Allens

Litigation & Dispute Resolution

Focus: School chaplaincy program out of bounds of executive power

27 June 2012

In brief: In a decision that has potential implications for a whole raft of government funding arrangements, the High Court recently held that the Commonwealth did not, without legislative authorisation, have executive power to enter into contracts and spend money for the provision of chaplaincy services in schools. Special Counsel Julie Freeman (view CV) and Law Graduate Darren Kamil report.

How does it affect you?

  • Parties contracting with the Commonwealth should consider its power to enter into the contract or make payments.
  • Payments made by, or contracts entered into with, the Commonwealth Executive may be challenged if the payments or contracts are not:
    • authorised by a statute; or
    • necessary or reasonably incidental to the execution and maintenance of Commonwealth laws.
  • Circumstances in which the Commonwealth Executive may act without legislative authorisation include:
    • when activities are peculiar to the character and status of the Commonwealth as the government of the country;
    • in accordance with Crown prerogatives; or
    • when it is necessary or incidental to the execution and maintenance of a law of the Commonwealth.
  • If there is no clear power for the Commonwealth to enter into a contract, alternative means for funding programs, which may include the provision of conditional grants, may be open to it.
  • In response to the High Court's decision1 , the Federal Government has introduced the Financial Framework Legislation Amendment Bill 2012 into Parliament, amending the Financial Management and Accountability Act 1997 (Cth), to validate the funding of chaplaincy services in schools and to provide legislative authorisation for other existing programs.

Background

The National School Chaplaincy Program (the NSCP) was first introduced by Prime Minister Howard in 2006, to provide chaplaincy services in schools. The NSCP was subsequently extended by Prime Minister Rudd.

On 9 November 2007, the Commonwealth entered into the Darling Heights Funding Agreement (the DHF agreement) with Scripture Union Queensland (SUQ), under which SUQ received payments for providing chaplaincy services at the Darling Heights State School.

The plaintiff, the father of four children enrolled in the school, challenged the validity of the DHF agreement. He argued that the making of payments was beyond the executive power of the Commonwealth.

The case centred on section 61 of the Constitution, which provides:

The executive power of the Commonwealth is vested in the Queen and is exercisable by the Governor‑General as the Queen's representative, and extends to the execution and maintenance of this Constitution, and of the laws of the Commonwealth.

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The High Court's decision

By a majority of 6-1, the High Court held that the DHF agreement was invalid because it went beyond the Commonwealth's executive powers under s61.

The court considered a number of arguments by the Commonwealth, supporting the validity of the DHF agreement as a legal use of executive power under s61. These are outlined below.

Broad contracting powers

The Commonwealth submitted that the Executive, in common with other legal persons, had broad power to enter contracts and spend money.

This submission was rejected by all judges other than Justice Heydon (who did not consider the issue). They held that the Commonwealth Executive could not be treated the same way as a natural person entering a contract, because it is spending public money and has significantly more power than a natural person. Furthermore, the Constitution provides for a system under which the Executive is accountable to Parliament, and Parliament controls the expenditure of public money. The Commonwealth's submission was found to be contrary to the limits on executive power imposed by the principles of a representative and responsible government. Finally, the federal structure and the distribution of powers between the Commonwealth and the States established in the Constitution would be threatened if the Commonwealth's submission were upheld: 'The executive is not authorised by the Constitution to expand its powers by contract.' 2

Contracting powers limited by legislative powers

The Commonwealth submitted that:

  • executive action is valid, provided that it falls within the subject matter of Commonwealth legislative power as set out in the Constitution and that actual legislative authority for the particular action is not required; and
  • the subject matter of this executive action fell within the Commonwealth's legislative power under s51(xx) (corporations power) and s51 (xxiiiA) (power to make laws with respect to the provision of benefits to students).

Justices Kiefel and Hayne rejected this submission because, in their view, the executive action did not fall within the subject matter of Commonwealth legislative power. They held that neither the corporations power nor the 'provision of benefits to students' power was applicable to the DHF agreement. On this basis, it was unnecessary to consider whether actual legislative authority was required for the valid exercise of executive power.

Chief Justice French and Justices Gummow, Bell and Crennan also rejected this submission. In their view, the existence of a legislative power does not confer, or give content to, executive power. These judges were concerned that acceptance of this submission would undermine central elements of the Constitution, such as: responsible and representative government; legislative control of the Executive; the role of the Senate; and a truly federal government. Further, they noted that many heads of power in s51 are inapt for exercise by the Executive.

Justice Heydon dissented and upheld the Commonwealth's submission.

The scope of executive power

All the judges accepted that the Executive could validly exercise power where there was actual legislative authority to do so. The court was also very clear that executive power extends beyond the areas of Commonwealth legislative power where the Constitution expressly or impliedly grants such power. For example:

  • Executive power to act can be derived from the character and status of the Commonwealth as a national government. This may be relevant in, for example, circumstances of national emergency or crisis, or to allow the Commonwealth to enter into an international treaty.
  • Executive power can be used in accordance with Crown prerogatives.
  • Executive power can be used when it is necessary or incidental to the execution and maintenance of a law of the Commonwealth.

The court held that none of these situations was applicable on the facts.

Potential legislative powers

The Commonwealth also submitted that the Financial Management and Accountability Act granted power to the Executive to enter into the contract. The judges (other than Justice Heydon, who did not consider this point) held that this legislation is not a source of power to spend money; thus, it did not confer any contracting power on the Commonwealth Executive. Rather, the Act is concerned with the prudent conduct of financial administration.

Similarly, the court supported the view that appropriation Acts do not confer power to spend the appropriated money; this power must be sourced elsewhere. Proper appropriation of funds is merely a condition of any payment obligation of the Commonwealth.

Argument on religious grounds

The plaintiff also argued that the DHF agreement was prohibited by s116 of the Constitution, which provides:

The Commonwealth shall not make any law for establishing any religion, or for imposing any religious observance, or for prohibiting the free exercise of any religion, and no religious test shall be required as a qualification for any office or public trust under the Commonwealth.

This argument did not succeed. The court unanimously held that the chaplains were in a contractual arrangement with the SUQ and therefore did not hold any office under the Commonwealth. Accordingly, s116 did not apply.

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What's next?

Legislation has been passed by the House of Representatives amending the Financial Management and Accountability Act to validate payments made under hundreds of programs that are threatened by this decision.

Among other things, the Financial Framework Legislation Amendment Bill inserts a provision into the Act granting the Commonwealth power to spend public money, provided that the spending is pursuant to an arrangement, grant or program specified in the regulations. The Bill also inserts a schedule into the regulations specifying hundreds of arrangements, grants and programs, including the school chaplaincy program. The Bill gives the Commonwealth the power to validate programs that may be identified as under threat in the future by simply adding them to the schedule in the regulations.

Although these regulations may be disallowed by Parliament, given that the Bill allows executive spending to be authorised by regulations which are made by the Executive and not by Parliament, it remains to be seen whether the Bill actually addresses the concerns of the court, namely the lack of parliamentary approval of executive spending. It also remains to be seen whether the proposed Bill as it applies to some of the programs listed in the regulations is supported by a s51 head of power. Thus doubts remain as to whether the High Court will uphold executive spending made under the proposed legislative amendments.

Footnotes
  1. Williams v Commonwealth [2012] HCA 23 (20 June 2012).
  2. Williams v Commonwealth [595] (Justice Kiefel).

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