Williams v Commonwealth of Australia [2014] HCA 23 (High Court of Australia, French CJ, Hayne, Crennan, Keifel, Bell and Keane JJ, 19 June 2014)

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1 Williams v Commonwealth of Australia [2014] HCA 23 (High Court of Australia, French CJ, Hayne, Crennan, Keifel, Bell and Keane JJ, 19 June 2014) This case followed on from a decision of the High Court in 2012: see Williams v The Commonwealth [2012] HCA 23. That case raised serious implications for many government programs which might be paid for by the Commonwealth government as part of executive power, without supporting federal legislation. The decision overturned the common assumption that executive power extends to all things for which a head of legislative power exists in the Constitution of Australia (the Constitution). This was held not to be so. The High Court held that although the Executive retains many powers, including prerogative powers, it was subject to the control of parliament on issues which involved expenditure from Consolidated Revenue. The government passed legislation to overcome this decision in late June 2012: see the Financial Framework Legislation Amendment Act (No 3) 2012 (Cth) (FFLA Act). The FFLA Act amended the Financial Management and Accountability Act 1997 (Cth) (FMA Act) and the Financial Management and Accountability Regulations 1997 (Cth) (FMA Regulations) in ways intended to provide legislative support not only for the making of agreements and payments of the kind which were in issue in the 2012 decision but also for the making of many other government arrangements and grants. This case concerned the validity of the amending legislation. The 2012 decision The 2012 decision dealt with the extent of executive power of the Commonwealth. In particular, the case dealt with the power of the executive to enter into contracts and expend money. The High Court held by a majority of 6 to 1 that the National School Chaplaincy Program (NSCP) was unable to be paid for by the Commonwealth Executive without supporting legislation. The Constitution divides power between the executive, the legislature (parliament) and the judicature (the courts). Executive government is dealt with in Chapter II of the Constitution, and vests executive power in the Queen, exercisable by the Governor-General as the Queen s representative: section 61. The Governor-General is to be advised by the Federal Executive Council : section 62. There is no mention in the Constitution of the Prime Minister or the Cabinet. This was because the parliament was always intended to operate on the Westminster system (the same as the English parliament). The Westminster system allows for a Prime Minister, ministers in a Cabinet, government departments, and ministerial responsibility to the parliament. This was regarded as a given when Australia was constituted as a nation. The Prime Minister and the Cabinet effectively wield the executive power referred to in the Constitution. The plaintiff, Williams, challenged the Commonwealth s power to enter into contracts with Scripture Union Queensland (SUQ) for the delivery of chaplaincy services into schools operated by the Queensland State Government. In particular, he challenged the provision of such services to Darling Heights State School in Toowoomba, where his children attended primary school. Money was expended on chaplaincy services under this contract during 2007 to Although the expenditure was said by the Commonwealth to have met the necessary condition of a parliamentary appropriation for each year in which it had been made, no Act of Parliament had conferred power on the Commonwealth to contract and expend public money in this way. Payments for chaplaincy services had first been implemented by the Howard government in 2006, and the services were extended in 2009 under the Rudd government and continued top operate under the Gillard government. Thus, both parties of government had supported the scheme since its inception. In the 2012 decision, the Full Court of the High Court held that: 1. Williams had standing to challenge certain payments made by the Commonwealth;

2 2. Payments made from consolidated revenue to the Darling Heights Funding (DHF) Agreement in Toowoomba, Queensland, were beyond the power of the Commonwealth under section 61 of the Constitution; 3. Payments made to Scripture Union Queensland pursuant to the Darling Heights Funding Agreement as above were not supported by the executive power of the Commonwealth under section 61 of the Constitution; 4. None of the issues raised in the case were contrary to section 116 of the Constitution (the section which forbids the Commonwealth from establishing a religion, imposing any religious observance, prohibiting the free exercise of religion, or imposing a religious test on employment). The main points made by the majority of the High Court were as follows: On the extent of executive power of the Commonwealth to contract and spend 1. Parliamentary appropriation (via an Appropriation Act) is not a source of spending power, contrary to long-standing assumption. 2. Also contrary to common assumption, the Executive cannot spend money on anything it chooses which is the subject of a commonwealth head of power in the Constitution. 3. There may be some scope, however, for payments to be made in this way in times of national disaster or national economic or other emergency: see Pape v Federal Commissioner of Taxation [2009] HCA The Commonwealth argued that the Executive is a legal person with ordinary powers to contract and spend. However, the Executive is not a separate juristic person. The Executive is a branch of the national polity. The character of the Executive Government as a branch of the national polity is relevant to the relationship between the power of that branch and the powers and functions of the legislative branch and, particularly, the Senate. 5. Unlike a natural person, the Commonwealth s power to contract and to pay money was constrained by the need for an appropriation and by the requirements of political accountability. The Executive spends public money, not its own money. 6. The exercise of legislative power must yield a law able to be characterised as a law with respect to a subject matter within the constitutional grant of legislative authority to the Parliament. The subject matters of legislative power are specified for that purpose, not to give content to the executive power. Executive action, except in the exercise of delegated legislative authority, is qualitatively different from legislative action. 7. The executive power of the Commonwealth does extend to the doing of all things which are necessary or reasonably incidental to the execution and maintenance of a valid law of the Commonwealth once that law has taken effect. That field of action does not require express statutory authority, nor is it necessary to find an implied power deriving from the statute. The necessary power can be found in the words execution and maintenance... of the laws of the Commonwealth appearing in section 61 of the Constitution. 8. Neither the DHF Agreement nor the expenditure made under it was done in the administration of a department of State in the sense used in section 64 of the Constitution. Neither constituted an exercise of the prerogative aspect of the executive power. Neither involved the exercise of a statutory power, nor executive action to give effect to a statute enacted for the purpose of providing chaplaincy or like services to State schools. 9. There was no statute, general or specific, identified by the parties, which could be invoked as a source of executive power to enter into the DHF Agreement and to undertake the challenged expenditure. 10. Whatever the scope of that aspect of the executive power which derives from the character and status of the Commonwealth as a national government, it did not authorise the contract and the expenditure under it in this case.

3 11. It is possible that there is no such power in the Constitution anyway i.e. it is possible that there could not have been a valid law about the provision of chaplaincy services. 12. Section 61 therefore did not empower the Commonwealth, in the absence of statutory authority, to contract for or undertake the challenged expenditure on chaplaincy services in Darling Heights State School. On federal vs state powers 1. Even if, as the Commonwealth argued, the DHF Agreement and expenditure under it could be referred to either section 51(xxiiiA) (the pensions payment power) or section 51(xx) (the corporations power) of the Constitution, they are fields in which the Commonwealth and the States have concurrent competencies subject to the paramountcy of Commonwealth laws effected by section 109 of the Constitution. The character of the Commonwealth Government as a national government does not entitle it, as a general proposition, to enter into any such field of activity by executive action alone. Such an extension of Commonwealth executive powers would, in a practical sense, correspondingly reduce those of the States and compromise the essential and distinctive feature of federal government. 2. The existence of Commonwealth executive power in areas beyond the express grants of legislative power will ordinarily be clearest where Commonwealth executive or legislative action involves no real competition with State executive or legislative competence. 3. The States have the legal and practical capacity to provide for a scheme such as the National School Chaplaincy Program (NSCP). The conduct of the public school system in Queensland, where the Darling Heights State School is situated, is the responsibility of that State. Indeed, Queensland maintains its own programme for school chaplains. 4. If the Commonwealth's capacities to contract and to spend generally permitted the Commonwealth Executive to intrude into areas of responsibility within the legislative and executive competence of the States in the absence of statutory authority other than appropriation Acts, access to section 109 of the Constitution (which provides for Commonwealth paramountcy in the case of inconsistent legislation) may be impeded. The 2014 decision The FFLA Act inserted a new Division (Div 3B, Supplementary powers to make commitments to spend public money etc) into Pt 4 of the FMA Act. The central provision of Div 3B is section 32B. In addition, the FFLA Act inserted a new Part (Part 5AA, Supplementary powers to make commitments to spend public money etc) and a new Schedule (Schedule 1AA, Arrangements, grants and programs) into the FMA Regulations. Regulation 16(1)(d) (inserted by the FFLA Act) provides that, for section 32B(1)(b)(iii) of the FMA Act, Part 4 of Schedule 1AA specifies programs. One of the programs identified (in item ) is: National School Chaplaincy and Student Welfare Program (NSCSWP) Objective: To assist school communities to support the wellbeing of their students, including by strengthening values, providing pastoral care and enhancing engagement with the broader community. The starting point The starting points in this decision were: that the appropriation of moneys in accordance with the requirements of sections 81 and 83 of the Constitution does not itself confer a substantive spending power; and that the power to spend appropriated moneys must be found elsewhere in the Constitution or in statutes made under it: see Pape v Federal Commissioner of Taxation [2009] HCA 23.

4 Standing Did Williams have standing? The High Court said that he did in the circumstances of this case, and to the extent necessary for the determination of this matter. This was qualified standing, based on the fact that the Commonwealth, the SUQ and the States intervening had conceded standing. Were the provisions of the amending legislation invalid? In response to this question, the High Court said (at [32]): In their operation with respect to the SUQ Funding Agreement (being the Funding Agreement dated 21 December 2011 between the Commonwealth and Scripture Union Queensland, the third defendant, as varied from time to time up to and including a Fourteenth Variation Deed dated 23 January 2014) 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. The Court said that the FMA Act provides for the administration of public money i.e. money in the custody or under the control of the Commonwealth or of a person acting for or on behalf of the Commonwealth. Division 3B of Part 4 of the FMA Act (and section 32B in particular) provides power to make commitments to spend public money. As enacted in the amending legislation, the Parliament s legislative power to enact the FMA Act derives from every head of legislative power which supports the Commonwealth, or a person acting for or on behalf of the Commonwealth, being entitled to have custody or control of money or being entitled to make a payment of public money. Section 32B deals particularly with the power to make a commitment to make one or more payments of public money. And the Parliament s legislative power to grant the authority to make a commitment to pay public money is founded in every head of legislative power which supports the making of the payments with which section 32B deals. This is a very wide power (at [36]): It may be that, taken literally, s 32B would have a very wide field of actual and potential application. It would be possible, for example, to read s 32B(1) as extending to cases where the Parliament does not have constitutional power to authorise the making, varying or administration of arrangements or grants. But ordinary principles of statutory construction require rejection of such a reading of those words. And, more generally, consistent with the requirements of s 15A of the Acts Interpretation Act 1901 (Cth), 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. To read the provision in that way is to read it within constitutional power. To read it as having a wider operation might take the provision beyond either constitutional power or the meaning and operation which its words can fairly bear, or beyond both constitutional power and the fair reading of its text. Were there benefits to students involved? The Commonwealth parties and SUQ each sought to support the impugned provisions, in their relevant operation, as laws with respect to the provision of benefits to students within section 51(xxiiiA) of the Constitution. This argument failed. The objective set out in item in Part 4 of Schedule 1AA to the FMA Regulations refers to assisting school communities to support the wellbeing of their students. The High Court said on this point (at [47] [48]): Providing at a school the services of a chaplain or welfare worker for the objective described in item is not provision of benefits of the kind described [in previous cases].

5 Providing those services does not provide material aid to provide for the human wants of students. It does not provide material aid in the form of any service rendered or to be rendered to or for any identified or identifiable student. There is no payment of money by the Commonwealth for or on behalf of any identified or identifiable student. And the service which is provided is not directed to the consequences of being a student. There is no more than the payment of an amount (in this case to an intermediary) to be applied in payment of the wages of a person to support the wellbeing of a particular group of children: those who attend an identified school. And the only description of how the support is to be given is that it includes strengthening values, providing pastoral care and enhancing engagement with the broader community. These are desirable ends. But seeking to achieve them in the course of the school day does not give the payments which are made the quality of being benefits to students. Providing money to pay persons to provide such services at a school is not to provide benefits which are directed to the consequences of being a student. It is not a provision of benefits to students within the meaning of s 51(xxiiiA). Could section 51(xx) of the Constitution (the corporations power) be relied on? The High Court said that the corporations power did not apply. A law which gives the Commonwealth the authority to make an agreement or payment is not a law with respect to trading or financial corporations. Therefore, the impugned legislation was not supported by either section 51(xxiiiA) or by section 51(xx). The scope of Executive power The High Court said that the Commonwealth s argument proceeded from a false assumption about the ambit of the Commonwealth s executive power. In particular, the Commonwealth s executive power was not as wide as that of the British parliament (at [78] [80]): The Commonwealth parties submitted that determining the content of executive power (but not the limitations on its exercise) should proceed from only two premises. First, a polity must possess all the powers that it needs in order to function as a polity. Second, the executive power is all that power of a polity that is not legislative or judicial power. Both of those premises may be accepted. But the conclusion the Commonwealth parties sought to draw from those premises about the content of Commonwealth executive power does not follow unless there is a third premise for the argument: that the executive power of the Commonwealth should be assumed to be no less than the executive power of the British Executive. This third premise is false. What the submissions called executive power at common law was executive power as exercised in Britain. Thus the assumption from which the second inquiry (about limitations ) proceeded was that, absent some limitation, the executive power of the Commonwealth is the same as British executive power. 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... And questions about the ambit of the Executive s power to spend must be decided in light of all of the relevant provisions of the Constitution, not just those which derive from British constitutional practice. The High Court said that it by no means follows from an examination of the history of executive power that the Commonwealth can be assumed to have an executive power to spend and contract which is the same as the power of the British Executive. Australia has a written Constitution which distributes powers between the Commonwealth and the States (at [83]): The polity which, as the Commonwealth parties rightly submitted, must possess all the powers that it needs in order to function as a polity is the central polity of a federation in which independent governments exist in the one area and exercise powers in different fields

6 of action carefully defined by law. It is not a polity organised and operating under a unitary system or under a flexible constitution where the Parliament is supreme. The assumption underpinning the Commonwealth parties submissions about executive power is not right and should be rejected. Did the incidental power (section 51(xxxix)) in the Constitution apply? The court said that this power did not apply to assist the Commonwealth s argument. The Commonwealth parties submitted that, in so far as the Appropriation Acts provided authority to spend appropriated moneys, the Appropriation Acts were supported by section 51(xxxix) as laws incidental to the power to appropriate. They further submitted that section 32B of the FMA Act was supported by the incidental power as a law incidental to the power to appropriate or the executive power under section 61 of the Constitution to spend and contract. The court rejected this argument (at [86] [87]): Conclusion To hold that the Parliament may make a law authorising the expenditure of any moneys lawfully appropriated in accordance with ss 81 and 83, no matter what the purpose of the expenditure may be, would treat outlay of the moneys as incidental to their ear-marking. But that would be to hold, contrary to Pape, that any and every appropriation of public moneys in accordance with ss 81 and 83 brings the expenditure of those moneys within the power of the Commonwealth. Likewise, to hold that s 32B of the FMA Act is a law with respect to a matter incidental to the execution of the executive power of the Commonwealth (to spend and contract) presupposes what both Pape and Williams (No 1) deny: that the executive power of the Commonwealth extends to any and every form of expenditure of public moneys and the making of any agreement providing for the expenditure of those moneys. Therefore, the amending legislation was held to be invalid. The Commonwealth s entry into, and expenditure under, the SUQ funding agreement was unsupported by the executive power of the Commonwealth in section 61 of the Constitution, or any power in section 51 of the Constitution. The 2012 decision may be viewed at: This decision may be viewed at: Implications of this case While this case was about whether the impugned laws were enacted validly to provide benefits to students (within section 51(xxiiiA) of the Constitution), it raises the question in regard to other programs which might be paid for by the Commonwealth government as part of executive power, and thus without supporting federal legislation. The attempt by the Commonwealth to legislate around the 2012 decision was held to be invalid. The Executive is not all-powerful. Although the Executive retains many powers, including prerogative powers, it is subject to the control of parliament on issues which involve expenditure from Consolidated Revenue.

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