The Public Service Association and Professional Officers' Association Amalgamated of NSW v Director of Public Employment & Ors [2012] HCATrans 207

[2012] HCATrans 207

[2012] HCATrans 207

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney   No S127 of 2012

B e t w e e n -

THE PUBLIC SERVICE ASSOCIATION AND PROFESSIONAL OFFICERS’ ASSOCIATION AMALGAMATED OF NSW

Appellant

and

DIRECTOR OF PUBLIC EMPLOYMENT

First Respondent

ROADS AND MARITIME SERVICES

Second Respondent

NSW ATTORNEY GENERAL

Third Respondent

NSW MINISTER FOR FINANCE & SERVICES

Fourth Respondent

UNIONS NSW

Fifth Respondent

FRENCH CJ
HAYNE J
HEYDON J
CRENNAN J
KIEFEL J
BELL J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 5 SEPTEMBER 2012, AT 10.15 AM

Copyright in the High Court of Australia

____________________

MR D.F. JACKSON, QC:   If the Court pleases, I appear with my learned friend, MR A.A. HATCHER, SC and MR M. GIBIAN, for the appellant.  (instructed by W.G. McNally Jones Staff Lawyers)

MR M.G. SEXTON, SC, Solicitor‑General for the State of New South Wales:   If the Court pleases, I appear with my learned friends, MR J.G. RENWICK, SC and MS A.M. MITCHELMORE, for the first, second, third and fourth respondents.  (instructed by Crown Solicitor (NSW))

MR M.G. HINTON, QC, Solicitor‑General for the State of South Australia:   If the Court pleases, I appear with my learned friend, MS J.C. COX, for the Attorney‑General for South Australia intervening, in support of the respondents.  (instructed by Crown Solicitor (SA))

MR S.G.E. McLEISH, SC, Solicitor‑General for the State of Victoria:   If the Court pleases, I appear with my learned friend, MS K.E. FOLEY, for the Attorney‑General for Victoria intervening and with my learned friend, MR G.J.D del VILLAR, for the Attorney‑General for Queensland intervening.  (Victorian Government Solicitor) (Crown Law Brisbane)

MR G.R. DONALDSON, SC, Solicitor‑General for the State of Western Australia:   May it please the Court, I appear with MS F.B. SEAWARD, for the Attorney‑General of Western Australia intervening.  (instructed by State Solicitor (WA))

MR JACKSON:   Your Honours will have, I think, our outline of oral argument and your Honours may I come immediately to the nature of the appellant’s case.  The Industrial Relations Act 1996 (New South Wales) – we have provided your Honours with a copy of the Act – provides for an Industrial Commission and an Industrial Court. I will come to the provisions shortly. The term “Industrial Court” is the title now given by section 151A of that Act, which your Honours will see at page 91 of volume 2 what had previously been described as the Industrial Commission in court session. Your Honours will see section 151A.

The Industrial Commission is a non‑judicial and arbitral body.  The Industrial Court is a judicial body.  The essence of our case is that the Industrial Court, or the Commission in Court session – and your Honours will see that that title still appears in a number of sections of the Act – is a body capable of being and is in fact invested with federal jurisdiction.  The persons who are judges of that court have had conferred upon them non‑judicial functions.  The non‑judicial functions are given to them in their capacity as members of the Industrial Commission and the incompatibility arises because the non‑judicial functions conferred on them give rise to a substantial impairment of the characteristics of independence and appearance of independence from the Executive Government.  The judges of the court are enlisted.  If I could take your Honours to our written submissions at paragraph 37 for a moment?

HAYNE J:   I am sorry, what paragraph?

MR JACKSON:   Paragraph 37, your Honour, of our submissions in‑chief.

HAYNE J:   Thank you.

MR JACKSON:   Your Honours will see that in that paragraph we set out a number of quotations from the cases on the issue, but could I say particularly that this is a case where – to use some of the expressions quoted from the cases in that paragraph – it is a case where judges of the Industrial Court are called on to:

“act and decide, effectively as the alter ego of the legislature or the executive –

and it is a case where the court is subjected –

“in reality or appearance to direction from the executive as to the content of –

your Honours will see the observation –

judicial decisions –

We do not say that that applies to the particular case, but to the decisions, and more exactly to – enlists the court or the judges of it –

in the implementation of legislative policy”.

Could I go, first, your Honours, to the provisions establishing the Commission and the court, and may I commence with one observation?  There is a question whether the Commission and the Commission in Court Session, if I could use that expression for the moment, are two separate bodies or two aspects of the one body or perhaps a concept of its own kind and not necessarily falling within either of those two.  In the end, your Honours, it probably does not matter very much, but one does see on a number of occasions in the Act provisions which suggest that the two bodies are in a sense two aspects of the one body or two manifestations of the one body.

FRENCH CJ:   Appointments of judicial members of the Commission are made to the Commission in Court Session as though that is a designation of a body rather than the Commission doing something.

MR JACKSON:   In some respects what your Honour says is right; in others perhaps not.  I will deal with that, if I may, as I go to these provisions which I am just coming to now.

CRENNAN J:   Are there separate commissions?

MR JACKSON:   Yes, your Honour.  I will come to the section in a moment, your Honour, but the Commission can be the one Commission too.  Could I just say, your Honours, the Commission is established by section 145(1) at page 86 of the Act.

Your Honours will see that section 145 says that the Industrial Relations Commission is established and then it has the functions conferred upon it by section 146(1).  Could I invite your Honours to note in section 146(2) that it is required to take into account the public interest in the exercise of its functions, et cetera, but then the last three lines of section 146(2) say that does not apply to proceedings before the Commission in Court Session at a criminal proceedings or that determines that it is not – that are not appropriate. 

Now, your Honours, the Commission then consists of presidential members and commissioners.  That is apparent from section 147.  The presidential members – section 147(2) – are those who are listed as being the president, vice‑president and the deputy presidents.  The Commission in Court Session is the Commission constituted by a judicial member.  That is at section 151(1).

Your Honours will see that the Commission in Court Session is a court of record – that is section 152(1) – and the terms “Commission” and “Commission in Court Session” are defined in the dictionary at page 274.  The “Commission” is defined to mean the Industrial Relations Commission, to put it shortly, and then:

Commission in Court Session means the Commission constituted as referred to in section 151.

If I could just mention this in passing, your Honours, in relation to what your Honour the Chief Justice was saying a little earlier, your Honours will see that the way in which the Act expresses the relationship between the two is not always particularly clear when one sees the Commission in Court Session being a reference to the Commission but constituted in a particular way.  Your Honours, the jurisdiction of the Industrial Court or Commission in Court Session is set out in sections 153 and 154.  I do not think I need to take your Honours to the detail of them, but may I mention also, your Honours, in relation to section 154 that the Commission in Court Session is given power to:

make binding declarations of right in relation to a matter in which the Commission (however constituted) has jurisdiction.

Your Honours will see subsection (2) of that provision.

FRENCH CJ:   Does the Commission in Court Session have any jurisdiction which would involve it in any of the functions referred to in 146C(1) – that is, “making or varying any award or order”?

MR JACKSON:   The Commission in Court Session, your Honour, directly no.  However, if one looks at section 154(1), it would have the ability to make declarations in relation to a matter in which the Commission – which would include, of course, the Commission not in Court Session – would have jurisdiction.  That would include matters of the kind referred to in 146C(1).  It also would have the power to enforce, at the instance of a party or other interested person, an award or order made by the Commission which would be subject to the direction in section 146C(1).

HAYNE J:   How would the making of a binding declaration of right under 154(1) intersect with making or varying an award, as distinct from intersecting with the award or order as so made or varied?

MR JACKSON:   Your Honour, of course it would apply to the latter of those, but in relation to the actual activity of making or varying, a person seeking to have the award varied or made, or to have that not happen, would be entitled to seek a declaration from the Industrial Court.

HAYNE J:   Well, a declaration of right.  What right would be declared?  It is taking us off into what declaration as a remedy can do.

MR JACKSON:   No, I understand that, your Honour.  What the declaration of right would be – bearing in mind the context of the Act – is a declaration that a party was or was not entitled to obtain or seek relief of a particular kind because of the terms of the policy that had been declared pursuant to section 146C. 

FRENCH CJ:   This raises the question, and you may come to this, of what application does section 146C(5) have?  Why is it necessary?

MR JACKSON:   Your Honour, it is declaratory, really.  Whether it is more than that is another question.  I will put it this way, your Honours.  If subsection (5) were not there, there would be a question that would arise about whether the expressions in 146C(1) could apply to the Commission in Court Session.  One would think the answer would be no, but section 146C(5) makes that apparent. 

Your Honours, I was just going to refer to section 151 for a moment.  Your Honours will see that section 151 provides that the judicial members are to constitute the Commission in Court Session.  Your Honours will see also that section 151, in both its subsections, refers to judicial members.  That is a phrase that comes from section 149(3) which says:

A person appointed as a member of the Commission in Court Session is referred to in this Act as a judicial member of the Commission.

Now, your Honours, most provisions creating courts require some qualifications for appointment, most commonly, of course, membership of the legal profession in one capacity or another for a particular time.

The Commission in Court Session has that also, as you will see from section 149(2), which requires a legal qualification, but, your Honours, there is also a further requirement.  The further requirement is found in section 149(1), and that is that to be a member of the Commission in Court Session a person must be a  presidential member of the Commission.  So unless a person is a presidential member of the Commission then they cannot become a member of the court.  In response to what your Honour Justice Crennan asked me a little earlier, as section 149(1) in the second sentence indicates, the appointment as a member of the Industrial Court may be made at the same time as an appointment to the Commission and by the same Commission, or it may be made later.

Your Honours, could I note in passing that this is not, in a sense, a case where a member of the court also has non‑judicial functions conferred in the persona designata sense.  Rather it is a case where a person cannot be a member of the court unless the person also has non‑judicial functions.  Your Honours, could I just say this, that matters commenced in the Commission may be continued in the Commission in Court Session if they are being heard by a judicial member.  That is section 176.

FRENCH CJ:   That has got to be matters within the jurisdiction of the Commission in Court Session.

MR JACKSON:   Yes, your Honour.

FRENCH CJ:   So it would not pick up the making of awards, would it?

MR JACKSON:   No, it would not, your Honour.  The reason why I refer to it is that it does demonstrate the dual functions and the closeness of the functions of the persons who are members of the court.  Your Honours, that was section 176(3), I think, to which I referred.

Your Honours will also see, if one goes back to section 151(2), that it makes it apparent that a member of the court – that is, a judicial member – has, as one of the functions of the judicial member, the function of sitting in a non‑judicial capacity as a member of the Commission.  Your Honours will see the term “judicial members” used in 151(2).  That takes one back to 149(3), and then if one adds to those 151(1), the position which obtains is that a member of the court, being a judicial member, is able to, and no doubt has to, as part of the task, engage in non‑judicial activities as a member of the Commission.

Your Honours, in our written submissions, in the last lines of paragraph 48, we referred to the numbers of members of the Commission and court.  There has been some change in that since those submissions were filed.  We have handed your Honours a document, which comes from the website of the Commission, showing the numbers of presidents and commissioners.  You will see that some of those are dual appointees of Fair Work Australia and one of them works full time for Fair Work Australia. 

FRENCH CJ:   There are specific provisions, I think, in the State Act for acceptance of federal commissions, are there not?

MR JACKSON:   Some of them hold dual commissions, your Honour, yes.  Your Honours, the approach to be taken by the Commission, at least prior to the introduction of section 146C, is set out in two sections of the Act.  One is section 10, which you will see at page 7.  It speaks of awards setting fair and reasonable commissions of employment for employees.  The other is in section 146(2) on page 86, where it says – and I have taken your Honours to this already – in paragraphs (a) and (b) what it is to take into account.  Your Honours, those provisions gave the Commission considerable independent judgment as to the content of awards.  That changed, your Honours, with the introduction of section 146C. 

Now, your Honours, may I just say a very brief thing about the history of the litigation and the introduction of section 146C.  Your Honours, as is apparent from page 2 of the appeal book – I do not think I need to take your Honours to it – the appellant on 7 March last year applied to the Commission for the making of new awards increasing salaries and allowances for employees the subject of the awards there referred to.  Before the matter could be determined, however, the Industrial Relations Act was amended by the addition of the new section 146C and that took effect on 17 June 2011.  May I, your Honours, go to section 146C and to a number of features of the provision.  It is at page 88 of that volume.

Could I go first to section 146C(6).  Your Honours will see that the provision extends to proceedings that are pending in the Commission on the commencement of this section, which would, for the reasons I have indicated, include this case.  Then it says:

A regulation made under this section extends to proceedings that are pending in the Commission on the commencement of the regulation, unless the regulation otherwise provides.

So it is clear that it applies to pending proceedings at present, of course, and to proceedings which may be pending at any time when a regulation under the provision comes into effect.  Could I go then, your Honours, to subsection (1).  Your Honours will see that by that provision it requires the Commission to give effect, when making or varying an award or order, to any policy on conditions of employment of public sector employees that satisfies two requirements.  One requirement is that it is declared by the regulations to be an aspect of government policy required to be given effect to by the Commission.  The other is that – hardly surprisingly, in a sense – it is a policy that applies to the matter before the Commission.

Your Honours, subsection (3) deals with the effect of such a regulation.  It provides that an award or order of the Commission does not have effect to the extent that it is inconsistent with the obligation, which is ‑ ‑ ‑

FRENCH CJ:   Does that equate to inconsistent with the policy?

MR JACKSON:   Inconsistent with the policy.  I am sorry, your Honour, I am putting it badly.  Inconsistent with the policy that is the subject of the obligation in subsection (1).  I suppose, to put it another way, to make an award which was inconsistent with that would be not to observe the statutory obligation imposed by subsection (1).  Your Honours, that stricture is enforced by subsection (7), firstly, that the section has effect despite section 10 or section 146 – the provisions to which I took your Honours earlier – or any other provision.

The second thing that is enforced, your Honours, is the ambit of the definition of “award or order”, which is contained in subsection (8).  It is very widely expressed.  If I could just go back for a moment to section 10, it applies to awards “in accordance with this Act setting fair and reasonable” standards and then your Honours will see the binding effect of awards set out in section 12, also at page 7.

Your Honours, if I could go then to section 146C(2).  As it indicates, the policy may be set out in the regulation itself or in a document referred to in the regulation.  Finally, in relation to section 146C(5), it says that the provision:

does not apply to the Commission in Court Session.

Now, your Honours, much is sought to be made of section 146C(5) in the respondent’s submissions and in the submissions made on behalf of the Attorneys‑General, but it is not part of our case that the Industrial Court, as such, is itself bound to follow government policy, except in one respect to which I will come.  Rather the case is that the association of the Industrial Court with the Commission, a body required to implement government policy, is the matter which gives rise to the incompatibility.  Could I just mention, your Honours, if one goes to the reasons for judgment of the court appealed from in the present case - and the heart of the reasoning of the Industrial Court can be seen in the appeal book at page 167, paragraph 49 ‑ ‑ ‑

FRENCH CJ:   There is an anterior question, is there not?  There is a lot of focus on the divided functions of the Commission, but the anterior question surely is the character of the policy as declared by regulation.  It has, in a sense, become a statutory instrument, has it not?  It is legislative in character.

MR JACKSON:   I intend to deal with that aspect of it, your Honour, but to put it shortly, we would say that certainly it is a statutory instrument.  Issues of incompatibility are really things that arise because of statutory provisions, whether they be by delegated legislation or primary legislation, that is how the incompatibility is likely to arise.  If it were simply a case of a minister or the government saying, you must do this without there being some statutory backing, then a court would have no obligation to follow it, nor would the Commission have an obligation to follow it in the light of the Commission’s powers under the Act. 

So that it has to be, your Honour, something dealt with by delegated legislation but it is the question of what is done by it.  Now, I intend to come the question of what would happen if this were done directly by legislation shortly, if I may, but the short position is that what is declared is government policy and that – and again, I will come this, your Honours – means policy of the Executive Government.  It does not make any difference that it is made by delegated legislation.  Your Honour, I am going to come to the terms of the policy in just a moment, if I may.

Your Honours, what I was going to say about paragraph 49 in the reasons for judgment of the court appealed from was that it does seem to place a rather narrow view on the concept of incompatibility in the current area of discourse.  The policies are in fact declared in relation to – in this case are set out in the Industrial Relations (Public Sector Conditions of Employment) Regulation 2001, which is, I think, your Honours, attached to our submissions in‑chief.

FRENCH CJ:   2011, I think.

MR JACKSON:   I am sorry, 2011.  The years do pass quickly sometimes.  The regulation came into force on 20 June 2011.  Regulation 4 contains the declaration contemplated by section 146C(1).  The regulation provides for two kinds of policies, paramount policies and other policies.  The paramount policies, your Honours, are set out, in a sense, in regulations 5 and 7 and then, your Honours, it is the other policies which are particularly relevant to this case and they have, in effect, the following aspects.

There is a 2.5 per cent per annum limit on “increases in remuneration or other conditions of employment”, and the 2.5 per cent limit relates to increases in “employee‑related costs”.  That is a term defined by regulation 8.  The 2.5 per cent can be exceeded, but only if the increase is offset by employee‑related savings ‑ that is regulation 6(1)(b) – and the term “employee‑related savings” is itself defined by regulation 9.  Your Honours will see that “Awards and orders” must “resolve all issues” ‑ that is referred to in regulation 6(1)(d) – and, your Honours, they must not operate retrospectively – that is 6(1)(e).  Your Honours, that is the regulation that has been brought in under section 146C(1).

Your Honours, could I also go to section 106 of the Industrial Relations Act?  You will see that subsection (1) gives power to the Commission to:

make an order declaring wholly or partly void, or varying, any contract whereby a person performs work in any industry –

and it may do so –

if the Commission finds that the contract is an unfair contract.

“Unfair contract” is a term defined by section 105(1).  The 2011 amending Act introduced subsection (2) to section 105, and your Honours will see in section 105(2) that – I am sorry, your Honours, I have just lost the connection between that and section 146C – yes, 105(2).  Your Honours, I am sorry, there is a provision which ties the two together and I have just lost it in passing but may I come back to it?

Now, your Honours, could I go to the decisions to incompatibility in relevant respects.  Your Honours, I do not want to go, of course, to all the decisions since Kable, but may I go to some references in the decision which are particularly apposite to the present case.  I wanted to do so, if I could, with a view to seeking to identify the principle applicable to a case such as this.  May I go first, your Honours, to Grollo v Palmer (1995) 184 CLR 348 at 365 in the reasons for judgment of four members of the Court? What your Honours will see is that ‑ about halfway down the page ‑ there was a reference to the incompatibility condition. Several ways were identified in which the institutional integrity of a court might be compromised, and they included, your Honours, in the large paragraph on the page down to about line 5:

the performance of non‑judicial functions of such a nature that the capacity of the judge to perform his or her judicial functions with integrity is compromised or impaired.

Another indication was that:

the performance of non‑judicial functions of such a nature that public confidence in the integrity of the judiciary as an institution or in the capacity of the individual judge to perform his or her judicial functions with integrity –

was compromised.  Your Honours will notice, of course, the reference to the second basis there referred to and that is the question of public confidence.

To the same effect, in the reasons for judgment of Justice McHugh at page 377, in the first new paragraph on the page – your Honours, I will not read it out but your Honours will see the first sentence:

the appearance of independence and impartiality is as important as its existence. 

His Honour develops that theme throughout that paragraph. 

FRENCH CJ:   It is important to bear in mind, is it not, that this has its roots in the separation of powers mandated by Chapters I, II and III?

MR JACKSON:   Yes, your Honour.  There is, of course, some overlapping between the conceptions and many cases, one might think, might fall within the two.  But the concepts, the ones that are being spoken about here, are ones that, in our submission, are apposite to the application of the Kable concept.

Your Honours, Grollo was concerned with federal judges, of course.  That is part of the point your Honour was just making.  But it is clear that the issue is one which applies also to members of State courts which are capable of being invested with federal jurisdiction.  Your Honours, in North Australian Aboriginal Legal Aid Service v Bradley (2004) 218 CLR 146 at 162, paragraph 27, one sees the adoption by six members of the Court in that case of what had been said by Justice Gaudron in Ebner v Official Trustee in Bankruptcy.  Could I just pause to say that was, of course, a case involving the question of apparent bias.  Your Honours will see her observations picked up in this case and the reference, in the third line of that quotation, to State courts and the application of Kable.  Then, your Honours, immediately following that, about six lines from the bottom of the page:

for the maintenance of public confidence, they be constituted by persons who are impartial and who appear to be impartial even when exercising non‑federal jurisdiction.

Your Honours, one sees also in paragraph 29 in that same case at page 163 the observations of members of the Court:

The second step in the Legal Aid Service’s argument is that it is implicit in the terms of Ch III of the Constitution, and necessary for the preservation of that structure, that a court capable of exercising the judicial power of the Commonwealth be and appear to be an independent and impartial tribunal.

Your Honours, that passage from Ebner was again quoted by four members of the Court in Gypsy Jokers Motorcycle Club v Commissioner of Police (2008) 234 CLR 532, paragraph 10. Your Honours, I will not read it out again, of course, but your Honours will see the passage there referred to. Your Honours, as appears from paragraph 9 of that case, it involved, of course, a State jurisdiction, although the challenge in fact failed.

Your Honours, if I could go in a little bit more detail to this Court’s more recent decision in Wainohu v New South Wales (2011) 243 CLR 181, that involved the conferral on persons who are judges of State courts of a power that was non‑judicial.

Could I go, first, your Honours, to the reasons of your Honour the Chief Justice and Justice Kiefel and then to the reasons of the full members of the Court?  Your Honours, the principle was stated by your Honour the Chief Justice and Justice Kiefel at page 208 at paragraph 44.  It was said:

Decisions of this Court, commencing with Kable, establish the principle that a State legislature cannot confer upon a State court a function which substantially impairs its institutional integrity, and which is therefore incompatible with its role, under Ch III -

I will not read the rest of the sentence, your Honours.  Then it said:

The term “institutional integrity”, applied to a court, refers to its possession of the defining or essential characteristics of a court.  Those characteristics include the reality and appearance of the court’s independence and its impartiality.

If I could move over to the next page, your Honours, the third line, it was observed that:

In the case of the Supreme Courts of the States, that characteristic has a constitutional dimension –

because of section 73.  Then, your Honours, in paragraph 45, commencing relevantly about a third of the way down the page, your Honour said:

It is not within the power of a State legislature to enact a law conferring upon courts which have or can have federal jurisdiction conferred upon them functions incompatible with the role of such courts under Ch III of the Constitution as repositories of federal jurisdiction.  A function conferred upon a court which substantially impairs the institutional integrity of the court has that effect.

Then, your Honours, we see the reference to Justice Gaudron’s observations in Kable.  If I could go from that to paragraph 46 on page 210, your Honours will see a summary in paragraph 46 of a number of propositions concerning this area and, in particular, if I could go, your Honours, about five lines into the paragraph:

Application of the Kable principle has the result that the State legislatures cannot validly enact a law –

Your Honours, might I interpolate, directly or pursuant to legislation -

which would effect an impermissible executive intrusion into the processes or decisions of a court; which would authorise the executive to enlist a court to implement decisions of the executive in a manner incompatible with that court’s institutional integrity; or –

importantly, for present purposes:

which would confer upon any court a function (judicial or otherwise) incompatible with the role of that court as a repository of federal jurisdiction.

Your Honours will see that elaborated upon a little in paragraph 47:

The principle in Kable also leads to the conclusion that a State legislature cannot enact a law conferring upon a judge of a State court a non‑judicial function which is substantially incompatible with the functions of the court of which the judge is a member.  Although the function may be conferred upon the judge in his or her capacity as an individual, the statute may create a close connection and therefore an association with the person’s role as a judge.  Where this is the case, the potential for incompatibility of the non‑judicial function is brought more sharply into focus.  The question which then arises is whether the performance of that function would impair the defining characteristics of that court.

Your Honours, one then sees in paragraph 48 a reference to the observation of Justice McHugh in Kable and I shall not read that out, but if one goes then to paragraphs 50 through to 52, one sees in the commencement of paragraph 50 a phrase rather seized upon, if that be not too exciting a word, in some of the submissions on behalf of our learned friends to the effect that there is, in the present case, “such a detachment”.  What was said in those observations was that if there was a legislatively prescribed detachment of a State judge from his or her court when performing a non‑judicial function that might weigh against a finding of impairment and your Honours will see the observation in the second sentence of paragraph 50 dealing with that topic.  Now, your Honours, one does come to the last three lines on that page, 211:

But so long as that function is conferred upon the judge by virtue of his or her office as a judge, the distinction is difficult to grasp and the fact that the function is conferred persona designate should not be given great weight.  It would generally not be determinative –

Your Honours, paragraph 51, if I could go to about the sixth line of that paragraph:

The fact that a judge discharges a statutory function as a persona designata does not logically exclude the possibility, which may arise in a variety of ways, that the exercise of that function substantially impairs the institutional integrity of the court by impairing, for example, the reality or appearance of its independence from the executive government.

Your Honours will see the remainder of that paragraph and then, I think, the first five lines of paragraph 52.

FRENCH CJ:   Just going back, these are all statements, of course, which had to be applied in the particular, as we know.

MR JACKSON:   Of course, your Honour, yes.

FRENCH CJ:   Supposing instead of a power to, by regulation, declare a policy, 146C simply authorised the making of regulations setting out criteria to be given effect to by the Commission in making or varying any award or order and then simply turn what is an underlying government policy into a set of regulatory criteria?

MR JACKSON:   Your Honour, apart from giving as a first answer a simple but germane response, which is that that would be a different case, the second answer would be that it would depend really upon the way in which it was done.  What I mean by that is that if one took the simplest case and had a case where the powers of the Commission were limited in a particular way then it may be that the case is one that would not give rise to the incompatibility. 

Your Honour, that is not, with respect, necessarily the case because if what you had was a situation where, in effect, the Commission and the members of the Commission were obliged to obey the instructions given pursuant to a regulation and regulations being ones expressing the will of the Executive Government and then, your Honour, the same issue arises.  It may it is decided a different way, but maybe not.

FRENCH CJ:   Well, is there any difference in principle between a regulation which incorporates, by reference, criteria set out in a written policy and a regulation which states those criteria?

MR JACKSON:   Well, they are a different sense, of course, but, I mean leaving aside any trivialities ‑ ‑ ‑

FRENCH CJ:   For present purposes I mean.

MR JACKSON:   Yes, I understand, your Honour, yes.  Leaving aside any trivialities this situation which obtains is that you have, in the present case, a provision which says what is to be the subject of it is to be government policy, and in effect that is government policy from time to time, that is because of the provision that says it applies to any proceedings and in effect can be changed.  So, it is policy of the Executive Government stated in a document.  If one had the situation where you had statutory provisions providing for the same thing prescriptions then, apart from saying it would be a difference case, but the possibility of there being no impairment of institutional integrity might well diminish but at the same time that just is not what the present Act says.

Now, if also you had a situation where you were just dealing with a regulation‑making power which would enable the making of regulations then the situation which you would obtain is that one may not be very different from the present case because the regulations, one would expect, would be ones that expressed what was a policy in one respect and, of course, policies expressed by statute, or pursuant to statute, are ones that have to be applied but it is probably, your Honour, in a sense, twofold; one, in relation to just this aspect of it, one that you do have policies expressed to be by statue, statements of government policy, and that, with respect, refers to policy of the Executive Government.  I will come to that shortly, if I may.

The second thing is that if one did have a situation where you had policies of any kind that could be made by the Governor‑in‑Council, pursuant to the statute, the same question, your Honour, would be likely to arise in a sense, because what you would have would be, because of the relationship between the two bodies, if I could use that expression, the same or a similar question arising in relation to the question of incompatibility.

HAYNE J:   But, are you making some distinction, Mr Jackson, between a regulation which either itself states or by reference incorporates what might be described as a fixed policy?  Are you distinguishing that from a case where the regulation refers to, or itself in terms permits variation of the policy from time to time?

MR JACKSON:   Well, your Honour, I am in a sense, but may I seek to explain what I am saying about that?  One is dealing, for present purposes of course, with what there is, and what there is is a legislative provision which says that the members of the Commission, in exercising their powers, are obliged to comply with government policy as declared from time to time.  That is the current situation.

Now, if it were that the legislation said that the Commission in making an award or order is bound to observe the terms provided for by, let us say, regulation from time to time made pursuant to this provision and without stating them as being element aspects of government policy and without perhaps particularly dwelling on the exact method of identification of them, whether attached or not, then you would have, in our submission, a rather similar situation and the incompatibility issue would still arise.

As a practical matter, it might be more difficult to establish it than by reference to legislation which in its present form says that the members of the Commission are, in effect, obliged to follow government policy, government policy as declared.  This is, we say, a stark case.  Cases can become more difficult the more one takes away the starkness with which it is expressed.

HAYNE J:   But are we to consider the present case, having regard to the regulation as made?  Surely we must.

MR JACKSON:   Well, your Honour, one does have to look at the regulation, of course.  Without looking at the regulation there is – one looks at the regulation really to see, in a sense, is it within power?  Is it within the power of the Act?  Presumably it is.  That is not challenged.  Does it say something applying to the present case?  Yes, it does.  But having said that, one is looking really at the combination, on the one hand, of the statutory provision 146C(1) and what is done under it.  But the ultimate issue is one that turns on the way in which 146C is expressed.

KIEFEL J:   Yes.  Mr Jackson, if the statute, section 146C, said regulations may prescribe the limits or conditions to be applied to awards regarding remuneration or conditions of employment, to take up some of the subject matter of the regulations, that would not be a problem, would it, expressed in that way?

MR JACKSON:   No, your Honour.  In that case, one would probably then be looking to see whether a particular regulation gave rise to an incompatibility issue.

FRENCH CJ:   Well, you might have a problem if the policy were ambulatory in the sense that it imbedded a ministerial direction power, for example.

MR JACKSON:   Yes.

KIEFEL J:   But I am talking about there being no reference to a policy and the question I was coming to was whether or not your argument really depends entirely upon how subsection (1) is framed, that is, it gives the appearance and hence your emphasis upon the appearance of institutional integrity.  That seems to be the principal focus of your argument.

MR JACKSON:   Well, your Honour, what we say is that one is looking at a situation where you have the statute which creates, to put it perhaps a little inaccurately, two bodies.  One looks at the two bodies to see what their functions are.  The conferral on members of the court and the obligation, no doubt, in some cases to exercise their powers as members of the Commission, is a situation which could give rise to questions of institutional incompatibility. 

Your Honour, having said that, one then comes to the question whether it does so in the particular case, and if one has a situation where the terms within which the Commission may operate are ones that are provided for by statute or pursuant to statute, without there being any particular reference to the Executive Government, then it may well be that one would look at the whole thing and say, yes, there is or no there is not the incompatibility that falls within the concepts to which we have been referring.

KIEFEL J:   But there is no vice in the Kable sense to what actually appears in the regulations, is there?  They circumscribe or create a ceiling upon the extent to which awards may relate to remuneration.  That is really the point I am saying.  How much emphasis is your argument really upon how it is expressed and how it is set up?  I mean, it might be a perfectly valid argument, but it is not really the subject matter of the regulation that is the problem.  It is the method of expression.

MR JACKSON:   No, your Honour.  Some of the arguments made by our learned friends seek to turn on the particular regulation, but what we say fundamentally is the feature that gives rise to the difficulty is the way in which section 146C(1) expresses itself.

KIEFEL J:   Expresses it.  That is what I thought, yes.

MR JACKSON:   What it does do – and I will come to the application of this in a moment, if I may – is to make the people who are judges of the court as judicial members of the Commission obey what is said by the Executive in their dealings.

Your Honours, I was going to go back, if I may, to Wainohu for a moment.  Could I go to page 228, paragraph 105, in the joint reasons of four members of the Court?  Your Honours will see that in the last four lines on page 228 it said that:

That constitutional principle has as its touchstone protection against legislative or executive intrusion upon the institutional integrity of the courts, whether federal or State.  The principle applies throughout the Australian integrated court system because it has been appreciated since federation . . . It follows that repugnancy . . . may be manifested by State (and Territory), as well as federal, legislation which provides for the conferral of functions upon a judicial officer persona designata.

Your Honours will then see the observation from Justices Mason and Deane in Hilton v Wells, and your Honours, the quotation or the matters referred to in that quotation do not seem to differ very much at all from that to which we have referred in our written submissions in‑chief in paragraph 49.  Could I take your Honours to that?  So one has a situation where a member of the Commission one day hears proceedings in which they are required to give effect to any policy determined by the government.  The same day they may sit in the same courtroom with the same staff but constituted as the Industrial Court to determine judicial proceedings involving the government as a party.  We would submit an intelligent observer would find no basis on which to distinguish between the two proceedings or have confidence that the members will, as required, give rise to government policy in one proceeding, but bring an impartial and independent mind to bear in the other.  We have quoted that passage from Justices Mason and Deane in Hilton v Wells which we would submit is very apposite to the particular case. 

FRENCH CJ:   You say “give effect to government policy in one proceeding, but bring an impartial and independent mind to bear upon another”.  Underneath that there is the question about the way in which the two processes can intersect.  You have got the give effect to a declared policy by the Commission in making awards or orders or varying awards or orders.  How does the Commission in Court Session acquire a function in respect of which it overlaps with, if you like, that function of the Commission not in court session?  It comes back to the original question we were asking.

MR JACKSON:   Paragraphs 50 and 51 of those submissions, your Honour.

FRENCH CJ:   Yes.

MR JACKSON:   You will see that we say the judicial functions are rather closely related to those of the Commission.  The court enforces the awards which:

give effect to Government policy by imposition of penalties or making of monetary orders.  Judges of the Industrial Court can hear and determine enforcement proceedings at the suit of the Government . . . with respect to rights and obligations the Commission itself has created in implementation of government policy. 

You will see the reference then to “declarations of right”, and “declaratory orders” in the last sentence of paragraph 51.  Your Honours, those are examples of the way in which there is a practical relationship between the two bodies.  Your Honours, I was going to refer finally to an observation of your Honour the Chief Justice in Crump v New South Wales (2012) 86 ALJR 623. It is at page 632, in paragraph 31, where your Honour summarised, I think, the principles applicable from relatively recent decisions in dealing with limits upon the power of State legislatures to make laws affecting State courts. Your Honour went on to say, at about letter B on the right column on that page:

Nor can a State legislature enact a law conferring upon a judge of a State court a non-judicial function which is substantially incompatible with the functions of the court of which the judge is a member.

HAYNE J:   That presents the question:  why should it be answered one way or t’other, Mr Jackson?

MR JACKSON:   Well, your Honour, that is what I wanted to come to now.

HAYNE J:   Good.

MR JACKSON:   Your Honours, could I just say this?  Could I take your Honours to our written submissions in paragraph 47?  The first thing is that only a person who is a presidential member of the Commission may be appointed as a member of the court and the members of the Industrial Court are necessarily persons who are required to comply with government policy when exercising functions as members of the court.  I referred your Honours earlier to section 151(2) of the Act, which recognises that the Commission may be constituted by judicial members – a term defined by section 149(3) – when not exercising functions as the Commission in Court Session.

As we have sought to say in our written submissions at paragraph 48:

all judges of the court are required as a condition of appointment to be members of a body subject to the direction and control of the executive.

There are also two matters which should be borne in mind, in our submission, as illustrating the closeness of the court to the Commission.  It is, as I have taken your Honours to a moment ago, the court which will be the body which is to enforce decisions of the Commission made in obedience to section 146C(1).  Your Honours can see that from section 153.  Your Honours, there is also the ability to continue as the court hearing matters commenced in the Commission.

I have taken your Honours already to section 176(3), and could we refer to paragraphs 53 and 54 of our written submissions?  Your Honours, I will not read those out but may I refer your Honours to that?  Your Honours, we would submit that if one goes to section 146C(1) it is, in our submission, very clear that the direction and control contemplated by section 146C is direction and control by the Executive Government.  Your Honours, in terms of section 146C, the policy to which the Commission is required to give effect is not fixed by the legislature; rather it is to be fixed in a regulation or some other document referred to in a regulation.  Secondly, the policy ‑ ‑ ‑

HAYNE J:   If there were incorporation of some other document would that document be a disallowable instrument under the New South Wales legislative regime?

MR JACKSON:   Your Honour, I think it would have to be a case where the regulation referring to the document was itself disallowed, but may I check that?

HAYNE J:   But at least the regulation is a disallowable instrument, is it not, by the Parliament of New South Wales?

MR JACKSON:   Yes.

FRENCH CJ:   It is the Subordinate Legislation Act 1989.

MR JACKSON:   Yes.  Your Honour, I do not doubt that it is disallowable, but it is a question of ‑ not the fact that it may be capable of being disallowed ‑ it is not a sort of common ground – …..case, in our submission.  One is looking at the content of it while it is in the ‑ ‑ ‑

FRENCH CJ:   I think part of it was there was a problem in this case because the regulation had been made and there was actually a motion for disallowance pending in the Parliament, was there not?

MR JACKSON:   Yes, I think that is so, your Honour, yes.

FRENCH CJ:   While the Commission was dealing with the matter?

MR JACKSON:   Yes, a certain degree of unhappiness with the course proposed appears in some of the President’s observations, I think, in the interlocutory stages of the matter.

FRENCH CJ:   He was unhappy about the media statements.

MR JACKSON:   Well, your Honour, I do not want to go into that now.  But, your Honours, I said, I think, that the policy is expressed to be an aspect of government policy.  That, in our submission, is one which can only refer to the policy of the Executive Government.  The words “government policy”, of course, are in 146C(1)(a).  Your Honours, the policy is one which extends to pending proceedings.  Could we refer your Honours to what we have said about that in paragraphs 43 and 44 of our written submissions?

FRENCH CJ:   What 146C(2) enables is the making of a regulation which actually sets out the – really, it was the two examples we were talking about earlier; you can have a regulation which sets out the policy – that is to say, sets out the criteria that are to apply – or incorporates it by reference to a document of some kind.

MR JACKSON:   Yes.  Your Honour, it would depend, of course.  It is perfectly possibly for a regulation but much more possible for a regulation which incorporates another document to be one which sets out a policy that has difficulties in its application.  Once one goes beyond the things that are drafted by those who do it professionally, there can be some difficulties, but I mention that in passing.

HAYNE J:   The direction that is given is a direction about the performance of an arbitral function.

MR JACKSON:   Yes, your Honour; that is so.

HAYNE J:   Leaving aside by whom – and the overlap issue to which you draw attention, performance of an arbitral function by a non‑curial body.

MR JACKSON:   Well, your Honour, it is by a body which is not exercising a judicial power, if I could put it that way.  But the persons who ‑ ‑ ‑

HAYNE J:   Are identical, you say?

MR JACKSON:   Well, yes.

HAYNE J:   Or may overlap?

MR JACKSON:   Yes.  Your Honour, although perhaps the legislation is not 100 per cent clear in this regard, it is apparent from 151(2) that when a person is a member of the court they are a judicial member and they can be, as a judicial member, yet exercising functions in the Commission.

HAYNE J:   In that respect there is, I think, no relevant distinction, is there, between this aspect of the set‑up of this body and that of the old Commonwealth Court of Conciliation and Arbitration?

MR JACKSON:   Your Honour, I think that is so conceptually.  When I say “conceptually” I mean in terms of the broad approach of the legislation, yes.

HAYNE J:   Which is to say that some members of the former Conciliation and Arbitration Court, if one wished to apply this tag and it was apt, were non‑judicial members; others were judicial members.  Is that right?

MR JACKSON:   Yes, your Honour, yes and, of course, that encountered its own difficulties because of Chapter III.

HAYNE J:   Which applied directly?

MR JACKSON:   Yes, and one is fortunate perhaps that Justice Higgins’ painting is not here, or it might be, looking unpleasantly at us.  Your Honours, we would say, if I could go back to paragraph 37 of our written submissions, that in reality the terms of section 146C give rise to effects which are similar to those at least referred to in that provision and, your Honours, if one speaks particularly of enlisting a court or a judge in the implementation of legislative policy. 

May I deal in passing with a number of matters raised by our learned friends, the respondents, and the interveners?  Could we just say this, your Honours, first of all that some of the interveners say that we are placing undue emphasis on the use of the word “policy” in section 146C(1)(a) and could I refer particularly in that regard to what is said by Victoria in paragraphs 9 to 13 of their submissions.  They suggest, as does South Australia at paragraph 28, that courts are often involved in the implementation of policy. 

Now, your Honours, of course legislation may reflect government policy choices as enacted by Parliament, but in the case of section 146C the policy choices have not been enacted in the form of legislation.  Rather the Executive has been empowered to make regulations setting out the policy required to be given effect to by members of the Commission.  If I could take your Honours for a moment to our reply submissions in paragraph 5 we would submit that whilst, as a matter of form, the regulations are to be regarded as made in the exercise of a statutory power, that as a matter of content the policy being declared by them is the policy of the Executive Government.  Your Honours, our learned friends have referred also to Thomas v Mowbray ‑ ‑ ‑

HAYNE J:   Your proposition in paragraph 5, as a matter of content the policy is the policy of the Executive, does it stand apart in any respect from what is done by any form of regulation made by the Executive?

MR JACKSON:   Well, it does in this sense, your Honour.  A regulation made by the Executive Government may be something which is purely a reflection of something that is required by the statute to be done.  If that is so, it may be a reflection but it is not a very strong one.  There are cases where the regulation‑making power allows regulations to be made if, in the opinion of the Governor‑in‑Council, let us say, the regulations should be made and that, in one sense, reflects the policy of the government.  What one does not see, your Honours, except in a case such as this is that the regulation is to state an aspect of government policy which is to be followed by a tribunal. 

Your Honours, it is an unusual expression but in the context it makes clear that what the government is doing is directing the way in which the tribunal is to exercise its powers, namely to be in accordance with that aspect of government policy and you see, particularly, the reference to the, in effect, exclusion of sections 10 and 146 in the statute.  It is different, we would submit, because what it is saying is we will declare a policy from time to time which is to be applied by the tribunal and the tribunal in exercising its activities must follow that.

Now, your Honours, if one did not have a connection between the Commission and the court one would then have a situation that you have an executive body which consisted of a tribunal at the – I am sorry, established by statute but which the Executive was entitled to give directions to, leaving aside any question of particular directions being outside the ambit of that power.  What you do have is a situation where the people who constitute the tribunal to whom the directions by the government are given are people who also are – almost all are, judges.  The connection between those persons in their judicial capacity and those persons in their non‑judicial capacity is very close.  That is where the incompatibility approach comes into play. 

Your Honours, could I just say this that some reference has been made by our learned friends to the Court’s decision in Thomas v Mowbray 233 CLR 307. Your Honours, I do not intend to go to it. It is a case where the Federal Magistrates Court was required to consider for the purposes of making control order whether the order was likely to reduce the risk of a terrorist act. That involved considerations of policy but it was not held to be antithetical to a judicial function.

Your Honours, the point in Thomas v Mowbray is not analogous to the present point and the difficulty with section 146C is not that it requires the Commission to give consideration to matters that might be described as policy in exercising its jurisdiction, it is that when exercising its jurisdiction a member of the Commission is required to give effect to that policy rather than having an independent discretion or decision‑making role.  That is in the context of a body having the relationship to the court.

Your Honours, our learned friends in Victoria also suggested in paragraphs 11 and 12 of their submissions that in some way section 146C is limited to making policies of general application rather than rules governing specific cases, and the suggestion seems to be that a requirement to comply with general policies does not constitute dictating the outcome of particular proceedings. 

Could we say two things about that, your Honours?  The first is that the terms of section 146C pretty clearly contemplate that they may affect the outcome of particular proceedings - see section 146C(6), and that is so whether the proceedings to which they apply relate to few or many government employees.  The second point is, your Honours, that the aspect of government policy referred to in a regulation under 146C(1) may be broad or narrow, and it may be very specific indeed, and we would submit there is no statutory basis for such a limitation. 

Your Honours, on the question of the fact that the policy is declared by regulation - I have made a number of submissions in relation to that already - may I just say we have referred to this in our written submissions in reply in paragraphs 4 to 7 and I have taken your Honours to paragraph 5 of that already.  The issue does not arise unless there is legislation and, in our submission, if the case were one where the government policy from time to time was set out in the Act itself or set out in a regulation made under a differently framed 146C(2), the provision may or may not be valid, but there would remain the very significant question whether the institutional independence of the court was affected by the requirement on its members acting non‑judicially to implement that policy. 

Your Honours, the fact that an outcome might perhaps have been achieved by direct legislation does not mean that legislation requiring a court or a judge to be involved in ensuring the outcome is achieved will be valid, having regard to the Kable principle, and in Totani 242 CLR 66 at paragraphs 146 and 148, Justice Gummow, we would say, was rather against such a proposition.

Your Honours, could we just add a couple of things?  One is that the validity of a provision such as 146C does not depend on how in fact judges might exercise powers.  Could we give a reference in that regard without taking your Honours to them - Wainohu 243 CLR 181 at paragraph 41 your Honour the Chief Justice and Justice Kiefel and also in Kable 189 CLR 123 to 124 per Justice McHugh. I took your Honours a moment ago, I think, to the Industrial Court’s views on the issue, which are set out in paragraph 49 of its reasons at page 167. We would submit that the view taken by the Industrial Court is too narrow a view of the principles applicable.

Your Honours, finally we would submit that the conclusion for which we contend is set out in our written submissions and we would submit that the relief which should be granted is set out in our written submissions in paragraphs 61 to 63. Your Honours, I lost myself in giving a reference in relation to section 105 of the Act earlier. If one goes to section 106 at page 60 there is the reference to the ability of the Commission to declare a contract:

wholly or partly void . . . if the Commission finds that the contract is an unfair contract.

Then you have section 105(1), which defines “unfair contract” and the relevant additional provision is 105(2) which says it:

is not an unfair contract . . . because of any provision in the contract that gives effect to a policy that is declared under section 146C.

Your Honours, those are our submissions.

FRENCH CJ:   Thank you, Mr Jackson.  Yes, Mr Sexton.

MR SEXTON:   If the Court pleases.  Your Honours, the question before the Court today largely has its origins in the decision in Kable.  Of course, that was a case of legislation from New South Wales that conferred a function on a court; in that case the Supreme Court of New South Wales.  The heart of the doctrine, as it has been considered and refined in later decisions by this Court, is that it is a contravention of Chapter III to confer a function on a court that exercises federal jurisdiction where the function is such that its conferral undermines or affects the institutional integrity of the court in question.

Prior to Wainohu there were two cases in this Court where it was held that a function had been conferred by legislation that did affect the institutional integrity of the courts in question – the New South Wales Supreme Court in IFTC and the South Australian Magistrates Court in Totani.  In Wainohu, a slightly different situation; the legislation conferred the relevant function on what it described as an eligible judge of the New South Wales Supreme Court.  It was accepted in that case that it was not conferred on that person in his or her capacity as a judge of the court but in a personal capacity or as persona designata.

In this case we would say by contrast the function of applying certain government policies outlined by statute – and I will come to the question of statutes – is conferred on a body that is not a court, the Industrial Relations Commission.  We would say that there are two distinct bodies, the Commission and the Industrial Court, which is a Chapter III court.  The Industrial Relations Commission of course is not and could not be, given its almost exclusively non‑judicial functions under the legislation, and the heart of its functions are of course the question of wage fixation and the settlement of industrial disputes.  The Industrial Court exercises, at least on some occasions, federal jurisdiction and has on frequent occasions considered constitutional questions and obviously in that situation exercising federal jurisdiction.

It might be noted that even at the federal level it is possible to have a mixture of judicial and non‑judicial members on bodies – the Administrative Appeals Tribunal, for example, the Competition Tribunal, the Copyright Tribunal, the Defence Force Discipline Appeal Tribunal – although that, of course, is subject to the notion of incompatibility in relation to federal judges at least.  That was discussed in Grollo v Palmer.

If your Honours will bear with me, I want to go to a couple of passages – in some cases the very passages that you have been taken to by my learned friend Mr Jackson – but that presumably means that we seek to draw a different conclusion from those particular passages. My learned friend did take your Honours to page 365 of the report, 184 CLR 348, Grollo v Palmer.  I paraphrase by saying that it was said there that incompatibility could arise in three possible ways:  the commitment to the performance of non‑judicial functions so permanent and complete that further performance by the judge of his or her judicial functions would not be practicable.  Then the second way, the non‑judicial functions were such that the capacity of the judge to perform his or her judicial functions with integrity would be comprised or impaired.  Finally, and thirdly, the non‑judicial functions were of such a nature that public confidence in the integrity of the judiciary as an institution or in the capacity of the judge to perform his or her judicial functions with integrity would be diminished.

We assume that it is the last of these that my learned friend, Mr Jackson, would rely on in the present case, in other words, not that there is an actual problem with the integrity of the judges of the Industrial Court but, as it were, a perceived problem because of this particular legislation.  So it is a question of perceptions, but we would say that ‑ ‑ ‑

HAYNE J:   Has not the court or have not at least some members of the court discountenanced the idea that perception or public confidence is the touchstone of Kable?

MR SEXTON:   That it is, your Honour?

HAYNE J:   It is not.

MR SEXTON:   That is right, that it is not, yes, that is so.  But it seems to be since one of the bases on which my learned friend puts the argument in this case – it may not be a touchstone, of course, your Honour, but it obviously has some relevance to the application of the principle. 

HAYNE J:   It may be a consequence but it is not – that is, lack of public confidence may be the consequence of contravention of Kable but not, I think, to be seen to be the test of whether there is a contravention.  I have in mind especially, I think, what Justice Gummow wrote in Fardon.  I think I might have mentioned this in Totani or Wainohu, one or the other, but I think that there can be seen through the more recent decisions of the Court the notion that public confidence may be a consequence, not the test.

MR SEXTON:   We appreciate that, your Honour, but there is a sense in which, if one talks about the notion of undermining or affecting the institutional integrity of the Court, that to some extent that must be dependent on how that would be – how the consequences of the legislation ‑ ‑ ‑

FRENCH CJ:   Well, this is a narrower base, is it not?  It is really an argument about an apprehension of partiality?

MR SEXTON:   That is why we say, your Honour, that it is a question of apprehension or perception perhaps because it does not seem to us that my learned friend puts the proposition that the judges for the Industrial Court in carrying out their functions as members of the court would actually be affected in a biased fashion by this legislation.  To some extent it is a question of what an informed observer would draw from this particular structure of the Commission and the court.

We would say why would just a person doubt the integrity of the members of the Industrial Court when its members, sitting on quite a different body, are subject to some aspects of government policy in carrying out different and non‑judicial functions?  It is really at the heart of our submission in this case that there are two separate bodies exercising quite different and separate functions, and the question is why could it be assumed that in carrying out those different and separate functions in the Industrial Court the judges of that court would be affected by this legislation, by section 146C, and the subordinate legislation, when it is relevant and applicable to the quite different function that they are carrying out as members of the Industrial Commission – that is, functions of wage fixation and dispute settlement? The structure, we would say, of the legislation and of those two bodies is what stands in the way of my learned friend, Mr Jackson’s, submissions.

If I can just take your Honour to a statement in Kable itself at 189 CLR 51. It is just a sentence where Justice McHugh, at 119, point 1, said that “the boundary of State legislative power” was only 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.

Because of the structure we say that that would not be the case here.  Although there have been a number of decisions, of course, since Kable, perhaps Totani is an example where the court held that, perhaps in the sense that Justice McHugh is talking about there, the boundary was crossed in relation to the South Australian Magistrates Court.

Can I go to Wainohu – and again I think my learned friend, Mr Jackson, has taken your Honours to some of these passages – at paragraph 44 on page 208 your Honour the Chief Justice and Justice Kiefel referred to the term “institutional integrity” and said that its aspects included:

the reality and appearance of the court’s independence and its impartiality . . . the application of procedural fairness and adherence, as a general rule, to the open court principle –

and reasons being generally given for decisions.  It would seem that the first of those, the reality and appearance of a court’s independence and its impartiality, is the item that is relevant in this case and on which my learned friend, Mr Jackson, relies.  It is a question of the appearance of the independence and impartiality of the Industrial Court.

Your Honour the Chief Justice and Justice Kiefel also noted at paragraph 52 on page 212 that, although exercising the relevant function as persona designata the judge in question in Wainohu was appearing to all the world as a judge of the court sitting as such, and that is the distinction that we would draw with the persona designata doctrine, that in this case a judge of the Industrial Court, sitting in that court, does not appear – sitting in the Commission, does not appear to all the world as a judge of the court sitting as such, sitting in the Commission.  The member of the Commission who does not in some cases, of course – in some cases was not a judicial member ‑ is not sitting in the capacity as a judicial member of any body.

BELL J:   Allied to that, in a case such as Wainohu, the vice in the persona designata approach is to clothe the function of the person who occupies judicial office with the badge of impartiality thought to go with the holding of that office.  This might be thought to be rather different when one looks at the distinct functions of the Commission and, as I understand the argument, no challenge made to the arrangements before the insertion of 146C for persons holding judicial office as members of the court to carry out the distinct arbitral functions conferred on the Commission.

MR SEXTON:   That is so, your Honour, and I will come – I might mention a little later that, of course, under the legislation prior to section 146C the Commission still had obligations in relation to, for example, the public interest and various other criteria which would be seemingly inconsistent with the exercise of judicial functions.  Just going back to Wainohu, again your Honour the Chief Justice and Justice Kiefel went on to say at paragraph 47 at page 210 that:

State legislature cannot enact a law conferring upon a judge of a State court a non‑judicial function which is substantially incompatible with the functions of the court of which the judge is a member.

We emphasise “with the functions of the court” which again seems to us to not be the case in relation to this legislation.  Then, your Honours, noting that the function might be conferred upon the judge as persona designata, went on to say that:

the statute may create a close connection and therefore an association with the person’s role as a judge –

which is perhaps the point that Justice Bell was just raising and again not something we would say that has occurred in this case.  Then, finally in that paragraph, your Honours said that:

A legislatively prescribed detachment of a State judge from his or her court when performing a non‑judicial function –

and I realise my learned friend has taken your Honours to this –

may weigh in the balance against a finding of impairment of the institutional integrity of the court.  Such a detachment may make it less likely that the exercise of the non‑judicial function undermines the reality or the appearance of the court as an institution independent of the executive government of the State.  But so long as that function is conferred upon the judge by virtue of his or her office as a judge, the distinction is difficult to grasp and the fact that the function is conferred persona designata should not be given great weight.

What we say here is that the function is not conferred upon a judge of the Industrial Court by virtue of his or her office as a judge but as a member of the Commission which is why I say it is at the heart of our submissions that there are two separate bodies with separate functions and that that is clearly part of the structure that is set out in the legislation.

FRENCH CJ:   What do you say about the operation of 146C(5)?

MR SEXTON:   The provision that says that it “does not apply to the Commission in Court Session”, your Honour ‑ ‑ ‑

FRENCH CJ:   Yes.

MR SEXTON:   We have assumed that it has been put there out of excessive caution, in a sense, that really it is hard to see how the section could apply to a judicial body in any event.  It spells that out but if it were not there I do not think the situation would be different.  And finally on that question again, just a sentence from Justice McHugh in Kable, at 117 at the very end of the page to 118, that the “appointments of a judge as persona designata”, according to Justice McHugh, only gave rise to a problem if it gave the appearance that the court, as an institution, was not independent of the Executive Government of the State and that is again, here we would say, a distinction to be drawn from that.

HAYNE J:   What, Mr Solicitor, is the purpose of the submissions that you are presently making?  Is it to attempt to give some further more definite content to the notion of incompatibility?  Is it to simply identify examples that have been considered by the Court in the past?  What exactly is the point that is being made?

MR SEXTON:   Well, your Honour, it is to say that there is not an undermining of institutional integrity by this arrangement under the legislation.  When I say “arrangement” I include not only the establishment of two distinct bodies, but include the directions – you would call them directions at the moment by way of shorthand – that are given to the Commission by section 146C.

HAYNE J:   I would have thought that the denial of effect on institutional integrity, which is the case you have to advocate, is one which might more usefully be articulated for once at a rather higher level of abstraction.  What is it about this arrangement that denies the asserted assault on integrity?  The asserted assault on integrity is to observe capacity in the Executive to affect the outcome of an award, to affect the outcome of an arbitral process in a particular case or particular series of cases is, I think, at least a large part of the assault.  What is the answer to it at that level?  Not by Reference to what has been said in pulling out gobbets from judgments, but what is the answer?

MR SEXTON:   In a sense the basis for that submission by my learned friend is the overlapping membership of the two bodies and our response to that is that, of course, there is an overlapping membership, but that the bodies are separate, their functions are separate and that, in those circumstances, there is no undermining of the institutional integrity of the Industrial Court, either in reality or in perception.  That, in other words, an informed observer looking at the legislation and understanding the difference between the two bodies ‑ ‑ ‑

HAYNE J:   Another way of putting that proposition would seem to be that there is no undermining or incompatibility or assault on integrity in the performance by the court of its functions because the Commission can be affected in its arbitral functions, and I use that as a designedly neutral term, by what is done by the Executive.

MR SEXTON:   Yes, and I hope that some of those passages that I took your Honours to go to that question of affecting the court as an institution in the exercise of its functions, which is the point that some of the members of the court appeared to be making in the context of those cases.  I am still just dealing with Wainohu where your Honour the Chief Justice and Justice Kiefel referred at paragraph 52 on page 212 to:

the long history in the States of the appointments of judges to extra‑judicial roles –

Of course, that has been particularly true in New South Wales in the industrial area where, on occasions, judicial officers have engaged in the non‑judicial role of wage fixation and settlement dispute for more than a century, starting with the Court of Arbitration, which was established in 1901.

The Industrial Commission that was established under the Industrial Arbitration Act 1940 was actually considered in some cases in this Court. Justice Williams considered it to be a court in the case of re an Application by the Public Service Association of New South Wales (1947). I do not need to take your Honours to the case, 75 CLR 430 at 433. In Tana v Baxter (1986) 160 CLR 572 the majority noted at 578 that it was assumed in argument that that body was a court. Although Justice Brennan at 582 was less sure of that proposition and specifically left the question open.

Finally, in relation to Wainohu in the majority judgment Justices Gummow, Hayne, Crennan and Bell there was a reference at paragraph 109, page 229 to the effect of the relevant provisions in Wainohu being – and this is again the point that perhaps Justice Bell raised:

to utilise confidence in impartial, reasoned and public decision‑making of eligible judges in the daily performance of their offices as members of the Supreme Court –

In Hilton v Wells (1985) 157 CLR 57 – I think your Honours have been taken to the passage at 83 to 84 where Justices Mason and Deane were critical of the persona designata concept, but while that is what happened in Wainohu, it is, as we say, it is not what happens in this case where the functions entrusted to the members of the Commission are entrusted by reference to their membership of that body and a body that carries out very different functions from those of the Industrial Court.

FRENCH CJ:   Just coming back for a moment to these ways in which the functions of the Industrial Court might overlap with issues that arise in the making or varying of an award, and I am looking at 146C:

An award or order of the Commission does not have effect to the extent that it is inconsistent with the obligation –

I suppose an enforcement action by, or on behalf of, public sector employees against government or a government authority might be met by a defence that the award as made was inconsistent with the obligation imposed by 146C and have to be considered in that context by the Commission in Court Session.

MR SEXTON:   I think your Honours have been taken - section 153, it is on page 92, (1), for example, (d), which is a:

Contravention of dispute order –

Subparagraph (f), which is:

Breach of industrial instruments –

They would involve the Industrial Court in applying, as it were, the decisions that have been made by the Commission, but they would not be considering or reconsidering the merits of those decisions in that ‑ ‑ ‑

FRENCH CJ:   But, they might be looking to questions whether the award or order was consistent with government policy and gave effect to it for the purpose of determining whether it had effect.

MR SEXTON:   But, that would be simply an application of the relevant provisions of the legislation ‑ ‑ ‑

FRENCH CJ:   Also the policy.

MR SEXTON:    ‑ ‑ ‑I suppose including the subordinate legislation in this case, just taking that as the factum and not, as I say, it is still a very different function from the Commission itself, which is the body that has to take account of the policy.

HAYNE J:   Would it in any way differ from any other question of construction of an award?

MR SEXTON:   I do not think so, your Honour.  The award itself, its terms are there to be, if necessary, to be construed, but, again, it is a question of assessing what it actually means and then that would be what would govern the court in making its orders.

FRENCH CJ:   Well, it might have to construe the policy as well, might it not, to determine the question of inconsistency?

MR SEXTON:   Ultimately, the policy must be part of legislation.  It is either in the regulation itself or it is in a document that is adopted by the regulation so ultimately this is a question of - the court in that sense would be construing and applying legislation.

HAYNE J:   Are you able to say whether a document adopted by the regulation is itself a disallowable instrument?

MR SEXTON:   Well, if the regulation can be disallowed the document would fall with it presumably, your Honour. 

HAYNE J:   Assuming the regulation made today contemplates subsequent instruments and subsequent instrument is made after the time for disallowance of the regulation.  It is that timing question which is lying behind the question, Mr Solicitor, where you have the instrument come into existence after the regulation has been made and after the time for disallowance of the regulation has passed. 

MR SEXTON:   I suppose, your Honour, it is something that Parliament has to take into account.  In other words, if it does not want to be in the position where a regulation will contain or be based upon – import a document that it has not seen, I suppose it has to make the decision at the time whether it disallows or not.

FRENCH CJ:   I suppose the question might be a matter of construction of 146C whether it can only apply to a policy in existence but the analogous problem arises where you have ambulatory provisions within the policy.

MR SEXTON:   Well, as I say, it is a decision for the Parliament as to what happens when it gets the regulation.  If the regulation allows some form of documentary material that has not yet been drafted or devised and the Parliament does not disallow the regulation then, I suppose, it assumes that that can happen in the future.  But it is still really a legislative exercise.

I think this is the final passage, your Honours, but I just did want to go to something that Justice Gaudron said in Kable at 103 to 104 because the fact that the relevant function here is conferred on the Commission and not on the court we say is important and it reflects a point that was made by Justice Gaudron where she was referring to the limitation on Commonwealth legislative power resulting from Boilermakers and she said:

The limitation on State legislative power is more closely confined and relates to powers or functions imposed on a State court, rather than its judges in their capacity as individuals –

Perhaps the situation there, we would say, is exactly what has not occurred in this case.  It is not conferred on the Industrial Court but on some of its judicial members in their capacity as members of the Commission.  Justice Gaudron went on to say the limitation:

is concerned with powers or functions that are repugnant to or incompatible with the exercise of the judicial power of the Commonwealth.

It seemed to us to be a useful summary, in a sense, of one of the points that we are making.  It might be noted in relation to section 146C that under the pre‑existing legislation, which still contains section 146(2), the Commission was required to take into account the public interest in the exercise of its functions and for that purpose to have regard, amongst other things, to the state of the economy of New South Wales and the likely effect of its decisions on the economy.

What the current regulation that is made under section 146C does is to set out, in effect, quantitative and qualitative parameters for the wage‑fixing function of the Commission and it also sets out principles under which those wage‑fixing decisions are to be made.  The question was raised perhaps earlier this morning by your Honour the Chief Justice and also perhaps by Justice Kiefel as to what would be the position if the regulation simply specified criteria and the term “government policy” was not used as it is in section 146C.  We would say that there would not be any difference between those positions.  In other words, the fact that they are called policies rather than criteria, that they are in the regulation rather than in section 146C, does not seem to us to be determinative.  The question is really what the effect of them is.

KIEFEL J:   Not in a functional sense or a practical sense, but you are in the realm of appearance once you have the language of section 146C, at least on the appellant’s argument, do you not?

MR SEXTON:   Again, as your Honour appreciates, our answer to that is the distinction between the two bodies.  In terms of the Commission, from the Commission’s point of view we say it would not be relevant as to how they were described or where they were put.  As I have already noted, ultimately they have to be, in some form, part of legislation. 

So, in one sense, it is the imposition of jurisdictional limits upon the Commission.  The only effect on the Industrial Court by section 146C, we would say, is in relation to – and I think the Chief Justice already raised this – the court’s award‑making function under section 153.  That is done through the, we would say, constitutionally permissible factum and consequence method of drafting.

FRENCH CJ:   I am sorry just to interrupt, subsection (7) means that a regulation can be made embodying a policy which effectively overrides the objects of the Act or any of them and also the fair and reasonable criterion.

MR SEXTON:   That is so, your Honour, yes.  Obviously, in terms of the Commission, these are limitations which were not present before.  I should say finally something briefly about the amendment to section 105 of the legislation which is on page 60 of that book.  It defines unfair contract in a way that prevents 146C being used as a ground for unfair contract.  That is a jurisdiction of course that is vested in the Industrial Court, but what that does, we would say, is no more than limit in one respect only the existing statutory jurisdiction of the Industrial Court relating to unfair contracts by removing a particular ground on which the allegation of unfairness might be made.

Section 105 already in a sense defines and therefore limits that jurisdiction and this, as it were, adds one particular aspect to it, similar to statutory provisions that limit the jurisdiction of courts, limitation legislation, impairment thresholds in relation to damages, caps on damages that were introduced in the uniform defamation legislation in 2005.  So we would say that that, which is a matter that is referred to by my learned friends on the other side, that that does not alter the basic proposition in any way that we have made in relation to this case.  Unless there is anything specific, your Honours, those are our submissions.

FRENCH CJ:   Thank you, Mr Solicitor.  Solicitor‑General for South Australia?

MR HINTON:   If the Court pleases, we seek to deal with two points.  The first addresses perhaps what your Honour the Chief Justice said earlier today is - or queried – is the anterior question.  The appellant’s contention is that in appearance the Industrial Court is subject to direction by the Executive because judges of the court when acting as presidential members of the Commission are subject to direction by the Executive as a consequence of complying with section 146C.

The first question in our submission then, the anterior question, is whether or not section 146C subjects the Commission to direction from the Executive.  We put this submission against the background of the relief sought in the notice of appeal being a declaration limited to the validity of the Act.  The relief does not target the regulations.  Ultimately our submission is that as a matter of construction section 146C is valid.  With respect to the regulations, we adopt the submissions of New South Wales as to why they too are valid, and indeed the other interveners.  Can I ask your Honours to look at 146C?

The command relates to the exercise of powers to make or vary an aware or order, clearly referring to subsection (8), picking up the powers in section 10 and 17, sections 35 and 43.  There is a context here then that is larger potentially than just the content of a policy, by virtue of the factors that may be taken into account in either arriving at an award or varying an award, or indeed making an order approving an enterprise bargaining agreement or varying one.  So, the command operates within a broader context, including all those factors that can be taken into account.  My point is that the decisional context in which this section operates is very broad.

There is nothing to indicate that a policy could not be narrow or far broader in its reach.  The consequence for any decisional independence then is dependent upon the content of the policy.  Merely requiring that the Commission give effect to any policy does not necessarily trespass upon decisional independence.  It does not necessarily amount to a direction as to the manner in which the Commission goes about its function or its outcome, which, if it were a court, would contravene the Kable doctrine.  One example, perhaps, can be found in the regulations passed in this case, and in particular, paramount policy 5(b), which states:

Equal remuneration for men and women doing work of equal or comparable value [is a paramount policy].

It does not direct manner or outcome.  Much depends upon the decisional context.  In that sense, in my submission, “must give effect to” does not translate into a directed outcome.  The point being, the extent of any Executive direction then depends on the content of the policy.  The command of itself does not result in manner or outcome being decided by the Executive.

In construing section 146C, in our submission regard must also be had to the regulation‑making power to be found in section 407 which the Court has not been taken to.  Earlier, your Honour the Chief Justice put to my learned friend, Mr Jackson, a proposition that included that the power to make the regulation was to be found in section 146C(2).  In our submission, the power to make the regulation is to be found in section 407. 

Section 146C(2) is to be construed along with section 407. Section 407 permits a regulation of a type referred to in 146C(2). The power is also to be construed, having regard to section 31(1) of the Interpretation Act 1987 (NSW). That is a provision with which your Honours will be familiar.

FRENCH CJ:   Of course, 146C does, in effect, support regulations which may be inconsistent with the Act, apart from 146C. 

MR HINTON:   It does, your Honour.  The two have an interrelationship ‑ ‑ ‑

FRENCH CJ:   So you have to read 146 and 407 together in that sense.

MR HINTON: Yes, hence the opening words “Any such regulation contemplates that somewhere else the power”, but it is this sort of regulation we are speaking about, yes, your Honour. Section 31(1) directs that:

An Act or instrument shall be construed as operating to the full extent of, but so as not to exceed, the legislative power of Parliament.

It has the consequence that section 407 empowers the Governor to make regulations to the full extent of what is required but not so as to exceed the legislative power of the State.  Any regulation then for the purposes of section 146C(2) is likewise limited.

In my submission, the effect of sections 407 and 146C(2), read in the light of section 31(1), is such that only a policy that falls within the legislative power of the State is authorised by that section. The approach that I am putting to your Honours is consistent with that adopted in a different context but applicable in Wotton in Queensland.  Your Honours will recall that that was a case where there was a challenge to the power to impose conditions upon a parole order.  The power itself was to be found in the Corrective Services Act (Qld). 

Can I take your Honours to that case? It is to be found in 86 ALJR and in particular paragraphs [9] and [10]. When one construes a power, one must have regard to section 31(1) in the context of this case, section 9(1) in the Wotton Case.  The effect of it in that case was spelt out in the majority judgment in paragraphs [21], [22] and [23].  For my purposes, the same approach, in my submission, should be taken in this case with the same consequence set out in paragraph [23], namely:

that if the power or discretion be susceptible of exercise in accordance with the constitutional restriction upon legislative power –

that “constitutional restriction”, that phrase there, refers back to paragraphs [9] and [10]:

then the legislation conferring that power or discretion is effective in those terms.  No question arises of severance or reading down –

In my submission, that is the position in which we find ourselves with respect to section 146C.  Its effect depends upon the content of a policy.  It can stand on its own.  There is no need to read that word “policy” down.  What is authorised under section 407 is a regulation declaring a policy that does not exceed the legislative power of the State.  If that is correct, in my submission, the relief sought with respect to the Act is relief that should not be granted.  The focus in this case must be upon the regulations and the effect of the regulations.  With respect to their effect we adopt the submissions of the respondents and the other interveners

Can I turn to the second point we wish to deal with?  I should add, with respect to the first point, it not being a case involving reading down or severance then the authorities cited against us in my learned friend Mr Jackson’s reply are distinguishable.  The 2UE Case and the Dingjan Case were reading‑down cases.

The second point we seek to make concerns the notion of appearance; it looms large in this particular appeal.  References were made by my learned friend, Mr Jackson, to the intelligent observer, or the reasonable observer.  My learned friend, Mr Jackson, took your Honours to the Wainohu judgment, and in particular paragraphs 106 and 107 of the judgment of their Honours Justices Gummow, Hayne, Crennan and Bell, and that is the paragraphs, your Honours will recall, where there is reference to the judgment of Justices Mason and Deane, as I recall, in Hilton v Wells, and in particular to the part played or the reference to the perception of the intelligent observer.

Now, regard is had to notions of the intelligent observer, or the fair‑minded person, as a means of injecting into this field of discourse an element of objectivity, and in this regard we have put to your Honours that the rule as to apprehended bias provides a useful analogy; not a perfect analogy but a useful analogy.  We do that having regard to what her Honour Justice Gaudron said in Wilson v Minister for Aboriginal and Torres Strait Islander Affairs – I will not take your Honours to it – 189 CLR 1, in particular at 23. That was a case concerning whether the undertaking of an inquiry by a Federal Court judge for the Executive was incompatible with that judge’s role as a judge of a Chapter III court. There are parallels between that situation and this. At 23 her Honour Justice Gaudron alluded to the assistance that could be gained by reference to the test for apprehended bias.

In particular what is of assistance is not just having regard to a label what would the intelligent observer think or the fair‑minded lay observer think, but, having regard to the test developed for apprehended bias, what are the characteristics of the intelligent observer or the fair‑minded observer that should be injected into what is an objective test?

At paragraph 10 of our oral hand‑up we refer in particular to the judgment of Johnson v Johnson and to paragraphs 12 and 13 of the judgment of the Chief Justice and Justices Gaudron, McHugh, Gummow and Hayne, and 52 to 53 of his Honour Justice Kirby.  There, there are spelt out characteristics of the intelligent observer and the fair‑minded lay observer.  In particular, that hypothetical person is a reasonable person who knows that they are observing a professional judge.  They do not have a detailed knowledge of the law but they are not ignorant of the context in which the judicial power is to be exercised or the general nature of the law in its application. 

If one has regard to the test so explained and transfers it to this case then, in my submission, the intelligent observer or the fair‑minded lay observer, generally informed as to the nature of proceedings and the law, would appreciate the division of functions between the Commission and the Industrial Court and the insulating effect of section 146C(5).

HAYNE J:   Well, some consideration was given to these issues in Forge v ASIC in the judgment of Justice Gummow, Justice Crennan and myself at paragraphs – so that is 228 CLR 45, particularly at 77 and following paragraph 66 through to 68, where we said that:

The apprehension of bias principle has its application in particular cases.

And suggested that no unthinking translation can be made of those principles to this, but perhaps the point you make has some force; perhaps not.  We have tried to identify it there.

MR HINTON:   I was hoping that I was putting a thinking application to your Honour.  It has some application here because unlike any of the other Kable cases so far, this case takes us very far into the realms of appearance and apprehension and as has been exchanged between Bench and Bar today, there are many references to the intelligent observer.  Your Honour is quite right, it is not a perfect analogy but, indeed, again in Wainohu v State of New South Wales at paragraphs 106 to 107 that allusion to Hilton v Wells does not allow us to escape it.  I am not saying it is determinative, but a thinking application allows you to gain some assistance in determining whether or not the intelligent observer, or rather whether or not an objective analysis of the supposed incompatibility is one that for practical purposes is real because we all know the Kable doctrine is one that deals with practical reality, not theory.  It deals with content, not form; it is functionalist.

For that reason, just to stop at the words in section 146C(2) is insufficient.  That permits form to triumph over content.  It is for that reason

that, in my submission, the reference to “the intelligent observer” does assist in determining whether or not there is incompatibility in this case.  If the Court pleases, those are our submissions.  We rely upon what we have produced in our written submissions and indeed adopt the submissions of the other interveners.

FRENCH CJ:   Thank you.  Solicitor‑General for Victoria.

MR McLEISH:   If the Court pleases, I propose to divide my submissions into two parts also.  The first focuses on the effect of section 146C on the work of the Commission.  We submit that that is relevant because if the Commission’s own independence is unaffected by the section then there is no ground for it identifying any loss of independence on the part of the court, whether real or imagined.  The second part of the submissions is in the alternative, to look at the section’s possible effect on the court.  The reason I have divided the submissions that way is that it is submitted that, when you look at what section 146C actually does, it does nothing surprising or controversial or affecting the independence of the Commission.  Therefore, if that submission is accepted, the whole case is a whole step removed from any effect on the court.

In one sense, if the Court adopts the submissions of my learned friend for South Australia, which we respectfully adopt in relation to the width of the power in section 146C, and the question of any effect on the court being derived from the policy rather than the section, then it may not be necessary to address the submission I am about to make.  But, we do submit that in terms, what section 146C permits is the making of regulations promulgating policies that are binding on the Commission and that which can be declared has to be a policy because of the opening words in section 146C. 

The section uses the word “policy” twice and it is the first use of the word which circumscribes the regulation‑making power.  In our submission, the reference to an aspect of government policy is a descriptive reference to what might then appear in a regulation.  When one focuses on the fact that the regulation must declare a policy, it becomes apparent, in our submission, that the regulations must be legislative in character.  We rely for that submission on this Court’s decision in The Commonwealth v Grunseit.

HAYNE J:   Just before you come to Grunseit, just staying for a moment with this question of the word “policy”, the word “policy” may also find its explanation or justification for use in the subject matter with which 146C deals, namely the formation of awards which are to regulate the relations between employer and employee, that is to say 146C is not itself fixing the award.  It is telling a body which is itself charged with the task of determining an award, giving it a mandatory consideration it must take to account in forming that body of rules which constitute the award regulating terms and conditions.

MR McLEISH:   Yes with respect, your Honour, and I will take the Court after lunch to other provisions of the Act which we say do exactly the same thing.  We would also submit, as we have in the written submissions, that the regulation in this case is of that nature.

HAYNE J:   I am sorry, I interrupted you.  You were taking us to Grunseit.

MR McLEISH:   No, your Honour, I wanted to take the Court just briefly before the adjournment to Grunseit (1943) 67 CLR 58 and in particular the judgment of Chief Justice Latham at pages 82 and 83. I do not think I need to take the Court to the regulation in question in this case which was held to be executive in nature, but Chief Justice Latham’s description towards the bottom of page 82 of the distinction between legislation and the execution of legislation is a classical description. Ten lines from the bottom of page 82, his Honour said:

The general distinction between legislation and the execution of legislation is that legislation determines the content of a law as a rule of conduct or a declaration as to power, right or duty, whereas executive authority applies the law in particular cases.

He then cites the United States Supreme Court at the bottom of the page in Hampton v United States where it was said:

“The true distinction, therefore, is, between the delegation of power to make the law, which necessarily involves a discretion as to what it shall be, and conferring an authority or discretion as to its execution, to be exercised under and in pursuance of the law.”

That same passage was, as his Honour says, cited at first instance by Justice Williams at page 66 with whom Justice Rich agreed at 86. 

It indicates – it is consistent, we submit, with the notion of policy being the laying down of rules for future application rather than any direction as to the way in which the existing law is to be applied.

HAYNE J:   I had in mind, I may be quite mistaken, that issues of that kind were looked at in Dignan’s Case too.  I may be quite wrong.

MR McLEISH:   I think I ought to check that.

HAYNE J:   What is it, Victorian Stevedoring v Dignan about 46 or thereabouts?  But I may be quite wrong.

MR McLEISH:   I will look at that over the luncheon adjournment.

FRENCH CJ:   That might be an appropriate moment.  The Court will adjourn until 2.15.

AT 12.45 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.15 PM:

FRENCH CJ:   Yes, Mr Solicitor.

MR McLEISH:   If the Court pleases, this morning I was submitting that the regulation enables the giving legal effect to policy and that the policies so promulgated are legislative in character.  Your Honour Justice Hayne raised the question with me of Dignan’s Case and there is a reference I wanted to draw the Court’s attention to, Victorian Stevedoring v Dignan (1931) 46 CLR 73 at page 100 in the judgment of Justice Dixon.

This was, of course, the case which upheld the validity of delegations of Commonwealth legislative power to the Executive, but both the nature of the provision in question and Justice Dixon’s explanation on page 100 is instructive for the present case.  His Honour at the top of the page refers to section 3 of the Transport Workers Act as doing nothing less than:

authorizing the Executive to perform a function which, if not subordinate, would be essentially legislative.  It gives the Governor‑General in Council a complete, although, of course, a subordinate power, over a large and by no means unimportant subject, in the exercise of which he is free to determine from time to time the ends to be achieved and the policy to be pursued as well as the means to be adopted.

That reference to the ability of the Governor‑General‑in‑Council to determine the policy to be pursued is consistent, it is submitted, with our submissions as to the significance of the word “policy” in section 146C.  It is also noteworthy that Justice Dixon says:

Within the limits of the subject matter, his ‑

that is the Governor‑General in Council –

will is unregulated and his discretion unguided.  Moreover, the power may be exercised in disregard of other existing statutes, the provisions of which concerning the same subject matter may be overridden.

In that respect the regulation upheld in Dignan’s Case resembles that in 146C in that it too is able to enact policy inconsistent with other provisions of the Act.  We submit that it follows from the character of any regulation made under section 146C that this case is one of legislative definition of the jurisdictional powers of the tribunal rather than one about the dominance of an executive act in determining the outcome of an exercise of jurisdiction, to use the language of your Honour the Chief Justice in Totani at paragraph 81.

It also distinguishes the case from that of decision‑making at the behest of the Executive – again, the language of your Honour Justice Hayne in Totani at paragraph  229 – or by an instrument of the Executive, as your Honours Justice Crennan and Bell said in Totani at paragraph 436.  Instead the Commission in complying with a regulation under the section is making a decision according to law and the position is therefore no different to the situation that would obtain if the policy in question were incorporated into the Act.

Not only is there no acting at the behest of the Executive; to the contrary, we submit that making a decision according to law is the essence of independent decision making.  I just wanted to take the Court briefly to Baker v The Queen 223 CLR 513 where Chief Justice Gleeson, at paragraph 6, having stated the principle for which Kable stands as authority, turned to look at the question of public confidence.  His Honour said:

In some of the judgments in Kable, references were made to public confidence in the courts.  Confidence is not something that exists in the abstract.  It is related to some quality or qualities which one person believes to exist in another.  The most basic quality of courts in which the public should have confidence is that they will administer justice according to law.

That is what the Commission does in complying with a legislative instrument, such as a regulation made under section 146C, in our submission.  As far as the question of public confidence goes, your Honour Justice Hayne raised an argument this morning, the question of whether public confidence was the touchstone or not for application of the Kable test. 

The most recent authority we could find on that question was in the judgment of Justice Gummow in Momcilovic v R 280 ALR 221 paragraph 175. Also consistent with what your Honour Justice Hayne said in Totani at paragraph 206 to the effect that institutional integrity is the touchstone of the Kable test.  Public confidence may be an indicator that feeds into that test but is not, itself, the touchstone.

We have also made reference in the oral hand‑up to Wilson v The Minister.  I do not want to take the Court to it but at page 17 of that judgment, there is a well‑known list of questions to be asked to determine whether incompatibility exists in the context of federal judges.  Although, we say that those questions indicate that merely making decisions under legislative instruction given pursuant to law or an instrument made under law indicates that at federal level there is no – I am sorry, does not indicate at federal level that there is incompatibility.  We do not urge the Court to apply federal cases in the State context.  I want to come back to that at the end of our submissions in relation to the reliance that has been placed on Grollo v Palmer.

As emerged in an exchange between my learned friend, Mr Jackson, and your Honour Justice Kiefel this morning, much in the appellant’s argument turns on the description of the content of regulations made under 146C as policy.  We contend that is not only consistent with the legislative character but it does not indicate that the Commission acts according to any impermissible criteria.  To the extent that the Executive is involved, the Executive is acting in a subordinate role as Justice Dixon mentioned in Dignan’s Case, in other words, exercising delegated legislative power and, of course, subject to legislative disallowance. 

It is familiar, of course, that the courts routinely consider questions of policy, but it is perhaps useful that I take the Court to what was said by Justices Gummow and Crennan in Thomas v Mowbray on this point, 233 CLR 307, given the reliance that is placed on the use of the word “policy” in section 146C in the argument of the appellant. At paragraph 81 on page 348 their Honours said that Justice Kitto in the Communist Party Case “spoke too broadly”, saying:

“[t]he courts have nothing to do with policy” –

It went on –

Where legislation is designed to effect a policy, and the courts then are called upon to interpret and apply that law, inevitably consideration of that policy cannot be excluded from the curial interpretative process.  No principle of the separation of the judicial power from that of the other branches of government should foreclose that activity –

We say, a fortiori, the Kable principle does not foreclose that activity and what is described there, that is legislation designed to effect a policy, aptly describes what is done by section 146C. 

So, it is submitted just as courts can apply a policy enacted into law so can a body such as the Commission.  In short, we submit section 146C provides for a change in the scope of the Commission’s jurisdictional powers, albeit reflecting a change in legislative policy.  There is nothing new, it is suggested, about the Commission applying policy enacted as law.  Section 10 itself can be regarded as a reflection of policy, that is, a policy that awards should be fair and reasonable. 

Other sections of the Act go further and stipulate precise content to awards in some respects so that the jurisdiction of the condition is already circumscribed by law giving effect to policy.  If can just take your Honours to the relevant provisions.  Section 22 provides – this is on page 12 of the print:

The number of ordinary working hours of an employee when set by an award must not exceed 40 hours per week, averaged over a 12 week period.

There is then provision for averaging.  Section 23 is the provision for:

equal remuneration and other conditions of employment for men and women doing work of equal or comparable value.

It is similar if not identical to the provision in the regulation in this case.  Section 26 sets out minimum sick leave entitlements, which “an award must include”, and section 27 contains prohibitions in relation to sick leave, in particular that:

An award must not allow or require an employee to cash‑in the employee’s accumulated sick leave.

Each of those provisions reflects a legislated government policy.  In that regard section 146C does no more than provide for that legislated government policy to be altered, albeit by delegated legislation.  For that reason we submit that one does not see any effect on the independence of the Commission as a result of these provisions, let alone the court.  However, if the provision were thought to enable the Commission to be subject to Executive direction, we still submit – and this is the second part of our argument – that that does not impermissibly touch upon the court or affect the appearance or reality of its independence or impartiality.

I do not want to spend time on this because my learned friends for New South Wales and South Australia have done so, but there are three broad points.  The first is that the Commission’s award is the source of the rights and obligations which the court enforces.  That is already the character of the relationship between the Commission and the court and the area of intersection of the award‑making power and the award‑enforcing power.  To supplement or substitute the rights and obligations that come under an award or to alter the way in which the Commission makes the award does not alter the fundamental function of the court in relation to awards, namely, to enforce the rights and obligations under them.

Secondly – this point has already been made – the Commission is not composed of judges identified or acting by reference to their status as judges, although some of its members happen to be judges, as they are required to be.  Parliament is not drawing on the reputation of the judicial branch to act as a cloak for its own decision making or that of the Executive.

Thirdly, apart from that partial overlap of membership, the court and the Commission are separate bodies.  The clearest indication of that is that they are separately established under sections 145 and 152 respectively, but also their powers, functions and processes are all distinct, notwithstanding the different nomenclature by which the court is described at different points in the Act.  Those matters are dealt with at paragraphs 17 to 24 of the Queensland written submissions.

As I mentioned, there has been reliance placed by the appellants on a passage in Grollo v Palmer 184 CLR 348 at page 365 and the Court has been taken to this at least twice already. It is the passage in the joint judgment where three different examples of the way in which incompatibility might arise at the Commonwealth level are considered, and the third is that the incompatibility:

might consist in the performance of non‑judicial functions of such a nature that public confidence in the integrity of the judiciary . . . is diminished.

I have already made one observation about public confidence, but the Court does go on to say that the basis for that incompatibility leading to unconstitutionality is implied from the separation of powers at the Commonwealth level.  That is at the end of that paragraph on page 365.  This leads me to make a submission about the nature of the Kable test as it applies and perhaps differs in the results it produces to the incompatibility test at the Commonwealth level.

Although the institutional integrity of State and federal courts is protected as a result of the integrated court system and the exercise of federal jurisdiction within that, and that is made clear in the judgment of four members of the Court in Wainohu at paragraph 105 drawing Kable and Wilson together, it is submitted that protection does not mandate identical outcomes in respect of State and federal courts. 

Firstly, it is a truism that there is no separation of State judicial power but more significantly, perhaps, Kable is concerned with identifying the essential characteristics of first a Supreme Court, secondly a court of a State more generally and, in particular, what is required of those courts to discharge their obligations, to exercise federal jurisdiction.  We have put a citation to Forge in the oral hand‑up document, that is, which I will not ‑ ‑ ‑

FRENCH CJ:   Is there any reason why the basis of incompatibility condition applicable to State courts should not also apply to federal courts, albeit not derived from separation of powers considerations?

MR McLEISH:   It may be, your Honour, that the ‑ ‑ ‑

FRENCH CJ:   You are worried about things going the other direction.

MR McLEISH:   I am.  It may be that the basis that is applied to State courts is a more doctrinally satisfactory basis for application to federal courts than perhaps the bare idea of separation of powers.  But what is involved at the State level that is not involved at the federal level is another essential characteristic, we submit, of both Supreme Courts and courts of a State and that is that in relation to State courts there is a diversity of permissible models for their establishment and operation as your Honour Chief Justice pointed out in Totani at paragraph 67 and 68. 

Put somewhat differently by your Honour Justice Heydon in Totani at paragraph 246, the States are free to experiment with different arrangements for their courts.  Of course, there is no single ideal of judicial independence.  We have cited in the oral hand‑up Chief Justice Gleeson in Bradley’s Case 218 CLR 146 at paragraphs 3 to 5 for that proposition. The submission is that it follows from those considerations and the functionalist nature of the Kable principle that it ought to be applied with restraint because it needs to bear in mind the ability of States to make different arrangements for their courts. 

Put differently, the constitutional expressions which the Court is dealing with in applying the Kable principle, that is Supreme Court and court of a State, carry with them not only the availability of those courts as repositories for the exercise of federal jurisdiction but also recognition of the variety of ways in which the States can structure their institutions and those courts may exist.

HAYNE J:   The proposition that restraint should be shown is a proposition that invites further questioning - what do you mean by?

MR McLEISH:   Your Honour, the notion of restraint, it is submitted, emerges from the need to recognise the array of possible models that might exist and that is, itself, a part of the essential character, it is submitted, of the court of a State that there is no single ideal model.  That counsels against comparing the arrangement in question with any postulated idea or, in particular, which is the main concern of this submission, comparing it with what would be required at the Commonwealth level.

HAYNE J:   I understand that, but for present purposes, if the question is sufficiently identified as being whether 149C is beyond power because it is repugnant to or incompatible with the institutional integrity of the Industrial Court, is the question of repugnancy or incompatibility to be assessed against the proposition that the Industrial Court must be, and be seen to be, a body making independent and impartial decisions according to law in the exercise of the jurisdiction given to it by section 153?

MR McLEISH:   That remains the test, yes, your Honour.

HAYNE J:   Is that a sufficient – at least for this case – identification of the subject matter of the comparison that must be undertaken in considering repugnancy or inconsistency?

MR McLEISH:   It may well be, your Honour.  Of course, the test necessarily involves shades and degrees and questions of impression.  The point of this submission is really that there being no single model, and the question being what are the essential characteristics of the State courts, the application of that test needs to simultaneously have in mind the variety of arrangements which the States are free to make for their courts.  So this Court and this Court structure is obviously of quite a distinctive kind, but it is merely one of the kinds of forms which a court of the State may take. 

It is submitted that may be relevant, depending on where the court, of course, gets to on applying the test, how close to the line I suppose the court would get to it, so it may be that this matter need not arise.  But, your Honour, the reliance on Grollo v Palmer, in particular, we wanted to submit to the Court that there is more to the essential character of courts of

the State than the unquestioned need for them to be able to exercise federal jurisdiction that may lead to different results in different jurisdictions.  If the Court pleases, those are the submissions.

FRENCH CJ:   Thank you, Mr Solicitor. 

MR DONALDSON:   May it please the Court, we make one submission, your Honours.  During the course of my learned friend, Mr Jackson’s, submissions this morning my learned friend accepted a proposition in response to a question from Justice Kiefel and that proposition that were a judicial member sitting as a commissioner to apply the substance of regulations 5 and 6 in these regulations during the course of making or varying an award, that that actual exercise of power would not impair the reality or appearance of the integrity of the Industrial Court, that is if one looks to the substance of the regulation, in particular, 5 and 6, which are the two substantial regulations.

The exercise of power by applying those two regulations to the making or variation of award is not incompatible with the judicial power of the Industrial Court.  If that is so, and with respect, my learned friend’s concession was entirely proper, if that is so then in our respectful submission this entire matter is simply one of form over substance, that is, the form of five words to be found in section 146C, that it is simply a mere question of form and not of substance can be demonstrated, with respect, in two ways, if one looks at section 146C(1)(a) and deletes from that provision the words to which exception is taken, and - your Honours, we have done that at point 8 of our hand up which is taken from our written submissions - your Honours will see that the meaning, effect and operation of the provision is identical.  It is a different formulation than the formulation that Justice Kiefel put to my learned friend which added a word or two but if those words are excluded then, in our submission, there is no difference in substance at all to the provision.

Your Honours will have seen from our written submissions that we advance that as part of a submission in relation to severance or reading down, but in any event, it also demonstrates, for our purposes, the inconsequential nature of the issue of form.  The second contention, your Honours, to demonstrate that this is really simply a question of mere form and not of substance is this:  if one looks at 146C(1)(a), the offending words, so a policy:

that is declared by the regulations to be an aspect of government policy that is required to be given effect to –

it could hardly be contended that it could be an aspect of any other policy if it were a regulation.  It is not going to be an aspect of opposition policy or

anybody else’s policy.  By the mere fact it is a regulation it is necessarily an aspect of government policy.  That, again, in our submission, establishes that really this is simply a question of form and, as your Honours are aware, issues of incompatibility and judicial power are determined by substance and practical operation and not contention such as ‑ ‑ ‑

FRENCH CJ:   You say that is just the form of the regulatory declaration that engages the obligation?

MR DONALDSON:   Yes.  The substance is the regulations, your Honour, and if one looks to the regulations there is nothing in the regulations that incompatible with any exercise of power by the Industrial Court.  It could have been expressed perhaps more elegantly, your Honour, but it is simply a question of form.

KIEFEL J:   The words might have been quite deliberately chosen.

MR DONALDSON:   If they were quite deliberately chosen they could be quite deliberately severed without consequence, not that I am offering that because it is not my legislation.  May it please your Honours.

FRENCH CJ:   Thank you.  Yes, Mr Jackson.

MR JACKSON:   Your Honours, may I say first that many of the matters raised by our learned friends, both in their written submissions and orally, are set out in our submissions in reply.  In particular, your Honours will see a response to the submission just made on behalf of Western Australia in paragraphs 22 and 23 in reply.

Your Honours, may I move on from that to the question of policy?  If one goes to the terms of section 146C, its terms, in our submission, are against the notion that – as I think your Honour Justice Hayne may have mooted with one of our friends – that the policy is something just to be taken into account by the Commission in arriving at its decision.  Your Honours, we would submit it goes beyond that and could I refer to four matters in that regard?  The first is section 146C(3), it speaks of “the obligation of the Commission”.

The second feature is again from section 146C(3), it speaks of “An award or order” not having effect in the circumstances to which it refers.  The third is subsection (6) and your Honours will see that the provision applies to pending proceedings.  The final matter, your Honours, is section 146C(7), and those matters are against the view, in our submission, that the policy is something simply to be taken into effect as one element in the mix being considered by the Commission.  It is a matter with which there has to be compliance and compliance by the Commission and the absence of compliance results in the award being void.

Your Honours, could I come then to the South Australian argument about the operation of the provisions? The argument is to the effect that the correct relief, if any, would be to the effect that the regulation was invalid but not the Act. That argument, your Honours will recall, was based on section 31 of the Interpretation Act (NSW) and in the observations in Wotton – and your Honours have the reference, I think – 86 ALJR 246 at paragraphs 9 and 21 to 23, where reliance was placed on the equivalent provision in the Queensland Acts Interpretation Act 1954, section 9(1). That provision says that the Acts are to be read down so they are to be within legislative power.

Your Honours, may we make the following points about that, however, and that is that the New South Wales Interpretation Act 1987 provides in section 5 – and your Honours may not have this particular provision. In subsection 5(2) it says:

This Act applies to an Act or instrument except in so far as the contrary intention appears in this Act or in the Act or instrument concerned.

Your Honours, if one applies that approach to section 146C, one does then note that section 146C(7) says:

This section –

namely, section 146C –

has effect despite section 10 or 146 or any other provision of this or any other Act –

which, prima facie, includes the Acts Interpretation Act.

Your Honours, in view of the declaration of legislative intent by section 146C(7) it is difficult, with respect, to see how there can be a basis for the argument based on section 31 because that argument does appear to give no weight to the very strong words of section 146C(7) – difficult to find stronger words – and, your Honours, it is also based on transporting reasoning from one, the legislative context, namely, that referred to in Wotton, to another different context.  Your Honours, the result, in our submission, is simply that section 146C is to be read in accordance with its terms and it imposes on the Commission an obligation to give effect to government policy as declared from time to time.

Could I turn, your Honours, to the past and the present argument?  We have not made any complaint about the position of the court and the Commission prior to the introduction of section 146C.  That is because the Commission was able to act in a manner which was analogous to that applying in the exercise of judicial power and, your Honours, by that I mean that the Commission had the discretion provided for by section 10 and had to take into account the matters referred to in section 146(2).  Could I refer also, your Honours, in this context to paragraph 30 of our written submissions?

Your Honours, that changed, as we have submitted earlier, with the introduction of section 146C and by the introduction of that provision the Commission became – and, your Honours, I do not want to put it excessively, but it became an instrument to implement government policy from time to time.  Yet the persons who are to implement it in significant measure are judges as well. 

Your Honours, may I come back to Wainohu for a moment?  We would submit that issues of the appearance, and I will come back to that expression in a moment, as well as the actuality of impartial and independent decision are criteria to be applied in relation to questions of institutional integrity

Could I go to Wainohu which, of course, is 243 CLR 181 and if one looks, your Honours, at paragraph 68 on page 219 in the reasons for judgment from the Chief Justice and Justice Kiefel your Honours will see, I will not read the whole paragraph but if I could go to the last six or seven lines, it says:

This has the consequence that a judge of the Court performs a function integral to the exercise of jurisdiction by the Court, by making the declaration, but lacks the duty to provide reasons for that decision.  The appearance of a judge making a declaration is thereby created whilst the giving of reasons, a hallmark of that office, is denied.  These features cannot but affect perceptions of the role of a judge of the Court, to the detriment of the Court.

Now, your Honours, one is not, to use a phrase from I think your Honour the Chief Justice in another case, one is not speaking about an opinion poll but one is looking at issues, issues that arise from the statutory context and the relationship created by the statute to see whether the statutory provisions bring about a situation which impairs institutional independence. 

Your Honours, in dealing with that question, one is applying a notion which has some similarities to but is not exactly the same as the question of apparent bias.  One does not assume that the judge will act in a way that is inappropriate for the judge to act, but one is looking to see whether the context in which the events occur is a context which gives rise to a fair assessment of the situation as one being where the judges are put, in a sense, too close to the Executive. 

If what you have is a situation, as this has become, where the judges are declared by statute when exercising their powers in an immediate and very close context to exercise powers in accordance with the determinations of the Executive Government, the government policy in relation to government employees from time to time.  Then, that is something which, in our submission, a fair minded person, a reasonable observer, would say this is too close.

No doubt one does it case by case.  No doubt a more acute perception of the issues has become involved since Kable and, of course, in another context by reason of the fact that there are now the establishment of the Federal Court and also the Family Court, but more particularly the Federal Court, as a significant institution in the mid‑1970s brought about, as some of the cases have observed, many more functions, being non‑judicial functions, being conferred on judges of the Federal Court.  So the Chapter III issues on the one hand and the Kable issues, if I could separate them that way, are ones that have arisen in a context that is somewhat different from the situation that occurred in a at least pre‑Kable sense and probably earlier.

Your Honours, the point of that digression, if I can call it that, was simply to say that it is fine to say for years there were these two bodies and they existed happily with the court officer saying the Commission is now in Court Session or we are back to the Commission and perhaps the heading of their transcript changing but, your Honours, maybe not much more, with great respect. 

One is now in the situation where the need to identify their functions and the roles has become clearer and when one looks at the functions and the roles one does see that one has persons who are a court on the one hand who cannot be on the court unless they also are prepared to be members of the Commission and the Commission is a body which now has to act in accordance with 146C(7). 

Your Honours, I was about to go to Wainohu and I think I took myself a little beyond that. One has, at paragraph 68 of Wainohu at page 219, your Honours, one sees also in the passage to which I referred this morning that the Court referred to – I am sorry, your Honour the Chief Justice and Justice Kiefel referred to a number of situations that if one looks – there was one element the requirement of a judge to act in a way which did not involve essential incidents of the judicial power. One sees here section 146C gives a command to obey the policy. There was also a reference to the connection between the non‑judicial function conferred on a judge on the one hand and the exercise of the jurisdiction on the other.

In the present case one has a connection in two ways - the institutional connection, meaning by that the structure of membership between the two bodies.  One also has the functional connection, the functional connection being that the Commission makes awards and orders as required by section 146C.  The court interprets and enforces them.

Your Honours will see in section 154 and 153(1)(b) – perhaps I should go to them, your Honours.  In section 153(1)(b):

proceedings for declarations of right under section 154,

One sees in section 153(1)(f) proceedings for breach and the substantive proceedings provided for by section 357 at page 211.  One sees in subsection (1)(g):

proceedings for recovery of money –

Section 365 is the substantive section there.  Your Honours, in all those cases, section 146C(3) might have the result of there being a collateral challenge to the validity of an award and the court would be required to determine whether the provisions of the award or order complied with the terms of section 146C and a regulation made under it.  Your Honours, I should have mentioned when one is speaking about section 153(1) that the proceedings in relation to unfair contracts are before the Commission in Court Session, or the Industrial Court, because of section 153(1)(c).

Now, your Honours, we would say in all those circumstances one does have a situation where the perception of the independence of the court is detrimentally affected.  Your Honours, could we in that regard refer also to the passage from Hilton v Wells referred to in the reasons for judgment of four members of the Court at page 229, paragraph 106? Whilst that is expressed with some emphasis in the reasons for judgment of Justices Mason and Deane, it is apparently accepted by the members of the Court in that part of the judgment.

Your Honours, may I say just a couple of other things.  One is in relation to Dignan 46 CLR 73. I think page 100 was referred to. The observations there made have to be read in the light of the fact that the issue there being dealt with was the validity of a regulation made under a wide power. So it was a question of whether the regulation fell within the wide power, and that was the relevant part of it.

HAYNE J:   But what follows from that?

MR JACKSON:   I am sorry, your Honour.  What I was seeking to say was that our learned friend seemed to be saying if you looked at regulation 3 in that case which appears at the headnote, there were two aspects to it.  One was that the provision that allowed the making of the relevant regulation was one that was very broadly expressed on the one hand, and on the other hand there was a provision that said it operated notwithstanding any other provision of any Act.  The point we apprehended that was being made was that that indicated first of all – and no doubt correctly – that a widely framed legislative provision conferring a regulation‑making power gives, hardly surprisingly, a very wide power.

And a similarity was pointed out between the provision of 146C(7) and also the provision in that legislation that allowed there to be a – to override other legislation.  But, your Honours, if one is coming to the present case what one sees is that the regulation‑making power is considerably more restricted.  Your Honours will see the words of 146C(1) and the analogy, to the extent to which it may be germane, is one which, in our submission, is not perfect or does not really take us anywhere.  I do not know if there is any other point about that case your Honour wanted me to ‑ ‑ ‑

HAYNE J:   A point I had understood to be being made in Dignan’s Case was that the regulation is, in effect, a self‑evident point, it is legislative and thus, the direction with which we are concerned in this case is, if you like, a legislative direction.  True, it is, formulated by the Executive pursuant to power given by legislation.

MR JACKSON:   Your Honour, could I say a couple of things about that.  The first is that, we would say in one sense, of course it is legislative.  The issue would not arise if it were not.  So, to say the self‑evident, as our learned friend’s submission would put it, self‑evidently gives an answer but these issues do not arise unless one finds legislation or delegated legislation which gives rise to the issue.  If it were otherwise, and one is simply talking about a direction given, without any legislative base, then it would simply be a question of administrative law.  Where does the power come from to do it, and the answer would probably be that it would not come at all because you would have to find a provision in the legislation that said, subject to direction by the Minister or something of that kind.  The issue just does not arise, otherwise, with respect, your Honour.

HAYNE J:   I understand that but does not your argument ultimately reduce to the proposition that the repugnancy or incompatibility lies in the observation that those who are members of the Industrial Court when performing the non‑judicial function of forming an award to fix terms and

conditions of employment must comply with the legislative stipulation that is made by or pursuant to section 149C?

MR JACKSON:   Well, your Honour, that is the case; there is no question but that that is the case.  If it were not that, the issue does not arise.  What we do say about it, though, is that by introducing a provision of that kind into a context in which there are persons who have judicial on the one hand and non‑judicial functions on the other, the direction given to those persons to exercise the non‑judicial functions in that way, in the way they are prescribed, is something that has the result of blurring the distinction that might otherwise exist between the two bodies that arises because of their structure and composition and does so in a way that does not satisfy or fails the relevant test.  Your Honours, those are our submissions.

FRENCH CJ:   Thank you, Mr Jackson.  The Court will reserve its decision.  The Court adjourns until 10 o’clock tomorrow morning.

AT 3.05 PM THE MATTER WAS ADJOURNED