legislatures have no power whatever. 50 The Commonwealth concedes, correctly in our view, that s 404 of the Industrial Relations Act displaces the presumption that the executive government is not bound by a statute which regulates the conduct and rights of individuals: Commonwealth v Western Australia . No federal statute is referred to or relied on as being in conflict with s 106 which would lead to a conflict of the kind which s 109 of the Constitution was designed to resolve. Similarly, no particular prerogative power is raised as being in point or which could be said to make the description given by Gibbs CJ in Hayden as something "any citizen might ordinarily do", inapplicable to the passing of information requested or required of the applicant. 51 As the Commonwealth has not availed itself of "the means of protection in its own hands", to use the words of Latham CJ in Uther , by the exercise of statutory power, it could not be concluded that this activity has been transformed into a subject matter beyond State legislative power. 52 Again, consideration of the very general and ordinary nature of the activity and the work or tasks performed by, and requested of, the applicant places into perspective the location of the relevant subject matter within the dichotomy which the majority judgment in Residential Tenancies Tribunal requires be addressed. The distinction drawn in that judgment was between legislation which purports to modify the nature of the Commonwealth executive power and legislation which seeks only to regulate activities which the Commonwealth chooses to engage in the exercise of that capacity. In no sense could it be said that s 106 empowers the impairing, modification or attempted modification of executive power. At its highest, it involves regulation of activities such as employment which the Commonwealth might choose to enter into. The fact that the exercise of the power under s 106 may result in unforeseen legal consequences or post hoc modification of a contract of employment or related work arrangement does not transform the function of s 106 from the regulation of activities carried out pursuant to the exercise of an executive power into a function which modifies or impairs the nature of the power or of the power itself pursuant to which the activities are initiated or carried on. 53 Accordingly, we do not consider that the Commonwealth has made out its contention that it is immune from the "substance" of s 106 in these proceedings. In any event, on the narrowest view of the power under s 106 it may be permissible to make money orders against the Commonwealth even in circumstances where it was not possible, or considered appropriate, to make orders avoiding wholly or in part a contract or arrangement to which the Commonwealth was a "party". So that if it were considered, contrary to our conclusions otherwise, that the potentially retroactive effect of s 106 orders of avoidance or variation were constitutionally impermissible, it is difficult to see how orders of a consequential kind only for payment of money by the Commonwealth flowing from orders as to the contract between Egis and the applicant could be considered impermissible. 54 This follows from the considerations earlier referred to in paragraph [45] which would permit, in the present case, the making of money orders against the Commonwealth. If it be thought that avoidance or variation of the contract or arrangement so far as the Commonwealth is a party to them is constitutionally impermissible as derogating from Commonwealth immunity, an assumption that such power exists is not the only basis for money orders to be made against the Commonwealth. The facts alleged here could (in the sense of being legally available) lead to such orders being made against the Commonwealth where the jurisdictional basis to do so is provided by an avoidance, in whole or in part, of the contract or arrangement between Egis and the applicant. The Commonwealth claim to immunity from suit 55 Apart from immunity from the substance of the law, the Commonwealth submits that it enjoys immunity from suit. The Commonwealth contends that any right to proceed against the Commonwealth in a State court depends upon authorisation by federal law or the Constitution . Section 78 of the Constitution provides: Proceedings against Commonwealth or State

[13]

(2) The several Courts of the States shall within the limits of their several jurisdictions, whether such limits are as to locality, subject-matter, or otherwise, be invested with federal jurisdiction, in all matters in which the High Court has original jurisdiction or in which original jurisdiction can be conferred upon it … 58 The original jurisdiction of the High Court is conferred by s 75 of the Constitution which provides: 75. Original jurisdiction of High Court In all matters: (i) Arising under any treaty: (ii) Affecting consuls or other representatives of other countries: (iii) In which the Commonwealth, or a person suing or being sued on behalf of the Commonwealth, is a party: (iv) Between States, or between residents of different States, or between a State and a resident of another State: (v) In which a writ of Mandamus or prohibition or an injunction is sought against an officer of the Commonwealth: the High Court shall have original jurisdiction. 59 The High Court has jurisdiction over a matter in which the Commonwealth is a party: s 75(iii) of the Constitution . As a result, jurisdiction is conferred on the State courts in relation to those matters by s 39(2) of the Judiciary Act : Evans Deakin at 264. It may thus be arguable that the Commission in Court Session is given jurisdiction to entertain a suit to which the Commonwealth is a party by virtue of s 39(2) of the Judiciary Act and s 75(iii) of the Constitution : see Evans Deakin at 264. The Commonwealth contends, however, that s 39(2) does not remove the immunity from suit because it merely confers jurisdiction on State courts within the limits of their jurisdiction for the purpose of exercising federal jurisdiction. 60 Section 56 of the Judiciary Act enables certain suits to be brought against the Commonwealth and relevantly provides: Suits against the Commonwealth 56. (1) A person making a claim against the Commonwealth, whether in contract or in tort, may in respect of the claim bring a suit against the Commonwealth: (a) in the High Court; (b) if the claim arose in a State or Territory - in the Supreme Court of that State or Territory or in any other court of competent jurisdiction of that State or Territory; or (c) if the claim did not arise in a State or Territory - in the Supreme Court of any State or Territory or in any other court of competent jurisdiction of any State or Territory. (2) …

[15]

In any suit to which the Commonwealth or a State is a party, the rights of parties shall as nearly as possible be the same, and judgment may be given and costs awarded on either side, as in a suit between subject and subject. 62 The effect of s 64 of the Judiciary Act is to enact as federal law that body of State law by which the rights of the parties would have been governed had the Commonwealth been a private litigant and not the Crown: Asiatic Steam Navigation Co Ltd v Commonwealth (1956) 96 CLR 397 at 427. One view of s 64 would be that it would apply only where there is some other law of the Commonwealth which enables a suit to be brought against the Commonwealth. This approach was rejected by the majority in Evans Deakin at 264 where it was held that s 64 was a provision conferring rights to proceed against the Commonwealth. In Commonwealth v Mewett the High Court considered the source of Commonwealth liability in tort. Dawson J held, at 502: Whilst it does not matter in this case and probably does not matter at all, I think that the preferable view and the view that accords most with the trend of recent authority, particularly Maguire v Simpson (1977) 139 CLR 362 and The Commonwealth v Evans Deakin Industries Ltd (1986) 161 CLR 254, is that s 64 is the provision which removes Crown immunity from suit and allows a citizen to proceed against the Commonwealth (or a State, for that matter) within federal jurisdiction. It is now settled that s 64 extends beyond matters of mere procedure to matters of substance. As was said in The Commonwealth v Evans Deakin Industries Ltd (at 262 - 263) of the decision in Maguire v Simpson : "That case establishes that in every suit to which the Commonwealth is a party s 64 requires the rights of the parties to be ascertained, as nearly as possible, by the same rules of law, substantive and procedural, statutory and otherwise, as would apply if the Commonwealth were a subject instead of being the Crown. That result seems entirely just; the Commonwealth acquires no special privilege except where it is not possible to give it the same rights and subject it to the same liabilities as an ordinary subject." If the same rules of law, substantive and procedural, statutory and otherwise, are to apply as they would if the Commonwealth were a subject instead of being the Crown, that must mean that, by power of s 64, the Commonwealth no longer has any immunity from suit in contract or tort in any suit to which it is a party within federal jurisdiction. 63 In Commonwealth v Western Australia at 438, Gummow J observed: In The Commonwealth v Evans Deakin Industries Ltd (1986) 161 CLR 254 five members of this Court rejected the view taken by the New South Wales Court of Appeal in Australian Postal Commission v Dao (1985) 3 NSWLR 565 that s 64 did not begin to operate against the Commonwealth until there was otherwise a cause of action which brought the Commonwealth before the court as a party. It was held that, whilst there must be a suit to which the Commonwealth is a party before s 64 commences its operation, this does not mean that the cause of action must arise under some other law before s 64 may apply. The commencement of a suit against the Commonwealth, the precondition for the operation of the section, was satisfied by the bringing of an action against the Commonwealth in a court of competent jurisdiction. 64 However, s 64 is subject to a number of limitations. For s 64 to operate, there must be a "suit" to which the Commonwealth is a party. "Suit" is defined is s 2 of the Judiciary Act in the following terms: "Suit" includes any action or original proceeding between parties. 65 The rights granted to the parties by s 64 are also qualified by the words "as nearly as possible". The meaning of this expression does not appear to be settled: see Maguire v Simpson (1977) 139 CLR 362 at 393. The Commonwealth cites the views of the majority of the High Court ( Gibbs CJ, Mason , Wilson , Deane and Dawson JJ) in Evans Deakin at 264: The Supreme Court is given jurisdiction to entertain a suit to which the Commonwealth is a party by the combined effect of s 39(2) of the Judiciary Act and s 75(iii) of the Constitution . When an action is brought against the Commonwealth in the Supreme Court the condition for the operation of s 64 is satisfied: see The Commonwealth v Anderson , at p 310. Once the suit is commenced the substantive rights of the parties shall be, as nearly as possible, as in a suit between subject and subject. If the Commonwealth were a subject, Evans Deakin, as sub-contractor, would, on the facts alleged in the statement of claim, be entitled to enforce the charge given by the Subcontractors' Charges Act . The qualification to s 64 expressed by the phrase "as nearly as possible" would not render the Subcontractors' Charges Act inapplicable. That phrase has been differently paraphrased by different judges, as the discussion by Stephen J in Maguire v Simpson , at pp 393 - 395, shows. The natural meaning of the expression appears to be that suggested by Kitto J in Asiatic Steam Navigation Co. Ltd. v The Commonwealth (1956) 96 CLR 397, at p 427: "as completely as possible". Kitto J went on to say, at p 428, that s.64 in effect requires the court "to put out of account any special position of the Crown, and as far as possible to decide all questions of right in the same way as they would have been decided if the Commonwealth or State had been a subject". It is unnecessary to consider for present purposes whether in some cases at least it would be right to consider the special position of the Crown, but this is not a case of that kind. Here the Commonwealth, in entering into a building contract, was not performing a function peculiar to government; it was making a contract of a kind commonly entered into by ordinary members of the public and the determination of the rights and liabilities of the Commonwealth by reference to the Subcontractors' Charges Act would not be incompatible with the position of the Commonwealth or detrimental to the public welfare. Even if the words "as nearly as possible" are given a wider meaning than that which Kitto J attributed to them, they do not exclude the rights given to Evans Deakin by the Subcontractors' Charges Act in the present case.

[16]

Although not at issue in that case, the Court left open the possibility that the words "as nearly as possible" could encompass a restriction based upon the special position of the Commonwealth and the functions peculiar to government. 66 The phrase "as nearly as possible" has been considered in a range of cases. For example, in Baillieu v Australian Electoral Commission (1996) 63 FCR 210 Sundberg J observed (at 225 - 226): Since Maguire v Simpson (1977) 139 CLR 362 it has been established that in every suit to which the Commonwealth is a party s 64 requires the rights of the parties to be ascertained, as nearly as possible, by the same rules of law, substantive and procedural, statutory or otherwise, as would apply if the Commonwealth were a subject instead of being the Crown. The Commonwealth acquires no special privilege except where it is not possible to give it the same rights and subject it to the same liabilities as an ordinary subject: see Commonwealth v Evans Deakin Industries Ltd (1986) 161 CLR 254 at 264 - 265. 67 In Asiatic Steam Navigation Co Ltd v Commonwealth at 427, Kitto J considered the expression "as nearly as possible" as equivalent to the phrase "as completely as possible", and went on to say (at 428) that s 64 in effect requires the Court "to put out of account any special position of the Crown, and so far as possible to decide all questions of right in the same way as they would have been decided if the Commonwealth ... had been a subject". In Evans Deakin at 264 - 265, Gibbs CJ, Mason , Wilson , Deane and Dawson JJ also held that "as completely as possible" was the natural meaning of "as nearly as possible", and after referring to the passage earlier set out, said it was "unnecessary to consider whether in some cases at least it would be right to consider the special position of the Crown", as the Commonwealth in that case "was not performing a function peculiar to government". In Deputy Commissioner of Taxation v Moorebank Pty Ltd (1988) 165 CLR 55 at 68, the High Court said it was not necessary to consider whether, and if so to what extent, s 64 would be ineffective to apply the provisions of State laws in circumstances where their application would interfere with the discharge of "an essentially governmental function such as the collection of taxes". See also Maguire v Simpson at 393 - 395. 68 It is important to return here to the detail of the Commonwealth's submissions. The Commonwealth's claim to immunity from the exercise of the jurisdiction under s 106 is, as we understand its submissions, put on two bases. The first on the basis that s 106 involves the exercise of judicial power, and the second on a broader basis that is relevant to either view of the power under s 106. In its submissions, the Commonwealth framed the first argument in this way: The immunity from suit is not removed by s 64 of the Judiciary Act 1903 … Even if an action in the Commission seeking orders under s 106 is a 'suit', s 64 provides that the rights of the parties shall as nearly as possible be the same '… as in a suit between subject and subject'. This provision does not apply to overcome immunity that otherwise exists where the transaction was done for the purpose of the Commonwealth performing a function peculiar to government or where its application would be incompatible with the position of the Commonwealth, in this case its ability to enter into an arrangement for the collection of information overseas in the circumstances alleged: Commonwealth v Evans Deakin Industries (1986) 161 CLR 254, 264 - 265; Commonwealth v Western Australia (1999) 196 CLR 392, 439 Gummow J.

[18]

and: Just because there is a contract - and we do not accept there was one - but assuming there was a contract, that in itself does not make section 64 operative. You have to look at the nature of the contract and you have to look at the type of work that is done or the things that are obliged to be performed. 71 This submission was made in reliance on the passage in the judgment of Evans Deakin at 264 - 265 where the High Court left open the possibility that, in considering the phrase "as nearly as possible" in s 64 of the Judiciary Act , it may be necessary to consider the special position of the Commonwealth when it was performing a function peculiar to government. 72 In a similar way, reliance was also placed on the distinction referred to in Re Residential Tenancies Tribunal at 438 - 439 between the capacities of the Crown (that is, its rights, powers, privileges and immunities) and the exercise of those capacities; and the appropriateness, in that case, of referring to that distinction because of the further distinction between legislation which purports to modify the nature of the executive power vested in the Crown (that is, its capacities) and legislation which assumes those capacities and merely seeks to regulate activities in which the Crown may choose to engage in the exercise of them. 73 The applicant's response to this part of the Commonwealth's submissions is important. Although senior counsel for the applicant stated the applicant's preference was not to rely on the principle that it was premature to decide what was, in effect, a strike out application by the Commonwealth, at least as to itself as a respondent, on the basis of authorities such as Nagle (T/as W D and J L Nagle & Sons) v Tilberg (1993) 51 IR 8, nevertheless, it was submitted: The Commonwealth has come here asking your Honours to strike us out or to have it removed as a party to the proceedings. In so far as that may raise questions of degree or about the character of work or things of that kind by its arguments, then it is the Commonwealth which bears the burden and not us. We think that the motion can be dismissed without concern about those sorts of issues, but at the end of the day if the motions cannot be dealt with without a further examination of the factual position, that is what will have to happen with respect to these parts of the motion …

[19]

and: Finally on that point, it is only necessary to look at the relief which is claimed. I understand that nothing which is in prospect could possibly constitute unfairness over the executive capacity of the Commonwealth. The Commonwealth is being asked to pay money. That is the order that is sought. Certain declarations are to be made and variations are sought, principally against the first respondent. The Commonwealth's obligations on this aspect of the case are not an interference with its capacities. 74 The submissions of the Attorney General for New South Wales were to similar effect. It was said that the arrangement in issue in this case, as appears from the amended summons and the particulars provided by the applicant, relate to a function that cannot be said to be inherently governmental as it relates to: the gathering of information … in relation to regional activities of some sort. … the first respondent, a private person was obtaining precisely the same information. That in itself suggests that the nature of the information or the scope and extent of the arrangement under which the applicant provided work in any industry to the Commonwealth was not an exchange that was inherently governmental, because precisely the same information was being provided by the first respondent in this case. One would need different circumstances to those in this case to be able to conclude that this is one of the exceptional cases referred to in Evans Deakin that might not attract the application of section 64 of the Judiciary Act . 75 The argument advanced by the Commonwealth is to the effect that it is not possible in these proceedings to give full effect to s 64 of the Judiciary Act because to do so would interfere with the right of the Commonwealth to exercise functions which are peculiar to government. It is argued that the Commonwealth, when it entered the arrangement with the applicant, was performing functions peculiar to government. Functions peculiar to government 76 We pause to deal with the aspect of the Commonwealth's argument as to "functions peculiar to government" before dealing further more particularly with the s 64 aspect. The Commonwealth's submissions as to its alleged immunity from suit under s 106 in the present case have been made on the most general basis. No specific authority has been relied upon other than the broad references to certain distinctions drawn from the cases, particularly the judgment of the High Court in Re Residential Tenancies Tribunal . To the extent that those submissions may have any foundation, it seems to rest on an apparent analogy with the notion of the immunity of the Crown (and in this case the Crown in right of the Commonwealth) in the area of Crown prerogative. A useful discussion of Crown prerogative occurs in Chapter 6 of the book by Professor George Winterton entitled Parliament, The Executive And The Governor-General - A Constitutional Analysis , Melbourne University Press, 1983. It is sufficient to observe that, notwithstanding the detail of the learned author's consideration, there is no basis to be found in it for concluding that the facts of these proceedings involve the exercise of any prerogative power, or any basis of immunity by analogy to prerogative power. It is, however, relevant also to note the statement of settled view by Professor Winterton in these terms (at 115 - 116, omitting footnotes): When the Crown claims to be entitled to act without statutory authority (but not contrary to legislative provisions) in situations which are not entirely novel and could have arisen in the past … it must establish the existence of a specific prerogative or common law power authorizing the action taken; as Coke CJ and his colleagues declared, 'the King hath no prerogative, but that which the law of the land allows him'. Although some commentators have suggested that the prerogative should be approached from a 'functional' perspective which, presumably, would result in the executive being able to exercise powers and enjoy privileges 'which, of necessity, inhere in governments', that approach has not been adopted by the courts. This is fortunate, because there is no criterion or standard, other than a judge's personal opinion, by which courts could assess the 'necessity' for governmental action, and civil liberty would be gravely imperilled if the determination of 'necessity' were left to the government itself. 77 Indeed, as Winterton notes, in submitting that Parliament should "ensure that the government cannot avoid judicial review of its actions by hiding behind any immunity from judicial process, or judicial review of [its] actions", (at 120): [A]s Justice Robert H Jackson remarked thirty years ago: "With all its defects, delays and inconveniences, men have discovered no technique for long preserving free government except that the Executive be under the law, and that the law be made by parliamentary deliberations": Youngstown Sheet & Tube Co. v. Sawyer (1952) 343 US 579, 655, adopted in Chief Settlement Commissioner, Punjab v Ajit Singh Kalha AIR 1969 SC 33, 36.

[21]

Gleeson CJ and Gaudron J held in the same case (at 414) that "[a]s a matter of ordinary language and, also, as a matter of context, the word 'suit' in s 64 of the Judiciary Act refers to proceedings for the determination of existing rights and obligations or other proceedings which involve the exercise of the judicial power of the Commonwealth". Although their Honours held that the issue in those proceedings, whether the application for the grant of a mining tenement was an application for the exercise of an administrative function, their Honours also observed (citing Gould v Brown (1998) 193 CLR 346 at 403, per Gaudron J) that some powers have a "double aspect" so that "they are properly characterised as judicial if conferred on a court and non-judicial if conferred on another body". Their Honours also held that s 64 only applies to suits in federal jurisdiction citing China Ocean Shipping Co v South Australia (1999) 145 CLR 172 at 223, 234 and Re Residential Tenancies Tribunal at 474. 80 The issue that is to be now considered is whether the proceedings commenced by the applicant against, inter alia , the Commonwealth are a "suit" in federal jurisdiction. That is, whether they are, or involve, the exercise of judicial power, and are also a suit in federal jurisdiction. The qualification last referred to does not require further exploration. If these proceedings involve the exercise of judicial power the qualification is satisfied as the matter is within the original jurisdiction of the High Court in terms of s 77(iii) of the Constitution and the Commission in Court Session is a State court relevantly exercising federal jurisdiction (cf Re Residential Tenancies Tribunal at 474). Accordingly, the issue requiring decision is the more general issue of whether the proceedings are, or involve, the exercise of judicial power. Before we consider that issue further it is important to observe that, although it is relevant and important to consider that question, a negative answer to it is not decisive of whether this Court has jurisdiction to deal with the proceedings to the extent that the Commonwealth is a respondent in them. To that extent, the proceedings are no different to the proceedings considered by the High Court in Re Residential Tenancies Tribunal . In that case, s 4 of the relevant New South Wales legislation, the Residential Tenancies Act 1987, expressly provided that the statute bound the Crown in all its aspects. The presumption that a statute expressed in general terms is not intended to bind the Crown was therefore rebutted both as to the Crown in right of New South Wales and also the Crown in right of the Commonwealth. The relevant Commonwealth instrumentality was therefore held to be bound generally by the statute. The tribunal accordingly had jurisdiction over it although the proceedings were held not to be proceedings of a judicial nature but rather proceedings before an administrative tribunal: see Re Residential Tenancies Tribunal at 448 and 475. 81 Section 64 of the Judiciary Act has been given a wide construction. For example in Maguire v Simpson , s 64 was held to deal not only with matters of procedure. The rights to which it refers include substantive rights. In Evans Deakin , the High Court held that the judgment in Maguire v Simpson had finally settled that issue, and said, at 262 - 263: That case establishes that in every suit to which the Commonwealth is a party s 64 requires the rights of the parties to be ascertained, as nearly as possible, by the same rules of law, substantive and procedural, statutory and otherwise, as would apply if the Commonwealth were a subject instead of being the Crown. That result seems entirely just; the Commonwealth acquires no special privilege except where it is not possible to give it the same rights and subject it to the same liabilities as an ordinary subject. The section is ambulatory, and is therefore capable of applying rights resulting from changes made to State legislation after s 64 was enacted: Maguire v Simpson (1977) 139 CLR at pp. 388, 395, 397, 407. … In Maguire v Simpson Barwick CJ and Jacobs J thought that it was, and held that s 78 is not limited to matters of procedure. It is more doubtful whether the Commonwealth Parliament has a general power to legislate to affect the substantive rights of the States in proceedings in the exercise of federal jurisdiction, but that question does not arise in the present case, since Maguire v Simpson establishes that the provisions of s 64 in their application to suits in which the Commonwealth is a party are not to be confined by considerations which might operate to limit their scope in their application to suits in which a State is a party. Certainly s 64 is validly enacted in so far as it deals with the rights and liabilities of the Commonwealth. 82 The Court also held that the correctness of the proposition drawn from earlier authorities including Maguire v Simpson that "the essential condition of the application of s 64 is the existence of the suit to which the Commonwealth is a party …" cannot be doubted; "… it appears from s 64 itself and there must be a suit to which the Commonwealth is a party before s 64 commences to operate, at least directly". In dismissing the Commonwealth's argument that there must be some other law of the Commonwealth enabling the Commonwealth to be sued in the particular matter before s 64 could apply or, in other words, there must be some other law of the Commonwealth which has itself given the plaintiff a cause of action before the suit is commenced, the Court held, at 264: Upon analysis, this argument can be seen to be a reversion to the theory, rejected in Maguire v Simpson , that s 64 does not refer to the substantive rights of the parties. The Supreme Court is given jurisdiction to entertain a suit to which the Commonwealth is a party by the combined effect of s 39(2) of the Judiciary Act and s 75(iii) of the Constitution. When an action is brought against the Commonwealth in the Supreme Court the condition for the operation of s 64 is satisfied: see The Commonwealth v Anderson (1960) 105 CLR at p 310. Once the suit is commenced the substantive rights of the parties shall be, as nearly as possible, as in a suit between subject and subject. If the Commonwealth were a subject, Evans Deakin, as sub-contractor, would, on the facts alleged in the statement of claim, be entitled to enforce the charge given by the Subcontractors' Charges Act . The qualification to s 64 expressed by the phrase "as nearly as possible" would not render the Subcontractors' Charges Act inapplicable. That phrase has been differently paraphrased by different judges, as the discussion by Stephen J in Maguire v Simpson (1977) 139 CLR at pp. 393 - 395 shows. The natural meaning of the expression appears to be that suggested Kitto J in Asiatic Steam Navigation Co Ltd v The Commonwealth (1956) 96 CLR 397, at p 427: "as completely as possible". Kitto J went on to say (50) that s 64 in effect requires the court "to put out of account any special position of the Crown, as far as possible to decide all questions of right in the same way as they would have been decided if the Commonwealth or State had been a subject". 83 What the Commonwealth relies upon in the matter presently before the Court is the issue apparently left open by the High Court in Evans Deakin in these terms, at 264 - 265: It is unnecessary to consider for present purposes whether in some cases at least it would be right to consider the special position of the Crown, but this is not a case of that kind. Here the Commonwealth, in entering into a building contract, was not performing a function peculiar to government; it was making a contract of a kind commonly entered into by ordinary members of the public and the determination of the rights and liabilities of the Commonwealth by reference to the Subcontractors' Charges Act would not be incompatible with the position of the Commonwealth or detrimental to the public welfare. 84 Subject to the consideration whether proceedings under s 106 are a "suit" for the purposes of s 64, to which we shall shortly return, we conclude that such proceedings fall within the purview of s 64 of the Judiciary Act . For reasons earlier given we do not consider that on the evidence before the Court it should be concluded that the subject matter of the claim against the Commonwealth could be said to relate to a function peculiar to government. In view of the wide scope given to s 64, although at this point subject to the aspect to be next dealt with, we consider that s 106 proceedings are within its operation. "Suit" 85 Section 64 of the Judiciary Act has no application unless the proceedings are a "suit" in terms of that provision. The Commonwealth has accepted that there is no issue as to this aspect. We consider that this further concession by the Commonwealth is also correctly made. Nevertheless, because of its significance in the present proceedings, it is appropriate to deal shortly with it. The word "suit" is one of wide meaning. As Kirby P observed in Minister for Youth and Community Services v Health and Research Employees Association of Australia, NSW Branch (1987) 10 NSWLR 543 at 548, the word is one of wide purport in describing proceedings before a court, and particularly so when used in conjunction with the word "action". That combination of words appears in s 64 since the term "suit", as earlier noted, is defined in s 2 of the Judiciary Act as "includ[ing] any action or original proceeding between parties." 86 Kirby P held that proceedings under s 88F of the Industrial Arbitration Act 1940 were a "suit or action" in terms of the legislation in issue in those proceedings relying, inter alia , on the judgment of the High Court in Tana v Baxter (1986) 160 CLR 572. McHugh JA, at 560 - 561, came to a similar conclusion although on a narrower basis. We therefore conclude that, subject to our further consideration of whether the power under s 106 is or involves the exercise of judicial power, proceedings thereunder are a "suit" for the purposes of s 64 of the Judiciary Act . The second question 87 The second question referred to the Full Bench concerns whether the New South Wales Parliament is constitutionally capable of conferring on the Commission power to grant the relief sought as this would involve the conferral of non-judicial power on a court exercising federal jurisdiction contrary to Chapter III of the Constitution . This question raises two subsidiary issues: (a) Whether this Court Session is a State court exercising jurisdiction over the Commonwealth, and is therefore exercising federal jurisdiction and judicial power of the Commonwealth within the meaning of Chapter III of the Constitution when making orders under s 106 of the Act; (b) Whether a court exercising federal jurisdiction can, in that capacity, only exercise judicial power. State court exercising federal jurisdiction 88 The Commission in Court Session is established as a superior court of record, equivalent in status to the Supreme Court. Section 152 of the Industrial Relations Act provides: 152. Commission in Court Session superior court of record (1) The Commission in Court Session is established by this Act as a superior court of record. (2) For the purposes of Part 9 of the Constitution Act 1902 , the Commission in Court Session is a court of equivalent status to the Supreme Court and the Land and Environment Court, and is of higher status than the courts referred to in section 52(2)(b) and (c) of that Act. See also Part 9 of the Constitution Act 1902 as amended in 1996 by Schedule 5 to the Industrial Relations Act . 89 The Commonwealth's argument proceeds on the basis that s 152 has the effect that the Commission in Court Session is a State court for the purposes of s 39(2) of the Judiciary Act . We consider that proposition is correct. However, because it has relevance to a number of issues in these proceedings we shall consider it subsequently in somewhat greater detail. 90 Further, the Commonwealth submits that the Commission in Court Session is exercising federal jurisdiction where, as in these proceedings, the Commonwealth is a party. The High Court has original jurisdiction in all matters in which the Commonwealth is a party: the Constitution , s 75(iii). Pursuant to s 77 of the Constitution , various provisions of the Judiciary Act (for example, s 39(2), s 56 and s 64) invest State courts with federal jurisdiction in matters in which the High Court has original jurisdiction. Section 77 of the Constitution provides: 77 Power to define jurisdiction

[23]

(i) Defining the jurisdiction of any federal court other than the High Court: (ii) Defining the extent to which the jurisdiction of any federal court shall be exclusive of that which belongs to or is invested in the courts of the States: (iii) Investing any court of a State with federal jurisdiction. ( Emphasis added) 91 As a result, when a State court is exercising jurisdiction over a matter in which the Commonwealth is a party, it is exercising federal jurisdiction. The submission of the Commonwealth is, therefore, that the Commission in Court Session is exercising federal judicial power when purporting to determine an application under s 106 of the Act in which the Commonwealth is a party. Court exercising federal jurisdiction may only exercise judicial power 92 A fundamental assumption in the Constitution is the separation of powers. Federal judicial power is conferred solely on courts created by Chapter III of the Constitution . This basic principle was established by R v Kirby; Ex parte Boilermakers' Society of Australia (1956) 94 CLR 254. Two principles have been said to arise from the Boilermakers' Case : first, only Chapter III courts may be conferred with judicial power; and second, Chapter III courts cannot be conferred with power other than judicial power, except where such other power is ancillary or incidental to the exercise of judicial power: see G Williams, Labour Law and the Constitution (Sydney, The Federation Press, 1999) at p 32. These principles are well established: see for example Gould v Brown at 440: [A]s was established by R v Kirby; Ex parte Boilermakers' Society of Australia (1956) 94 CLR 254; affd Attorney-General (Cth) v The Queen (1957) 95 CLR 529; [1957] AC 288 (PC), the Parliament may not confer upon a federal court functions which are non-judicial and which are not ancillary or incidental to the exercise of the judicial power of the Commonwealth. 93 The argument of the Commonwealth is dependant on the proposition that, when exercising federal jurisdiction, State courts are bound by the requirements of Chapter III of the Constitution . The argument is, in effect, that the Boilermakers' principle applies to State courts exercising federal jurisdiction. 94 The cases cited by the Commonwealth establish that the Commonwealth Parliament cannot confer non-judicial functions on State courts: see Queen Victoria Memorial Hospital v Thornton and Insurance Commissioner v Associated Dominions Assurance Society Pty Ltd at 85 per Fullager J. In the Boilermakers' Case , Williams J stated (at 315 - 316): State courts … can be invested with judicial power and it is necessary strictly to limit the extent to which State courts can have duties imposed on them by federal law . Non judicial functions cannot be imposed on such courts. (Emphasis added) 95 The relevant question here is whether the same principle applies to limit the legislative power of the States. The recent case of Kable v Director of Public Prosecutions (NSW ) (1996) 189 CLR 51 is important in this context, even though it related to the distinct "incompatibility doctrine". In that case, two competing views were expressed. The judgment of Toohey J may appear to provide some support for the Commonwealth's argument. His Honour stated (at 94): To the extent that they are invested with federal jurisdiction, the federal courts and the courts of the States exercise a common jurisdiction. It follows that in the exercise of its federal jurisdiction a State court may not act in a manner which is incompatible with Ch III of the Constitution." (Emphasis added) 96 On the other hand, Dawson J, albeit in a minority judgment, emphasised that there is no separation of powers doctrine under the New South Wales Constitution, and that the federal Parliament, in investing State courts with federal jurisdiction, must take them as it finds them. His Honour held that the Boilermakers' principle did not apply to State courts invested with federal jurisdiction. His Honour held, at 85 - 86, that State courts, even those exercising federal judicial power, may exercise powers (such as non-judicial powers) which could not be exercised by a Chapter III federal court: What is incompatible with the exercise of the judicial power of the Commonwealth by a Ch III court may not be incompatible with the exercise of the judicial power of the Commonwealth by a court which is not restricted by any separation of powers. Of course, only judicial functions may be vested by the federal Parliament in State courts pursuant to s 77(iii) (see Queen Victoria Memorial Hospital v Thornton (1953) 87 CLR 144.), but that is an entirely different thing.

[25]

These approaches, so understood, provide no support for the submissions made by the Commonwealth. 98 The implications limiting the powers of State parliaments in relation to State courts identified by McHugh J do not extend as far as the Commonwealth claims in this case. His Honour said at 118 - 119: A State may invest a State court with non-judicial functions and its judges with duties that, in the federal sphere, would be incompatible with the holding of judicial office. But under the Constitution the boundary of State legislative power is crossed when the vesting of those functions or duties might lead ordinary reasonable members of the public to conclude that the State court as an institution was not free of government influence in administering the judicial functions invested in the court. 99 Brennan CJ was also in the minority in Kable . Nevertheless, his Honour's rejection of the majority view as set out in these words (at 67) serves to show the limits of the issue and thus of the holding in that case: The submission that a State court cannot be a repository of both State non-judicial power and federal judicial power if the exercise of the former would be incompatible with the exercise of the latter attributes to Ch III a novel operation. On one approach Ch III would limit the power of the Parliament of a State to invest the courts of the State with incompatible non-judicial powers. 100 The Commonwealth submission is not put in terms of the invalidity of State (or federal) law, but in terms of the restriction imposed by Chapter III on the State court because, it is said, when exercising federal jurisdiction State courts are bound by the requirements of Chapter III of the Constitution . 101 Indeed, Professor Enid Campbell recently observed, in reflecting on the implications of Kable for State courts and the powers of State legislatures as to these courts ("Constitutional Protection of State Courts and Judges" (1997) 23 Monash Law Review 397 at 417): After all, in some cases State courts will be exercising federal and State jurisdiction concurrently. And from a practical point of view it would be highly inconvenient if State courts were required to observe certain minimal procedural requirements in federal cases but not in State cases. Whether s 106 involves the exercise of judicial power 102 If State courts are required to comply with the requirements of Chapter III of the Constitution , at least when exercising federal jurisdiction, the question which arises is whether an action under s 106 involves an exercise of judicial or non-judicial power. An early attempt to define judicial power is that of Griffith CJ in Huddart, Parker & Co Pty Ltd v Moorehead (1909) 8 CLR 330 at 357: … I am of the opinion that the words "judicial power" as used in sec 71 of the Constitution mean the power which every sovereign authority must of necessity have to decide controversies between its subjects, or between itself and its subjects, whether the rights relate to life, liberty or property. The exercise of this power does not begin until some tribunal which has power to give a binding and authoritative decision (whether subject to appeal or not) is called upon to take action. 103 However, the High Court has noted the "difficulty, if not impossibility of framing a definition of judicial power that is at once exclusive and exhaustive " : Precision Data Holdings Ltd v Wills (1991) 173 CLR 167 at 188. It is now accepted that there are a range of indicia which will need to be examined, although the presence or absence of any one of these is not decisive. For example, in Re Dingjan; Ex parte Wagner (1995) 183 CLR 323, the High Court considered whether s 127A and s 127B of the Industrial Relations Act 1988 (Cth) involved the exercise of judicial power. Sections 127A and 127B conferred jurisdiction on the Australian Industrial Relations Commission to set aside or vary contracts relating to work by an independent contractor if the contract was unfair, harsh or against the public interest. The majority found that s 127A and s 127B did not confer judicial power on the Commission. Gaudron J held at 360 - 361 (omitting footnotes): It is convenient to deal first with the argument that ss 127A and 127B purport to confer judicial power on the Commission. It is well settled that some powers are essentially judicial so that they can be conferred by the Commonwealth only on courts named or designated in Ch III of the Constitution, while others take their character from the tribunal in which they are reposed and the way in which they are to be exercised and, thus, may be conferred on courts or other tribunals as the Parliament chooses. A power to adjudicate "a dispute about rights and obligations arising solely from the operation of the law on past events or conduct" is one that is essentially and exclusively judicial. On the other hand, a power to bring a new set of rights and obligations into existence is generally non-judicial, although it may take its character from the tribunal involved. Thus, a power to create new rights and obligations, if it is conferred on a court and "is to be exercised according to legal principle or by reference to an objective standard or test prescribed by the legislature and not by reference to (unspecified) policy considerations", will be characterized as judicial power involving the determination of rights and obligations for which the law provides. At least that is so if the subject matter and prescribed procedures are consistent with the nature and functions of a court. However, if power to bring a new set of rights and obligations into existence is vested in a tribunal which is not a court and policy considerations have a part to play in the tribunal's determination, the power is not judicial. And that is so even if it is necessary for the tribunal to decide disputed facts or to form an opinion as to existing rights and obligations as a step in arriving at its ultimate determination. The power of variation which ss 127A and 127B contemplate is, in essence, a power to create new rights and obligations, even though they are attached to a pre-existing contract for services. In that respect, the power is precisely analogous with the Commission's power to make industrial awards, at least when the award-making power is exercised, as is generally the case, to create new rights and obligations attaching to pre-existing employment relationships. Quite apart from the fact that the power to form an opinion as to what is unfair, harsh or against the public interest is to be exercised to promote the objects of the Act and, thus, will often involve policy considerations, the nature of the power of variation with which ss 127A and 127B are, in essence, concerned and the character of the Commission as an arbitral tribunal suffice to indicate that that power is not judicial power. 104 The other members of the Court agreed with her Honour's approach. In holding that the power conferred by s 127A was a non-judicial power, the important considerations were that it is a power to create new rights and obligations, analogous to the power to make awards; policy considerations will often be needed to determine whether the contracts are unfair, harsh or against the public interest; the power of variation of the contracts; and the "character of the Commission as an arbitral tribunal" (per Gaudron J at 361). 105 The adjudication of existing rights and obligations is generally considered a judicial function, whilst the creation of new rights and obligations will generally be a non-judicial function. However, Gaudron J makes clear that the character of the tribunal upon which a power is conferred and the nature of the considerations relevant to any determination to be made may influence the characterisation of the function. Thus, although "a power to bring a new set of rights and obligations into existence is generally non-judicial … it may take its character from the tribunal involved": see Dingjan (at 360). A court must exercise a power which involves the creation of new rights and obligations, at least where the power is exercised, according to objective standards and legal principles. 106 The principle that, whilst some powers are essentially and exclusively judicial, other powers "may take their character from the tribunal involved" is an important one. Another way of describing the second category is that some powers have a "double aspect", in that they may be characterised as judicial when conferred on a court, or non-judicial when conferred on a non-court: see R v Davison (1954) 90 CLR 353 at 369 per Dixon CJ. 107 It is relevant to examine briefly cases dealing with s 127A of the Industrial Relations Act 1988 (Cth) and its successor, s 127A of the Workplace Relations Act 1996 (Cth). The differences between the original and replacement versions of s 127A are summarised in Gerard v Mayne Nickless (1995) 58 IR 203 at 203 - 208. As earlier observed the High Court in Dingjan held that the power conferred by s 127A of the 1988 federal Act was non-judicial. In contrast, in Finch v Herald & Weekly Times Ltd (1996) 65 IR 239 North J concluded that the power conferred by s 127A of the 1996 federal Act, when exercised by the Federal Court, was judicial power. A number of factors were particularly relevant in his Honour's conclusion that the power was judicial. His Honour placed considerable weight on the fact that the criteria of public interest has been removed from the section, concluding that (at 244): Gaudron J said … that the power conferred by ss.127A and 127B was "precisely analogous with the Commission's power to make industrial awards". The analogy is certainly complete in respect of the power to vary on the ground that the contract is against the public interest. In making industrial awards, the Commission was bound to take account of the public interest and have regard to the objects of the Act (see s.90 of the Act). Further, the Commission was empowered to dismiss or refrain from further hearing or determination of an industrial dispute if further proceedings were not desirable in the public interest (see s.111(1)(g)(iii) of the Act). However, once the public interest ground was removed, the analogy was considerably weakened. No longer was the power primarily concerned with the interest of the public and the national economy, but it was primarily concerned with the defined issues of harshness and unfairness - issues which take account of the interests of the parties to the contract. The award-making power of the Commission remains directed to the prevention and settlement of disputes by reference to matters of industrial and economic policy. The power to vary unfair or harsh contracts is directed to the circumstances of the contracting parties. Thus, the repeal of s.127A(2)(c) made a critical difference in the nature of the power conferred by the sections. The removal of "public interest" as a ground of review removed the major factor which had caused the sections to be characterised as conferring non-judicial power in Dingjan . 108 A factor which was said to support the conclusion that s 127A involved the exercise of a judicial power was the fact that the Federal Court was required to determine the fairness and harshness of the contract. His Honour held (at 245-246): The criterion of unconscionability has been an accepted basis upon which courts have acted to set aside contracts. It provides a framework within which the courts can act. The criterion is, if anything, less defined than the criteria of unfairness and harshness found in the section under consideration. Further, Victoria, New South Wales and Queensland each have passed consumer credit legislation which invests courts with the power to reopen unjust credit contracts. Each State Act adopts a uniform consumer credit code, which is also expected to be adopted by the remaining Australian States and Territories. In addition, in New South Wales the courts have a general power to set aside or vary an unjust contract under s.7 of the Contracts Review Act 1980. Thus, the power of courts to review contracts on the grounds of unfairness or harshness or grounds analogous to unfairness or harshness is well known to the law. The power is historically conferred on courts, and is consistent with the nature and functions of a court. The concepts of unfairness and harshness are standards prescribed by the legislature in s.127A(2) of the Act. The court is not left to formulate the appropriate standard without reference to prescribed criteria. 109 The Commonwealth contends that s 106, in contrast, cannot be compared to the established judicial power to review and vary contracts. One element which may provide the basis for such a distinction concerns the capacity of the Commission in Court Session to consider events occurring after a contract or arrangement has been entered into. The Commonwealth submits that this capacity is a further indication that non-judicial power is involved in the discretion under s 106. 110 An important decision in relation to the nature of an application under s 106 is that of the Court of Appeal in Minister for Youth and Community Services v Health and Research Employees' Association of Australia, NSW Branch . The Court of Appeal there considered whether an application under s 88F of the 1940 Act constituted a "suit or action" for the purposes of Child Welfare Act 1939. McHugh JA held at 559 - 560 that: A further indication that the proceedings are not an ordinary suit or action is that the power conferred by s 88F is arbitral, not judicial power. Even before the amendments made in 1985 an industrial union of employees could invoke the jurisdiction of the Commission under s 88F: Federated Miscellaneous Workers' Union of Australia, New South Wales Branch v Wilson Parking (NSW) Pty Ltd [1978] 1 NSWLR 563. That a stranger to a contract can obtain an order that the contract is void is itself an indication that the Commission is not exercising judicial power in an ordinary suit or action. Moreover, I think that the Commission can exercise its power under s 88F in a case where, although the contract was not unfair or harsh or unconscionable or against the public interest at the time of its making, subsequent events have made it so. The jurisdiction of the Commission to void or vary a contract, independently of the circumstances which existed at the time of its making, indicates conclusively in my opinion that the power conferred by s 88F is not the exercise of judicial power: cf R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd (1970) 123 CLR 361. It is a further indication that the Commission does not hear a suit or action as those expressions are ordinarily understood.

[27]

This distinction may apply to s 106 of the Act, as s 106(2) expressly provides that the Commission in Court Session may find a contract became unfair after it was entered into "because of any conduct of the parties, any variation in the contract or any other reason". 112 The Commonwealth argues that s 106 of the Act is closer to the original version of s 127A - which was found in Dingjan not to involve judicial power - than the amended version of s 127A, which was found in Finch to involve judicial power. Creighton and Stewart argue that the results of the two cases may well be consistent under the principle expressed in Dingjan that, whilst some powers are "essentially judicial", others "take their character from the tribunal in which they are reposed and the way in which they are to be exercised and thus, may be conferred on courts or other tribunals as the Parliament chooses": see Labour Law: An Introduction (3rd edition, Sydney, Law Book Company, 2000). Creighton and Stewart's approach finds some support in the approach of North J in which he emphasises the fact that the Parliament chose to amend the section, and transfer the jurisdiction to the Federal Court: see Finch (at 246). 113 The Commonwealth also relies on the consideration in Beahan v Bush Boake Allen Australia Limited at 15-16 which refers to the classic statement by Sheldon J in Davies v General Transport Development Pty Ltd [1967] AR (NSW) 371 at 373-374, as supportive of its submissions in this area. We consider that the discussion in Bush Boake and the reference to Davies itself do not, on their face, appear to support the proposition that s 106 of the Act is a non-judicial power. Rather, it appears that the extract from Davies simply points out the fundamental differences between the legislative provisions and the common law of contract. 114 The High Court considered in H A Bachrach Pty Ltd v The State of Queensland (1998) 195 CLR 547, in a way which we consider useful for present purposes, some of the difficulties in deciding whether an exercise of power granted to a court or tribunal is the exercise of judicial power. At paragraph [15] the court observed: There are some matters which appertain exclusively to the judicial power ( Waterside Workers' Federation of Australia v J W Alexander Ltd (1918) 25 CLR 434 at 444). For example, the determination of criminal guilt and the trial of actions for breach of contract and for civil wrongs are inalienable exercises of judicial power. (See Polyukhovich v The Commonwealth (1991) 172 CLR 501 at 706; Brandy v Human Rights and Equal Opportunity Commission (1995) 183 CLR 245 at 258,269.) Changes by the legislature to what might be called town planning legislation previously enacted by it are not of this character. Rather, the rights, duties, powers and privileges created by such legislation are more aptly seen under a "functional" analysis of separation of powers as taking their character from the nature of the body dealing with them. Thus, when entrusted in an appropriate context to a court, dealings with those rights, duties, powers and privileges may attract the exercise of judicial power but they need not necessarily be so entrusted ( Cominos v Cominos (1972) 127 CLR 588 at 606-607; Re Ranger Uranium Mines Pty Ltd; Ex parte Federated Miscellaneous Workers' Union of Australia (1987) 163 CLR 656 at 665 - 666; Precision Data Holdings Ltd v Wills (1991) 173 CLR 167 at 189; Re Dingjan; Ex parte Wagner (1995) 183 CLR 323 at 360-361). 115 We shall deal subsequently with the important consideration that the Commission in Court Session, as now constituted, is a qualitatively different body to the former Industrial Commission of New South Wales which existed until 1992. However, for present purposes the last sentence extracted from the judgment of the High Court in Bachrach is a useful starting point which also leads to a consideration of the High Court judgment in Re Ranger Uranium Mines Pty Ltd; Ex parte Federated Miscellaneous Workers' Union of Australia (1987) 163 CLR 656. There the High Court dealt with a challenge to a finding of the then Australian Conciliation and Arbitration Commission that it had no jurisdiction to deal with an alleged dispute between certain unions and an employer said to have arisen from the employer's action in summarily dismissing a number of union members. A ground of challenge was that the resolution of the dispute would involve the determination of whether the dismissals were harsh, unjust or unreasonable. That is, a determination which required the Commission, in the context of making an award, to determine whether the employer was in breach of an award obligation also dependent on the test of whether an employer's action was "harsh, unjust or unreasonable". An issue or assumption was thus posed in the proceedings as described by the Court in this way: This, it was contended, necessitates an assumption of the judicial power of the Commonwealth, for it involved the Commission in precisely the same task as would be undertaken by a court in the event that proceedings were taken under s 119 of the [ Conciliation and Arbitration Act 1904 (Cth)] alleging breach of [the award provision]. 116 In upholding the challenge to the Commission's decision and granting the prerogative writ of madamus, the High Court held (at 665-666): It is well settled that functions "may be classified as either judicial or administrative according to the way in which they are to be exercised": The Queen v. Hegarty; Ex parte City of Salisbury (1981) 147 CLR 617, per Mason J, at p 628. See also Federal Commissioner of Taxation v. Munro (1926) 38 CLR 153 per Isaacs J, at p 177; The Queen v. Spicer; Ex parte Australian Builders' Labourers' Federation (1957) 100 CLR 277, per McTiernan J, at p 293 and Kitto J, at p 305; Re Cram; Ex parte Newcastle Wallsend Coal Co. Pty. Ltd . (1987) 163 CLR at p 158. A finding that a dismissal is harsh, unjust or unreasonable involves the finding of relevant facts and the formation and expression of a value judgment in the context of the facts so found. Although findings of fact are a common ingredient in the exercise of judicial power, such findings may also be an element in the exercise of administrative, executive and arbitral powers: see The Queen v. Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty. Ltd . (1970) 123 CLR 361, per McTiernan J, at p 371 and The Queen v. Hegarty; Ex parte City of Salisbury (1981) 147 CLR, per Murphy J, at p 631. So too with the formation and expression of value judgments.

[30]

It will happen in some cases, that an order of the kind referred to in step (3) is not necessary or appropriate (see, for example Daley v New South Wales Rugby League Limited (1995) 78 IR 247 at 287 - 288) but in order for step (3) to be taken, steps (1) and (2) are necessary. Similarly, the jurisdictional prerequisite to an order in terms of step (2) is a finding under the first step. 118 The primary finding required for the grant of any relief under s 106 is a finding that the contract the subject of the proceedings is an "unfair contract". The definition of "unfair contract" has a number of elements. The words "contract" and "unfair contract" are given extended meanings by the definitions of those terms in s 105. The definition of "unfair contract" has a number of elements, the first of which is that the contract is "unfair, harsh or unconscionable". The first two elements of that tripartite test are words which were considered in Re Ranger Uranium Mines as potentially involving the exercise of judicial power. The third element, of unconscionability or relief from unconscionable dealing, is well known to the law as involving the exercise of judicial power: see for example the judgment of the High Court in Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447 at 474 - 475 per Deane J. See also the important judgment of his Honour, when a judge of the Federal Court, in Municipal Officers' Association of Australia v Lancaster (1981) 54 FLR 129 at 165 - 166 where he considered the approach the Court should take in a challenge to union rules on the ground that the rules, having regard to the objects of the relevant Act, were "oppressive, unreasonable or unjust". The judgment usefully illustrates the lack of novelty in a court considering provisions similar to s 106 and being obliged to have regard to widely expressed statutory objects. 119 Other bases upon which an unfair contract might be found to exist under s 106 are set out in the third and fourth paragraphs of the definition which specifically require findings, respectively, that the contract provided total remuneration less than a person performing the work would have received as an employee performing the work, or a finding that the contract was one designed to, or did, avoid the provisions of an industrial instrument. Findings to that effect, or to similar effect, are findings made routinely in the exercise of judicial powers by courts at all levels of the judicial hierarchy. 120 The second paragraph of the definition of "unfair contract" is the only element of the definition which could be said to be doubtful in terms of it involving the exercise of judicial power. The paragraph refers to a contract being found to be against the public interest. However, s 106(4) requires the Court Session in making or considering whether to make a finding in this respect to have regard to "the effect that the contract, or a series of such contracts, has had, or may have, on any system of apprenticeship and other methods of providing a sufficient and trained labour force". That determination also, we consider, involves the exercise of judicial power. Further, s 146(2) of the Act provides that the Commission must take into account the public interest in the exercise of its functions and for that purpose must have regard to the objects of the Act and the state of the economy of New South Wales or likely effect of its decision on that economy. However, that requirement is expressed to be subject to an important qualification in these terms: This sub-section does not apply to proceedings before the Commission in Court Session that are criminal proceedings or that it determines are not appropriate.

[31]

To the extent that it might be thought that the requirement to take into account the public interest might tend to indicate the power under s 106 is not judicial power, by virtue of s 31 of the Interpretation Act 1987 such elements of the provisions are severable. Indeed, the way in which the qualification in s 146(2) is expressed provides a ready means of severance in the practical consideration by the Commission of a particular case. 121 Other important powers of the Commission pursuant to s 106 include the power to make an order declaring wholly or partly void or varying any contract where a finding that the contract is unfair is made. Such provisions are not qualitatively different to similar provisions in the Contracts Review Act 1980 (NSW) and the Trade Practices Act 1974 (Cth) which are usually considered to involve the exercise of judicial power. Further, where orders are made under the section wholly or partially voiding or varying a contract, the Court Session may make orders as to the payment of money in connection with any contract declared wholly or partly void or varied "as the Commission considers just in the circumstances of the case". The exercise of the power in that regard and as provided by s 106(5) is not materially different to the routine exercise of judicial power in assessing and awarding damages. Whether the Court Session is exercising judicial power in proceedings under s 106 122 One of the important bases of the Commonwealth's submissions is that the Commission in exercising power under s 106 of the Act is not exercising judicial power and thus, since the Commission in the present case is exercising the judicial power of the Commonwealth pursuant to Chapter III of the Constitution , the conferral on the Commission of non-judicial power is an invalid conferral of power. It also submits, in the alternative, that if it be held that the conferral is a conferral of judicial power, then the conferral is also invalid. 123 We consider that the fundamental basis of the Commonwealth's submissions depends upon a flawed premise. That is, that a State court that is or may be exercising the judicial power of the Commonwealth is not able to exercise, either at all or when exercising the judicial power of the Commonwealth, power of a non-judicial nature. There is no authority to support that proposition and there are a number of authorities which clearly tell against it. Relevantly, the most important authority is the judgment of the High Court in Kable where at 106 ( Gaudron J), 109 -110 ( McHugh J), and 132, 136 - 137 ( Gummow J) it was held that there is nothing to prevent the Parliaments of the States from conferring powers on their courts which are non-judicial provided that they are not inconsistent with the exercise by those courts of the judicial power of the Commonwealth. See also Commonwealth v Western Australia at 414 (per Gleeson CJ and Gaudron J); H A Bachrach Pty Ltd v Queensland at 562 and also Re Dingjan; Ex parte Wagner at 333, 341, 342, 355, 360 and 361.

[32]

Judicial power - nature of the Commission in Court Session 124 We conclude that it is clear that the nature of the power exercised by the Commission in Court Session under s 106 of the Industrial Relations Act is, or involves, the exercise of judicial power. We have earlier referred to the authorities which make clear that a relevant consideration in ascertaining the nature of the power being exercised is the nature of the body exercising it. This involves a consideration of the nature of the Commission in Court Session. An important feature of that consideration is that the Industrial Relations Commission of New South Wales in Court Session is a significantly different body to the Industrial Commission of New South Wales which was considered in 1987 by McHugh JA in Minister for Youth and Community Services v Health and Research Employees' Association of Australia, NSW Branch . 125 The starting point of this consideration in turn involves a consideration of the establishment of the Court Session in 1996, the relevant statutory provisions which established the Court Session, and the statutory and constitutional background to its establishment. 126 However, what occurred in 1996 must not be considered only in the context of the changes by statute and referendum in the period 1992 to 1995. It must also be seen in the context of the statutory regime applicable to the predecessor of the Commission in Court Session, the Industrial Court of New South Wales, as constituted by the Industrial Relations Act 1991. Although it is not necessary to refer to the relevant parts of that statute in detail, reference may be made to the establishment of the Industrial Court by s 288 and that the whole of Part 1 of Chapter 4 of the Act deals with the establishment, functions and functioning of the Court. An examination of those provisions make clear that apart from its specialised jurisdiction, the manner in which the Industrial Court was established and structured was entirely consistent with the manner in which courts are usually constituted by statute. 127 The specialised jurisdiction is shown by, for example, the following provisions of Chapter 2: Part 10 of the statute, entitled "Void Contracts and Regulated Contracts"; Division 2 of Part 4 entitled "Appeals and references to the Industrial Court"; and certain divisions of Part 3 of Chapter 5 relating to the regulation of the affairs of registered organisations including enquiries into elections (such as Subdivision 2 of Division 2; Subdivision 7 of Division 9 as to validation proceedings in connection with amalgamation of registered organisations; Division 10 relating to validating provisions for organisations other than in relation to amalgamations; Division 11 relating to suspension and cancellation of the registration of registered organisations). The nature of the jurisdiction is also exemplified by the power of the Court to enforce and interpret award provisions and those of similar instruments in, for example, ss 133 and 134, and Chapter 2, Part 4 entitled "Enforcement of Conditions of Employment"; Divisions 3 and 4 of Part 1 of Chapter 3 relating to injunctions in respect of industrial action and interpretation of awards or agreements; and proceedings under Part 5 relating to "Enforcement of Contract Determinations and Agreements". 128 We return then to the statutory changes of 1996. Relevantly, Part 3 of Chapter 4 of the Industrial Relations Act of that year contains the following provisions: Part 3 The Commission in Court Session 151 Judicial members to constitute Commission in Court Session (1) The Commission in Court Session is the Commission constituted by a judicial member or members only for the purposes of exercising the functions that are conferred or imposed on the Commission in Court Session by or under this or any other Act or law. (2) This section does not prevent the Commission from being constituted by judicial members when not exercising those functions. 152 Commission in Court Session superior court of record (1) The Commission in Court Session is established by this Act as a superior court of record. (2) For the purposes of Part 9 of the Constitution Act 1902 , the Commission in Court Session is a court of equivalent status to the Supreme Court and the Land and Environment Court, and is of higher status than the courts referred to in section 52 (2) (b) and (c) of that Act. Note. Part 9 of the Constitution Act 1902 is amended by Schedule 5 to this Act to extend that Part to members of the Commission in Court Session. That Part already applies to Judges of the Industrial Court. As a consequence of the abolition of the Industrial Court by this Act, that Part confers a right on the former Judges of that Court to be appointed to judicial office in a court of equivalent or higher status. The above provision ensures that the appointment of all Judges of the former Industrial Court as members of the Commission in Court Session (by Part 4 of Schedule 4 to this Act) satisfies the requirements of the Constitution Act 1902 . 129 Part 3 also includes s 153 and s 154. Section 153, in sub-sections 153(1)(c) and (i), provides that the functions of the Commission relating to proceedings under Part 9 of Chapter 2 (Unfair contracts) and proceedings on appeal from a member exercising those functions are to be exercised only by the Commission in Court Session. Section 154 confers power on the Court Session to make binding declarations of right in relation to a matter in which the Commission (however constituted) has jurisdiction, whether or not any consequential relief is or could be claimed. 130 Before returning to discuss the significance of s 151 and s 152 of the Industrial Relations Act , and in order to understand the background to, and the context in which, those provisions were enacted, it is necessary to refer to relevant provisions in the Constitution Act 1902. The relevant provisions are s 7B and Part 9, entitled "The judiciary". The relevant parts of those provisions are as follows: 7B Referendum for Bills with respect to Legislative Assembly and certain other matters (1) A Bill that: (a) expressly or impliedly repeals or amends … Part 9, … or this section …

[34]

Part 9 The judiciary 52 Definition and application (1) In this Part: judicial office means the office of any of the following: (a) Chief Justice, President of the Court of Appeal, Judge of Appeal, Judge or Master of the Supreme Court, (b) Chief Judge, Deputy Chief Judge or Judge of the Industrial Court or member of the Industrial Relations Commission in Court Session, (c) Chief Judge or Judge of the Land and Environment Court, (d) Chief Judge or Judge of the District Court, (e) Chief Judge or Judge of the Compensation Court, (f) Chief Magistrate, Deputy Chief Magistrate or Magistrate of the Local Courts; Senior Children's Magistrate or Children's Magistrate of the Children's Court; Chief Industrial Magistrate or Industrial Magistrate; Chairman, Deputy Chairman or Licensing Magistrate of the Licensing Court. (2) For the purposes of this Part: (a) the Supreme Court, the Industrial Court and the Land and Environment Court are taken to be courts of equivalent status, and are of higher status than the courts referred to in paragraphs (b) and (c), and (b) the District Court and the Compensation Court are taken to be courts of equivalent status, and are of higher status than the court referred to in paragraph (c), and (c) the holders of the judicial offices referred to in paragraph (f) of the definition of judicial office are taken to constitute one court, and (d) the relative status of any other court is to be as determined by legislation. (3) This Part extends to the removal or suspension of judicial officers after the commencement of this Part because of matters arising before that commencement. 53 Removal from judicial office (1) No holder of a judicial office can be removed from the office, except as provided by this Part. (2) The holder of a judicial office can be removed from the office by the Governor, on an address from both Houses of Parliament in the same session, seeking removal on the ground of proved misbehaviour or incapacity. (3) Legislation may lay down additional procedures and requirements to be complied with before a judicial officer may be removed from office. (5) This section extends to term appointments to a judicial office, but does not apply to the holder of the office at the expiry of such a term. (5) This section extends to acting appointments to a judicial office, whether made with or without a specific term. … 56 Abolition of judicial office (1) This Part does not prevent the abolition by legislation of a judicial office. (2) The person who held an abolished judicial office is entitled (without loss of remuneration) to be appointed to and to hold another judicial office in the same court or in a court of equivalent or higher status, unless already the holder of such an office. (3) That right remains operative for the period during which the person was entitled to hold the abolished office, subject to removal or suspension in accordance with law. The right lapses if the person declines appointment to the other office or resigns from it. (4) This section applies whether the judicial office was abolished directly or whether it was abolished indirectly by the abolition of a court or part of a court. 131 Relevantly, s 53(2)(d) when read with s 7B(8) has the effect that later enacted legislation may amend s 52 for the purposes of extending the application of Part 9 to additional judicial offices or classes of judicial offices and, in that circumstance, the relative status of any new court relevant to the new offices or class of offices is to be determined by legislation, presumably and usually the legislation constituting the new court. 132 It is necessary to refer to the circumstances of the enactment of the relevant provisions which are now in the Constitution Act . Part 9 was inserted by the Constitution (Amendment) Act 1992. Section 7B was amended in two important and relevant respects by the Constitution (Entrenchment) Amendment Act 1992 (Act No 2 of 1995). These amendments involved the insertion in s 7B(1)(a) of the reference to Part 9 and the inclusion in s 7B of sub-section (8). The 1992 Act became Act No 2 of 1995 because it was a constitutional entrenching Act, and thus required for its effectiveness, not only carriage by both houses of Parliament, but approval by the electors at a referendum, which did not occur until the referendum held in March 1995. The cumulative effect of those steps led to the Act coming into force on its date of assent on 2 May 1995. The relevant history is briefly adverted to by Dawson J in Kable at 80. His Honour refers to Part 9 of the Constitution Act as "being doubly entrenched" as s 7B(1) provides that specified provisions, including Part 9, may not be repealed or altered until the repeal or alteration has been approved by referendum. The specified provisions also include s 7B itself. 133 Lastly, in terms of this historical background and context, reference should be made to the long titles of the Constitution (Amendment) Act 1992 and the Constitution (Entrenchment) Amendment Act 1992. The long title of the former Act is relevantly: "An Act to amend the Constitution Act 1902 to secure the independence of the judiciary …"

[35]

and the long title of the latter is: "An Act to prevent Parliament from changing laws about the independence of judges and magistrates without a referendum." 134 This then was the statutory and constitutional context which existed at the time the Industrial Relations Act was enacted in 1996 and came into force on 2 September that year. 135 Accordingly, the Industrial Relations Act , when it came into force on 2 September 1996, not only constituted the Commission in Court Session as a superior court of record (see s 152(1)) but its fifth Schedule also amended s 52(1)(b) of the Constitution Act by insertion of the words "Member of the Industrial Relations Commission in Court Session". It also thereby made provision as contemplated by s 7B(8) and s 52(2)(c). Section 152(2) is a provision made for the purpose of both of those provisions as it is a provision of the kind contemplated by them. The result of the statutory provisions to which reference has been made, is that the amendments to the Constitution Act by the Industrial Relations Act and also the provisions of the former Act which have the effect of amending or supplementing those provisions are also "doubly entrenched". 136 Accordingly, for relevant purposes, the enactment of the Industrial Relations Act resulted in the creation of a new superior court of record, with equivalent status to the Supreme Court and the Land and Environment Court, and a higher status than the District Court, the Compensation Court and the Magistracy. This occurred in the context of an increased measure of statutory and constitutional security of independence and of tenure for the New South Wales judiciary and for judges of newly created courts such as the Commission in Court Session. 137 In addition, there have been a number of decisions of this Court which have emphasised that the Commission in Court Session is not only a superior court of record but is a separate and distinct body to the Commission otherwise constituted: see, for example, the Full Bench judgments in GIO Australia Ltd v O'Donnell (1996) 70 IR 1 at 9 - 10 and Hollingsworth v Commissioner of Police (1998) 81 IR 276 at 292, 309 - 310; and those of single judges in Virtue v New South Wales Department of Education and Training at 448 and Packer v The Greater Murray Area Health Service [2000] NSWIRComm 149 at [13]. We consider that those judgments correctly state the legal situation. 138 The Commission in Court Session is thus to be considered as a qualitatively different body to the Industrial Commission of New South Wales which existed between 1927 and 1992. So much is clear from its method of constitution and the specific powers granted to it upon its foundation in 1996. It also follows from the constitutional context which existed at the time of its foundation and from the fact that it is the statutory successor of the Industrial Court established in 1992. A comparison between the Commission in Court Session and the former Industrial Commission is also telling. Unlike the latter body and the Industrial Relations Commission which existed and now exists under the 1991 and 1996 statutes, the constitution, composition and range of powers relevant to the Commission in Court Session demonstrate that it is not a hybrid body as was the Industrial Commission, nor is it purely an arbitral or quasi-administrative tribunal such as the 1992 Industrial Relations Commission; rather it is a court in the usual or strict sense, albeit a court with a specialist jurisdiction. 139 This then is the context in which to consider the significance of the conferral of power on the Commission in Court Session by s 106 and the related sections. Unlike the situation in the mid 1960's when s 88F was originally enacted, the power has not been vested in a hybrid body but in a court stricto sensu . The nature of the power exercised under those provisions is to be considered in that context. 140 We also consider that the approach of Austin J of the Supreme Court in Heath v Hanning [1999] NSWSC 719 at [49] to [54], in the following terms provides confirmation of the conclusions we have reached: Judicial or non-judicial power? 49 The Commission in Court Session is a superior court of record (IR Act, s 152), and has been described as a superior court of limited jurisdiction: Nisbet v Kilfoyle (Industrial Relations Commission of New South Wales, Commission in Court Session, Full Bench, No.CT1120/96, 18 December 1996, unreported). The source of the jurisdiction of such a court is statutory; it does not have any inherent jurisdiction to deal with common law claims, and it appears unlikely that it has any pendent or accrued jurisdiction ( National Parks & Wildlife Service v Stables Perisher Pty Ltd (1990) 20 NSWLR 573), though this point was not fully argued before me. 50 The Commission in Court Session is empowered by Ch 2 Pt 9 to make orders avoiding or varying certain contracts where the Commission finds that the contract is 'unfair contract'. The words an 'unfair contract' are defined in s 105 to mean (relevantly) a contract that is unfair, harsh or unconscionable, or that is against the public interest. The Commission may find that the contract was unfair at the time it was entered into, that it subsequently became an unfair contract because of conduct of the parties, a variation or other reason, s 106(2). In considering whether a contract is unfair because it is against the public interest, the Commission must have regard to a number of matters specified in s 106(4), including the effect of the contract on any system of apprenticeship or other methods of providing a sufficient and trained labour force. The considerations to which s 106 refers are not limited to matters of an essentially industrial character: Stevenson v Barham (1997) 136 CLR 190, 199. 51 While these provisions are very broad, especially as they permit the Commission to vary a contract, they are not so widely expressed as to be necessarily powers of a non-judicial nature. It is not uncommon for the legislature to confer a very broad statutory jurisdiction on this Court - for example, the jurisdiction to determine that a contract is unjust, and hence to make an order varying it, under the Contracts Review Act 1980 (NSW); and the jurisdiction to make orders which have the effect of superseding the testator's intention under the Family Provision Act 1982 (NSW). The fact that the Commission's jurisdiction extends to conduct after the making of the contract does not render its discretion any less a judicial discretion. The evaluation of a course of conduct by reference to broad standards occurs, for example, in cases which seek to invoke equitable doctrines with respect to unconscionable conduct, or statutory jurisdiction for misleading or deceptive conduct. Nor, in my opinion, does the statutory reference to the public interest render the Commission's power non-judicial. By analogy, this Court must apply the criterion of public benefit in order to assess whether a trust is a valid charitable trust. In summary, in my view there is nothing in the statutory provisions which confer jurisdiction on the Commission in Court Session under Pt 9 of the IR Act which identifies the Commission's power as a non-judicial power which ought not to be exercised by a court such as the Supreme Court pursuant to an order for removal under s 8 of the cross-vesting legislation. 52 I was referred to cases dealing with the question whether similar powers conferred on tribunals were part of the judicial power of the Commonwealth, to be exercised only by a court constituted pursuant to ss 71 and 72 of the Constitution. That question is rather different from the question before me, which is whether I ought to decline to remove the proceedings from the Commission on the ground that those proceedings raise non-judicial questions inappropriate for determination by the Supreme Court. Nevertheless I note that in Re Dingjan; ex parte Wagner (1995) 183 CLR 323, 360, Gaudron J observed that it was relevant to the question before her that the power of the Australian Industrial Relations Commission with respect to unfair contracts had been vested in a tribunal which is not a court, and that policy considerations had a part to play in the tribunal's determination. In the case of IR Act, the relevant power is vested in a court, namely the Commission in Court Session. That reinforces my view that there is nothing in Pt 9 which makes the exercise of power under those provisions inappropriate for this Court, either generally or in the specific circumstances of this case.

[36]

Arbitral power? 53 In Minister for Youth & Community Services v Health & Research Employees' Association of Australia (1987) 10 NSWLR 543, 559-560, McHugh JA observed that the power conferred by the Industrial Arbitration Act 1940 (NSW), s 88F (an ancestor of s 106) was an arbitral rather than a judicial power (see also Minproc Ltd v Killinger [1999] NSWSC 564). In addition to the breadth of the grounds for making orders, his Honour was influenced by the fact that under the industrial relations legislation of the time, the power was vested in the Commission rather than a judicial body, and the Commission could at that time apply s 88F of its own motion. Now the power conferred by s 106 is vested in the Commission in Court Session, and s 108 states that an order may be made on the application of listed persons (the list not including the Commission itself) and not otherwise. McHugh JA was also influenced by the facts that an application for an order could be made by a stranger to the contract (such as an industrial organisation) and that the Commission could exercise its power although the contract was not unfair when made but became unfair by virtue of subsequent events. The former is no longer an unusual occurrence - for example, in an application to a court under s 1324 of the Corporations Law. I have already commented on the latter point. 54 The question before the Court of Appeal in that case was different from the issue which I must determine, in the exercise of my discretion under s 8 of the cross-vesting legislation. Even if the Commission's power under s 106 is, like its power under s 88F, an arbitral rather than a judicial power, it may nevertheless be appropriate to make an order which has the effect that the arbitral power is exercised by this Court. However, the combination of changes to the industrial relations legislation and expansion of the functions required to be performed by a court may well mean that what was an arbitral rather than a judicial power in 1987 is now better classified, at least for present purposes, as a judicial power. 141 See also the judgment of the Court of Appeal in Tszyu v Fightvision Pty Ltd (2001) 104 IR 225 at 238 where Mason P held, with the concurrence of Priestley and Powell JJA: [58] As indicated previously, I am prepared to assume that the appellant is correct in submitting that the Commission will not be prevented from considering the "unfair contract" issue by reference to the issues of unconscionability fought before and decided by Bainton J. But this still leaves the contract, novation, breach and damages issues resolved conclusively between the parties by virtue of the application of the principles of issue estoppel to the Supreme Court judgment. The appellant acknowledges that these principles will apply in the further prosecution of the industrial proceedings. This concession is properly made when it is recognised that the Commission is a superior court of record in its present role. It is exercising judicial power: Tana v Baxter (1986) 160 CLR 572. Separation of powers point 142 Another important ingredient of the Commonwealth's submissions as to the Commission's lack of jurisdiction depends upon the proposition that s 106 involves the conferral of non-judicial power on a State court or, it appears, the alternative proposition that the conferral of power by s 106 is the conferral, in part, of non-judicial power. On this basis, it is said the prohibition under the Constitution , particularly Chapter III thereof, referred to in judgments such as that in the Boilermakers' Case , any conferral of non-judicial power on a State court, in so far as that court might be required to exercise the judicial power of the Commonwealth, is invalid. As stated, these submissions require a detailed consideration of the High Court judgment in Kable. 143 We do not consider that the submissions of the Commonwealth are correct to the extent that they rely on those propositions. Our reasons for so concluding may be shortly stated. The difficulty with reliance on Kable for present purposes is that it was not necessary to resolve the issue in those proceedings. To the extent that the High Court considered related issues, it was held, by those members of the Court who considered the matter, that there was no general prohibition arising from Chapter III of the Australian Constitution precluding the judicial power of the Commonwealth being vested in State courts (such as the Supreme Court of New South Wales) which might have conferred on them non-judicial power. That was so as State courts were not subject to a constitutional prohibition on conferral of both judicial and non-judicial powers by analogy to the federal prohibition arising from the Boilermakers' Case principle. 144 So considered, the point raised by the Commonwealth requires the resolution of the tension between two competing principles which does not appear to have yet occurred in the case law to date. The first principle is that the Constitution , in providing for the vesting in State courts of the judicial power of the Commonwealth, takes State courts as it finds them - see, for example, Commonwealth v Hospital Contributions Fund of Australia (1982) 150 CLR 49 at 60; Adams v Chas S Watson Pty Ltd (1938) 60 CLR 545 at 554; Le Mesurier v Connor (1929) 42 CLR 481 and Federated Sawmill, Timberyard and General Woodworkers' Employees' Association (Adelaide Branch) v Alexander (1912) 15 CLR 308 at 313, 321. The second principle is the apparent prohibition preventing the same body or court exercising both the judicial power of the Commonwealth and non-judicial powers, in reliance on the principle established by the Boilermakers' Case . 145 We consider that there is, however, a fundamental misconception at the heart of the Commonwealth's submissions. There are three clear principles to be considered in relation to this issue. The first, as we have earlier noted, is the principle that the Constitution in vesting federal power in State courts is considered to take those courts "as it finds them" - see Hospital Contributions Fund and Kable . 146 The second principle is that the constitutional requirement as to the separation of powers found in the Australian Constitution does not apply to the New South Wales Constitution or the New South Wales polity - see, for example, Clyne v East (1967) 68 SR (NSW) 385, Building Construction Employees and Builders' Labourers Federation of New South Wales v Minister for Industrial Relations (1986) 7 NSWLR 372 at 401 and Kable . 147 However, for the purposes of the present argument, the third proposition is the most important and represents the basic fallacy in the Commonwealth's approach. It involves the identification of the precise proposition for which the Boilermakers' Case stands. The particular proposition has been formulated in various ways. Indeed, it appears to be often formulated on too broad a basis. We consider that the appropriate formulation is that found in the joint judgment of Dixon CJ, McTiernan , Fullagar and Kitto JJ at 289 where their Honours held that the Arbitration Court was established as an arbitral tribunal which could not constitutionally combine with its dominant purpose and essential function the exercise of any part of the judicial power of the Commonwealth and said: The basal reason why such a combination is constitutionally inadmissible is that Chapter III does not allow powers which are foreign to the judicial power to be attached to the courts created by or under that chapter for the exercise of the judicial power of the Commonwealth. 148 If, as we think is appropriate, it is accepted that the Boilermakers' Case principle is to be considered in the narrow terms so stated and the prohibition is to be seen as one precluding the vesting in Chapter III courts (that is, federal courts established under Chapter III of the Constitution) non-judicial powers, then it follows that the principle does not provide that the judicial power of the Commonwealth may not be exercised by State courts which also exercise non-judicial power. The only relevant prohibition is that for which the judgment in Kable is authority. That is, that it is not permissible under the framework of federal and State courts established under, or contemplated by, the Constitution since 1901, to vest in a federal or State court power which is incompatible with the role of the court as the repository of the exercise of federal judicial power. 149 Indeed, the first two of the three principles earlier identified could not logically result in the basic premise of the Commonwealth's submissions being correct. If the Constitution operates on the basis that the State courts (such as State Supreme Courts) which are the repositories of federal judicial power are to be taken "as found" and there is no analogous principle to Boilermakers' in State Constitutions, it follows that State courts exercising federal jurisdiction may well be courts which also exercise non-judicial power. 150 In any event, the Boilermakers' principle, where applicable, has a particular operation in two respects which have present relevance. First, it operates only as to federal courts - that is, courts established under Chapter III. Second, when applicable, it applies to the affected courts generally; that is, it precludes them from exercising non-judicial powers generally. The minor qualification on the second proposition that federal courts may exercise non-judicial powers to the extent that they are merely incidental or in aid of the judicial power conferred, is not in truth a qualification at all. On analysis, the Commonwealth's submissions, for their correctness, depend on very different propositions. That is, that the Boilermakers' principle applies to all courts referred to in Chapter III. Thus the State courts contemplated by Chapter III must be constituted differently to State constitutional requirements or, perhaps, constituted specifically for the receipt of federal power. The second proposition, if correct, would mean that a State court constituted satisfactorily in terms of State constitutional requirements could not be an available recipient of federal power under Chapter III. This would render the relevant provisions in the Chapter either unavailable or otiose, or both. So considered, the Commonwealth's submissions require for their validity the acceptance of a number of propositions entirely inconsistent with and contrary to long standing High Court constitutional authority. The submissions of the Commonwealth therefore cannot be accepted as correct. Orders to be made 151 We now turn to the orders to be made in this matter which in turn involves a consideration of the questions that have been referred to the Full Bench. As we earlier noted, the questions referred are in the following terms: (1) Whether the second respondent is immune from any exercise of the power in s 106 of the Act in the circumstances set out in the applicant's amended summons filed 10 March 2000 as supplemented by the particulars given on 30 March 2000 on the basis that in respect of those circumstances, so far as they involve the second respondent, the New South Wales parliament is not constitutionally capable of affecting the Commonwealth in the manner otherwise permitted by the section. (2) Whether the second respondent is immune from any exercise of the power in s 106 of the Act in these proceedings on the basis that the New South Wales parliament is not constitutionally capable of conferring on the Commission power to grant the relief sought by the applicant against the second respondent as this would involve the conferral of non-judicial power on a court exercising federal jurisdiction, contrary to Chapter III of the Constitution. 152 In light of the earlier discussion in these reasons of the way in which the submissions of the Commonwealth should be dealt with, we consider that it may not be strictly necessary to provide an answer, in terms, to the second question posed. However, before dealing with the answer that should be provided to that question it is convenient to state the way in which we propose to deal with it. 153 It will be noted that the second question depends upon a particular premise or assumption that the New South Wales Parliament is not constitutionally capable of conferring on the Commission in Court Session both judicial and non-judicial power. We consider that that assumption or premise is not correct and it may be sufficient to deal with the second question on the basis that it does not require answering. However, on balance, we think it preferable to answer the second question in the negative and we propose to do so. 154 The first question too should be answered in the negative. For the reasons we have earlier given, we consider that the Commonwealth is not immune from the exercise of power in these proceedings under s 106 of the Industrial Relations Act and that that conclusion is available in either of the circumstances argued before us. That is, whether or not the exercise by the Commission in Court Session of power under s 106 is the exercise of judicial or non-judicial power. 155 The questions are answered accordingly. The Commonwealth shall pay the applicant's costs of its motion and the costs of and incidental to the reference to the Full Bench. Egis is to bear its own costs. We so order. ____________

Parties

Applicant/Plaintiff:

Taudevin

Respondent/Defendant:

Egis Consulting Australia Pty Limited and the Commonwealth

Legislation Cited (9)

Judiciary Act 1903(Cth)s 2

Industrial Relations Act 1996(NSW)

Contracts Review Act 1980(NSW)

Industrial Relations Act 1988(Cth)s 127A

Trade Practices Act 1974(Cth)

Workplace Relations Act 1996(Cth)s 127A

Conciliation and Arbitration Act 1904(Cth)

Family Provision Act 1982(NSW)

Industrial Arbitration Act 1940(NSW)

Cases Cited (73)

INTERVENER: Attorney-General for New South Wales FILE NUMBER: IRC 7025 of 1999 CORAM: Wright J President; Walton J Vice-President; Hungerford J Unfair contracts - Reference of questions to Full Bench - Whether s 106 of the Industrial Relations Act 1996 applies to the Commonwealth - Whether s 106 involves exercise of judicial power - Separation of powers - Nature of Commission in Court Session - Crown immunity - Immunity of Commonwealth from State law - State court exercising federal jurisdiction - Functions peculiar to government - "Suit" - Whether premature to answer questions - Whether appropriate to answer question based on incorrect premise - Questions answered in the negative. CATCHWORDS : Constitutional law - Immunity of Commonwealth from State law - Functions peculiar to government - State court exercising federal jurisdiction - Whether s 106 involves exercise of judicial power - Separation of powers. Constitution s 51 s 52 s 75 s 76(ii) s 77 s 78 ch III s 106 s 107 s 108 s 109 s 122 Constitution Act 1902 s 7B s 52 s 53 s 56 Pt 9 Constitution (Amendment) Act 1992 Constitution (Entrenchment) Amendment Act 1992 (Act No 2 of 1995) Contracts Review Act 1980 LEGISLATION CITED : Industrial Relations Act 1988 (Cth) s 127A s 127 B (repealed) Industrial Relations Act 1991 Pts 4 and 10 of ch 2 - s 133 s 134 - Divs 3 and 4 of Pt 1 of ch 3 - Pt 1 of ch 4 - s 288 - Pt 3 of ch 5 Industrial Relations Act 1996 s 105 s 106 s 146(2) s 151 s 152 s 153 s 154 s 404 ch 4 Pt 3 Interpretation Act 1987 s 31 Judiciary Act 1903 (Cth) s 2 s 39 s 56 s 64 s 78A s 79 Trade Practices Act 1974 (Cth) Workplace Relations Act 1996 (Cth) s 127A A v Hayden (1984) 156 CLR 532, Adams v Chas S Watson Pty Ltd (1938) 60 CLR 545 Asiatic Steam Navigation Co Ltd v Commonwealth (1956) 96 CLR 397 Australasian Memory Pty Ltd v Brien (1997) 149 ALR 393 Australasian Memory Pty Ltd v Brien (1998) 45 NSWLR 111 Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270 Baillieu v Australian Electoral Commission (1996) 63 FCR 210 Beahan v Bush Boake Allen Australia Limited (1999) 47 NSWLR 648, (1999) 93 IR 1 Brown v Rezitis (1970) 127 CLR 157 Building Construction Employees and Builders' Labourers Federation of New South Wales v Minister for Industrial Relations (1986) 7 NSWLR 372 China Ocean Shipping Co v South Australia (1999) 145 CLR 172 Clyne v East (1967) 68 SR (NSW) 385 Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447 Commonwealth of Australia v Cigamatic Pty Ltd (1962) 108 CLR 372 Commonwealth v Evans Deakin Industries Limited (1986) 161 CLR 254 Commonwealth v Hospital Contributions Fund of Australia (1982) 150 CLR 49 Commonwealth v Mewett (1997) 191 CLR 471 Commonwealth of Australia v Verwayen (1990) 170 CLR 394 Commonwealth v Western Australia (1999) 196 CLR 392 Davies v General Transport Development Pty Ltd [1967] AR (NSW) 371 Deputy Commissioner of Taxation v Moorebank Pty Ltd (1988) 165 CLR 55 Dingjan Re, Ex parte Wagner (1995) 183 CLR 323 Federal Commissioner of Taxation v Official Liquidator of E O Farley Ltd (1940) 63 CLR 278 Federated Sawmill, Timberyard and General Woodworkers' Employees' Association (Adelaide Branch) v Alexander (1912) 15 CLR 308 Finch v Herald & Weekly Times Ltd (1996) 65 IR 239 Gerard v Mayne Nickless (1995) 58 IR 203 GIO Australia Ltd v O'Donnell (1996) 70 IR 1 CASES CITED : Gould v Brown (1998) 193 CLR 346 H A Bachrach Pty Ltd v The State of Queensland (1998) 195 CLR 547 Heath v Hanning [1999] NSWSC 719 Hoffman v Industrial Commission of New South Wales (1990) 33 IR 139 Hollingsworth v Commissioner of Police (1998) 81 IR 276 Huddart, Parker & Co Pty Ltd v Moorehead (1909) 8 CLR 330 Insurance Commissioner v Associated Dominions Assurance Society Pty Ltd (1953) 89 CLR 78 Jacobsen v Rogers (1995) 182 CLR 572 Kable v The Director of Public Prosecutions for the State of New South Wales (1996) 189 CLR 51 Le Mesurier v Connor (1929) 42 CLR 481 Maguire v Simpson (1977) 139 CLR 362 Minister for Youth and Community Services v Health and Research Employees' Association of Australia, NSW Branch (1987) 10 NSWLR 543. Municipal Officers' Association of Australia v Lancaster (1981) 54 FLR 129 Nagle (T/as W D and J L Nagle & Sons) v Tilberg (1993) 51 IR 8, Packer v The Greater Murray Area Health Service [2000] NSWIRComm 149 Pirrie v McFarlane (1925) 36 CLR 170, Precision Data Holdings Ltd v Wills (1991) 173 CLR 167 Queen Victoria Memorial Hospital v Thornton (1953) 87 CLR 144 R v Davison (1954) 90 CLR 353 R v Kirby, Ex parte Boilermakers' Society of Australia (1956) 94 CLR 254 Ranger Uranium Mines Pty Ltd, Re, Ex parte Federated Miscellaneous Workers' Union of Australia (1987) 163 CLR 656 Residential Tenancies Tribunal of New South Wales, Re, Ex parte Defence Housing Authority (1997) 190 CLR 410. Richard Foreman & Sons Pty Ltd, Re, Uther v The Federal Commissioner of Taxation (1947) 74 CLR 508 Tana v Baxter (1986) 160 CLR 572 Tszyu v Fightvision Pty Ltd (2001) 104 IR 225 Virtue v New South Wales Department of Education and Training (1999) 92 IR 428 Visalli v Southwell (1988) 12 NSWLR 502

(1984) 156 CLR 532

(1938) 60 CLR 545

(1956) 96 CLR 397

(1997) 149 ALR 393

(1998) 45 NSWLR 111

(2000) 200 CLR 270

(1996) 63 FCR 210

(1999) 47 NSWLR 648

(1999) 93 IR 1

(1970) 127 CLR 157

(1986) 7 NSWLR 372

(1999) 145 CLR 172

(1983) 151 CLR 447

(1962) 108 CLR 372

(1986) 161 CLR 254

(1982) 150 CLR 49

(1997) 191 CLR 471

(1990) 170 CLR 394

(1999) 196 CLR 392

(1988) 165 CLR 55

(1995) 183 CLR 323

(1940) 63 CLR 278

(1912) 15 CLR 308

(1996) 65 IR 239

(1995) 58 IR 203

(1996) 70 IR 1

(1998) 193 CLR 346

(1998) 195 CLR 547

(1990) 33 IR 139

(1998) 81 IR 276

(1909) 8 CLR 330

(1953) 89 CLR 78

(1995) 182 CLR 572

(1996) 189 CLR 51

(1929) 42 CLR 481

(1977) 139 CLR 362

(1987) 10 NSWLR 543

(1981) 54 FLR 129

(1993) 51 IR 8

(1925) 36 CLR 170

(1991) 173 CLR 167

(1953) 87 CLR 144

(1954) 90 CLR 353

(1956) 94 CLR 254

(1987) 163 CLR 656

(1997) 190 CLR 410

(1947) 74 CLR 508

(1986) 160 CLR 572

(2001) 104 IR 225

(1999) 92 IR 428

(1988) 12 NSWLR 502

(1947) 74 CLR 31

(1953) 89 CLR 229

(1977) 52 ALJR 125

(1937) 56 CLR 657

(1977) 139 CLR 54

(1985) 3 NSWLR 565

(1957) 95 CLR 529

(1970) 123 CLR 361

(1918) 25 CLR 434

(1991) 172 CLR 501

(1995) 183 CLR 245

(1972) 127 CLR 588

(1981) 147 CLR 617

(1926) 38 CLR 153

(1957) 100 CLR 277

(1992) 40 IR 1

(1995) 78 IR 247

(1990) 20 NSWLR 573

(1997) 136 CLR 190

[2000] NSWIRComm 149

[1999] NSWSC 564