Appeal against a decision of the Commission given on 17 January 2011 in matter no. PSACR 26/2008

WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

FULL BENCH

CITATION : 2011 WAIRC 00332

DELIVERED : friday, 13 May 2011

FILE NO. : FBA 2 OF 2011

Appellant

AND

Health Services Union of Western Australia (Union of Workers)

Respondent

ON APPEAL FROM:

Jurisdiction : Public Service Arbitrator

Coram : Commissioner J L Harrison

Citation : [2011] WAIRC 00039; (2011) 91 WAIG 259

File No : PSACR 26 of 2008

CatchWords : Industrial law (WA) - Jurisdiction of Public Service Arbitrator - Construction of s 80E(1) and s 80E(2)(a) of the Industrial Relations Act 1979 (WA) - Principles that apply to pre-contractual representations considered - Arbitrator erred in construing express terms of contract of employment of a government officer - Industrial matter before the Arbitrator raised not only the express terms of contract of the employment but whether the appellant had acted in a manner that was fair, just or reasonable.

Legislation : Industrial Relations Act 1979 (WA) s 23, s 26(1)(a), s 29(1)(a), s 29(1)(b)(ii), s 44, s 44(1), s 44(9), s 49, s 49(5)(c), s 49(6a), s 80E(1), s 80E(2), s 80E(2)(a), s 80I(1)(b), s 80I(1)(c), s 80L(1).

Result : Decision at first instance suspended and remitted to the Arbitrator

Representation:

Counsel:

Appellant : Mr R J Andretich (of counsel) and with him Mr J Misso (of counsel)

Respondent : Mr D H Schapper (of counsel)

Solicitors:

Appellant : State Solicitor's Office

Respondent : Derek Schapper

Case(s) referred to in reasons:

Belo Fisheries v Froggett (1983) 63 WAIG 2394

Carello v Jordan [1935] QSR 294

Chief Executive Officer, Department of Agriculture and Food v Ward & Wall [No 1] [2008] WAIRC 00079; (2008) 88 WAIG 156

Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337

Director-General Department of Justice v Civil Service Association of Western Australia Inc (Jones) [2005] WASCA 244; (2005) 149 IR 160

Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41

Perth Finishing College Pty Ltd v Watts (1989) 69 WAIG 2307

Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45

Waroona Contracting v Usher (1984) 64 WAIG 1500

Reasons for Decision

SMITH AP:

The Appeal

1          This is an appeal to the Full Bench pursuant to s 49 of the Industrial Relations Act 1979 (WA) (the Act) against a decision of the Public Service Arbitrator given on 17 January 2011 in PSACR 26 of 2008: [2011] WAIRC 00039.  The order appealed against is an order requiring the appellant to pay Mr Edward Scull, one of the respondent's members, an increase in salary. 

2          The respondent's member is an employee of the appellant who is employed as the head of the Department of Medical Engineering and Physics at Royal Perth Hospital.  Mr Scull was appointed to the position on 23 December 2002.  It is common ground that the terms and conditions of his employment are set out in a common law contract of employment.  His salary commenced at $126,622 with $1,892 by way of a professional expenses allowance, and his conditions of service were to mirror the Hospital Salaried Officers Award 1968 (No 39 of 1968) (the Award) and the Hospital Salaried Officers Metropolitan Health Services Enterprise Agreement 2001 (the 2001 Agreement) and any subsequent industrial agreement.  Whilst the appellant's representative, (Mr Stephen Seeds, who was at that time the Manager of Human Resource Services and Industrial Relations at Royal Perth Hospital) and Mr Scull agreed in correspondence that Mr Scull's salary would be maintained by percentage in respect of any increases in rates in the Award or industrial agreement, following a work value review of positions that reported to him a dispute arose as to whether Mr Scull was entitled to, or should be entitled to, further increases in remuneration to maintain relativity with those positions.

3          The matter came before the Commission in an application for a compulsory conference under s 44 of the Act.  As the matter was not resolved by conciliation, the matter was referred for hearing and determination and as required by s 44 a memorandum of matters referred for hearing was issued by the Commission on 23 June 2010.  For the purposes of this appeal, it is important to set out the memorandum in full which was as follows:

1. The applicant claims that the respondent has acted in a manner which is not fair, just and or reasonable by refusing to award an increase in remuneration for the position of Head of the Department of Medical Engineering and Physics at Royal Perth Hospital (Post number: 103229) ('the position') occupied by Mr Edward Scull consequent upon the respondent implementing outcomes of the Health Professions Work Value Review ('the HPR') to the position, pursuant to the provisions of the Hospital Salaried Officers Metropolitan Health Services Enterprise Agreement 2001 (PSAAG 1 of 2002) ('the Agreement').

2. The applicant seeks the following orders:

(a) THAT the recognised value of the position of Head of the Department of Medical Engineering & Physics at Royal Perth Hospital (Post number: 103229) be restored to and maintained at its value in the Hospital Salaried Officers Metropolitan Health Services Enterprise Agreement 2001 and peer professions at the time Mr Scull accepted appointment to the position.

(b) THAT salary levels foreshadowed in Column 3, (headed '(3) Salary claimed') of the Table included on page 2 of the report 'Head of Department Medical Physics Royal Perth Hospital – Review of Remuneration' Ref RSD8800 dated 2 September 2009, be implemented as being those applicable to the position of Head of the Department of Medical Engineering & Physics at Royal Perth Hospital (Post number: 103229).

3. The respondent denies that there is any basis for the relief claimed on behalf of Mr Scull and argues that the application be dismissed.

CONTENTIONS

4. The applicant contends as follows:

(a) Mr Scull was appointed to the position under a Contract of Service dated 2 October 2002 at a salary commensurate with an undertaking given at interview that the position would be remunerated at a level equivalent to that of the previous incumbent.

(b) The offer of appointment to the position was accepted on an understanding between Mr Scull and the respondent that:

(i) the conditions of service and salary increases of the position would mirror those applied to the Hospital Salaried Officer's Award 1968 (No 39 of 1968) ('the Award') and would be implemented in a manner consistent with its application to other specified callings; and

(ii) any variations under the Award applicable to the post of Head of the Department would be equally applicable to Mr Scull's position as the incumbent of that post; and

(iii) the recognised value of the position at appointment would be maintained with respect to the Award and its peer professions.

(c) The respondent has not acted in accord with the contract of service in relation to implementation of the HPR review that was conducted pursuant to the provisions of the Agreement.

5. The respondent contends as follows:

(a) By letter dated 9 December 2002 the respondent offered Mr Scull the position on the following terms which are material to this application:

(i) '… offer is to be made with conditions of employment that mirror those prescribed in the Hospital Salaried Officers' Award No. 39 of 1968 and the Hospital Salaried Officers' Metropolitan Health Service Employment Agreement and any subsequent agreement.'

(ii) The commencing salary was $126,622 plus a professional expenses allowance of $1892.

(iii) Mr Scull's commencement date in the position was 2 October 2002.

(b) The Contract of Service between Mr Scull and the respondent stated:

'Conditions of service and salary increases are award free but to mirror the Hospital Salaried Officers' Award No. 39 of 1968 and the Hospital Salaried Officer's Metropolitan Health Service Enterprise Agreement 2001 and any subsequent agreement.'

(c) Under cover of a memo dated 23 December 2002 Mr Scull accepted the above offer and sought clarification in respect to a number of matters including, relevantly, his understanding that his remuneration would be 'maintained by percentage' in respect to any material variations to the Award or the Agreement.

(d) By memo dated 6 January 2003 the respondent acknowledged Mr Scull's acceptance of the offer and advised him that the offer did not include an automatic adjustment to his remuneration following a material change to the Award or the Agreement to maintain the relativities existing at the time of appointment however, should positions that report to his 'be reclassified or receive additional remuneration' and Mr Scull be of the view that this has resulted in a significant increase in work value for his position he could seek to renegotiate his contract.

(e) The Order made by the Commission in application P18 of 2003 did not provide for any increase in remuneration for positions of Mr Scull's level of classification nor did it, in accordance with the terms of his employment, give rise to an entitlement to any increase in remuneration.

(f) The position occupied by Mr Scull, although not initially classified, has subsequently been classified as being at Level 11 under the Award at the time of his appointment and at Level 12 HSU following an assessment carried out in or about May 2009 in the context of the HPR.

(g) There was no occasion to increase the remuneration of Mr Scull following the HPR as he has always been paid in excess of the level of classification of the position he occupies and that remains the current position.

(h) The respondent considered Mr Scull's request that his remuneration be renegotiated and rejected it on 5 October 2009.

(i) The respondent denies that there is any basis for the relief claimed on behalf of Mr Scull and asks for the application to be dismissed on the following grounds:

(i) If the applicant's claim is based upon contract there is no jurisdiction for the Public Service Arbitrator to entertain it pursuant to s 29AA(4) of the Industrial Relations Act 1979 ('the Act'), as the Contract of Service between the respondent and Mr Scull was 'award free' and the remuneration of Mr Scull has always exceeded the prescribed amount in s 29AA(5) of the Act.

(ii) Further and in the alternative:

aa. if an industrial instrument applies to Mr Scull's employment for the purposes of s 29AA(4) of the Act, the Award and the Agreement have settled the industrial matter regarding the appropriate salary levels for health professionals employed by the respondent;

bb. if it is alleged that the respondent has not met the terms of the Award or the Agreement, or any subsequent agreement, or an order of the Commission, the appropriate forum in which to apply for enforcement of these industrial instruments is the Industrial Magistrate's Court.

cc. the appropriate level of classification of Mr Scull's position under the Award and the Agreement was properly determined following the HPR and that level of classification is not in dispute; and

dd. the respondent has always paid Mr Scull more than the remuneration for this level of classification.

(iii) Further and in the alternative, if the Public Service Arbitrator has jurisdiction to entertain a claim based upon the Contract of Service between the respondent and Mr Scull, the respondent has not breached the Contract of Service and there is no basis for the relief claimed by the applicant.

4          Prior to the hearing of the matters in dispute the parties filed an agreed statement of facts which provided as follows:

1 The conditions of service and salary increases defined in the Contract of Service provided by the Hospital for the position No.103229, Head of Department of Medical Engineering & Physics ('the position') were described as 'Award free' but were to 'mirror the Hospital Salaried Officers Award No.39 of 1968 ('the Award') and the Hospital Salaried Officer's Metropolitan Health Service Enterprise Agreement 2001 ('the Agreement') and any subsequent agreement."

2 The present occupant of the position, Mr Edward Scull ('the incumbent') was appointed to the position on 2 October 2002 at a commencing salary of $126,622 plus $1892 (Professional Expenses Allowance).

3 As a result of work conducted in relation to the Agreement the parties pursuant to application P18 of 2003 sought to amend the Award to reflect increases in the work value of health professions in what are commonly referred to as 'specified callings'.

4 On 24 November 2005 the incumbent made application to the Hospital to have a salary adjustment applied to the position in consideration of the outcome of the Health Professions Work Value Review ('the HPR') as it applied to the position.

5 On the 12 May 2009 the incumbent was advised that:

The review of the position occupied by Mr Scull (Head of Department, Medical Engineering and Physics, Royal Perth Hospital) was finalised and the employer (has) determined that;

(a) the classification of the position be regarded as Level 11 HSU at the time of the appointment of Mr Scull in 2002, and also that

(b) the current classification level, based on work value increases which applied to the Health Professions Work Value Review, be Level 12 HSU.

6 The Health Industrial Relations Service advised the Chief Executive, South Metropolitan Area Health Service in a report (Ref: RSD8800) dated 2 September 2009 of the substance of the claim for review of remuneration of the position and recommended that 'the claim be rejected'.

7 On the 5 October 2009 the Applicant and the incumbent were advised that:

The Area Chief Executive Officer, South Metropolitan Area Health Service has given consideration to your (ie. the incumbent's) request for the renegotiation of your remuneration, in light of the Health Professional Review, and has determined that the claim be rejected.

5          After hearing the evidence and the parties the Public Service Arbitrator made the following order:

1. THAT the salary of the position of Head of Department, Medical Engineering and Physics (position number 103229) at Royal Perth Hospital held by Mr Edward Scull be increased to reflect the relativity of this position to other senior positions within the Department of Medical Engineering and Physics at the level it was when Mr Scull commenced employment in the position.

2. THAT the salary levels contained in Column 3 of the table in the Internal Memorandum to the Chief Executive South Metropolitan Area Health Service from Mr Gregory dated 2 September 2009 be applied to the position of Head of the Department, Medical Engineering and Physics at Royal Perth Hospital held by Mr Scull.

Applicant's Evidence

6          Mr Scull gave evidence in a witness statement and orally.  He was interviewed for appointment to the position on or about 26 June 2002.  At that time he was acting in the position and he was aware that the salary applying to the post and its incumbent, Dr Richard Fox, was linked to the relevant Australian Medical Association (WA) Incorporated (AMA) Industrial Agreement and any movements in the salary of the position would match those of the relevant AMA industrial instrument.  Mr Scull was also aware that Dr Fox was employed on an individual contract.

7          On 25 July 2002 Mr Scull was advised his application for the position had been unsuccessful and the position had been offered to another person.  Shortly thereafter, Mr Scull was advised that the person to whom the position had been offered had not accepted and the hospital made Mr Scull a provisional offer of appointment to the position.  On 7 August 2002 Mr Scull wrote to the appellant's representative, Dr Phillip Montgomery, the Acting Director of Clinical Services, that he intended to accept the position and that he understood that the terms and conditions of employment offered to him would reflect advice given to him at his interview that the position would remain as a clinical staff appointment with the conditions of service for the position being equivalent to that of the previous incumbent.

8          On 26 August 2002 Mr Scull was informed that a formal contract for the position could not be offered to him at that stage because an appeal of the process had been lodged.  At the same time he was informed that it had been determined that in the position he would receive a permanent allowance to Level 12 of the Award and the 2001 Agreement, his remuneration was to be $92,921 and his conditions of service were to be as per the Award and as such, any relevant award increases would also be applicable.  This was different to what Mr Scull had been offered during his interview.  Mr Scull testified that it was evident during the interview that the conditions of appointment agreed to by the committee, including the salary and conditions of service of the appointee, and the continued recognition of the appointee as having clinical staff status and retention of the position within the clinical divisional structure of the hospital, were a measure of the value placed on the position by the hospital, at that time.

9          On 2 October 2002 Mr Scull was notified that the appeal against his appointment to the position had been unsuccessful and he was offered the position.

10       On 3 October 2002 Mr Scull received an offer of appointment which was made in accordance with the provisions of the Award and the 2001 Agreement.  The offer indicated the classification level for the post was to be Level 10 with a permanent personal allowance to Level 12 ($92,921).  Level 10 was the same level as his substantive position as senior bioengineer and so Mr Scull saw this as a substantial reduction in the value and the standing of the position.  When Mr Scull was acting in the position he was paid $92,921 (Level 12.1) by means of a higher duties allowance of $11,818 per annum, and the fact that he was being paid a higher duties allowance suggested to him that the classification of the position was at least Level 12, which was contrary to the offer made to him on 3 October 2002.

11       Mr Scull met with the Chief Executive Officer, Mr Glen Palmer, the Director of Clinical Services, Dr William Beresford and the Deputy Director of Clinical Services, Dr Phillip Montgomery, on 21 October 2002 to discuss the contract offered to him.  During this meeting it was agreed that the terms of his offer of appointment would be amended to reflect what was offered to him during his interview, namely conditions of service equivalent to those of the previous incumbent.

12       Importantly, Mr Scull prepared a summary of events prior to and post his appointment to the position, containing information relevant to his appointment and his terms and conditions of appointment.  The last entry in the document was made in early November 2002.  This document was provided to the appellant's representative in early November 2002 which was prior to the acceptance by Mr Scull of the final offer of appointment to the position.  In the summary under the heading 'Expectation' Mr Scull stated as follows:

As there has been;

1. no change to the duties and responsibilities of the position,

2. no indication in advertising and information relevant to the post, that it would be otherwise and

3. because of assurances given at interview, to myself and others, [my emphasis]

it is expected that appointment will be to a permanent post with salary and conditions commensurate with (ie. equivalent to) the previous incumbent.  It is further expected that;

1. the appointment is to be to a substantive position commensurate with the salary and conditions of the post.
2. the post is linked to the AMA Industrial Agreement 2002 as per the previous incumbent,
3. the relativity of the post with respect to other senior scientific, physics and engineering posts under the HSOA Award is protected within the arrangement.
4. the post will not be subject to a probationary requirement in view of previous service to the Hospital and extensive experience, acting in the post.
5. the appointment will be backdated to the date at which the post was vacated and at which the acting appointment was assumed OR there is an assurance that the salary paid for the acting period is at the level of appointment and back paid accordingly.
6. that the post to which the HOD is responsible is defined in the contract. (preference is that this resides with the Director of Clinical Services responsible for the Surgical Division.)
7. that the appointee will accept election to the Clinical Staff Association when offered.

13       On 9 December 2002 an amended contract was sent to Mr Scull.  The offer did not specify the classification of the position.  Mr Scull received the offer on 20 December 2002.

14       The letter which contained the contract of service dated 9 December 2002 expressly stated as follows (formal parts omitted):

On behalf of the Metropolitan Health Services – Royal Perth Hospital, I am pleased to advise that your application for the position of Head of Department was successful and subsequently wish to make the following offer of appointment and salary increase.

This offer is to be made with conditions of employment that mirror those prescribed in the Hospital Salaried Officers' Award No. 39 of 1968 and the Hospital Salaried Officers' Metropolitan Health Service Enterprise Agreement 2001 and any subsequent agreement.

The attached sheet provides details of your contract of service.

Under this contract of employment you will be initially located at Royal Perth Hospital, Wellington Street Campus or Shenton Park Campus.  However, as an employee of the Metropolitan Health Services, you may be required to work at other sites should the need arise.  Any variation to hours worked will be as per the Hospital Salaried Officers' Award No. 39 of 1968 and the Hospital Salaried Officers' Metropolitan Health Service Enterprise Agreement 2001.

Royal Perth Hospital is an accredited organisation that strives to maintain high standards in all areas.  Therefore regulations are laid down in order that efficiency and sound practices are sustained.  In each Department/Division there are copies of the following documents:

• RPH Hospital Policies and Procedures Manual
• Public Sector Code of Ethics
• Metropolitan Health Service Code of Conduct

It is your responsibility to ensure that you are familiar with the instructions contained therein and abide by them as part of your contract of employment.

It is a requirement for all staff to carry out all their lawful duties.  If for any reason you are either unable or unwilling to perform all of your duties, the performance of some of your duties will not be acceptable.  You will not be paid any salary until such time as you perform all of your duties, unless you are otherwise specifically authorised in writing by the Director of Surgical Division.  This, of course, does not apply to non-performance of duties whilst on approved leave from the workplace.

Please sign where required to confirm the acceptance of your contract and return the signed documents immediately to Human Resource Services.

We would like to take this opportunity to congratulate you on your appointment to the position, and hope you find your role both interesting and enjoyable.

15       Dr Montgomery explained to Mr Scull that under the revised offer, his conditions of service had to be award free because the salary offered was in excess of the salary range prescribed under the Award at that time and by 'mirroring' the Award and the 2001 Agreement that for all intents and purposes the conditions under the Award and the 2001 Agreement would apply to Mr Scull's appointment and this was in lieu of writing an individual contract for the position as provided to the previous incumbent.

16       Mr Scull testified that he accepted the appointment on 23 December 2002 in accordance with the amended offer dated 9 December 2002.  However due to a lack of detail provided within the contract, he sought to clarify a number of issues that were the subject of discussion prior to the offer of appointment.

17       In a memorandum dated 23 December 2002 Mr Scull wrote to Mr Seeds as follows (formal parts omitted):

Please find enclosed a signed copy of the amended contract, dated 9th.December (sic), accepting the offer of appointment to the post of Head of Department of Medical Physics, Royal Perth Hospital.

I also include, for the record, a copy of correspondence recently sent to the Chairman of the Clinical Association Executive, accepting their invitation to become a full member of the Clinical Association of Royal Perth Hospital.

In accepting the appointment as Head of Department, I wish to clarify matters related to the contract which were discussed prior to the offer; (sic)

1. It is my understanding that the conditions of service and salary increases related to the post are 'award free' but that they mirror (ie, are the same as) as the Hospital Salaried Officers Award No39 of 1968 and the current Hospital Salaried Officers Metropolitan Health Service Enterprise Agreement 2001 and any subsequent agreement.

2. I understand that by 'any subsequent agreement' this will include any further Enterprise Agreements between the HSOA and the MHS and any amendments or variations struck within the agreement(s) or outside the agreement(s) that relate to the professions represented under the Award, including Medical Physicist, Biomedical Engineer and Bioengineer.

3. I understand that the relativity of the Head of Department post will be maintained by percentage with respect to any variations subsequently agreed under 2 above unless otherwise negotiated.

4. I understand that it will be in my interest to check that the Head of Department post is included in any variations that occur as a result of the above.

5. It was my understanding that the previous Head of Department was eligible to apply to the Clinical Staff Education Fund for assistance to attend conferences, seminars etc..  I will assume that this is to continue, unless otherwise informed, and I would seek your advice as to who will advise the Fund in this regard.

6. The previous incumbent of the HOD post made applications for leave through a 'consultant staff' application authorised by the Director of Clinical Services (DCS).  It is proposed to adopt the normal staff leave application, to be authorised by the DCS or the Deputy DCS, which ever is responsible for Surgical Division, unless otherwise instructed.

18       Mr Seeds responded to Mr Scull in a memorandum dated 6 January 2003 as follows (formal parts omitted):

Thank you for your memorandum, and the enclosure of your signed copy of your contract accepting the position of Head of Department of Medical Physics, Royal Perth Hospital.  Consequentially, I would like to take this opportunity to clarify the matters that were discussed prior to the offer, that you have raised in your memorandum in relation to your permanent appointment.

I refer to your memorandum dated, 23 December 2002, and agree with your understanding of points one and two, and note that they have been reflected in your appointment letter and contract.

In response to the point number three, it is important to note that there is no automatic adjustment to salary as a result of internal changes in relativities.  Should positions that reports (sic) to yours be reclassified or receive additional remuneration, and you are of the view that this has resulted in significant increase in work value for your position then you will be free at that time to renegotiate your contract of service with the Hospital.  You will however be entitled to any salary increments that are generally applicable to the HSOA MHS Enterprise Agreement.

In relation to point number four, the Hospital has entered into the system all increases that are due under the current HSOA MHS Enterprise Agreement, which will be granted to you.  However, as explained as future Enterprise Agreements increases are unknown it was agreed as a 'salary check' that you would monitor any increases to ensure that they flowed to you.

In relation to point number five.  You are eligible to apply to the Clinical Staff Education Fund (CSEF) for assistance to attend conferences, seminars, etc., this is by virtue of your acceptance as a member of the Clinical Association, a decision which was made at the Clinical Association Executive meeting held in October 2002.  Ms Marion Schultz, Administrative Assistant will notify Dr Philip Montgomery, who is the Chairman of CSEF.

For your information, please note that your applications to the CSEF will need to be made on the appropriate forms, and each and every application will be judged individually in accordance with CSEF Guidelines, the same as for every other consultant staff member.  The forms and more information are available on Servio, under Clinical Services.

Lastly, in relation to point number 6, a new process is to be implemented.  It has been decided that leave application approval process is to be authorised by the Director of the Surgical Division, as this is where the Head of Department position functionally reports.  However, the Deputy Director of Clinical Services can authorise the application in the absence of the Director of the Surgical Division.

Should you have any questions in relation to any of the matters clarified in this memorandum, please do not hesitate to contact me on [telephone number].

19       Mr Scull responded to that memo from Mr Seeds in an email sent on 8 January 2003 which provided as follows (formal parts omitted):

thanks for your correspondence dated 6th.January re appointment of Head of Department.

I note your response to point three (your paragraph 3) which seems to have missed the point I was hoping to make.  On review, I may not have been clear in my intent.

I wished to make the point that the position of Head of Department, while being a senior management post is also a senior scientific/engineering post within the Department with duties, included in the JDP, which relate to the conduct of scientific investigations, research and development.

Accordingly I would expect that, if there were to be a review of class positions in (or related to) the Department (eg. Medical Physicists, Scientists or Engineers), the position of Head of Department would be included in such a review, to be considered on merit related to changing work value, etc..  I would not expect the position of HOD to be set aside from such a review, if it eventuated, on the basis that the position is purely a management post and is therefore not part of the physics/engineering team.

I trust this makes the point more succinctly and I would value your response.

20       Mr Seeds then responded to Mr Scull's email on the same date (formal parts omitted):

Thank you for clarifying this matter as I did misunderstand it.

If there were to be a review of class positions in (or related to) the Department (eg. Medical Physicists, Scientists or Engineers) I think that it would be appropriate to look at the HOD positions if the positions being reviewed are at the top tier level of the Depts organisation structure as there may be some impact on the HOD position

So I do not disagree with your sentiments

21       Mr Scull testified that as a result of the final email received from Mr Seeds that he understood that if there was to be a general movement in classification or remuneration of senior staff within the department, that the head of Department position would be considered under the same conditions applying to those arrangements.  He said, however, that this did not happen.  As a result of the assurance that he received from Mr Seeds in that exchange, on 24 November 2005 he lodged a request to have his remuneration adjusted in a manner commensurate with adjustments made to other specified callings in the department as a result of the Health Professional Work Value Review conducted in accordance with the 2001 Agreement.

22       The Health Professional Work Value Review sought to amend the Award to reflect significant increases in the work value of health professionals in what are referred to as 'specified callings' classifications and the subsequent reclassification of positions in recognition of work value changes (application P 18 of 2003: [2006] WAIRC 03473; (2006) 86 WAIG 34).

23       Mr Scull claimed that the appellant's rejection of his claim to have his remuneration adjusted in respect of the Health Professional Work Value Review is inconsistent with the previous decision to award an outcome based on work value change in respect of his position and this was unfair and has resulted in a substantial reduction in the value of his position.  He also contended that this was contrary to the basis upon which he accepted his appointment to the position whereby the value of the position would retain its relativity to other senior scientific, physics and engineering posts under the Award.

24       Importantly, when cross-examined.  Mr Scull:

(a) agreed that not all the expectations included in the summary of pre and post appointment discussions for the position were met; and

(b) said that the offer he signed on or about 23 December 2002 together with the subsequent correspondence he had with Mr Seeds about the terms of contract constituted the terms under which he could accept appointment to the position.

The Respondent's Evidence

25       Mr Seeds gave evidence by way of a witness statement and orally.  Mr Seeds stated that the advertisement for the position stated the salary was negotiable up to $107,000 per annum plus salary packaging dependant on qualifications and experience.  The essential selection criteria for the position was drafted to make it available to either applicants with a Bachelors degree in physics, engineering or similar qualifications or a medical degree.

26       Mr Seeds became directly involved in the process of appointing Mr Scull to the position at the point in time when the contract of service was being finalised.  Some time in August 2002 Mr Seeds prepared a memorandum to Dr Montgomery advising him of the basis for the salary at which the position was advertised.  He recommended to Dr Montgomery that in finalising the new contract of service with Mr Scull, the position be classified below Level 12 of the Award whilst maintaining a personal remuneration to Mr Scull of a Level 12 salary.  The remuneration offered to Mr Scull was at Level 12 of the 2001 Agreement as he was not a medical practitioner and this rate of pay was the highest classification available under the 2001 Agreement.  Mr Seeds also said that Mr Scull's classification and remuneration in comparison to other non-clinicians was significantly higher, with other more senior heads of Department who were remunerated at Level 10 under the 2001 Agreement.

27       After Mr Scull rejected the offer made to him on 3 October 2002 on the basis that Dr Fox had been paid a significantly higher remuneration under the AMA award and following discussions within the hospital; and after considering Mr Scull's representations in relation to his salary; Mr Seeds was instructed by the Director of Clinical Services and the Deputy Director of Clinical Services to issue a revised contract to Mr Scull which included a rate of pay in excess of the salary scales provided for in the 2001 Agreement. 

28       Mr Seeds drafted Mr Scull's contract of service to state that future salary increases would be award free but would mirror the Award and the 2001 Agreement so that Mr Scull would receive a salary in excess of the salary scale provided for under the 2001 Agreement as well as the prescribed percentage increases in salary rates that were payable at prescribed dates under the 2001 Agreement.  Mr Seeds provided a revised letter of appointment to Mr Scull and a revised contract of service.  Mr Scull signed a copy of the contract and returned it on 23 December 2002.

29       Mr Seeds testified it was not his intention for Mr Scull's contract to provide that the relativity between Mr Scull's position and positions classified under the Award would be automatically maintained so he reiterated in the email exchange that the only automatic increases in Mr Scull's salary which the hospital had agreed to would be general periodic adjustments across all salary rates as provided for under the Award and the 2001 Agreement.  In accordance with this agreement all of the percentage increases applicable under the Award and the 2001 Agreement and subsequent industrial agreements were applied to Mr Scull's salary over the course of his employment in the position.

30       Mr Seeds said that when he received the memorandum from Mr Scull dated 23 December 2002 he was surprised and puzzled about the content of point 3 in Mr Scull's memorandum because as far as he was aware the prospect of maintaining relativity between the position and positions under the 2001 Agreement was not a term of Mr Scull's contract with the appellant.  Nor was he aware that this issue was discussed at any point by the hospital's officers in the negotiations about Mr Scull's contract.  Mr Seeds considered the wording of his response very carefully as he considered it to be material to the way in which Mr Scull's contract of service with the appellant would be interpreted and applied by both parties.  After Mr Scull sought further clarification that the position would be included in any review of the classification of positions such as Medical Physicist, Scientist or Engineer within or related to the department in the email dated 8 January 2003, Mr Seeds in a return email confirmed that it would be appropriate to consider the position as part of any such classification review, should such a review occur.  Mr Seeds said that the hospital was of the view that Mr Scull's salary should be reviewed if the classification of all or some of the staff that reported to Mr Scull changed drastically, for example, if the reclassification of subordinate staff meant that they were to earn salaries equivalent to Mr Scull's salary this would clearly be inappropriate from a human resource management perspective.

31       The appellant rejected Mr Scull's request, set out in a letter dated 24 November 2005, that his position be granted a number of salary increases to maintain relativity in line with the Health Professional Work Value Review.  A memorandum addressed to Mr Scull dated 10 July 2006, signed by Dr Montgomery, was sent to Mr Scull in which Mr Scull was informed that the 17.28% salary adjustment sought was not in accordance with the terms of his contract with the appellant and that the explanatory memorandum Mr Seeds sent to Mr Scull on 6 January 2003 confirmed that the Health Professional Work Value Review did not apply to Mr Scull's position.

32       The work value of Mr Scull's position was however later reviewed by Mr Tony Pepper, a consultant at Austral Training and Human Resources.  As a result of the review Mr Scull's position was reclassified at a Level 12 position under the Health Services Union - WA Health State Industrial Agreement 2008 (the 2008 Agreement).  Mr Seeds said that the classification of this position was consistent with the classification of the position of head of Department, Medical Technology and Physics Department at Sir Charles Gairdner Hospital.  However no adjustment was made to Mr Scull's remuneration as Mr Scull was being paid in excess of the remuneration for a Level 12 professional officer under the 2008 Agreement.  Mr Scull was therefore advised on 5 October 2009 that his request to renegotiate his remuneration in light of the Health Professional Work Value Review was rejected.

33       Mr Seeds said that following the review and reclassification of Mr Scull's position the decision was made not to adjust Mr Scull's remuneration as his current salary was considered appropriate.  Mr Scull had received all salary increases generally applied to the rates under the Award, the 2001 Agreement and the 2008 Agreement and his current salary is $182,557, which exceeded the amount provided under the salary scales of the 2008 Agreement.  The 2008 Agreement provides a salary range for a Level 12 from 1 July 2010 from $130,554 to $140,358.

34       When cross-examined, Mr Seeds conceded that he did not attend Mr Scull's interview for the position, nor was he involved in discussions with anyone at the hospital about the terms of Mr Scull's contract at the time of the interview.

35       Mr John Ross also gave evidence on behalf of the appellant.  Since 2004 Mr Ross has been employed in the WA Health Department Industrial Relations Service as a Senior Industrial Relations Consultant.  In 2008 he was appointed to the position of Principal Industrial Relations Consultant.  Between 2004 and 2010 Mr Ross project managed the Health Professional Work Value Review. 

36       Mr Ross gave evidence that as Mr Scull's position was not within the scope of the Health Professional Work Value Review claim, the working party did not review Mr Scull's position or his contract of employment within that inquiry.  Mr Ross said that Mr Scull's position was anomalous, as the salary for the position was in excess of the salary applicable to the position under the 2001 Agreement.  Mr Ross stated that as with all anomalous positions if it had been within the scope of the Health Professional Work Value Review claim, Mr Scull's position would have been referred to the Classification Review Committee with a recommendation that it be placed on salary maintenance, for a determination as to whether or not any future salary increases in the Award or the relevant agreement would apply, until such time as the salary for Level 12 positions under the relevant agreement reached the salary currently paid to Mr Scull.

Reasons for Decision of the Public Service Arbitrator

37       The increase in pay sought by Mr Scull was in addition to the increases paid to him which were in line with general wage increases given to employees covered by the Award and the industrial agreements.  The Public Service Arbitrator characterised the issue in dispute between the parties as whether Mr Scull's contract of employment with the appellant provides that Mr Scull's salary should be increased by an average of the percentage of pay increases awarded to senior staff in the department that report to Mr Scull as a result of the Health Professional Work Value Review, in order to retain the relativity of the position to other peer professions.

38       The Public Service Arbitrator held that the task before the Commission was to determine the terms of the contract of employment and to ascertain whether the claim constituted a benefit which has been denied under the contract of employment, having regard to the obligation on the Commission to act according to equity, good conscience and the substantial merits of the case.  When characterising the industrial dispute before her as a dispute about the terms and conditions of contract, the Public Service Arbitrator referred to a number of decisions which establish principles to be applied by the Commission when considering claims of contractual benefits under s 29(1)(b)(ii) of the Act:  Belo Fisheries v Froggett (1983) 63 WAIG 2394; Waroona Contracting v Usher (1984) 64 WAIG 1500; Perth Finishing College Pty Ltd v Watts (1989) 69 WAIG 2307.

39       The Public Service Arbitrator found that terms of Mr Scull's contract of employment were contained in the following documents:

(a) Letter of appointment dated 9 December 2002;

(b) Contract signed by Mr Scull on or about 23 December 2002;

(c) The memoranda and emails exchanged between Mr Seeds and Mr Scull between 23 December 2002 to 8 January 2003.

40       The Public Service Arbitrator observed that the memoranda and emails referred to in (c) arose as a result of the terms of the contract being unclear and silent on a number of conditions relevant to Mr Scull's appointment to the position and were conditions that Mr Scull had discussed and reached agreement with the appellant prior to accepting appointment to the position.

41       The Public Service Arbitrator found that during discussions between Mr Scull and the appellant's representatives that occurred prior to the final contract and letter of appointment being given to Mr Scull, an agreement was reached that the salary, status and other entitlements associated with the position would equate to the conditions of employment of the incumbent in the position whose contract was linked to a classification under the AMA award.  The Public Service Arbitrator also found that she accepted Mr Scull's evidence that as part of these discussions, Mr Scull had reached an agreement with the appellant's representatives that the status of the position would be maintained which included maintaining the relativity of the salary of the position with respect to other senior positions within the department if work value reviews of those senior positions resulted in salary increases.

42       Also of importance, the Public Service Arbitrator made a finding that the summary prepared by Mr Scull and submitted to the appellant in early November 2002 was not a document that was part of pre-contractual negotiations between Mr Scull and the appellant's representatives which should be disregarded.  Instead she found that the summary contained a record of what had been clarified and agreed between the parties prior to Mr Scull accepting appointment to the position.  In particular, the Public Service Arbitrator found that the statement in the summary that it was expected that 'the relativity of the post with respect to other senior scientific, physics and engineering posts under the HSOA Award is protected within the arrangement' reinforced Mr Scull's understanding that he had an agreement with the appellant's representatives that the relativity of any salary increases of senior positions to the position by way of work value increases would be retained when he signed the contract.

43       The Public Service Arbitrator then had regard to the uncontradicted evidence that:

(a) on 24 November 2005 Mr Scull had asked the appellant's representatives to adjust the relativity of his salary with respect to other senior positions within the department in consideration of the outcome of the Health Professional Work Value Review;

(b) After the application was lodged in the Commission on 23 September 2008 the appellant's representatives arranged for a review of the work value of the position to be undertaken, as it was award free and not linked to any classification in the Award;

(c) After a classification review report was completed in March 2009 the appellant determined that the classification of the position was at Level 11 when Mr Scull was appointed to the position and based on work value increases to the position, the position should now be classified as a Level 12 position.  However, the appellant determined that Mr Scull's remuneration was higher than that of a Level 12 employee under the relevant industrial agreement and rejected Mr Scull's claim for an increase to his salary.

44       After having regard to this evidence the Public Service Arbitrator found that:

(a) Mr Scull was not entitled by the terms of the memorandum dated 6 January 2003 to have his salary automatically adjusted as a result of work value changes to positions that reported to Mr Scull and was dependent on work value changes to Mr Scull's position;

(b) At that time Mr Seeds accepted the proposition put to him by Mr Scull that if internal relativities with respect to senior positions within the department changed and the value of work of the position increased then Mr Scull could renegotiate his salary with the appellant; and

(c) As the value of the work required of Mr Scull's position had increased from a Level 11 to a Level 12; and

(d) The appellant through his representatives had agreed to retain the status of the position prior to Mr Scull's appointment to the position;

the salary of the position should be increased to reflect the relativity of the position to other senior positions within the department at the level it was when Mr Scull commenced employment in the position.

The Appellant's Submissions

45       Counsel for the appellant made a very strong submission on behalf of the appellant that the matter at first instance solely proceeded before the Public Service Arbitrator as a claim for contractual benefits.  In support of this contention the appellant's counsel took the Full Bench to an exchange between counsel for the appellant, the respondent and the Public Service Arbitrator at pages 4 – 5 of the transcript of the hearing at first instance.  Apart from an issue raised in respect of estoppel, the respondent's outline of submissions filed in the matter at first instance dealt with the respondent's claim in respect of Mr Scull solely on the basis as to whether the terms and conditions of Mr Scull's contract entitled him to the remuneration which was claimed.

46       The appellant says in its written submissions that the letter of offer dated 9 December 2002 made no mention of the salary specified in the offer being maintained at the same relativity to other senior positions as existed at the time of the appointment, or there being any right to a review of the remuneration payable.

47       The appellant says that when the documents which were found to constitute the contract of employment are examined, the finding at [91] of the Public Service Arbitrator's reasons for decision that the appellant had agreed to retain the status of the position prior to Mr Scull's appointment to the position was not a condition of Mr Scull's contract of employment was directly contrary to the content of the documents found to constitute the contract between the appellant and the respondent.  All that Mr Scull was entitled to if anything, is where senior scientific positions were reclassified, was the opportunity to renegotiate his contract where a significant increase in work value accrued to his position as the result of changes in work value in those senior positions that reported to him.

48       The appellant contends there was no evidence that an offer of employment was made that contained a term that the salary of Mr Scull would be maintained according to the relativities which existed at the time of his appointment to the salaries of those senior positions reporting to him.  Further, that the remuneration of Mr Scull's position was not related to any classification under the Award or industrial agreements.  Nor was there any provision which provided a right to increased remuneration.

49       At law, the appellant says that whatever may have been discussed during interviews those discussions are merely pre-contractual representations and are not admissible.  They are superseded by and merged in the contract itself.  Furthermore, pre-contractual representations can only become binding terms of the contract if they are promissory in nature:  Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 (352) (Codelfa).

50       The appellant says that neither party sought seriously to argue the claim should be determined as a matter of fairness and equity.  The appellant also says that such a claim did not appear in the papers and if the Full Bench is of the opinion that the matter should be determined on the basis of fairness and equity then as suggested by the respondent in their written submissions the matter should be referred back to the Public Service Arbitrator for further hearing and determination as the appellant had not put its case on that basis in any meaningful sense.

51       The appellant says that Mr Scull's entitlement under the contract was that his conditions to remuneration were to mirror those of the Award and industrial agreements and he received those general increases payable under these industrial instruments.  It was not as if his remuneration was stagnate that the terms of the Award and the industrial agreements applied to him in all respects except in relation to his remuneration.

52       In any event, the appellant says that for a person like Mr Scull to come to the Commission and ask for more when the Commission has issued an award and industrial agreement which settles the industrial matter of salary increases it is not open for Mr Scull to come back and ask the Commission to set a higher remuneration as a matter of contract or even as a matter of fairness and equity.

53       The appellant's counsel also made a submission that if there is to be a dispute about Mr Scull's remuneration that the Public Service Arbitrator's jurisdiction arises under s 80E(2) of the Act which allows the Public Service Arbitrator to allocate a salary to the post that the government officer occupies.  The appellant says that that allocation of salary to an office can only be allocated according to the industrial instruments that apply to that position and to the employee.  If the industrial instruments are applied, Level 12 is the highest level of classification which is the classification that the review produced for Mr Scull.  Consequently, the appellant says that the order made by the Public Service Arbitrator was contrary to s 80E(2) of the Act.  However, it is conceded by the appellant that the point that they wish to make in relation to s 80E(2)(a) is not raised in the appellant's ground of appeal.

The Respondent's Submissions

54       The respondent says the appeal should be dismissed on two grounds.  Firstly, the application to the Public Service Arbitrator was not an application under s 29(1)(b)(ii) of the Act to recover a benefit under a contract, but was an application made under s 44 of the Act and as such the Public Service Arbitrator in making the decision was not constrained by the express terms of the contract.  Secondly and in the alternative, the respondent says the Public Service Arbitrator correctly construed the terms and conditions of the contract of Mr Scull. 

55       In the event that the Full Bench is not persuaded by either of those arguments the respondent says the Full Bench should find that the Public Service Arbitrator has only determined the contractual position and if it is determined that she erred in law, then it follows that the discretionary merit of the aspect of the application remains undetermined and the decision of the Public Service Arbitrator should be suspended and the case remitted for further hearing and determination.

(a) The appeal misses the point

56       The respondent points out that the appeal is based on the sole ground that the Public Service Arbitrator at first instance failed to give effect to the terms of the contract between Mr Scull and the appellant.  It also points out that the application was made under s 44 of the Act and the matter in dispute was whether the refusal of the appellant to increase Mr Scull's remuneration as a result of the work value review of the position was 'a failure of good faith', unjust, or harsh, unfair and oppressive.  The respondent says that when one has regard to the particulars provided by the respondent and the outline of submissions filed by the respondent at first instance that whilst consideration of the matters in dispute necessarily involved determining the contractual position of the parties, proper disposition of those matters was not limited to giving effect to the contractual position.  For practical purposes the matter fell into two parts which required the Public Service Arbitrator to:

(a) determine whether the contract required an increase in Mr Scull's remuneration as a result of the reclassification; and

(b) if not, determine whether as a matter of merit, the equity, good conscience and substantial merits of the situation required an increase in Mr Scull's remuneration.  This required an exercise of discretion.

57       The respondent concedes that whilst there was some ambiguity and blurring between the two issues at first instance it is clear that both issues were before the Public Service Arbitrator for determination.  It is submitted that the Public Service Arbitrator has discretionarily determined the matter as a matter of merit unconstrained by the terms of the contract and that this is reflected in the decision the Public Service Arbitrator at [91] – [92]. 

58       The respondent says the effect of the findings of the Public Service Arbitrator was that in light of the fact that the work value of the position was reviewed and it was found that the work value of the position had changed from a Level 11 to a Level 12; and as there was an agreement to retain the status of the position that Mr Scull's salary should be increased to reflect the relativity of the position to other senior positions within the department at the level it was when Mr Scull commenced employment in the position, the salary of Mr Scull should be increased to maintain that relativity.

59       Consequently, the respondent says the appeal is misconceived in that it proceeds on the erroneous basis that the Public Service Arbitrator has merely construed the contract and given effect to it by applying a composite determination of the terms of the contract and them considering the circumstances justified an increase in order to do equity between the parties.  On this ground the respondent says the appeal should be dismissed.

(b) The Public Service Arbitrator correctly construed the contract

60       In the alternative, the respondent says that if it be the case that the Public Service Arbitrator only construed the contract, the appeal asserts that the error is said to arise because the Public Service Arbitrator ordered that:

(a) the relativity of Mr Scull's position be increased to reflect its relativity with other senior positions within the Department of Medical Engineering and Physics at the level it was when Mr Scull commenced employment in the position; and

(b) the salary levels contained in column 3 of the table in the internal memorandum to the Chief Executive South Metropolitan Area Health Service from Mr Gregory dated 2 September 2009 be applied to Mr Scull's position;

when the terms of the contract as found by the Public Service Arbitrator:

(c) expressly excluded automatic maintenance of the relativity referred to; and

(d) provided only for renegotiation of salary in the event of a change in relativity.

61       The respondent argues that when the offer was made by the appellant's representatives on 9 December 2002, Mr Scull's memorandum dated 23 December 2002 could not be characterised at law as an acceptance of the offer of employment but a counter-offer.  What Mr Scull was saying was 'I am accepting your offer but with these additional conditions'.  Then there was further interchange between the parties by memorandum and email by way of qualification of the terms and conditions of the contract and all of those documents properly constitute the terms and conditions of the contract between the parties.

62       The relevant terms of the contract as found by the Public Service Arbitrator may be summarised as follows:

(a) The status of the position as at the date of contract would be retained.

(b) Although the position was award free, it would relate to the Award and industrial agreements and enjoy any general increases in rates to the Award and the industrial agreements.

(c) Any review of the classifications/positions which reported to Mr Scull would include a review of his position.

(d) Should the classifications/positions which reported to Mr Scull be reclassified or receive additional remuneration Mr Scull would be free to renegotiate his contract.

63       As to the maintenance of the 'status' of the position, the respondent says it should be construed to mean 'relative social or professional position' or 'standing'.  Consequently, it is argued that on a stand-alone basis, the condition that the status and position of the date of the contract would be retained would entitle Mr Scull to maintenance of relativity where the classification/positions which reported to Mr Scull were reclassified or receive additional remuneration.  However, automatic maintenance is excluded by the condition in (d) above, that is, should the classifications/positions which reported to Mr Scull be reclassified or receive additional remuneration Mr Scull would be free to renegotiate his contract.  As both (a) and (d) are terms of the contract they must be construed such that, as far as possible, they each have effect.  It is submitted that whilst (d) excludes an increase as of right where other positions have been reclassified it does not exclude the operation of (a) where the proper classification of Mr Scull's position itself has changed.  Thus, if a review resulted in reclassification of some or all of the positions reporting to Mr Scull but not of Mr Scull's position itself, Mr Scull would not be entitled to an increase by virtue of (a) because of the operation of (d).  However, as Mr Scull's position itself has been reclassified from a Level 11 to a Level 12 on the basis of work value, it is submitted that (a) does entitle him to an increase, or, in the language of the contract, to retain the status of the position.  That is, his actual remuneration should be increased by the percentage increase constituted by the change from a Level 11 to a Level 12.  Such an increase would give effect to the contractual requirement that the status be retained.  That retention of status is relative to his position's award ranking, but not relative to the ranking of other positions.

64       The appellant's decision not to increase Mr Scull's remuneration was based on an internal memorandum by Mr Gregory dated 2 September 2009.  Mr Gregory's conclusion in the memorandum was that: 'The employer is contractually obliged to consider Mr Scull's claim.  The claim has no apparent merit in the context of recognition of work value changes'.  Accepting this to be correct, the claim does however have merit in the context of retention of the status of the position, which the employer is contractually obliged to do.  However, it is not correct to say that the claim has no merit in the context of recognition of work value changes.  The work value of the position was recognised by the review of the position to have increased from a Level 11 to a Level 12.  That review was accepted by the employer.  In accepting the review, the employer merely made an administrative adjustment to the formal linking of Mr Scull's position to award a Level 12, in lieu of a Level 11.  As Mr Scull's remuneration was over the Award and industrial agreements, that adjustment had no effect on his actual remuneration and was simply absorbed.  There is no provision for absorption in the Wage Fixing Principles:  (2010) 90 WAIG 588.

65       Further, the contractual requirement to review Mr Scull's remuneration in the event of work value changes is a requirement to conduct that review bona fide and in good faith.  In view of the fact that the review found that there had been a significant work value increase to the position there was no basis for the appellant's representatives to then find that '[t]he claim has no merit in the context of recognition of work value changes'.  On the contrary, bona fide and good faith recognition of changes in work value compels the conclusion that the actual remuneration be increased appropriately, not just passed off by an administrative sleight of hand.

(c) The Public Service Arbitrator failed to determine the merit aspect of the claim

66       In the event that the Full Bench finds that the Public Service Arbitrator wrongly found that Mr Scull had a contractual right to an increase of his remuneration as a result of the work value review of his position then the matter should be remitted back to the Public Service Arbitrator at first instance for determination of the discretionary merit aspect of Mr Scull's claim.  For the purposes of s 49(6a) of the Act, the respondent says the reasons why it should be remitted back rather than determined by the Full Bench are:

(a) There may be further evidence to be adduced on the broader equity question;

(b) The matter has a complex and intricate history with which the Public Service Arbitrator at first instance is well acquainted and it is preferable in such a case for a discretionary decision on the merits be made by the Public Service Arbitrator so constituted; and

(c) Given that the outstanding issue requires the exercise of the Public Service Arbitrator's discretion, the parties' appeal rights would be preserved by remission back.  If not remitted back those rights would effectively be lost because the Full Bench would itself exercise the discretion effectively at first instance.

Conclusions

(a) Jurisdiction of Public Service Arbitrator

67       The exclusive jurisdiction of the Public Service Arbitrator is provided for in s 80E(1) of the Act which is as follows:

Subject to Division 3 of Part II and subsections (6) and (7), an Arbitrator has exclusive jurisdiction to enquire into and deal with any industrial matter relating to a government officer, a group of government officers or government officers generally.

68       The powers of the Public Service Arbitrator are very wide.  They are to inquire into and deal with any industrial matter: Director-General Department of Justice v Civil Service Association of Western Australia Inc [2005] WASCA 244; (2005) 149 IR 160 (Jones) [29] (Wheeler and Le Miere JJ).  The expression 'exclusive jurisdiction' in s 80E(1) of the Act was likely intended to do no more than exclude the general jurisdiction of the Commission, pursuant to s 23 of the Act, to inquire into and deal with industrial matters generally: Jones [27] (Wheeler and Le Miere JJ). 

69       Section 80E(2) of the Act provides for the jurisdiction that is to be included in s 80E(1) of the Act.  Section 80E(2) of the Act states:

Without limiting the generality of subsection (1) the jurisdiction conferred by that subsection includes jurisdiction to deal with — 

(a) a claim in respect of the salary, range of salary or title allocated to the office occupied by a government officer and, where a range of salary was allocated to the office occupied by him, in respect of the particular salary within that range of salary allocated to him; and

(b) a claim in respect of a decision of an employer to downgrade any office that is vacant.

70       Pursuant to s 80E(5) of the Act, the Public Service Arbitrator has power to review, modify, nullify or vary any act, matter or thing done by an employer of a government office that is within the jurisdiction of the Public Service Arbitrator and under s 80L(1) of the Act the provisions of Part II Division 2 of the Act applies to the exercise of the jurisdiction of the Public Service Arbitrator which includes the powers under s 44 of the Act.

71       Whilst the general jurisdiction of the Public Service Arbitrator under s 80E(1) can include claims under s 29(1)(b)(ii) of the Act: Chief Executive Officer, Department of Agriculture and Food v Ward & Wall [No 1] [2008] WAIRC 00079; (2008) 88 WAIG 156 [92] (Ritter AP), the application before the Public Service Arbitrator in this matter is not a claim under s 29(1)(b)(ii) of the Act, as it is not a claim made by an employee.  It is an industrial matter referred by the respondent as an organisation of employees under s 80F(1) of the Act whereby the jurisdiction of the Public Service Arbitrator was invoked under s 80E(1) of the Act to inquire into and deal with an industrial matter.  In inquiring into and dealing with the industrial matter, a compulsory conference was convened by the Public Service Arbitrator pursuant to s 80G(1) and s 44(1) of the Act and the matter was referred for hearing under s 44(9) of the Act.

(b) The scope of the industrial matter before the Public Service Arbitrator

72       Despite the valiant submissions made on behalf of the appellant, the industrial matter before the Public Service Arbitrator is not a claim that is made and sought to be determined solely on grounds that attach to the determination of a claim in contract.  This is not only evident from paragraph 1 of the memorandum of matters referred for hearing and determination but also from the written outline of submissions filed by the respondent on 30 July 2010.  In paragraph 1 of the memorandum of matters referred for hearing and determination it is stated:

The applicant claims that the respondent has acted in a manner which is not fair, just and or reasonable by refusing to award an increase in remuneration for the position of Head of the Department of Medical Engineering and Physics at Royal Perth Hospital (Post number: 103229) ('the position') occupied by Mr Edward Scull consequent upon the respondent implementing outcomes of the Health Professions Work Value Review ('the HPR') to the position, pursuant to the provisions of the Hospital Salaried Officers Metropolitan Health Services Enterprise Agreement 2001 (PSAAG 1 of 2002) ('the Agreement').

73       In [57] and [58] of the applicant's outline of submissions, after setting out the history of the matter at some length and referring to the fact that the appellant's representatives had refused to apply any salary increase as a result of the Health Professional Work Value Review to senior specific callings in the Department headed by Mr Scull, the respondent stated [AB 181]:

We submit that this is fundamentally unfair and stands to be corrected. This is submitted because the effect of not recognising Mr Scull's claim in respect of the HPR and it not being fairly applied to the position occupied by him, has resulted in a nett overall reduction of the value of his position; a value established by the hospital under the contract applying to the position and fundamental to his accepting appointment to the position.

It is submitted that to deny Mr Scull the benefit of the effects of the HPR in conjunction with increases that flow from 'salary increments that are generally applicable to the HSOA MHS Enterprise Agreement' (ABD 16) is harsh unjust and unreasonable.

74       The respondent's outline of submissions also made a claim for relief in respect of a pre-acceptance bargain on grounds of estoppel in respect of which the Public Service Arbitrator did not find it necessary to consider.

75       It is however clear from the appellant's submissions that the appellant only sought to address the matter before the Public Service Arbitrator on grounds that there was no breach of contract and the elements of estoppel had not been made out.

(c) What were the terms of contract and did the Public Service Arbitrator err?

76       When construing the terms of a contract regard cannot be had to pre-contractual negotiations unless there is some ambiguity in the terms of the contract.  This rule was explained by Mason J in Codelfa where his Honour said (352):

The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.

It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification.

77       A pre-contractual representation can however become binding if it was promissory in nature and thus not representational.  In Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 Gibbs CJ (61) explained:

A representation made in the course of negotiations which result in a binding agreement may be a warranty — i.e., it may have binding contractual force — in one of two ways: it may become a term of the agreement itself, or it may be a separate collateral contract, the consideration for which is the promise to enter into the main agreement. In either case the question whether the representation creates a binding contractual obligation depends on the intention of the parties. In J. J. Savage & Sons Pty. Ltd. v. Blakney and Ross v. Allis-Chalmers Australia Pty. Ltd., it was said that a statement will constitute a collateral warranty only if it was 'promissory and not merely representational', and it is equally true that a statement which is 'merely representational' — i.e., which is not intended to be a binding promise — will not form part of the main contract. If the parties did not intend that there should be contractual liability in respect of the accuracy of the representation, it will not create contractual obligations.  (footnotes omitted)

78       It is common ground that the Public Service Arbitrator did not err in finding that the terms and conditions of Mr Scull's contract of employment were contained in the letter of appointment dated 9 December 2002, the contract signed by Mr Scull on or about 23 December 2002 and the memoranda and emails exchanged between Mr Seeds and Mr Scull between 23 December 2002 to 8 January 2003.  When regard is had to that finding and the terms contained in these documents are analysed, it is clear that the terms of the contract in respect of salary increases were as follows:

(a) The position was not covered by the Award or any relevant industrial agreement.

(b) Any percentage increases that applied to the Award, the 2001 industrial agreement and any subsequent agreement would be applied to the salary paid to Mr Scull.

(c) If senior positions that report to the position held by Mr Scull were reclassified or were to receive additional remuneration which resulted in significant work value for the position held by Mr Scull, Mr Scull could renegotiate his contract.

(d) Any review of senior positions in the Department which were positions that reported to Mr Scull would include a review of his position.

79       When regard is had only to these documents, it was not open to find that it was a term of the contract that the status of the position held by Mr Scull as at the date of the contract would be maintained.  All of the discussions that took place between Mr Scull and the appellant's representative prior to the entering into the contract between 23 December 2002 and 8 January 2003 were pre-contractual negotiations.  That is evident from the evidence given by Mr Scull and his summary.  It is clear in particular from the summary, that at its highest Mr Scull 'expected' that the relativity of the salary that would attach to his position would be maintained with the salaries of those senior positions that reported to him.  However, there is no record in the summary of any representation made to Mr Scull which could be construed as a representation made on behalf of the appellant that such a relativity would be maintained.

80       The evidence given by Mr Scull in his witness statement, orally and the record of negotiations in his summary does not support a finding that the appellant's representatives made any representation that could be regarded as promissory that the relativity of his salary to those positions that reported to him would be maintained.  There was no such representation.  It was simply an expectation of Mr Scull.

81       For these reasons I am of the opinion that the Public Service Arbitrator erred in failing to have regard to the express terms of the contact which provided that Mr Scull was not entitled to automatically have his salary adjusted as a result of changes to the classifications or remuneration of the senior positions that reported to him as head of Department.

82       I do however agree with the submission made on behalf of the respondent that part of the industrial matter before the Public Service Arbitrator was whether consequent upon the appellant implementing the outcomes of the Health Professional Work Value Review the appellant acted in a manner that was not fair, just or reasonable by refusing to award an increase in remuneration for the position held by Mr Scull.  I also agree that it is open to hear and determine the application on these grounds and for this reason it is my opinion that the appeal should be allowed and the decision remitted to the Public Service Arbitrator for further hearing and determination.

83       Whilst the issues raised by the appellant in respect of the application of s 80E(2)(a) of the Act is not directly raised by the appellant in his ground of appeal, as the issue was ventilated by counsel it is appropriate to make some observations about whether s 80E(2)(a) of the Act has any application to the facts of the matter in this appeal.  Section 80E(2) of the Act makes it clear the jurisdiction under s 80E(2)(a) of the Act includes jurisdiction to deal with a claim in respect of the salary or range of salary allocated to an office occupied by a government officer.  However, it is apparent that s 80E(2)(a) of the Act is not concerned with the salary that attaches to the person who holds an office but to the office.  Section 80E(1)(a) of the Act contains a distinction between what may be colloquially described as a job (an office) and the person who holds that job (an officer).  This distinction is found not only in s 80E(1)(a) of the Act but in other provisions of the Act and the Public Sector Management Act 1984 (WA):  (see, for example, s 80I(1)(b) and s 80I(1)(c) of the Act).  The documents that contain Mr Scull's terms of contract of employment attach to him personally and do not attach to the office held by him.  For this reason I am of the opinion that it is doubtful that s 80E(2)(a) of the Act has any application to the industrial matter raised in this appeal.

BEECH CC

84       I have read the reasons for decision of both the Hon. Acting President and Kenner C.  I agree with them for the reasons they have given that the decision at first instance should be suspended and the matter be remitted to the learned Arbitrator for further hearing and determination on the merits.

KENNER C:

85       This appeal under s 49 of the Industrial Relations Act ("the Act") is narrow in scope and is limited to one ground. The ground is that the learned Arbitrator was in error in finding that the respondent had an entitlement to a salary increase, commensurate with relativities of his position as Head of Department of Medical Engineering and Physics at Royal Perth Hospital, to other senior positions in his Department.

86       The background to the appeal, the reasons for decision of the learned Arbitrator and the contentions of the parties on the appeal, are set out in the reasons of Smith AP which are not necessary to re-traverse.

87       It was accepted by both the appellant and the respondent, that the learned Arbitrator was correct in her finding at par 74 of her reasons at AB 48, that the terms of the contract of employment between the appellant and the respondent was set out in a number of documents.

88       These included the letter of appointment of 9 December 2002 signed by the respondent; the respondent's memorandum of 23 December 2002 to the appellant seeking "clarification" of certain matters; and memoranda and emails passing between the respondent and the appellant of 6 and 8 January 2003 in relation to the matters to be "clarified" (see AB 33-37).

89       In my view it was open to find that the negotiations between the respondent and appellant regarding his appointment to the position of Head of Department, which commenced in about April 2002, involved pre-contractual representations which were not intended to be promissory in character, objectively determined from the stance of a reasonable person: Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41. 

90       Statements of parties to negotiations reflecting their subjective intentions and reasonable expectations, consistent with the parole evidence rule, are generally not admissible, nor of assistance, in construing the terms of a contract ultimately reduced to writing. Whilst the Commission is of course, not bound by the strict rules of evidence, nonetheless such evidence can sometimes distract attention from the real issues in dispute. 

91       As a matter of broad principle, where parties record their agreement in writing, and such writing does not include a pre-contractual statement later alleged to be a term, this is strongly indicative of it not being enforceable as a term of the agreement.

92       In this case, there was no doubt from the evidence before the learned Arbitrator that the respondent had a desire and an expectation, that any salary relativity between his position, then under negotiation, and other senior positions within the Department, would be maintained. 

93       However, ultimately, objectively considered, it is to the terms of the relevant written instruments, embodying the terms of the contract as finally agreed, that primary attention must be paid in ascertaining the rights and entitlements of the parties: Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45 per Kirby J at 70.

94       The terms of the written agreement between the parties, does not reflect any undertaking that the respondent's salary relativity will be maintained with other senior officers of the department.  Indeed, Mr Seeds' reply of 6 January 2003 to the respondent, expressly denied that there was any such commitment other than an opportunity to renegotiate the contract, if certain preconditions were met. 

95       There was also no reference in the written agreement as to the preservation of the status of the respondent's position, relative to others, whatever ultimately, that might entail.

96       In contract law parlance, it is settled that an offer and acceptance must precisely correspond. A variation from the offer, in an acceptance, may result in any such acceptance being invalid. Any purported acceptance which accepts an offer in general terms, but with additions and qualifications, may in fact constitute a counter offer, open for acceptance by the other party: Carello v Jordan [1935] QSR 294. 

97       It might be open to have concluded that the respondent's memorandum of 23 December 2002 to the appellant, which sought "clarification" of some matters, in reality, constituted a counter offer which was not accepted by the appellant in its reply of 8 January 2003. Regardless of this however, the parties, by their conduct, entered into a contractual relationship of employment and have continued to do so for some years to date.  In these circumstances, the respondent must be taken to have accepted the terms as proposed by the appellant at the time. 

98       Accordingly, with respect, I consider that the learned Arbitrator was in error in concluding that the status of the respondent's position, and hence salary relativity to others in his Department, would be preserved, as a contractual term. As these findings were integral to the learned Arbitrator's further consideration of whether any salary adjustment should apply to the respondent, the appeal should be allowed.

99       However, that is not the end of the matter. Whilst the appellant attempted to argue that the only issue before the learned Arbitrator was the terms of the respondent's contract with the appellant, and whether it afforded him a contractual entitlement to a salary increase, in my view, that was not the totality of the dispute at first instance.

100    The application originally made by the respondent was for a compulsory conference pursuant to s 44 of the Act. The application referred to the review of health professionals work value in accordance with the provisions of the Hospital Salaried Officers Metropolitan Health Services Enterprise Agreement 2001. 

101    Grounds advanced in support of the application, included allegations that the appellant had failed to deal with the respondent's position in good faith and the appellant had dealt with the respondent in a manner which was harsh, unfair and oppressive: AB 5-8. 

102    The Memorandum of Matters Referred for Hearing and Determination under s 44(9) of the Act, appearing at AB 15-17, makes it plain at par 1, that the dispute referred for arbitration included allegations that the respondent "has acted in a manner which is not fair, just and or reasonable by refusing to award an increase in remuneration for the position of Head of the Department of Medical Engineering and Physics at Royal Perth Hospital (post number: 103229)".

103    Furthermore, the applicant's outline of submissions at first instance, as set out at AB 172-185, also makes reference to the unfairness, harshness and unjustness of the appellant's conduct towards the respondent, by denying him a salary review.

104    In my view therefore, the matter referred for hearing and determination under s 44(9) of the Act, was not confined to the contractual rights of the parties.  This is so, notwithstanding the fact that it appeared from exchanges between the parties and the learned Arbitrator, for example at AB 65-66, a focal point was the contractual arrangements between the appellant and the respondent. 

105    The referral plainly raised matters going to discretionary considerations under s 26(1)(a) of the Act, as to whether, in accordance with equity and good conscience, the respondent should be granted the relief sought. 

106    In these circumstances, it would be appropriate, that under s 49(5)(c) of the Act, the decision at first instance be suspended and the matter be remitted to the learned Arbitrator for further hearing and determination on the merits.