Last week the Public Law and Policy Research Unit met to discuss the High Court’s decision in Williams v Commonwealth (No 2). PLPRU members Dr Gabrielle Appleby and Anna Olijnyk led a discussion of the different aspects of the decision, considering its consequences for federal spending and the breadth of the Commowealth Parliament’s corporations and benefits to students powers.
Gabrielle Appleby: Consequences for Federal Spending
Background
To understand Williams v Commonwealth (No 2) requires an understanding of two important prior events. The first was the High Court’s 2012 decision, Williams v Commonwealth (No 1). This was Mr Williams’ first successful challenge to the federal funding of Scripture Union Queensland to provide chaplaincy services at Toowoomba State School. In Williams (No 1), the High Court affirmed its 2009 decision in Pape v Federal Commissioner of Taxation. Pape held that the federal government’s power to spend money is not, as had been previously assumed, sourced in ss 81 and 83 (which set out the requirement for parliamentary appropriations) but must be sourced elsewhere in the Constitution.
In Williams (No 1) six members of the Court rejected that the Commonwealth had the capacities of an individual, at least insofar as they follow the contours of the legislative grants of power. Four members (French CJ, Gummow, Crennan and Bell JJ) found that even within this area, expenditure outside ordinary governmental services (formulated slightly differently across the judgments), and other sources (eg the prerogatives and the ‘nationhood power’), must be authorised by both an appropriation AND a statutory grant of power. Two members (Hayne and Kiefel JJ) did not have to decide this question because they found that the funding of SUQ under the National School Chaplaincy Program fell outside both the corporations power (s 51(xx)) and benefits to students power (s 51(xxiiiA). Heydon J was in lone dissent.
The second event was the government’s response to Williams (No 1). This was to introduced s 32B of the Financial Management and Accountability Act 1997 – now rebadged the Financial Framework (Supplementary Powers) Act 1997. Section 32B purported to authorise expenditures listed in the regulations. There was also included in the amendment a transitional provision that retrospectively validated previous expenditures in existing programs. 427 expenditures were initially listed in the amending legislation, including the National School Chaplaincy and Student Welfare Program. Additions and changes to this list of authorised expenditures have subsequently been made by regulation.
The second challenge to the National School Chaplaincy and Student Welfare Program
In Williams (No 2), a challenge was brought to the continued funding of the SUQ. After the oral hearing it appeared that the Commonwealth’s arguments rested on two grounds:
1. A broad reading of the federal executive power coupled with the incidental legislative power supported the legislation authorising the NSCSWP. This required the Commonwealth to argue that at least part of Williams (No 1) was incorrectly decided, and that the Commonwealth executive did have the capacity to spend money equivalent to an individual/the British Crown. The Commonwealth accepted that there may now have to be legislative authorisation for some expenditures, this authorisation did not have to be connected to a head of legislative power.
Asking the Court to revisit Williams (No 1) so soon after it had been decided was an interesting strategy by the federal government. It was not well received by the Court. This was apparent at the hearing and also in the judgment. See, eg, this passage:
As these reasons will later show, some of the arguments have been advanced by the Commonwealth more than once in litigation in this Court. Some were advanced in Williams (No 1). They are arguments which have not hitherto been accepted by the Court. Their repetition does not demonstrate their validity. They are arguments which should not now be accepted. It is not necessary to decide whether, or to what extent, the Commonwealth or the Minister may, or should be permitted to, advance these additional arguments.
2. If Williams (No 1) was correctly decided, the authorisation of the NSCSWP in the regulations was a valid law of the Commonwealth because it was either supported by s 51(xx) or s 51(xxiiiA).
Federal spending power and Williams (No 1)
The Commonwealth argued that the necessary legislative authorisation for the expenditure was given either by s 32B or the Appropriations Act, as it authorised the executive to withdraw and apply the monies. The Court avoided the question of whether the Appropriations Act alone could authorise the expenditure in this way because the validity of both Acts turned on the same issue – did the Commonwealth have power to pass them?
The unanimous finding of the Court was that:
In their operation with respect to the SUQ Funding Agreement and with respect to the payments purportedly made under that Funding Agreement in January 2012, June 2012, January 2013 and February 2014, none of s 32B of the Financial Management and Accountability Act 1997 (Cth), Pt 5AA and Sched 1AA of the Financial Management and Accountability Regulations 1997 (Cth) or item 9 of Sched 1 to the Financial Framework Legislation Amendment Act (No 3) 2012 (Cth) is a valid law of the Commonwealth.
Crennan J wrote a separate judgment, differing only with respect to interpretation of benefits to students power.
French CJ, Hayne, Kiefel, Bell and Keane JJ on the federal spending power
In Williams (No 2), a unanimous High Court of six judges (French CJ, Hayne, Kiefel, Bell and Keane JJ with Crennan J agreeing on this point – Gageler J recused himself from the case) confirmed the doctrine established by four judges in Williams (No 1). This was a significant ‘backfire’ for the Commonwealth, who had argued to overturn the decision. The doctrine is now stronger and more established than it was in Williams (No 1).
In confirming Williams (No 1), the Court considered four arguments for reopening the case that had been put forward by the Commonwealth (at [59]).
The first argument was that ‘“the principle identified in [Williams (No 1)] was not carefully worked out in a significant succession of cases” and “constituted a radical departure from what had previously been assumed by all parties to be the orthodox legal position”. The judges disagreed with the characterisation of the development of the principle, citing their reasoning in Pape in support. In any event, they dismissed that this, alone, would be a sufficient reason to reopen the case.
The second argument of the Commonwealth was ‘that the course taken in the hearing in Williams (No 1) resulted in the Court not receiving “sufficient argument, or sufficient material by way of constitutional fact, on what became the ultimate issue”. (The material was said to include “evidence of how the Senate in fact functions in and about the appropriation process” and “evidence of consultation with the States in relation to” the National School Chaplaincy and Student Welfare Program.)’
As one would expect, the judges closed ranks: they defended the Court’s conduct of the hearing in Williams (No 1), and noted that, in any event, the Commonwealth was not going so far as to argue that the decision was given in ignorance of any relevant legal argument or decision or that there was any want of procedural fairness. The judges also rejected that there was any relevant material that should have informed their decision in Williams (No 1) in relation to the operation of the Senate or the cooperation between the Commonwealth and the States in relation to the NSCSWP. This appears, at first, logical as the doctrine does not turn on constitutional facts as some other constitutional principles do (eg, s 92 and s 51(vi)). However, when it is remembered that particularly the judgments of French CJ and Crennan J in Williams (No 1) relied heavily on the use of spending and contracting by the Commonwealth as a basis for the new doctrine, the rejection of this practical evidence becomes less congruous.
Third, the Commonwealth argued ‘that “the reasons of the four Justices constituting the majority in [Williams (No 1)] do not contain a single answer” to when and why Commonwealth spending requires authorising legislation or whether the requirement for authorising legislation operates “solely at Commonwealth level or at both Commonwealth and State levels”.’ The judges again rejected this as a reason for reopening the case, explaining that constitutional doctrine, by its nature, will not decide everything about its application in a single case.
Fourth, and finally, the Commonwealth argued ‘that the decision in Williams (No 1) “led to considerable inconvenience with no significant corresponding benefits”.’ At [65] the judges responded to this argument:
What was meant in this context by the references to “inconvenience” and “corresponding benefits” would require a deal of elaboration in order to reveal how they bear upon the resolution of an important question of constitutional law. Examination of the proposition reveals no greater content than that the Commonwealth parties wish that the decision in Williams (No 1) had been different and seek a further opportunity to persuade the Court to their view. The only inconvenience identified was the need to enact the impugned provisions. These are not reasons enough to permit reopening.
In lieu of the doctrine established in Williams (No 1), the Commonwealth submitted that there should be seven limits on the federal spending power (at [68]). These statements largely reflect the assumed position prior to Williams (No 1), although many of them directly address the reasoning employed by at least some of the judges in that case, for example, in relation to the depth of the Executive power, its effect on responsible government, and the States:
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.
The Commonwealth was only prepared to accept the following limitation on federal spending (at [70]):
[E]xecutive 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. (emphasis added)
This may at first instance appear to be a restatement of the nationhood power, but that would be to construe it more narrowly than the Commonwealth intended. What the proposed limitation does, in effect, is take the federal spending power back to the debates over its breadth that occurred when it was assumed to rest on ss 81 and 83 of the Constitution and the question was whether certain expenditures were for ‘the purposes of the Commonwealth.’ The Commonwealth argued that the NSCSWP would have fallen within this test of national benefit or concern, because the States had agreed to the federal funding of the program. The Court rejected that this could be the constitutional test, noting the express constitutional provision for cooperation between the States and the Commonwealth, for example through ss 96 and s 51(xxxvii)).
Finally, the High Court rejected the analogy that the Commonwealth tried to draw between the federal Executive and the British Executive. At [80] the Court emphasised, as it had in Williams (No 1), that the Australian Constitution may have its history in British constitutional practice, and this has informed the inclusions of many of the provisions in Chapter II of the Constitution, but questions about the ambit of the Commonwealth’s executive power in s 61 of the Constitution must be decided ‘in light of all of the relevant provisions of the Constitution, not just those which derive from British constitutional practice.’
Anna Olijnyk: The Corporations and Student Benefits Powers
Given the Court’s conclusions on the spending power, the validity of the NSCSWP depended on whether the impugned provisions were supported by a head of power. Two heads of power were considered: ss 51(xx) and (xxiiiA). The High Court found the legislation was not supported by either head of power.
The corporations power
French CJ, Hayne, Kiefel, Bell and Keane JJ dealt with the corporations power argument in three paragraphs. For the purposes of this analysis, their Honours were prepared to assume that the opposite party to any agreement made for the purposes of the NSCSWP would be (or even must be) a trading or financial corporation. On this assumption, the law was one authorising the Commonwealth to make payments to trading and financial corporations. Nevertheless, the law was held not to be supported by s 51(xx) as it made ‘no provision regulating or permitting any act by or on behalf of any corporation’. Further, the law
is not one authorising or regulating the activities, functions, relationships or business of constitutional corporations generally or any particular constitutional corporation; it is not one regulating the conduct of those through whom a constitutional corporation acts or those whose conduct is capable of affecting its activities, functions, relationships or business.
This passage reproduces much of the statement of the scope of the corporations power adopted in Work Choices, with the notable exception of part of that statement that seemed most relevant to the issue in Williams (No 2): the ‘creation of rights, and privileges belonging to’ trading and financial corporations. This somewhat selective use of Work Choices may indicate a move away from the expansive reading of the corporations power that has developed since the Concrete Pipes Case.
The conclusion that the law was not supported by the corporations power negated the need to determine whether SUQ – a corporation whose purposes and activities are largely religious – was a trading or financial corporation. The Court expressly left open the question of the meaning of ‘trading or financial corporations’ for the purposes of s 51(xx).
Benefits to students
The Commonwealth argued that the legislation was supported by the power to provide ‘benefits to students’ under s 51(xxiiiA). As an amendment (by referendum in 1946), s 51(xxiiiA) presents some unusual interpretive challenges.
Crennan J, in an entire judgment devoted to this issue, engaged with these issues by reviewing the historical context in which s 51(xxiiiA) was introduced, including Sir William Beveridge’s report on Social Insurance and Allied Services, the proliferation of social security legislation in Australia in the mid-1940s and the High Court’s decision that the Pharmaceutical Benefits Act 1944 (Cth) was not supported by a head of power. Her Honour concluded (at [109]) that:
Each of the 11 grants of power in s 51(xxiiiA), whether described by reference to ‘allowances’, ‘pensions’, ‘child endowment’, ‘benefits’ or ‘services’, involves an entitlement of persons to money, goods or services provided, or underwritten, by the federal government.
On this view, the fact that the NSCSWP had no identified beneficiaries able to assert an entitlement to chaplaincy services was fatal to its validity.
French CJ, Hayne, Kiefel, Bell and Keane JJ relied less on matters of history and more on the text of s 51(xxiiiA) and on the two authorities on the meaning of ‘benefits’ in that section. In British Medical Association v Commonwealth, McTiernan J said ‘benefits’ meant ‘material aid given pursuant to a scheme to provide for human wants … under legislation designed to promote social welfare or security’. In the Alexandra Hospital Case, payments by the Commonwealth to private nursing homes, calculated on the basis of the number of days each patient was in care, were held to be ‘sickness and hospital benefits’ within the meaning of s 51(xxiiiA). In Williams (No 2), the Alexandra Hospital Case was distinguished on the basis that there were no identifiable beneficiaries of payments made under the NSCSWP: the Commonwealth paid SUQ to provide services, but the payments were not tied to the provision of services to particular students.
Having regard to the various kinds of ‘benefit’ named in s 51(xxiiiA) – unemployment, pharmaceutical, sickness and hospital benefits as well as benefits to students – French CJ, Hayne, Kiefel, Bell and Keane JJ found (at [46]) that ‘benefits’ in s 51(xxiiiA) refers to
the provision of aid to or for individuals for human wants arising as a consequence of the several occasions identified: being unemployed, needing pharmaceutical items such as drugs or medical appliances, being sick, needing the services of a hospital, or, as is relevant to this case, being a student. The benefits are occasioned by and directed to the identified circumstances. In the usual case, the assistance will be a form of material aid to relieve against consequences associated with the identified circumstances.
It followed that ‘benefits to students’ would ordinarily take the form of ‘material aid provided against the human wants which the student has by reason of being a student’: see [46]. The legislation supporting the NSCSWP did not fall within this concept. Like Crennan J, the authors of the joint judgment found it significant that the program did not provide aid to identified or identifiable students. Further, they found that the ‘the service which is provided is not directed to the consequences of being a student’: see [47]. This was partly because the description of the NSCSWP in the regulations did no more than identify the objectives of the program: supporting the wellbeing of students by ‘strengthening values, providing pastoral care and enhancing engagement with the broader community.’ On its own, this description provided little insight into how the program would provide benefits directed to the consequences of being a student. While the Commonwealth sought to rely on departmental guidelines to illuminate the content of the program, the Court did not appear to accept that such guidelines could be taken into account in determining the validity of the legislation itself: see [39]-[41].
This decision does not completely rule out the prospect of the Commonwealth implementing a School Chaplains program – or something similar – in the future. It does indicate, though, that the legislation creating these programs must be crafted carefully in order to provide a sufficient connection to a head of power. The Court’s reasoning seems to leave it open to the Commonwealth to provide, for example, a right for students to access counselling or pastoral care services, with funding provided based on the number of students accessing those services. Such legislation would arguably provide a ‘benefit to students’ within the meaning of s 51(xxiiiA). A law providing trading and financial corporations with the right to apply for funding to provide such services, together with controls on the way such services are administered, might be supported by s 51(xx) as a law regulating the activities of corporations. Legislation that merely provides a broad description of the goals of a program is less likely to be valid.
