In a decision that has potential implications for a raft of Federal Government programs, the High Court held that legislation, passed to authorise hundreds of government funding arrangements, is invalid insofar as it relates to the national schools chaplaincy program. The decision once again confirms that the Federal executive cannot enter into contracts or authorise spending on a subject matter that it does not have power to legislate for. Partner Paul Kenny and Lawyer Danielle Atkin report.
How does it affect you?
- Parties contracting with the Federal Government should consider its power to enter into the contract or make payments.
- Payments made by, or contracts entered into with, the Federal Government 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 Federal Government may act without legislative authorisation include:
- when activities are peculiar to the character and status of the Commonwealth as the government of the country;
- when the act is done in accordance with Crown prerogatives; or
- when it is necessary or incidental to the execution and maintenance of a Commonwealth law.
In Williams v The Commonwealth (2012) 248 CLR 156 (Williams (No 1)) the High Court held, by a majority of 6-1, that an agreement, and the payments made under that agreement, to provide chaplaincy services at a school were invalid because it went beyond the Commonwealth's executive powers under section 61 of the Constitution.
In response to the decision in Williams (No 1), the Federal Parliament passed legislation in an attempt to validate the funding of the school chaplaincy services and to provide legislative authority for other existing programs whose validity had also been called into question by the decision (the remedial legislation). The central provision of the remedial legislation was the insertion of s32B into the Financial Management and Accountability Act 1997 (Cth) (the FMA Act). Section 32B(1) of the FMA Act purports to give the Federal Government the power to make, vary or administer arrangements and grants that it would otherwise not have so long as those arrangements or grants are specified in the regulations and all relevant laws are complied with.
In Williams v The Commonwealth  HCA 23 (Williams (No 2)), Mr Williams challenged the validity of the remedial legislation both generally and specifically in relation to the agreement and payments made for the school chaplaincy program.
The Federal Government argued that the remedial legislation was valid with respect to the school chaplaincy program as it was providing benefits to students within s51(xxiiiA) of the Constitution. The Government also sought to reopen Williams (No 1) and have the High Court reconsider the ambit of the executive's power to spend.
The High Court unanimously held that s32B of the FMA Act should be read as providing the Federal Government with the power to make, vary or administer arrangements or grants only where Parliament has the power to authorise the making, variation or administration of those arrangements or grants.1
The High Court went on to hold that the school chaplaincy program did not provide benefits to students within the meaning of s51(xxiiA) of the Constitution. As such, the Court ruled that the remedial legislation was invalid to the extent that it operated to permit the Federal Government to enter into an agreement and make payments for school chaplaincy services. The Court declined to consider the broader question of validity of the remedial legislation.
The High Court also rejected the Federal Government's arguments that sought to have Williams (No 1) reopened. The Court reiterated that, consistent with Williams (No 1) and Pape v Federal Commissioner of Taxation (2009) 238 CLR 1, the executive power of the Federal Government does not extend to the making of any agreement or to any and every form of expenditure of public money.2 Instead, the Government's power to spend 'must be found elsewhere in the Constitution or in statutes made under it.' 3
Further, the High Court rejected the Federal Government's argument that the content of the executive's power to spend money is to be determined by reference to the common law. The Court reasoned that this submission proceeded on the false assumption that the Federal Government's executive power is the same as British executive power. This assumption ignores the fact that the Constitution effects the distribution of power between the Commonwealth and the states.4
The Prime Minister has reaffirmed the Coalition Government's commitment to the national schools chaplaincy program. However, given the High Court's decision, it will have to reconsider how to distribute the $243.5 million allocated to run the program, if the program is to continue. One likely solution is for the money to be provided to the state and territory governments through grants.
Considerable uncertainty also remains over the validity of hundreds of Federal Government contracts that are purportedly authorised by the remedial legislation. Williams (No 2) makes it clear that unless those other Federal Government contracts are supported by a head of legislative power, the agreement and payments made under the agreement may be subject to challenge.
If there is no clear power for the Federal Government to enter into a contract, alternative means of funding programs (including the provision of conditional grants) may be open to it.
- Williams v Commonwealth  HCA 23 (19 June 2014), .
- Ibid, -.
- Ibid, .
- Ibid, -.