Williams [No 2] Symposium: Some Curiosities and Further Thoughts on Williams [No 2]

By Benjamin Saunders

Williams [No 2] Case Page

This post makes some additional comments about the Court’s reasoning with respect to executive power (the subject of an earlier post by Cheryl Saunders (no relation to the author)) and also briefly discusses the Commonwealth waiving debts owed to it as a consequence of the Court’s finding of invalidity.

Executive power, British and Australian
I do not disagree with the opinions expressed by Cheryl Saunders in her earlier post, that ‘Williams [No 2] does not add a great deal of substance to the conclusions about the ambit of the executive power of the Commonwealth reached in Williams [No 1]’. However, I wish to make some additional observations, namely that the Court in Williams [No 2] reached its decision about the scope of executive power in an unusual way.

In its submissions the Commonwealth argued that the Commonwealth had executive power to spend and contract, subject only to seven limitations. These were: first, the Executive may not ‘stray into an area reserved for legislative power’. Second, an exercise of executive power cannot fetter the exercise of legislative power and cannot dispense with the operation of the law. Third, there can be no withdrawal of money from the Consolidated Revenue Fund without parliamentary authority in the form of appropriation legislation. Fourth, s 51 of the Constitution ‘provides every power necessary for the Parliament to prohibit or control the activity of the Executive in spending’. Fifth, through collective and individual ministerial responsibility to the Parliament, the Parliament ‘exercises substantial control over spending’. Sixth, the Constitution assumes the separate existence and continued organisation of the States. Seventh, State laws of general application apply to spending and contracting by the Commonwealth without legislative authority: at [68]. In the alternative, the Commonwealth submitted that, if an additional limitation was necessary, this was that ‘executive power to contract and spend under s 61 of the Constitution extends to all those matters that are reasonably capable of being seen as of national benefit or concern; that is, all those matters that befit the national government of the federation, as discerned from the text and structure of the Constitution’: at [70].

The majority considered this to be no more than a re-agitation of the ‘broad basis’ submission that was rejected by six judges in Williams [No 1]: Williams [No 2] at [69]. So characterised, it is no surprise that the Court rejected these submissions. However, the majority did so in an unusual way. If these submissions were no more than a repetition of the arguments previously rejected in Williams [No 1], it would have been open to the Court to simply reject them for that reason alone. Instead, the majority considered that there were ‘more fundamental defects in the argument of the Commonwealth parties about the breadth of the Executive’s power to spend and contract’: [75].

What could be more fundamental than a direct contradiction of a recent decision of the High Court? These ‘fundamental defects’ were unstated assumptions about the breadth of Commonwealth executive power. The majority considered that underlying the Commonwealth’s submissions was an assumption that, ‘absent some ‘limitation’, the executive power of the Commonwealth is the same as British executive power’. The majority rejected this proposition at [79]:

But why the executive power of the new federal entity created by the Constitution should be assumed to have the same ambit, or be exercised in the same way and same circumstances, as the power exercised by the Executive of a unitary state having no written constitution was not demonstrated. To make an assumption of that kind, as the arguments of the Commonwealth parties did, begs the question for decision.

The majority is here speaking of the common law powers or capacities of the British Crown, namely its powers held in common with other legal persons, and not its prerogative powers.

This reasoning is curious in several respects.

First, it is an unexceptional proposition that the Commonwealth does not have the same executive power as that of the British Crown. Commonwealth executive power has always been seen as subject to limitations, including ‘depth’ limitations arising as a result of principles of separation of powers and also ‘breadth’ limitations arising as a result of the federal nature of the Constitution. It may be that these constraints were not seen as limiting the Commonwealth’s capacities or common law powers.

If it was ever arguable that the Commonwealth has the same common law executive power as that of the British Crown, it certainly was not arguable after Williams [No 1]. Even the Commonwealth did not go so far as to submit that Commonwealth executive power has the same ambit as that of the United Kingdom. The Commonwealth expressly acknowledged limitations on that power to which the British Crown is not subject: see points 6 and 7 from paragraph [68] as quoted above. The fact that the Commonwealth should have gone further and acknowledged additional limitations which should have been obvious after Williams [No 1] does not deny the fact that the Commonwealth did concede that Commonwealth executive power is subject to limitations which the British executive is not.

The High Court’s characterisation of the Commonwealth’s argument appears to be a ‘straw man’, attributing to it an underlying assumption it is not reasonably capable of bearing. This raises an interesting question: why did the Court consider it necessary to devote such effort to discrediting an untenable proposition which no party had even submitted to the Court?

One possibility — which is, admittedly, pure speculation — may be related to the divided nature of the reasoning in Williams [No 1]. Williams [No 1] was a highly divided decision, with all judgments differing in significant respects about the scope of Commonwealth executive power. In rough summary, French CJ held the fields of Commonwealth legislative power are areas of concurrent competence with the States, and the Commonwealth is not entitled to enter that field by executive action alone as this would encroach on the States’ proper domain. Gummow and Bell JJ appear to have held that the Commonwealth does not have executive power to undertake activity which competes with State legislative or executive competence, whether or not that activity is within the subject matter of Commonwealth legislative power. Hayne J and Kiefel J held that legislation authorising spending under the NSCP could not have been supported by a head of legislative power, thus denying the broad proposition about executive power (that is, the Commonwealth has all the capacities of other juristic entities), but did not commit to any proposition as to the extent of Commonwealth capacities to act within the heads of legislative power. Crennan J held that the Commonwealth’s capacities to contract and spend are not analogous to those of other juristic persons, and that Commonwealth expenditure will ‘often’ require statutory authorisation. Heydon J dissented. (See also Shipra Chordia, Andrew Lynch and George Williams, ‘Williams v Commonwealth: Commonwealth Executive Power and Australian Federalism’ (2013) 37 Melbourne University Law Review 189.) The Court’s ‘straw man’ approach in Williams [No 2] may have been an attempt to find common ground among members of the Court. Perhaps the only way a near-unanimous judgment could be obtained from a court which had recently divided so spectacularly was to rely on a proposition so obvious that no judge could refuse to give assent to it.

Another, also speculative, possibility is that the Court considered that the seven limitations proffered by the Commonwealth (listed above) were not meaningful limitations, but were so blindingly obvious as effectively to amount to a proposition that the Commonwealth possessed the same executive power as that of the British Crown.

A second curiosity is that the proposition rejected by the majority (namely that ‘absent some ‘limitation’, the executive power of the Commonwealth is the same as British executive power’) is not very different from a proposition affirmed by 3 judges in Pape v Commissioner of Taxation [2009] HCA 23. In Pape, Gummow, Crennan and Bell JJ held, at [220]:

Express provision was made in s 109 respecting the exercise of concurrent legislative powers. But what are the respective spheres of exercise of executive power by the Commonwealth and State governments? We have posed the question in that way because it is only by some constraint having its source in the position of the Executive Governments of the States that the government of the Commonwealth is denied the power, after appropriation by the Parliament, of expenditure of moneys raised by taxation imposed by the Parliament. Otherwise there appears no good reason to treat the executive power recognised in s 61 of the Constitution as being, in matters of the raising and expenditure of public moneys, any less than that of the executive in the United Kingdom at the time of the inauguration of the Commonwealth.

In Williams [No 2] a similar proposition was rejected, including by Crennan and Bell JJ. Federalism was of course the key limitation on the Commonwealth’s executive power identified in Pape by Gummow, Crennan and Bell JJ, and also later by five judges in Williams [No 1]. Williams [No 2] has identified a new limitation, namely that British constitutional principles may no longer even be the appropriate starting point in determining the scope of Commonwealth executive power (see Cheryl Saunders’s post).

A final curiosity is the language employed. The majority queried why the powers of the Commonwealth should be identical to those of ‘a unitary state having no written constitution’. Of course, that ‘unitary state having no written constitution’ is Britain. There is an obvious reason why the powers of the British Crown are relevant to those of the Commonwealth. The Commonwealth is an entity established under the Crown: it was formed by the people of the colonies agreeing to unite ‘in one indissoluble Federal Commonwealth under the Crown of the United Kingdom of Great Britain and Ireland’ (Constitution, preamble); the head of State, the Governor-General, is appointed by the Queen and is Her Majesty’s representative in the Commonwealth (s 2); and the executive power of the Commonwealth ‘is vested in the Queen and is exercisable by the Governor-General as the Queen’s representative’ (s 61).

Thus, Britain is not merely ‘a unitary state having no written constitution’, but the scope of its executive powers has traditionally been seen to be of great relevance to the determination of questions about Australian executive power, informing the scope of executive power both at the Commonwealth and the state level. Gummow, Crennan and Bell JJ in Pape acknowledged that Commonwealth executive power ‘has its roots in the executive power exercised in the United Kingdom up to the time of the adoption of the Constitution’ (at [233]).

The reasoning of the majority distances Commonwealth executive power from British constitutional principles, perhaps consistently with the growing reluctance to employ the language of the Crown in constitutional decisions. Perhaps this signals a new approach to Commonwealth executive power, an approach which is more distinctively Australian and where British constitutional principles and history assume less importance.

The fate of s 32B
One key issue for decision in Williams [No 2] was the validity of s 32B of the Financial Management and Accountability Act 1997 (Cth) (FMA). The Court held at [36] that ‘s 32B should be read as providing power to the Commonwealth to make, vary or administer arrangements or grants only where it is within the power of the Parliament to authorise the making, variation or administration of those arrangements or grants’. On this basis, the provision was held to be valid. Although the new public sector financial framework legislation, the Public Governance, Performance and Accountability (Consequential and Transitional Provisions) Bill 2014 (Cth), has repealed most of the FMA, it has retained s 32B.

Should there be further consequences for cases of invalid spending?
One troubling aspect of the two Williams decisions is the Commonwealth’s persistence in continuing to fund the chaplaincy program despite the High Court having twice ruled that such spending was not constitutionally valid. The finding of invalidity clearly has important consequences for the future, in particular that the Commonwealth has no power to undertake the chaplaincy program in its own right, but will need to fund the program in another way, eg, through grants under s 96 of the Constitution or by altering it so that it fits within a head of power.

The finding of invalidity also means that all payments that have already been made under the program are invalid and thus are debts owed to the Commonwealth. It is doubtful that the plaintiff expected the Commonwealth to seek recovery of the unlawfully paid funds; the point of the challenge was no doubt to establish the point that the program was beyond Commonwealth power. Nevertheless, it raises the question of what should be done about those invalid payments.

According to news reports, the Minister for Finance has waived all debts owing to the Commonwealth as a result of the invalidity of the payments, so that these debts will not be recovered from recipients. Should the Commonwealth be able to do this? It seems highly problematic for the Commonwealth to be able to avoid constitutional limits on its power merely by waiving debts owed to it after invalid payments have already been made. This is clearly a strategy that could be employed in the future.

It might be thought that the Commonwealth should seek to recover all payments made under the program. Should the Commonwealth be under a duty to do so? That would seem to be an extreme (and costly) duty to impose on the Commonwealth, and potentially highly unfair to those organisations who have relied on the payments and who may be unable to repay the funds in any case. If sued, those organisations may also have a claim in restitution against the Commonwealth, because they have provided services in consideration for payment. Further, the funds paid under the program were not substantial amounts, so an award on a quantum meruit basis may even be more favourable to those organisations. There is also the question of whether it is appropriate for private law principles of restitution to effectively take precedence over the Constitution, the nation’s most ‘fundamental law’.

AGLC3 Citation: Benjamin Saunders, ‘Williams [No 2] Symposium: Some Curiosities and Further Thoughts on Williams [No 2]’ on Opinions on High (10 July 2014) <http://blogs.unimelb.edu.au/opinionsonhigh/2014/07/10/saunders-williams-2/>.

Benjamin Saunders is Legal Officer, Office of Crown Counsel (Advisings) and is a graduate of Melbourne Law School. The opinions expressed in this post are those of the author alone.

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