FEDERAL COURT OF AUSTRALIA

Australian Education Union v State of Victoria (Department of Education and Early Childhood Development) [2015] FCA 1196

THE COURT ORDERS THAT:

1.    The proceeding be listed for directions at 9.30 am on 25 November 2015.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

TABLE OF CONTENTS

REASONS FOR JUDGMENT

Introduction

1    Division 2 of Part 2-9 of Chapter 2 (Division 2) of the Fair Work Act 2009 (Cth) (FW Act) contains provisions (ss 323–327) that are newcomers to Federal industrial law but have a provenance that can be traced back through the English “Truck Acts” to 1465. The provisions deal with the payment of wages. So far as is relevant for the disposition of this proceeding, s 323(1) requires an employer to pay to its employee amounts payable to the employee in relation to the performance of work, in full and in money, except where the making of a deduction is permitted by s 324(1). Section 324(1) specifies the limited circumstances in which deductions may be made and permits a deduction authorised by an employee in accordance with an enterprise agreement, or authorised by or under a law of a State. Section 325(1) prohibits an employer from requiring its employee to spend amounts payable to the employee in any particular way, where the requirement is “unreasonable in the circumstances”. Section 326(1) invalidates a term of an enterprise agreement or a contract of employment that has the effect of permitting the employer to make a deduction, where the deduction is for the benefit of the employer and is “unreasonable in the circumstances”.

2    Between 1 July 2009 and 29 November 2013, the State of Victoria (Department of Education and Early Childhood Development) (DEECD) deducted over $20 million from the salaries of certain employees. The deductions were made in respect of a scheme known prior to March 2012 as the “Notebooks for Teachers and Principals Program” and subsequently as the “eduSTAR.NTP Program” (NTPP). In broad terms, this proceeding concerns whether deductions made by DEECD were or were not permitted by s 324(1). If they were not, the AEU contends that s 323(1)(a) has been contravened as well as applicable enterprise agreements requiring the payment of wages in full. In considering whether the deductions were authorised in accordance with s 324(1), the operation and effect of s 326(1) is engaged and whether the deductions were “unreasonable in the circumstances” needs to be considered. There is also an issue as to whether DEECD’s conduct contravened s 325(1) by requiring teachers to spend part of their pay on the NTPP.

3    The simplicity of that statement of the issues is belied by the myriad and complex questions that are necessary to answer in order to resolve the dispute. I will outline the main issues in more detail shortly, but first some more background is required.

4    This proceeding was brought by the Australian Education Union (AEU). The AEU is an organisation of employees registered under the Fair Work (Registered Organisations) Act 2009 (Cth), and is entitled to represent the industrial interests of teachers and principals (teachers) employed by DEECD, under part 2.4 of the Education and Training Reform Act 2006 (Vic) (ETR Act), in the teaching service in Victorian government schools (schools). It was not in contest that the AEU has standing to apply for the relief it seeks.

5    The AEU and DEECD were both parties to the Victorian Government Schools Agreement 2004 (2004 Agreement), the Victorian Government Schools Agreement 2008 (2008 Agreement) and the Victorian Government Schools Agreement 2013 (2013 Agreement) (collectively, the Agreements). There was no issue that contravention of the 2008 Agreement or of the 2013 Agreement would constitute contravention of Schedule 16, item 2(2) of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) (Transitional Act) or of s 50 of the FW Act, respectively.

6    In around 1995, the then Premier of Victoria launched a scheme known as the “Navigator Schools Project,” the purpose of which was to increase the implementation of technology in Victorian schools. That led some years later (in around 1998) to the commencement of the NTPP. In brief, and relevantly to the issues which arise in this proceeding, the program was designed to provide participating teachers with a laptop computer and associated software for the teacher to use in teaching, preparation, administration and professional development. DEECD entered into arrangements (originally lease arrangements; later purchase arrangements) with third parties to procure large numbers of laptop computers. Those computers were then licensed to teachers pursuant to written agreements called Recipient Agreements. Ordinarily, a teacher retained a laptop for around three to four years, and then returned it to DEECD contemporaneously with the receipt of a new laptop under a new Recipient Agreement. Personal use of the laptop was permitted, on conditions.

7    NTPP laptops were provided to teachers in “Cycles” and “Rounds.” Each Cycle comprised a number of Rounds: initially seven, though in times material to this proceeding ordinarily five. Each Round entailed a fresh lease or purchase arrangement by DEECD with a third party, and fresh Recipient Agreements between DEECD and teachers. Teachers that participated in a particular Round of a Cycle participated in the same-numbered Round of the next Cycle. That is, a teacher that received his or her laptop as part of Cycle 3 Round 2 (for example) would receive his or her next laptop some three to four years later as part of Cycle 4 Round 2. The NTPP was rolled out progressively, starting with one Round of teachers in 1998, two Rounds in March and November 1999, and so on until seven Rounds had been completed. The first seven Rounds were Cycle 1. Teachers that were part of Cycle 1 Round 1 returned their laptops in around February 2002 and took up computers as part of Cycle 2 Round 1 (amongst others who had not been part of Cycle 1 Round 1). Cycle 2 Round 1 computers were returned in June 2005 and Cycle 2 Round 1 teachers (again, I assume, amongst others) became part of Cycle 3 Round 1.

8    Teachers made monetary “contributions” to the cost of the NTPP. The Recipient Agreements authorised fortnightly “deductions” from a teacher’s salary. The quantum of the deductions differed depending on the kind of computer licensed by the teacher. In most Rounds during times material to this proceeding, two computers were offered: an Apple-branded computer and a computer of some other brand (commonly Lenovo) running the Windows operating system rather than the Mac operating system. In some rounds (for example Cycle 4 Round 2), only a Windows computer was offered. The nature of teachers’ contributions is the subject of contest, but in neutral terms the outcome for teachers was that they received in their pockets between $4 and $17 less per fortnight (depending on the Cycle and Round and the nature of computer) than would have been the case had they not entered into Recipient Agreements. The fortnightly amounts deducted in respect of individual teachers were not large, but total contributions were not insignificant.

9    The AEU contended that in deducting the contributions from teachers’ wages (and thereby not paying teachers the amounts payable to them in full), DEECD contravened s 323(1)(a) and one or other of the Agreements (and, consequently the Transitional Act or the FW Act). The AEU’s pleaded case is that the deductions were made, relevantly, in the period 1 July 2009 (being the date Division 2 commenced) to 29 November 2013 (being the date of the Amended Statement of Claim). That the deductions were made in that period is admitted. However, the AEU’s claim for relief seeks an order requiring the repayment of all deductions made to the date of any order for repayment. It may well be that there is no issue that the deductions continued beyond the date of the Amended Statement of Claim and can be the subject of any order which may later be made. For current purposes, however, I will (in accordance with the case as pleaded) proceed on the basis that the deductions alleged to have been made in contravention of s 323(1)(a) and in breach of one or other of the Agreements are those that were made in the period 1 July 2009 to 29 November 2013 (the claim period).

10    DEECD denied it had required any of the teachers to spend their pay on the NTPP in contravention of s 325. As to the alleged contravention of s 323(1), DEECD relied upon each of s 324(1)(b) and s 324(1)(d) to contend that the deductions were permitted deductions. Each of the Agreements contained a clause providing that teachers may enter into “salary packaging arrangements”. DEECD contended that the deductions made were authorised by the Recipient Agreements as part of salary packaging arrangements which were authorised by the Agreements. DEECD relied on s 324(1)(b) to contend that, in these circumstances, the deductions made were authorised by the teachers “in accordance with an enterprise agreement” and consequently s 323(1) was not contravened. DEECD also contended that the salary packaging arrangements made in accordance with the Agreements qualified its obligation under those Agreements to pay teachers in full and, consequently, that those Agreements were not breached. Whether the Recipient Agreements were “salary packaging arrangements” within the meaning of the Agreements is the main issue in contention in that part of the case. The AEU contends that they were not and that, consequently, s 324(1)(b) is not applicable.

11    On 19 December 2012, following the commencement of a proceeding against DEECD in which it was alleged that the FW Act and the Agreements had been contravened, Ministerial Order No. 632 (Ministerial Order) was made under the ETR Act. Relevantly, it inserted a new clause 2.9.1 after clause 2.8.1 of the Teaching Service (Employment Conditions, Salaries, Allowances, Selection and Conduct) Order 2009. Clause 2.9.1 included that on and from 1 July 2009 any amount that a person had agreed would be deducted from that person’s salary in accordance with a Recipient Agreement was authorised to be deducted from and may lawfully be deducted from the salary of such a person. DEECD contended that the Ministerial Order, on and from 1 July 2009, attracted both the retrospective and prospective operation of s 324(1)(d) of the FW Act, which provided that an employer may deduct an amount from an amount payable to an employee where “authorised by or under a law of a State”.

12    The AEU has raised a number of challenges to the operation and effect of the Ministerial Order, including as to whether it can operate retrospectively. In addition, the AEU relies on s 326(1) to contend that, to the extent that the Agreements or the Recipient Agreements permitted or had the effect of permitting the deductions, they were of no effect because the deductions were “for the benefit of the employer” and “unreasonable in the circumstances”. If that is so, the AEU contends that the deductions made from teachers’ salaries were not permitted by s 324(1)(b) or s 324(1)(d).

13    The number of NTPP laptops in circulation over the claim period varied marginally but was always around 40,000. Given that teachers come and go, the number of affected persons over the claim period may well be 50,000 teachers or more. The matters arising for determination extend to the individual circumstances of each of those affected persons. A potential difficulty arises. If it were necessary to resolve the issues raised including by reference to the individual circumstances of each and every affected teacher the expense for the parties would be prohibitive and the burden placed on the Court would be enormous. Whilst the proceeding is not a representative proceeding under Part IVA of the Federal Court Act of Australia 1976 (Cth), with the agreement of the parties I determined to utilise techniques familiar to class action proceedings to provide an efficient means by which the dispute can be resolved.

14    Accordingly, it was agreed that that part of the claim of unlawful deductions relating to a sample group of teachers, as well as a set of common questions, be determined by an initial trial, with all other issues raised by the proceeding (including any question of penalty or costs) deferred to a further trial. My orders of 26 May 2014 included the following:

(1)    The trial of the proceeding, in so far as it concerns alleged unlawful deductions in respect of the employees listed in Schedule A (the representative employees) (other than on any question of penalty or costs) be heard and determined at the trial commencing on 21 July 2014 (the first trial).

(2)    The trial of questions the form of which is agreed between the parties pursuant to orders 4 to 6 hereof or determined by the Court (common questions), be heard at the first trial.

(3)    All questions or issues raised by the proceeding, which fall beyond the scope of the matters to be dealt with at the first trial, be adjourned for determination by further trial to be conducted on a date to be fixed after the delivery of judgment determining the matters dealt with at the first trial.

15    Eleven sample employees (Group 11 teachers) were chosen by the AEU. They are Ms Seona Aulich, Mr Reginald Farquhar, Ms Debra Jane Fischer, Ms Sally Haddow, Ms Jessie Ann Humphries, Mr Sasha Kober, Mr Andrew Kumar, Ms Donna MacKinnon, Ms Erin O’Grady, Ms Jennifer Renton, and Ms Karen Terry. DEECD accepted that those teachers were generally representative of the various kinds of schools and categories of teachers in schools. It was not accepted that the personal use made by those teachers of their NTPP laptops was typical of the personal use made more generally by teachers. To that end and more generally, DEECD called nine teacher witnesses. They are Ms Natalie Barbara Rose Alpine, Ms Jodie Lynne Bray, Ms Kathryn Susan Davis, Ms Janelle Evans, Ms Amanda Jane Henning, Mr Nathan John Jagoe, Ms Amanda Jane Prosser, Mr Peter David Walsh, and Ms Karen Lea Elizabeth Wheeler (DEECD teacher witnesses).

16    The parties agreed that the witness evidence together with the detailed statements of agreed facts was the evidence upon which the Court can determine both the claims relating to the Group 11 teachers and the common questions.

17    The common questions (common questions) are as follows (incorporating a change in the wording of question 9 agreed during the hearing):

In these questions:

•    the NTPP refers to the program known as the "Notebooks for Teachers and Principals Program" and the eduSTAR.NTP Program which is referred to in paragraph 7 of the Statement of Agreed Facts dated 11 September 2013.

•    NTPP deductions refers to the contributions in respect of NTPP notebook computers made by participating teachers.

•    Participating teachers means teachers who were parties to recipient agreements pursuant to which NTPP deductions were made.

•    Recipient agreement means the agreement pursuant to which participating teachers agreed to make the NTPP deductions.

•    The Ministerial Order means Ministerial Order 632 made on 19 December 2012 under the Education and Training Reform Act 2006 (Vic).

1.    Were the NTPP deductions made between 1 July 2009 to the present a "salary packaging arrangement" within the meaning of any or all of:

a.    clause 17 of the Victorian Government Schools Agreement 2004;

b.    clause 18 of the Victorian Government Schools Agreement 2008;

c.    clause 19 of the Victorian Government Schools Agreement 2013?

2.    If yes, were the NTPP deductions, or some of them, authorised by the participating teachers in accordance with an enterprise agreement within the meaning of s 324(1)(b) of the Fair Work Act 2009 (Cth) (FW Act), namely any or all of:

a.    clause 17 of the Victorian Government Schools Agreement 2004,

b.    clause 18 of the Victorian Government Schools Agreement 2008, or

c.    clause 19 of the Victorian Government Schools Agreement 2013?

3.    If the NTPP deductions, or some of them, were authorised by all or any of

a.    clause 17 of the Victorian Government Schools Agreement 2004,

b.    clause 18 of the Victorian Government Schools Agreement 2008,

c.    clause 19 of the Victorian Government Schools Agreement 2013,

were those deductions

(i)    directly or indirectly for the benefit of the respondent; and

(ii)    unreasonable in the circumstances

within the meaning of s 326(1) of the FW Act?

4.    Is the effect of the Ministerial Order that:

a.    the NTPP deductions made from 19 December 2012 to the present; and/or

b.    the NTPP deductions made between 1 July 2009 and 19 December 2012

were authorised by or under a law of a State within the meaning of s 324(1)(d) of the FW Act?

5.    Does s 326 of the FW Act have any application where a deduction from an amount payable to an employee is authorised by a law falling within the scope of s 324(1)(d) of the FW Act?

6.    Is the recipient agreement a term of the contract of employment of participating teachers within the meaning of s326(1) of the FW Act?

7.    If yes, does the recipient agreement:

a.    permit, or have the effect of permitting, the respondent to deduct an amount from an amount that was payable to participating teachers in relation to the performance of work; or

b.    require, or have the effect of requiring, participating teachers to make a payment to the respondent,

within the meaning [sic] s326(1) of the FW Act?

8.    If yes, are the NTPP deductions:

a.    directly or indirectly for the benefit of the respondent; and

b.    unreasonable in the circumstances

within the meaning of s 326(1) of the FW Act?

9.    Does the respondent, as employer, require participating teachers to spend any part of an amount payable to them in relation to the performance of work within the meaning of s325(1) of the FW Act?

10.    If so, is that requirement unreasonable in the circumstances, within the meaning of s325(1) of the FW Act?

18    The position, then, is that that by this initial trial the claim relating to the Group 11 teachers (Group 11 claims) is to be determined to completion. Further, I am to answer the common questions. My determination of the common questions will determine the Group 11 claims. It is intended by the parties that the answers to the common questions will enable the parties to resolve the claims made relating to all affected teachers, without further trial.

19    Having set out that context, and before moving on, I note that the relief sought by the AEU in its Amended Originating Application was (in broad terms) as follows: declarations of breach of provisions of Division 2; declarations of contravention of the Agreements, and (consequentially) of the sections of the FW Act and of the Transitional Act that proscribe such contraventions; an injunction prohibiting further deductions from the salaries of teachers; orders requiring DEECD to pay to teachers the amounts deducted from their salaries in respect of NTPP laptop computers; and, penalties, payable to the AEU, in respect of contraventions of the FW Act and of the Transitional Act.

Relevant Legislation

20    While I have described the effect of Division 2 above, it will assist the reader to set it out, in so far as relevant, in full:

Division 2—Payment of wages

323    Method and frequency of payment

(1)    An employer must pay an employee amounts payable to the employee in relation to the performance of work:

(a)    in full (except as provided by section 324); and

(b)    in money by one, or a combination, of the methods referred to in subsection (2); and

(c)    at least monthly.

…

324    Permitted deductions

(1)    An employer may deduct an amount from an amount payable to an employee in accordance with subsection 323(1) if:

(a)    the deduction is authorised in writing by the employee and is principally for the employee’s benefit; or

(b)    the deduction is authorised by the employee in accordance with an enterprise agreement; or

(c)    the deduction is authorised by or under a modern award or an FWC order; or

(d)    the deduction is authorised by or under a law of the Commonwealth, a State or a Territory, or an order of a court.

Note 1: A deduction in accordance with a salary sacrifice or other arrangement, under which an employee chooses to:

(a)    forgo an amount payable to the employee in relation to the performance of work; but

(b)    receive some other form of benefit or remuneration;

will be permitted if it is made in accordance with this section and the other provisions of this Division.

Note 2: Certain terms of modern awards, enterprise agreements and contracts of employment relating to deductions have no effect (see section 326). A deduction made in accordance with such a term will not be authorised for the purposes of this section.

(2)    An authorisation for the purposes of paragraph (1)(a):

(a)    must specify the amount of the deduction; and

(b)    may be withdrawn in writing by the employee at any time.

(3)    Any variation in the amount of the deduction must be authorised in writing by the employee.

325    Unreasonable requirements to spend amount

(1)    An employer must not directly or indirectly require an employee to spend any part of an amount payable to the employee in relation to the performance of work if the requirement is unreasonable in the circumstances.

Note: This subsection is a civil remedy provision (see Part 4-1).

(2)    The regulations may prescribe circumstances in which a requirement referred to in subsection (1) is or is not reasonable.

326    Certain terms have no effect

Unreasonable payments and deductions for benefit of employer

(1)    A term of a modern award, an enterprise agreement or a contract of employment has no effect to the extent that the term:

(a)    permits, or has the effect of permitting, an employer to deduct an amount from an amount that is payable to an employee in relation to the performance of work; or

(b)    requires, or has the effect of requiring, an employee to make a payment to an employer or another person;

if either of the following apply:

(c)    the deduction or payment is:

(i)    directly or indirectly for the benefit of the employer, or a party related to the employer; and

(ii)    unreasonable in the circumstances;

(d)    if the employee is under 18—the deduction or payment is not agreed to in writing by a parent or guardian of the employee.

(2)    The regulations may prescribe circumstances in which a deduction or payment referred to in subsection (1) is or is not reasonable.

Unreasonable requirements to spend an amount

(3)    A term of a modern award, an enterprise agreement or a contract of employment has no effect to the extent that the term:

(a)    permits, or has the effect of permitting, an employer to make a requirement that would contravene subsection 325(1); or

(b)    directly or indirectly requires an employee to spend an amount, if the requirement would contravene subsection 325(1) if it had been made by an employer.

Were the deductions authorised in accordance with the agreements?

21    The statutory exemption case raised by DEECD that relied upon s 324(1)(b) agitated the following three common questions:

1.    Were the NTPP deductions made between 1 July 2009 to the present a “salary packaging arrangement” within the meaning of any or all of:

a.    clause 17 of the Victorian Government Schools Agreement 2004;

b.    clause 18 of the Victorian Government Schools Agreement 2008;

c.    clause 19 of the Victorian Government Schools Agreement 2013?

2.    If yes, were the NTPP deductions, or some of them, authorised by the participating teachers in accordance with an enterprise agreement within the meaning of s 324(1)(b) of the Fair Work Act 2009 (Cth) (FW Act), namely any or all of:

a.    clause 17 of the Victorian Government Schools Agreement 2004,

b.    clause 18 of the Victorian Government Schools Agreement 2008, or

c.    clause 19 of the Victorian Government Schools Agreement 2013?

22    Relying on s 324(1)(b), DEECD contended that the NTPP deductions were “authorised by the employee in accordance with an enterprise agreement.” DEECD contended that the NTPP deductions made by it from participating teachers’ salaries were authorised in accordance with one or another of the Agreements.

23    Clause 18 of the 2008 Agreement provided that:

(1)    An employee may enter into a salary packaging arrangement in respect of a range of salary packaged benefits including:

(a)    superannuation;

(b)    a novated lease on a motor vehicle;

(c)    payment of medical benefits insurance to a fund nominated by the employee;

(d)    mobile telephones;

(e)    note book and lap top computers;

(f)    membership fees and subscriptions to professional associations;

(g)    home office expenses;

(h)    financial counselling fees;

(i)    disability/income protection insurance premiums; and

(j)    self education expenses.     

(2)    All costs associated with salary packaging, including administrative costs and any additional tax associated with the employment benefit, are to be met from the salary of the participating employee.

24    The text of clause 17 of the 2004 Agreement is in precisely the same form. Clauses 19(1) and (2) of the 2013 Agreement are also in precisely the same form. Although clause 19 contains additional provisions in relation to the authorisation of deductions, nothing turns on a consideration of those provisions.

25    Each of the Agreements binds DEECD, the AEU and (amongst others) teachers and principals employed in government schools in the State of Victoria. Each requires that principals and teachers be paid the specified remuneration (expressed in monetary terms) set out in a salary schedule included in the Agreement.

26    As the issues in contest relate to the proper interpretation of identical terms found in each Agreement, I will focus my consideration on the proper meaning of clause 18 of the 2008 Agreement (clause 18). It is accepted that if the NTPP deductions are a “salary packaging arrangement” within the meaning of clause 18, then they would also meet that description in clause 17 of the 2004 Agreement and clause 19 of the 2013 Agreement. The same approach may be taken in answering questions 2 and 3, as no point of distinction has been raised by either party and none is apparent.

27    I should say at this point that it is not entirely clear to me why common questions 1, 2 and 3 raised clause 17 of the 2004 Agreement. The 2008 Agreement came into force and replaced the 2004 Agreement on 1 August 2008. The claim period commenced on 1 July 2009 and the AEU made no claim in relation to any earlier period. It was not explained, or at least not clearly explained, why in those circumstances it was necessary for DEECD to rely upon the 2004 Agreement as a foundation for a s 324(1)(b) exception.

28    It may be that DEECD held the precautionary view that reliance on the 2004 Agreement was necessary to support deductions made after 1 July 2009 which had been authorised under a Recipient Agreement made before 1 July 2009 and whilst the 2004 Agreement was in operation. To my mind it is unnecessary for DEECD to adopt such a precautionary position, if that is what it did. I have no difficulty in reading clause 18 of the 2008 Agreement as picking up arrangements entered into prior to that Agreement coming into force (assuming those arrangements met the description “salary packaging arrangement”, etc.). I consider that to have been the likely intent of the parties to the 2008 Agreement.

29    I need not, at this juncture, determine that issue, although it may require determination at a later time. There is, as I have said, no relevant distinction between the terms of cl 17 of the 2004 Agreement and cl 18 of the 2008 Agreement and the case was conducted on the basis that, if DEECD’s submissions are correct, all NTPP deductions made in the claim period were authorised by one of the 2004, 2008 or 2013 Agreements. I will proceed on that foundation.

Were the NTPP deductions a “salary packaging arrangement”?

30    The question raised on this part of the case, is whether the NTPP deductions were deductions from salary of the kind that clause 18 permitted DEECD to make. That question turns on whether the NTPP was a “salary packaging arrangement in respect of a range of salary package benefits” within the meaning of clause 18(1).

31    Clause 18 does not expressly authorise DEECD to make any deductions from the salary that the 2008 Agreement obliges it to pay to each of its teachers. However, it is not in contest that the clause is to be read as authorising the making of deductions from the full salary to which a teacher is otherwise entitled, where the deduction is made pursuant to a “salary packaging arrangement”. In the context of the 2008 Agreement, which contained a primary requirement upon DEECD to pay to its teachers their salaries in money and in full, clause 18(1) must have been intended to provide a capacity for a “salary packaging arrangement” to qualify that primary rule. Clause 18(1) thus contemplated that the full salary payable to a teacher in money may be reduced in accordance with a “salary packaging arrangement”. I accept that clause 18(1) is capable of authorising a deduction to be made from the monetary salary which would otherwise have been payable to an employee under the 2008 Agreement, where that deduction was made pursuant to a “salary packaging arrangement”.

32    Whether the NTPP is a “salary packaging arrangement” within the meaning of clause 18(1) is where the contest lies. The determination of that issue involves two questions. First, what is the intended meaning of “salary packaging arrangement”? Second, as a matter of characterisation of the NTPP arrangement made between DEECD and each relevant teacher, was the NTPP arrangement a “salary packaging arrangement”?

The meaning of the phrase “salary packaging arrangement”

33    The phrase “salary packaging arrangement” is not defined by the 2008 Agreement. Its meaning falls to be determined according to established principles of construction of an industrial instrument.

34    The starting point for interpretation of an enterprise agreement is the ordinary meaning of the words, read as a whole and in context: City of Wanneroo v Holmes (1989) 30 IR 362 at 378 (French J). The interpretation “… turns on the language of the particular agreement, understood in the light of its industrial context and purpose …”: Amcor Limited v Construction, Forestry, Mining and Energy Union (2005) 222 CLR 241 at [2] (Gleeson CJ and McHugh J). The words are not to be interpreted in a vacuum divorced from industrial realities (Holmes at 378): rather, industrial agreements are made for various industries in the light of the customs and working conditions of each, and they frequently are couched in terms intelligible to the parties but without the careful attention to form and draftsmanship that one expects to find in an Act of Parliament: see Holmes at 378–9, citing Geo A Bond & Co Ltd (in liq) v McKenzie [1929] AR(NSW) 498 at 503 (Street J). To similar effect, it has been said that the framers of such documents were likely of a “practical bent of mind” and may well have been more concerned with expressing an intention in a way likely to be understood in the relevant industry rather than with legal niceties and jargon, so that a purposive approach to interpretation is appropriate and a narrow or pedantic approach is misplaced: see Kucks v CSR Limited (1996) 66 IR 182 at 184 (Madgwick J); Shop Distributive and Allied Employees’ Association v Woolworths SA Pty Ltd [2011] FCAFC 67 at [16] (Marshall, Tracey and Flick JJ); Amcor at [96] (Kirby J).

35    It will become apparent in the analysis that follows, that I draw an important distinction between the payment made to an employer out of an employee’s entitlement to salary and the substitution for an entitlement to salary of another form of remuneration. It is only the latter which, to my mind, is capable of constituting a “salary packaging arrangement” within the meaning of clause 18(1). It is convenient that I commence the discussion by identifying what is remuneration.

36    Remuneration is the reward paid or provided in return for the performance of a service or for work done. The ordinary meaning of “remuneration” is pay for services rendered: Chalmers v The Commonwealth of Australia (1946) 73 CLR 19 at 37 (Williams J). That connotes a connection between the payment or benefit received and the provision of work or services: Settlement Agents Supervisory Board v L J Hooker Settlements Pty Ltd [2009] WASCA 89 at [22] (Martin CJ, with whom Pullin JA and Newnes AJA agreed). As Blackburn J observed in the Queen on the prosecution of J. B. Saunders v The Postmaster General [1876] 1 QBD 658 at 663, “… I think the word ‘remuneration’ is a wider term and means a quid pro quo. If a man gives his services, whatever consideration he gets for giving his services seems to me a remuneration for them.” A comparable understanding has been applied in Australia: May v Lilyvale Hotel Pty Limited [1995] IRCA 628 at 9–12 (Wilcox CJ). In Rofin Australia Pty Ltd v Newton (1997) 78 IR 78 at 81, a Full Bench of the Australian Industrial Relations Commission defined remuneration as:

… the reward payable by an employer to an employee for the work done by that employee in the course of his or her employment with that employer. It is a term that is confined neither to cash payments nor, necessarily, to payments actually made to the employee. It would include non-pecuniary benefits and payments made on behalf of and at the direction of the employee to another person out of moneys otherwise due to that employee as salary or wages.

37    In an employment relationship an employer will ordinarily remunerate its employee for the work provided by paying a monetary salary. However, as the passage just cited illustrates, remuneration can be provided in other ways. Where a mix of remunerative benefits is provided in exchange for work, that will often be collectively referred to as a “remuneration package”.

38    The phrase “salary packaging”, in the context of an existing employment relationship, describes a situation where an employee’s total remuneration paid by way of salary is restructured by the employee sacrificing salary in exchange for a non-salary form of remuneration. To engage in “salary packaging” is to make a salary packaging arrangement. Sometimes this process is referred to as “salary sacrificing”.

39    The CCH Macquarie Dictionary of Employment and Industrial Relations describes the practice of salary packaging synonymously with “salary sacrifice” as follows (D Yerbury & M Karlsson, The CCH Macquarie Dictionary of Employment and Industrial Relations (CCH Australia Limited & Macquarie Library Pty Ltd, 1992), at 310):

the structuring of the total remuneration to an employee … so as to increase that employee’s disposable income and maximise his/her choice as to which elements of a remuneration package would be most personally beneficial, while retaining the same net cost of employment to the employer. Often the package involves less direct salary than hitherto and more fringe benefits.

…

40    As that definition makes clear, the subject of a salary packaging arrangement is remuneration earned. A salary packaging arrangement, or salary packaging, is the making of an arrangement that will restructure the remuneration otherwise payable to an employee as salary for a mix of salary and non-salary remuneration. In an existing employment, that restructure will involve the employee sacrificing part of an existing entitlement to receive salary in return for service for other benefits earned by the employee and provided by the employer as remuneration in return for service. A fundamental feature of a salary packaging arrangement is the substitution of one form of remuneration for another.

41    The remuneration provided in substitution for salary may take various forms. It may be the provision of a good or service like a vehicle or access to a gym. It may be the discharge of a debt owed by the employee to another person, such as a membership subscription to a union or to a health fund. What is crucial, to my mind, is that the salary substitute is provided to the employee as remuneration for services rendered. Only if that is so, is remuneration the subject of the arrangement and the arrangement a salary packaging arrangement.

42    Where a good or service is not provided by an employer to an employee as remuneration, it is not provided as part of a salary packaging arrangement. In that case, there is no exchange of salary for a different remunerative benefit, there is simply the provision of a benefit either gratuitously or in exchange for a payment. If such a benefit is paid for, it may be paid for out of the salary due to be paid to the employee, but that would simply be a payment made by the employee, out of salary, for a good or service provided by the employer. It would not be the substitution of salary for another form of remuneration where the good or service was not provided as remuneration. By definition, it would not constitute a salary packaging arrangement.

43    I should add that, in addressing the meaning of “salary packaging arrangement”, I have taken into account the views of two accountants called by the parties which, in each case, were contained in expert reports received, pursuant to order, as submissions. I think it fair to say, as DEECD contended, that both experts agreed that the general understanding of the term “salary packaging arrangement” is:

An arrangement between an employer and employee whereby the employee agrees to forego an amount of monetary remuneration in return for the provision of non-cash benefits by the employer.

Neither expert directly addressed whether a fundamental feature of a salary packaging arrangement is the substitution of one form of remuneration for another, but that seems implicit from their agreed definition.

44    DEECD also contended that the definition of “salary packaging arrangement” in s 136(1) of the Fringe Benefits Tax Assessment Act 1986 (Cth) (FBTAA) could shed light on the intended meaning of “salary packaging arrangement” in clause 18. I accept that the definition there provided is arguably broader than that which I have described as reflecting the ordinary understanding of the phrase. There are, however, two reasons why I consider that the FBTAA definition does not assist. First, while true of all legislation, it is notorious that a definition found in tax legislation is often driven by the imperatives of that kind of legislation and is not necessarily designed to reflect the ordinary usage of the term defined. Second, the definition was only introduced on 28 June 2013. Even if it is the case, as DEEDC contended, that the definition was modelled upon words first introduced into s 41(2) of the FBTAA in May 2008, the introduction of those words pre-dated by many years the making of the 2001 Agreement when, as DEECD accepted, the meaning of the phrase “salary packaging arrangement” as found in the Agreements, was settled.

45    The terms of the 2004 Agreement do not suggest that the phrase “salary packaging arrangement” utilised in clause 18(1) was intended to have a meaning other than the ordinary meaning that I have identified. The words “in respect of a range of salary packaged benefits” do not add very much. Those words simply confirm the nature of the intended arrangement which is already apparent. The “benefits” identified in the non-exhaustive list are recognisable as those for which concessional taxation treatment is available and are reflective of the fact that salary packaging will usually be utilised so as to enable the employee to obtain a financial advantage by restructuring the manner in which remuneration earned is received.

46    That last observation and two other features of clause 18 suggest that the clause contemplates facilitating an employee’s desire to obtain an advantage through restructuring his or her remuneration. The opening line of clause 18(1) provides that “an employee may enter into a salary packaging arrangement.” That suggests that the arrangement contemplated is an arrangement made for the employee’s benefit. The conclusion is reinforced by the terms of clause 18(2) which require the employee to bear all of the costs associated with the arrangement.

47    I accept the AEU’s contention that the word “benefit” in clause 18(1) must be understood by reference to its context, namely, a “salary packaged benefit” the subject of a “salary packaging arrangement.” In that context, as the AEU correctly contended, the kind of benefit addressed in clause 18(1) is a substitute for wages provided by DEECD in consideration of the teacher’s services, or, as the AEU submitted, “earned remuneration standing in the place of monetary compensation”. As I have said already, by definition, a fundamental feature of a salary packaging arrangement is the provision by the employer of non-salary remuneration. Accordingly, a benefit provided to an employee for a purpose other than as the quid pro quo for services is not a benefit of the kind that clause 18(1) contemplates.

48    The AEU went on to contend that, as the purpose of the provision of the non-monetary benefit is to remunerate the employee, a benefit that benefits the employer and only incidentally the employee cannot be a benefit within the meaning of clause 18(1). I do not accept that submission. I would accept that the provision to an employee of a non-salary benefit that principally advantages the employer and only incidentally the employee, is a situation that is unlikely to evidence the provision of a benefit for the purpose of remunerating the employee. But, the question is whether or not the benefit was provided as remuneration, not whether provision of the benefit was more beneficial to the employer than it was to the employee.

49    Similarly, I do not accept the AEU’s submission that a “benefit” must be a benefit that an employee has control over. Again, lack of employee control over how a benefit can be utilised and the fact that its utilisation is controlled by the employer will likely assist in establishing that the benefit was not provided as remuneration. But, to my mind, an absence of control is not necessarily a disqualifying feature.

50    All of that reflects the fact that an employer and its employee may have a range of reasons for agreeing that a particular good or service be provided in a salary package. The arrangement may be a good or a bad bargain for the employee, or it may reflect some peculiar need of the employee. What matters, in my view, is whether the substituted benefit was provided as remuneration.

51    Whilst DEECD contended (as I accept) that none of the degree to which the employee obtains an advantage, the degree of control the employee has over a benefit, or the degree to which the benefit is utilised for work purposes, is determinative, DEECD’s submissions did not really confront the AEU’s proposition that a “benefit” must be a form of remuneration. In so far as DEECD contended to the contrary, I reject that contention. For the reasons I have already given, to construe a “salary package benefit” as capable of being any kind of benefit provided for any kind of purpose fails to understand that the subject matter of a salary packaging arrangement (as the phrase is ordinarily understood and as it is used in clause 18) is remuneration.

Does a clause 18 salary packaging arrangement require the agreement of the employer?

52    The AEU contended that a salary packaging arrangement of the kind contemplated by clause 18 does not require the employer’s approval. That proposition was contested. Its determination has some indirect relevance to issues otherwise raised. It is convenient that I deal with it now.

53    The contention was based upon clause 18 making no reference to employer approval. The AEU contrasted that position with other provisions of the 2004 Agreement where, in relation to some aspects of the taking of various kinds of leave, the express approval of the employer is referred to. The AEU relied on the employee-initiated nature of the salary packaging arrangement contemplated by clause 18 and submitted that if an employee sought a restructuring of his or her salary the employee could insist upon it as long as the arrangement was cost neutral to the employer.

54    DEECD contended that the purpose of clause 18 was to authorise a deduction from salary. Its purpose was not to impose an obligation upon DEECD to make a salary packaging arrangement that it did not wish to make.

55    A common feature of a salary packaging arrangement is the agreement of both employee and employer. Despite a proposed arrangement being cost neutral for an employer, the employer may have a host of legitimate reasons for wanting to pay the totality of an employee’s remuneration by way of salary. That may be simpler, or it may be more efficient for the employer even where any cost burden to the employer is negated.

56    The AEU’s contention inheres that the ordinary capacity of an employer to refuse an employee’s proposal for salary packaging was intended to be overridden and an obligation to accept such a proposal was intended to be imposed. There is, in my view, insufficient support for that construction in the text of clause 18 or in the context in which that text appears.

Was “salary packaging arrangement” understood by the framers of the clause to exclude the NTPP?

57    Each of the parties led evidence about the surrounding circumstances to the making of clause 18 and its successor provisions. Evidence was also led about the making of the Victorian Government Schools Agreement 2001 (2001 Agreement). That was because a predecessor to clause 18 was clause 14 of the 2001 Agreement and it was on the making of that agreement that a clause like clause 18 was first introduced. The terms of clause 14(2) and (3) of the 2001 Agreement are nearly identical to the terms of clause 18(1) and (2). The sole difference is that, whereas clause 18(2) includes the words “and any additional tax associated with the employment benefit”, clause 14(3) does not. It seems to me that nothing turns on this difference. Clause 14(1) imposed upon DEECD an obligation to pay its employees the salary specified by the salary schedules elsewhere set out in the 2001 Agreement.

58    The AEU contended that the evidence of the surrounding circumstances known to the parties at the time of the making of the 2001 Agreements was to the effect that the NTPP deductions were not regarded as, or understood to be, salary packaging arrangements because they were separate to and excluded from the arrangements understood to be the salary packaging arrangements available for teachers to make with DEECD. On that foundation, the AEU contended that an NTPP arrangement was not a “salary packaging arrangement” as contemplated by the 2001 Agreement, and that the intended meaning carried over to each of the 2004, 2008 and 2013 Agreements.

59    The evidence relevant to this issue is largely uncontentious. From the AEU’s perspective, the strongest evidentiary support is that, at the time the 2001 Agreement was made, DEECD had in place a comprehensive policy on salary packaging in a Salary Packaging Guide dated March 1999 (1999 SP Guide). The 1999 SP Guide set out a wide range of options for salary packaging which included a capacity for the salary packaging of laptops or notebook computers. The policy prescribed a range of mechanisms and processes by which salary packaging could be arranged and provided for that to be done through external providers. The 1999 SP Guide specifically excluded the NTPP arrangements as capable of being included in any permitted salary packaging arrangements for a laptop or notebook computer. The policy relevantly said:

A computer provided as part of the Department’s ‘notebook computers for teachers’ initiative cannot be included as an optional benefit in the salary package.

60    There is a controversy between the parties as to whether or not that exclusion was removed in November 2002 when the 1999 SP Guide was updated. It will be necessary to address that matter for other purposes shortly. For current purposes, that is not necessary. DEECD accepted that whatever meaning was intended for the phrase “salary packaging arrangement” by the framers of clause 14 on the making of the 2001 Agreement carried through to clauses 17, 18 and 19 of the 2004, 2008 and 2013 Agreements respectively. In essence, DEECD accepted that the substance of clause 14 was transposed into the Agreements that followed.

61    The relevant question, then, is whether the evidence of surrounding circumstances, as at the time the 2001 Agreement was made, demonstrated that the terms utilised by the parties in clause 14 were intended to have a meaning that excluded an NTPP arrangement. In my view, the surrounding circumstances do not suggest that the parties intended to restrict the meaning of “salary packaging arrangement” so as to exclude the NTPP. The evidence does not sustain a view that the parties intended the phrase to have anything other than its ordinary meaning.

62    The extent to which DEECD was prepared to allow or not allow any particular item at any particular time to be the subject of salary packaging should not be regarded as of any significance to the meaning of the clause. As I have indicated already, DEECD had a capacity, unaffected by clause 14, to determine whether it would make or would not make a salary package with any particular employee about any particular salary restructure. There is no reason to assume that the framers of clause 14 intended that DEECD’s position as to what benefits could or could not be included in a salary packaging arrangement would remain fixed by any policy that DEECD had at any particular time, or that clause 14 was intended to reflect that fixed scope. The policy embodied in the 1999 SP Guide was made pursuant to a discretion conferred upon the Secretary to the Department of Education by Ministerial Order No. 154 (see clauses 2.1.2 and 2.3.2(3)). Within the broad parameters set by that Ministerial Order, the policy was capable of being altered at the discretion of the Secretary. There is no reason to suppose that the framers of clause 14 intended that, over the course of its operation, the salary packaging arrangements available under clause 14 should be restricted by what DEECD regarded at an earlier time to have been an appropriate item for salary packaging. It is more likely that, if the framers of clause 14 had turned their mind to the issue, they would have recognised that the optional benefits that DEECD was prepared to allow to be salary packaged may vary over time. In my view, the terms of clause 14 were broadly drawn and intended to facilitate salary packaging for whatever remunerative benefits an employee sought and DEECD was prepared to allow.

63    It is not, therefore, necessary for me to determine DEECD’s contention that a relevant change to the surrounding circumstances was made in August 2000 when deductions of NTPP contributions commenced to be made from “pre-tax salary”. Even if the AEU is correct in its contention that no relevant change to the surrounding circumstances was thereby effected, my view as to the meaning of the phrase would be unaltered.

Was a Recipient Agreement a “salary packaging arrangement”?

64    Although common question 1 was posed by reference to the NTPP deductions, in substance the question asks whether the NTPP arrangements which authorised those deductions were “salary packaging arrangements”. The only relevant deductions were the fortnightly deductions made pursuant to the Recipient Agreements between each teacher and DEECD. If a “salary packaging arrangement” was made between a teacher and DEECD it was made by the Recipient Agreement. No party contended to the contrary. The AEU contended that DEECD could only succeed if the whole of the Recipient Agreement could be characterised as a “salary packaging arrangement”. On the other hand, DEECD relied on particular features of the Recipient Agreement to contend that the NTPP arrangement was a “salary packaging arrangement”.

65    To my mind, if a part of an arrangement with a wider purpose or subject is able to be characterised as a “salary packaging arrangement” then such a part can be regarded as an arrangement of itself. The features of a “salary packaging arrangement” may be embedded in an arrangement of wider compass. If those features are sufficiently connected to be recognisable as an arrangement of themselves, then I can see no reason why their placement within a wider arrangement should deny those features their combined character. Accordingly, I should consider whether, either as a whole or in respect of a part thereof, a Recipient Agreement was a “salary packaging arrangement”.

66    That consideration ought not be based upon the evidence led by the AEU from teachers to the effect that, when they made a Recipient Agreement, subjectively they did not believe they were committing their salary to a salary packaging arrangement. The nature of the legal relations created when teachers and DEECD entered into Recipient Agreements is to be assessed objectively by reference to what a reasonable person would have understood to be the common intention of the parties from the text of the Recipient Agreements, the surrounding circumstances known to the parties, and the purpose and object of the transaction: Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165 at [40] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ). It is appropriate that I commence the analysis by considering the text.

The Recipient Agreement

67    A number of different versions of the standard-form Recipient Agreement were in evidence. Each version had application during a different period within the claim period. In so far as terms differed, no party suggested any relevant distinction.

68    The standard form Recipient Agreement commenced with its title: Notebooks for Teachers and Principals Program Licence Agreement (or, in later versions, “Recipient Agreement” rather than “Licence Agreement”). The descriptor “Licence Agreement” is a fair representation of the content that followed. The document set out the terms and conditions of the licence offered by DEECD which the teacher was invited to accept. The document was formal, comprehensive, and readily recognisable as an agreement intended to be legally binding.

69    It commenced by explaining the “Background”. The NTPP was described as an initiative of the Government of Victoria administered by DEECD. It referred to the NTPP, or “the Program”, as:

… designed to support and encourage principals and teachers (“Recipients”) to integrate the use of learning technologies into the classroom, and to provide Recipients with a tool for professional planning, classroom practice, assessment and reporting.

70    In further describing the Background, the document stated that DEECD had entered into an operating lease with a finance company (or, in later versions, a “procurement agreement”) for the lease of notebook computers and other related items for the purposes of the NTPP. Those items were defined as the “Equipment” set out in Schedule 1. There were non-substantive differences in the scheduled “Equipment” as between the various versions of the Recipient Agreements. The following is the “Equipment” as set out in the earliest of the three versions I was provided:

•    Notebook Computer and peripherals (battery, adaptor, power cord, Optical Drives (where provided) and carry bag or backpack) with operating system software sufficient for use by the Recipient as a work tool and for self education purposes both at home and at school.

•    Microsoft Office software, Anti-Virus software and other selected software preloaded on the Notebook Computer, Guides and Manuals.

•    User manuals as supplied by the notebook manufacturer.

71    The Background continued that, in accordance with the NTPP, DEECD “has agreed to make the Program package as described in Schedule 2 (Notebook Package), available to the Recipient under a non-exclusive licence in accordance with these Terms and Conditions.” Later versions of the Recipient Agreement omitted the words, “under a non-exclusive licence”. Schedule 2 identified the Notebook Package as the Equipment together with “Equipment warranty support and Help Desk for dealing with product faults and difficulties” as well as “Insurance against loss or damage of the Equipment.” Again, there were immaterial differences in Schedule 2 of later Recipient Agreement versions. Finally, the Background stated that the Notebook Package was provided directly to the Recipient and that the agreement was between DEECD and the Recipient personally and not with the Recipient’s school.

72    The next part of the document should be set out in full. Again, there were differences in the wordings of these provisions in the various versions of the Recipient Agreement. Most are immaterial, so I will set out below the first version, noting important differences in later versions in square brackets:

2.    LICENCE [later versions said “Provisions of Notebook Package”]

2.1    The Department agrees to make the Equipment available to the Recipient for his or her non-exclusive [later versions omitted “non-exclusive”] use in accordance with these Terms and Conditions (“Licence Agreement”) [later versions omitted the words “Licence Agreement”].

2.2    In consideration of receiving the Notebook Package, the Recipient will:

(a)    contribute to the cost of the Notebook Package at the nominated fortnight rate (referred to as the “Contribution Rate”);

(b)    authorise the deduction of the Contribution Rate from the Recipient’s pre-tax salary by equal fortnightly instalments for the period:

(i)    commencing on the date of delivery of the Equipment in accordance with this Licence Agreement, or at a date agreed between the Department and the Recipient (with an agreed date taking precedence over the date of delivery); and

(ii)    ending on the date when the total contribution for the notebook package is paid or the date upon which the Equipment is returned to the Department, whichever is the latter;

(c)    demonstrate a commitment to ongoing professional development as set out in Schedule 4; [in later versions, “Schedule 3”] and

(d)    observe and comply with the terms and conditions of this Licence Agreement.

2.3    The Department will give the Recipient reasonable written notice of any proposed or actual change to the Contribution Rate.

2.4    The Department in relation to the collection of information from the Recipient will comply with the Information Privacy Act 2000 and its Privacy Collection Statement referred to in Schedule 3 [in later versions, “Schedule 4”].

73    The terms of the Schedule referred to in clause 2.2(c) were as follows:

Teachers and Principals are expected to commit to:

•    the use of learning technologies in the school;

at least 40 hours of professional development in learning technologies in their professional development plan; Refer to these links for ICT Professional Support:

•    Information on a range of Professional Learning Opportunities:

http://www.education.vic.gov.au/studentlearning/elearning/proflearn.htm

•    List of events and dates for Professional Learning:

http://www.education.vic.gov.au/studentlearning/elearning/calendar.htm

•    Education Times Professional Learning Opportunities

http://www.education.vic.gov.au/about/news/edtimes/onlineeditions.htm

•    the use of the Equipment as a tool in their curriculum planning, classroom practice and assessment and report [sic];

•    sharing with other teachers curriculum materials or teaching strategies that are developed using the Equipment.

In the later two versions, the final bullet point was omitted.

74    The next section of the document was headed “Period of Licence.” It dealt with how the agreement could be terminated. Various termination events were specified including by notice from DEECD, on the Recipient ceasing employment with the DEECD, and on the Recipient advising DEECD that he or she wished to withdraw from the Program (or, in later versions, on the Recipient permanently returning the Equipment to DEECD).

75    Section 4 of the Recipient Agreement was headed “Recipient Agreement As To Use.” Pursuant to clause 4.1(a) the Recipient agreed:

(a)    to use the Equipment as a work tool and for self-education purposes in accordance with:

(i)    the objectives of the Program; and

(ii)    the Department reserves the right to amend the Department’s Notebooks for Teachers and Principals Program Policy and Guidelines from time to time and to provide information to the Recipient via the Department’s email and other means of communication as outlined in the Department’s Policies and Guidelines;

76    There were no differences of substance in later versions. Pursuant to clause 4.1 the Recipient further agreed, inter alia, to:

    share with other employees of DEECD and its schools any curriculum materials or teaching strategies that are developed using the Notebook Package;

    care and maintain the Equipment in good working order;

    report any loss of or damage to the Equipment;

    utilise the warranty support services provided by the manufacturer;

    keep the Equipment under his or her personal control at all times;

    not assign any rights in the Equipment.

77    The matter set out in the first bullet-point above was removed in the two later versions that were in evidence. Clause 4.2 set out financial obligations upon the Recipient to pay for costs incurred in repairing the Equipment or in replacing Equipment as a result of loss, burglary or theft as well as in relation to other costs arising out of breach by the Recipient of the agreement.

78    Clause 6 required the Recipient to acknowledge that he or she did not own the Equipment and may only use the Equipment as provided for in the agreement. Clause 7 stated that the agreement did not confer on the Recipient any proprietary interest (or, later, ownership interest) in or to the Equipment.

79    The terms of clause 4.1(a)(ii) set out above are taken from the earliest version of the Recipient Agreement in evidence. Those terms did not expressly bind the Recipient to observe DEECD’s NTPP “Policy and Guidelines”. That subclause spoke of DEECD’s right to amend the Policy and Guidelines without expressing their binding force on the Recipient. Later versions of the Recipient Agreement did require the Recipient’s agreement to abide by the Program’s Policy and Guidelines (as amended from time to time). Despite the omission in the earliest version, it was not in contest that throughout the entirety of the claim period, Recipients were obliged to observe the Program’s Policy and Guidelines.

80    It was agreed that at all times in the claim period, a document entitled “Notebooks for Teachers and Principals Program Policy” (NTPP Policy) was incorporated by the applicable standard-form Recipient Agreements. This document did not relevantly add anything. It largely repeated the purpose of, and the obligations set out in, the Recipient Agreements. It was also agreed that from (relevantly) the beginning of the claim period to around March 2011, a document entitled “Acceptable Use Policy for Department of Education and Early Childhood Development Information, Communications and Technology (ICT) Systems” was incorporated (first Acceptable Use Policy), and that from March 2011 to the end of the claim period a different document entitled “Acceptable use policy: DEECD Information Communications and Technology (ICT) Resources” (second Acceptable Use Policy) was incorporated. Both of the first and second Acceptable Use Policies were applicable not only to the NTPP but also to all other of DEECD’s ICT systems, including intranet, internet, email, computer systems, software services, desktop computers, notebook computers, mobile phones, digital cameras, other handheld devices, and storage devices. Each stated that its purpose was to ensure that use of ICT systems was “legal, ethical and consistent with the aims, values and objectives of DEECD …”. Each provided that ICT systems must be properly and efficiently used and not used for “inappropriate activities” therein listed (e.g., access to pornography).

81    It is necessary to refer to some of the terms of the Acceptable Use Policies. Clause 3 in each Acceptable Use Policy stated its “Rationale,” and emphasised that the use of ICT resources carried with it responsibilities. Clause 3 in the second Acceptable Use Policy stated, “Users must at all times remember that when using DEECD ICT resources, they are using ICT resources provided to them for business purposes.” The first Acceptable Use Policy did not contain these words, but did provide that “[t]he provision of DEECD ICT systems … is to improve and enhance learning and teaching, and conduct of the business and functions of DEECD.” Clause 5 in both Acceptable Use Policies included that non-compliance with the Acceptable Use Policy would be regarded as a serious matter and that appropriate action, including termination of employment, could be taken in response. Again in both cases clause 6 included that use of DEECD ICT resources must only be used for DEECD purposes unless otherwise expressly authorized. However, in both cases, clause 6 permitted non-excessive personal use. Below is the form of words used in the second Acceptable Use Policy, with additions as compared with the first Acceptable Use Policy marked by underlining:

Notwithstanding clause 6.1(a) [“6.2(a)” in first Acceptable Use Policy], users of DEECD ICT resources [“systems” in first Acceptable Use Policy] may use DEECD ICT resources [ditto] for personal use provided the use is not excessive and does not breach this Policy. Users must not engage in excessive personal use of DEECD ICT resources [ditto] during working hours (refer to Clause 20, Category 4, for guidance). Users must not engage in excessive personal use of DEECD email systems [“electronic communications” in the first Acceptable Use Policy] or the internet using DEECD networks outside working hours. A breach of either of these constitutes a failure to abide by this Policy. In using DEECD ICT resources for personal use, users should be aware that the provisions that apply to access and monitoring of DEECD ICT resources apply to personal use as well.

82    Clause 8 provided for DEECD to have access to and monitor DEECD ICT resources. In the second Acceptable Use Policy, it was expressly stated that this might occur “without notice to the user,” but that a valid reason must exist for accessing or monitoring. Neither of those two express statements was made in the first Acceptable Use Policy, but I think each is implicit. Clause 20 in each Acceptable Use Policy provided for categories of breach of the Policy, comprising Illegal (category 1), Extreme (category 2), Critical (category 3), and “Excessive personal use during working hours” (category 4).

83    It is agreed that from March 2012, a further document was incorporated as a policy or guideline. This document was titled “Frequently Asked Questions for all recipients of eduSTAR.NTP notebooks” (FAQ Policy). It began by describing the NTPP (by then called the eduSTAR.NTP) as a DEECD initiative which supported and encouraged principals, teachers and para-professionals (instructors) “to integrate learning technologies into their school classroom and administrative practices.” A question was asked – “What do I get for my fortnightly pre-tax eduSTAR.NTP contribution?” The equipment provided under the package was then set out. The next question and answer stated that DEECD subsidised the cost of the laptops. The extent of that subsidy was not specified. The following question asked, “How is the contribution rate worked out?” The answer given was that the contribution rate reflected the overall cost of purchasing, maintaining and supporting each notebook over the term of the agreement, after DEECD’s subsidy had been applied. The document included the following question and answer:

Why do I have to pay for an eduSTAR.NTP notebook?

The program is voluntary and offers the choice of an Apple or Windows notebook for use by participants of the Program.

The co-contribution made by recipients and the terms of the program’s agreement for the use of notebooks strikes an appropriate balance between the ability of teachers and principals to use the notebook for both professional and personal purposes.

On the evidence, this was the first and only occasion where a document explaining the NTPP program suggested that the teacher’s contribution had a nexus to personal use of the laptop.

84    Later, the document addressed whether a teacher could bring his or her “personal” computer to use at school. It stated that whether an individual teacher could bring a personal computer into the school was a “local school decision that resides with the Principal and School Council,” and that DEECD’s eduSTAR software could not be installed on the teacher’s personal computer. If a personal computer was permitted to be brought to the school, the principal would require the teacher to have suitable and current anti-virus and other security software installed.

85    The document contained a glossary of terms in which the term “Recipient Contribution” was defined as follows:

Pre-tax fortnightly contribution made by recipients.

The actual contribution is determined based on the total cost of the notebook after taking into account the Department subsidy.

The recipient is advised of the contribution during the nomination process and accepts this when they complete the nomination process formalities.

After the recipient has executed their eduSTAR.NTP Recipient Agreement their contribution will be automatically deducted through the Department’s payroll system.

Discussion

86    In evaluating whether a common intention to make a salary packaging arrangement should be imputed to DEECD and each of the teachers with whom it made a Recipient Agreement, it is appropriate to commence with a consideration of the text of the Recipient Agreement and the purpose and object of the transaction as there identified.

87    The Recipient Agreement initially characterised itself as a Licence Agreement. The transaction the subject of the Recipient Agreement was identified by its terms as the provision by DEECD of the “Notebook Package” including a licence to the teacher to use the “Equipment” in exchange for the teacher agreeing to “contribute to the cost of the Notebook Package” and to “demonstrate a commitment to ongoing professional development.” The teacher also agreed to “use the Equipment as a work tool and for self-education purposes in accordance with … the objectives of the Program.” Those objectives were expressed as supporting and encouraging principals and teachers to “integrate the use of learning technologies into the classroom, and to provide Recipients with a tool for professional planning, classroom practice, assessment and reporting.” No party sought to make anything of the fact that the language of licence ceased to be used after the first relevant version of the Recipient, and I cannot see that anything turns on that change.

88    There is no reference in the Recipient Agreement to salary packaging or to a salary packaging arrangement. There is, in the clause providing for deductions, a reference to “pre-tax salary” as the source for the teacher’s contribution; there is no reference to a teacher’s remuneration beyond the reference to the source of the deduction just referred to. There is no suggestion that the provision of the Notebook Package has a remunerative purpose.

89    The nature or character of the transaction, as it appears on the face of the terms of the Recipient Agreement, was the making of a regular contribution “to the cost of the Notebook Package” in exchange for the Notebook Package which included a licence to use the Equipment.

90    The parties’ characterisation of their agreement may not be given effect according to its terms where the characterisation contradicts the nature of the relationship the parties have actually created: Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd (2015) 228 FCR 346 at [148] (North and Bromberg JJ). But here, the characterisation made by the parties of the Recipient Agreement is consonant with its terms. If there was ambiguity it would follow that the parties’ characterisation of their own agreement would be relevant. If the nature of an agreement is ambiguous, the parties’ characterisation can remove that ambiguity: Australian Mutual Provident Society v Chaplin (1978) 18 ALR 385 at 389 (Lord Fraser of Tullybelton, for the Privy Council), citing Lord Denning MR in Massey v Crown Life Insurance Co [1978] 2 All ER 576 at 580. As Lord Denning MR said in the passage cited:

The agreement itself then becomes the best material from which to gather the true legal relationship ... .

91    It may be that the parties characterised the primary nature of the agreement, but not a subsidiary nature (e.g., as a salary packaging arrangement). The parties’ failure to acknowledge the subsidiary nature may be inconsequential if it were the case that, in substance, the Recipient Agreement exhibited the features of a salary packaging arrangement.

92    The difficulty for DEECD is that the Recipient Agreement does not contain the requisite features of a salary packaging arrangement. As earlier stated, remuneration is the essential subject matter of a salary packaging arrangement and, in the context of an existing employment relationship, the arrangement must involve the substitution of one form of remuneration for another.

93    Putting to one side (for the moment) the manner in which the Recipient Agreement provided for the teacher’s contribution to be effected—the “pre-tax salary” issue to which I will return—there is nothing in either the terms of the Recipient Agreement or the surrounding circumstances that, in my view, supports a conclusion that the Recipient Agreement concerned teacher remuneration. The purpose of the transaction, as is apparent from the terms of the Recipient Agreement, was to provide the teacher with Equipment for use “as a work tool and for self-education purposes” in accordance with the objectives of the NTPP. In consideration of receiving the Notebook Package the teacher agreed to “contribute to the cost of the Notebook Package.” Those contributions (as clause 2.2(b) specified) commenced on the date the Equipment was delivered (or at a date agreed) and ended when “the total contribution for the Notebook Package is paid” (though this possibility was not mentioned in later versions) or the date upon which the Equipment was returned. There are other references in the contractual documents to the same effect. The NTPP Policy at clause 4.4 stated that teachers must agree to “contribute towards the cost of participating in the Program.” The FAQ Policy referred to the teachers’ contribution by reference to the cost of the NTPP and included an explanation as to why a teacher had to pay for a NTPP notebook. Those references tend to confirm that the NTPP Package was provided in exchange for the teacher contributing financially to its cost. Indeed, in a submission about the characterisation of the Recipient Agreement, DEECD said that “[i]t provides for a voluntary arrangement for access to and use of a notebook computer package in exchange for a financial contribution to its cost” (15 August 2014 submission at [17]). The conclusion that the quid pro quo for the NTPP Package was a financial contribution to its cost, and not the provision by the teacher of his or her services, to my mind, seems irresistible.

94    A reasonable person with knowledge of the Recipient Agreement and the surrounding circumstances would not have concluded that teachers were being remunerated in part in money and in part by being provided with a laptop computer. In coming to that view I have considered the nature of the benefits provided to a teacher under the Recipient Agreement. The nature of a benefit provided under an arrangement may, in context, shed light on the purpose for which the benefit was provided. I do not consider that the benefits provided to a teacher by the Recipient Agreement indicate remunerative purpose.

95    DEECD relied upon a number of asserted benefits to teachers. The asserted benefits were:

(a)    Personal use of the lap top;

(b)    Capacity to work flexibly both as to time and place of performance of work;

(c)    Provision of preloaded software suitable for professional and personal use;

(d)    Availability of IT support and a help desk function;

(e)    Regular turnover of lap tops;

(f)    Ability to obtain use of a lap top at a “cost” far below that which could be obtained on the retail market.

96    With the exception of personal use, each of these benefits was said by the AEU to be irrelevant. The “benefits” were said to be benefits to DEECD and not anything that could have been regarded as a “salary packaged benefit” made available to the teacher. As earlier identified, the contest between DEECD and the AEU largely involved competing contentions as to whether a broad or narrow conception of a benefit was appropriate. I have accepted DEECD’s contention that a broad range of benefits may be included in a salary package arrangement. However, the fact that a wide range of benefits is capable of being provided as remuneration does not demonstrate that any one out of that range was so provided. The real issue is not whether each benefit was capable of being provided as remuneration but whether it was so provided.

97    In answering that question it is useful to commence by making some broad observations about the nature of benefits which may be provided to an employee. Remuneration is clearly one kind of benefit. However, employees are commonly provided with other facilities that, taking a broad view, are of benefit to them. Some are provided to enhance the accommodation or the environment in which their work is performed. Air-conditioning, furniture, and toilet facilities are illustrative examples of that nature of benefit. Other facilities provided to employees may be more directed to assisting the actual performance of work. Tools and equipment, training, the assistance of other employees, and the like, may benefit an employee performing work. But the provision of facilitative benefits of that kind would not ordinarily be provided as remuneration, because the usual purpose of such benefits is to facilitate the performance of work, rather than remunerate the employee for the work performed.

98    Those general observations do not seek to deny that instances of the forgoing natures of benefit might, in the context of particular employment relationships, be remunerative. They nevertheless provide some context. It is necessary then to turn to the specific benefits upon which DEECD relied. I will address personal use last.

99    It was not in contest that a teacher’s capacity to work effectively and efficiently is enhanced by having access to a personal laptop computer. The evidence established that teachers’ work is usually performed at school, but that a substantial amount of preparatory and administrative work is also performed at home. Whilst at school, teachers move from class to class. The portability of a laptop suits the nomadic work patterns of the teacher. The teacher can carry with her and have at her immediate disposal the major tool she uses for creating and storing written work and for sending and receiving electronic information including in the direct delivery of teaching to students. That capacity is beneficial because it enables work to be performed more efficiently and also more conveniently. The teacher can carry out work at the most convenient location—often at home and in a way that accommodates conflicting work and personal commitments.

100    The Equipment provided to the teacher pursuant to the NTPP included pre-loaded software. Some of the programs included were of broad application (e.g., Microsoft’s Windows Media Player). Other programs were included with the specific intention of accommodating teachers’ educational or administrative work (e.g., Wolfram’s Mathematica).

101    The evidence supports a finding that teacher access to specially-designed software was an important facilitator of work. Lack of access put teachers at a significant disadvantage. It was not in contest that access to the software was advantageous to the teacher in regard to performance of work. Indeed, the evidence supports a finding that access to (or at least ease of access to) DEECD-provided specialist software was a significant reason for a number of teachers taking up an NTPP laptop instead of purchasing their own portable computer.

102    Software of a general nature (such as Microsoft Office) was available for personal use by teachers. A few teachers (e.g., Ms Bray, Ms Henning, and Ms Prosser) gave evidence that they used their notebooks for personal word processing. Ms Henning referred to the possibility of making personal use of the “extensive range” of eduSTAR software. While that evidence was limited and did not go to extent of any such personal use of eduSTAR software, I think it fair to assume that some personal use would have been made of the software.

103    The availability of technical support including computer maintenance and help desk functions was valued by many of the teachers and, I infer, would have been of some value to all teachers utilising the NTPP. The convenience of access to those services, which were often located at the school, was appreciated. Some teachers appreciated the cost saving involved in comparison to the costs that may have been incurred if they had purchased their own laptops.

104    Since the NTPP commenced in 1998 there had been a pattern of new Rounds and Cycles, which allowed teachers to replace an existing laptop with a new laptop after a period of between three and four years. Some teachers thought it advantageous that, by continuing participation in the NTPP, they could regularly update to a new and improved laptop.

105    DEECD contended that NTPP laptops were far cheaper than the retail market. The evidence supports a finding to that effect, as the cost of NTPP computers was shared between DEECD and the teacher, and because DEECD purchased in bulk and obtained laptops at discounted rates.

106    The evidence of the extent to which the witnesses utilised their NTPP laptops for personal use is dealt with in Annexure 5. All teachers called made some personal use, although, in the main, personal use was not substantial. As Annexure 5 identifies, across all of the teacher witnesses called, personal use was, on average, 14 per cent of total use. However, I agree with DEECD’s contention that whether personal use constitutes a benefit is not resolved by ascertaining whether any particular threshold of use is demonstrated. The fact that a laptop is available for personal use can of itself be regarded as a benefit.

107    Some of the evidence to which I have referred and the findings made about each of the benefits listed above relate to facts and matters that occurred after a teacher made a Recipient Agreement. Strictly, those are not findings of the surrounding circumstances that were known to DEECD and each of the teachers with whom a Recipient Agreement was made. However by 2009, some eleven years after the NTPP commenced, many teachers (including all of the Group 11 teachers) had made multiple Recipient Agreements and the benefits of having an NTPP laptop would have been widely understood. The findings I have made would reflect what I would consider to have been a common understanding. I find that in relation to Recipient Agreements made in the claim period, the surrounding circumstances known to the parties were that the proposed transaction would likely result in:

(i)    the teacher obtaining an enhanced capacity to work in a way that was more convenient to the teacher because of the device’s portability;

(ii)    the teacher’s performance of work being facilitated by access to specialised software;

(iii)    the teacher’s utilisation of the NTPP laptop assisting the teacher’s access to technical support obtained from a convenient location;

(iv)    an opportunity to make a new Recipient Agreement and thus to obtain an updated and improved laptop every three or four years;

(v)    the laptop being provided at a lower cost than that which would have been incurred had the teacher provided a laptop for herself; and

(vi)    the laptop (including the eduSTAR suite of software) being available for personal use and it being used for that purpose.

108    Each of items (i)-(iii) is a facilitative benefit, directed to assisting the performance of work. Each relates to or arises out of what is identified in the Recipient Agreements as a work tool, which DEECD desired teachers to use in order to enhance teaching. The employer is ordinarily the principal (if not the sole) beneficiary of measures provided to enhance the performance of work. In this proceeding and for the purpose of s 326(1)(c)(i), DEECD admits that the NTPP deductions were directly or indirectly for its benefit. That is consistent with what I would find based on the evidence.

109    As earlier stated, a facilitative benefit is not ordinarily provided to an employee as remuneration earned. There is nothing in the Recipient Agreement or surrounding circumstances that suggests that a remunerative purpose was here intended. To the contrary, the terms of the Recipient Agreements show that the purpose of the transaction was providing DEECD with an improved work product. Any flow-on benefits to teachers in the performance of their work would not, objectively, have been regarded as remuneration.

110    Item (iv) is the opportunity to make further Recipient Agreements and obtain an improved computer every few years. It is not a benefit that arises at all from the making of a Recipient Agreement and says nothing as to the purpose of each Recipient Agreement. Item (v) is the provision of a laptop at a lower cost than that which a teacher may have obtained privately. Again, that is a background matter and not a purpose of the Recipient Agreement. In any event, there is nothing to support a finding that these benefits were remunerative in nature.

111    Item (vi) is the personal use of the NTPP laptop and its software. Tools, equipment, or vehicles used for work are capable of being provided as remuneration, and often the provision of such chattels will have a remunerative purpose where given for private purposes. However, personal use of an employer-provided facility may be gratuitous. The gratuitous provision by employers of the personal use of work tools or other facilities is a common feature of workplace arrangements. One example is the personal use of desktop telephones. Recently, the increasing availability of electronic devices has resulted in an expanded range of personal use of various employer-provided electronic devices, such as printers, computers, and networks for accessing emails and the internet. Personal use of an employer’s facilities may also be permitted on condition that the employee reimburse the employer for any cost. Personal calls on a work-provided mobile phone exemplify such arrangements.

112    Since personal use of a work tool may or may not be remunerative, the nature of personal use of a work tool as a benefit is not of itself determinative of whether the purpose of its provision was to provide remuneration. It is necessary to consider the terms of the Recipient Agreements and the context in which personal use of NTPP laptops was provided to teachers.

113    First, it is important to note that personal use is not acknowledged as a purpose of the Recipient Agreement. Nor is it acknowledged as a benefit or dealt with at all in the main body of the agreement. It is only by incorporation of the Acceptable Use Policies that a right to non-excessive personal use of the Equipment is given to the teacher.

114    The Acceptable Use Policies are not specific to the Equipment but apply to use of all DEECD ICT resources. Examples of such use are given at clause 2.5 of the first Acceptable Use Policy and at clause 2.2 of the second Acceptable Use Policy. Those examples include the following: publishing and browsing on the internet; downloading or accessing files from the internet or other electronic sources; email; social networking; file transfer, storage and sharing; videoconferencing; instant messaging; copying, saving or distributing files; viewing material electronically; and, printing material.

115    The main purpose of each Acceptable Use Policy is apparent from its terms: to regulate and control the use by DEECD’s employees of DEECD’s ICT resources. It is in that context that clause 6.3 of the first Acceptable Use Policy and clause 6.2 of the second Acceptable Use Policy acknowledge that non-excessive personal use is authorised. The ability to make personal use of DEECD ICT resources is not the subject of any charge. In other words, non-excessive personal use of DEECD’s ICT resources is gratuitously provided. The permitted uses provided by way of example are the kind of low-cost uses of electronic facilities which it might be expected would, within limits, be provided gratuitously in many workplace settings.

116    That the Recipient Agreements provided personal use of NTPP laptops by the same mechanism as gratuitous personal use was provided of all other DEECD ICT resources suggests that the Recipient Agreements intended that personal use of NTPP laptops should also be gratuitous. That is supported by the evidence that there is no marginal cost to DEECD of providing personal use irrespective of how extensive that use may be. The Recipient Agreement does not negative such a proposition. There is no link in the terms of the Recipient Agreement between the teacher’s contribution to the cost of the NTPP Package and personal use. To the contrary, by the terms of the Recipient Agreements, it is only use of the Equipment for work purposes that has a nexus with the contribution required to be made by the teacher.

117    It is only from March 2012, when the FAQ Policy was incorporated into the Recipient Agreement, that a suggestion was first made in the contractual documentation that a link existed between a teacher’s contribution and personal use. Personal use was given as a justification for the teacher having to “pay” for the NTPP laptop. Whilst that assists DEECD to establish a nexus between personal use and the contribution, it characterises the contribution as a payment, which (although a minor indication) tends against the proposition that the laptop’s personal use was provided as remuneration.

118    I accept that teachers were likely to have regarded personal use as attractive. Although other DEECD ICT resources (such as email) were also accessible from a teacher’s home, I accept that a laptop would have been particularly attractive because of the wide range of personal uses to which it could be put at home. Nevertheless, accepting that (to various degrees) personal use of an NTPP laptop was attractive to teachers, there is a distinction between an incentive to make an agreement and the purpose for which the agreement was made.

119    If a purpose of the Recipient Agreement was to provide personal use of the Equipment as remuneration, it is surprising that the purpose was not set out expressly in the Recipient Agreement and that personal use was not dealt with directly in the Recipient Agreement, rather than (as it was) indirectly addressed by incorporation in a policy that deals with the gratuitous provision of personal use of ICT equipment.

120    I am not of the view that a purpose of the Recipient Agreements was to provide teachers with access to personal use of a laptop and associated services. If that was a purpose, there is no basis for the conclusion that personal use was provided as remuneration. If personal use was not provided gratuitously, it must have been provided in exchange for a contribution made by the teacher to the cost of the NTPP Package. A reasonable observer would not have concluded that personal use of NTPP laptops was being provided under the Recipient Agreements to remunerate teachers for their services.

The “pre-tax salary” issue

121    Clause 2.2(b) of the Recipient Agreement contains the teacher’s agreement to authorise the deduction of the “Contribution Rate from the Recipient’s pre-tax salary by equal fortnightly instalments.” At the foot of the Recipient Agreement under the heading “Acceptance of Licence Agreement,” the teacher authorised that the specified sum (being the applicable “Contribution Rate”) be deducted each fortnight “from my pre-tax salary.”

122    The phrase “pre-tax salary,” as utilised in those provisions, is something of a misnomer. Salary is assessable income and cannot itself be pre or post tax. Having said that, I think that the intended meaning is clear, notwithstanding that (as the evidence demonstrated) it was not understood by all teachers. What was intended was that the teacher’s salary would be reduced by the authorised sum. That is, that the contribution would come out of salary that would otherwise have been payable to the teacher, rather than from salary payable to the teacher. In that way, the deduction would be made prior to becoming assessable income, and would be “pre-tax”.

123    From the NTPP’s inception in 1998 until about August 2000, NTPP deductions were made post-tax. Although a pre-August 2000 version of the standard form Recipient Agreement was not in evidence, from the evidence I have, I would infer that at that time, the Recipient Agreement authorised a deduction from “salary” rather than from “pre-tax salary”.

124    DEECD’s contention that the NTPP arrangement was a salary packaging arrangement was heavily reliant on the fact that, from about August 2000, the Recipient Agreement provided for deductions to be made from “pre-tax salary”. It was that change that DEECD contended converted the Recipient Agreement into a salary packaging arrangement. Why that should be so is not apparent. A “pre-tax salary” deduction can involve a salary sacrifice, but so can a post-tax salary deduction. In each case, the entitlement to receive a particular amount of salary is sacrificed. In the first case, the entitlement to salary is reduced. In the second case, the entitlement to receive salary earned is reduced. In either case, whether or not the arrangement is a salary packaging arrangement depends upon whether the salary sacrificed was exchanged for a remunerative benefit.

125    The evidence does not support a conclusion that the change to “pre-tax salary” deductions was associated with a common intention to convert the NTPP arrangement into a salary packaging arrangement, or an unremunerative benefit into a remunerative one. The purpose of the change, as DEECD communicated to teachers, was so that teachers’ contributions to the NTPP would not attract GST where GST paid by teachers would not be recoverable by them as an input tax credit.

126    That, post-August 2000, teachers agreed to make a contribution to the cost by way of a reduction in salary, did not effect a change in the intended purpose of the provision of the NTPP Package. Both before and after August 2000, Recipient Agreements required that teachers meet the cost of the NTPP Package by making a financial contribution out of their entitlement to salary. In neither case did the Recipient Agreement contemplate that the teacher’s services were the quid pro quo for the NTPP Package. In both cases the quid pro quo for the NTPP Package was the teacher’s financial contribution to its cost.

Further matters

127    In arriving at the conclusions just stated, I have taken into account a range of surrounding facts upon which one or both of DEECD and the AEU relied. But, for reasons I shall now give, they were not of great assistance.

128    There are a number of aspects of the way in which the NTPP arrangements were administered that tended to deny the proposition that, as a matter of common understanding, the NTPP arrangements would have been understood as a salary packaging arrangement. First, the NTPP arrangements were dealt with discretely and separately from other arrangements which were expressly identified as salary packaging arrangements. Ordinarily, salary packaging arrangements available to teachers were administered through identified external providers. Those arrangements incorporated features common to arrangements made for salary packaging, including recommendations to teachers to seek financial advice, and the availability of various reporting processes. The NTPP arrangements were not made through external providers, were not the subject of a recommendation that teachers seek advice, and were not the subject of the reporting processes to which I have referred. Items listed on teacher payslips relating to salary packaging were identified or identifiable as such because of reference therein made to the external provider. That was not the case for the NTPP deductions, although those deductions were, like some others, shown as “Pre Tax Deductions”. In conformity with the requirements of clause 17 of the 2004 Agreement and its successors, the administrative costs of arrangements made explicitly as salary packaging arrangements were borne by teachers. That was not the case in relation to the NTPP arrangement.

129    As earlier stated, the 1999 SP Guide specifically excluded NTPP laptops from salary packaging. A November 2002 re-issue of the SP Guide suggested that the prior exclusion was removed. However, when read in context the position is less clear. In December 2001, DEECD notified teachers by circular that new laptop computers supplied by IBM could be purchased. The notification stated that options for salary packaging were being considered and would be announced in the following year. The AEU contended that the updated SP Guide was addressing only the purchase of computers as notified in the circular, and not the licence arrangements made pursuant to Recipient Agreements. In my view, this contention has some force but I need not resolve the issue.

130    All of those facts do no more than point to the likely characterisation held by the parties to Recipient Agreements of their nature. That the parties to a Recipient Agreement did not characterise their agreement as a salary packaging arrangement is plain from the text of the agreement.

131    There are other matters that support my conclusion. The extent of control over equipment that the Recipient Agreement gives to DEECD is odd if it was intended to provide teachers with an alternative form of remuneration. Employees are ordinarily able to spend or otherwise utilise remuneration in whatever manner they desire. Here the Equipment and its use was highly regulated by the employer, and the level of control travelled well beyond what might be imposed in order to protect an employer’s property where remuneration is provided by way of use of that property. Here, the Equipment had to be used for work purposes (professional planning, classroom practice, assessment, reporting and professional development) and in furtherance of the employer’s specific work objectives (the integration of the use of learning technologies into the classroom). At least in the first relevant version of the Recipient Agreement, the teacher had to commit to share the work product of the Equipment with other staff. Both work and personal use was regulated by the Acceptable Use Policies, which imposed significant restraints on utilisation of the Equipment and permitted DEECD to monitor use. For around 4 years (the likely period in which the earliest version of the Recipient Agreement in evidence was utilised) the licence provided to the teacher was non-exclusive. When the licence was non-exclusive, DEECD could have required the teacher to permit others to use the NTPP computer allocated to the teacher (albeit that there was no evidence this ever occurred). DEECD had the capacity to recall the Equipment at will.

132    Additionally, it would be surprising for a salary packaging arrangement to permit the extent of the salary sacrifice to be varied by the employer. Clauses 2.2 and 2.3 of the Recipient Agreement permit DEECD to change the Contribution Rate on providing reasonable notice to the teacher.

133    Neither of those features necessarily disqualifies an arrangement from being a salary packaging arrangement. But they are out of character with what would ordinarily be found in a salary packaging arrangement.

134    Having considered the detail, and standing back to take stock of its overall effect, I am unpersuaded that any part of the Recipient Agreement constituted an arrangement for remunerating teachers for their work by providing them with a laptop. Consonantly with the text of the Recipient Agreements, the surrounding circumstances known to the parties and the purpose and object of their transaction, a reasonable person would not have concluded that, in making a Recipient Agreement, the common intention of the parties was to restructure the remuneration of the teacher by remunerating the teacher in part by way of salary and in part by way of the provision of a licence to use the “Notebook Package.” That denies the characterisation of the arrangement as a “salary packaging arrangement”. For those reasons, the answer to common question 1 is, “No”.

Were the NTPP deductions authorised by teachers in accordance with the Agreements?

135    The AEU advanced a further argument in support of its contention that the exemption in s 324(1)(b) was not engaged because none of the Group 11 teachers had authorised the deductions “in accordance with an enterprise agreement.” The AEU submitted that, by completing the Recipient Agreement, the teachers did not authorise any action being taken under or in respect of the 2004 Agreement or its successors, because none of the teachers was cognisant that he or she was making a salary packaging arrangement. The AEU also relied upon the fact that, contrary to clause 17(2) (and its successors), the costs associated with salary packaging, including administrative costs, were not met from participating teachers’ salaries.

136    The requirement made by s 324(1)(b), that “the deduction is authorised by the employee in accordance with an enterprise agreement”, addresses two matters. First, a deduction made must be a deduction that the enterprise agreement permits an employee to authorise. Second, in so far as the enterprise agreement provides for the manner in which the authorisation by the employee is to be made, the authorisation must be made in accordance with that requirement. As to the first aspect, it was not in contest that clause 18 impliedly permitted an employee making a salary packaging arrangement to authorise a deduction to be made from the salary otherwise payable to the employee. The second—the manner in which the authority is to be given—is not addressed by clause 18. In particular, there is no requirement that the employee be cognisant that the deduction being authorised is a deduction for the purposes of a salary packaging arrangement. Contrary to the AEU’s contention, the words in the opening line of clause 18(1), that “[a]n employee may enter into a salary packaging arrangement”, do not support its contention.

137    Parties to a legally binding agreement may make an agreement recognised by the law to have a particular character despite the fact that the parties (or one of them) subjectively thought the agreement to have a different character. The subjective belief of the parties will not deny such an agreement its true character in law: see, e.g., Quest at [148] and cases there cited, Chaplin at 389, Massey at 580. The same analysis applies here. If an employee has authorised a deduction by means of what one of the Agreements recognises to be a salary packaging arrangement, then the deduction made under that arrangement will be authorised by the employee “in accordance with an enterprise agreement.”

138    Nor are the terms of clause 18(2) of any assistance to the AEU. That subclause deals with the employee’s obligation to pay the costs associated with salary packaging. It does not deal with whether the authorisation made was made in accordance with clause 18.

139    Given my answer to common question 1, it is unnecessary to decide common question 2. If it had been necessary, I would have answered it “No” for the reasons just given. I should add that the common question as agreed was not confined to the Group 11 teachers. The AEU’s contention only pressed the question in relation to the Group 11 teachers. But despite that, in so far as the question raised whether it was necessary for teachers to be cognisant that the teacher had authorised a deduction in relation to a salary packaging arrangement made under the Agreements, the question was capable of being given a common answer. That answer is “No”.

Was each of the NTPP deductions unreasonable in the circumstances?

140    The statutory exemption case raised by DEECD and based on s 324(1)(b) agitated the following common question in relation to s 326(1):

3.    If the NTPP deductions, or some of them, were authorised by all or any of

a.    clause 17 of the Victorian Government Schools Agreement 2004,

b.    clause 18 of the Victorian Government Schools Agreement 2008,

c.    clause 19 of the Victorian Government Schools Agreement 2013,

were those deductions

(i)    directly or indirectly for the benefit of the respondent; and

(ii)    unreasonable in the circumstances

within the meaning of s 326(1) of the FW Act?

141    I have answered “No” to question 1. For the purpose of dealing with DEECD’s reliance upon s 324(1)(b), it is not strictly necessary that I consider common question 3. But if I am wrong as to common questions 1 or 2, the answer to 3 becomes relevant. I will consider and determine common question 3 for that reason and also because the answer is relevant to two other of the common questions that also raise s 326(1). The first of those two common questions is common question 7, as follows:

7.    If yes [to Question 6], does the recipient agreement:

a)    permit, or have the effect of permitting, the respondent to deduct an amount from an amount that was payable to participating teachers in relation to the performance of work; or

b)    require, or have the effect of requiring, participating teachers to make a payment to the respondent,