Even broad governmental powers have limitations - Brett Cattle Company Pty Ltd v Minister for Agriculture

In brief 7 min read

On 2 June 2020, the Federal Court handed down its decision in the class action case Brett Cattle Company Pty Ltd v Minister for Agriculture,¹ finding that the actions of then Minister for Agriculture Fisheries and Forestry, Senator Joe Ludwig, constituted the tort of misfeasance in imposing a ban on the live export of Australian cattle to Indonesia in 2011.

Following the broadcast of footage depicting widespread mistreatment of cattle in Indonesian abattoirs on ABC's Four Corners, a ban on the export of live cattle to Indonesia was imposed on 8 June 2011. The court found that the prohibition was unlawful and was imposed with reckless indifference to both the availability of the power to make such an order and the injury it would cause.

This decision serves as a timely reminder that there are limits on the exercise of seemingly broad governmental powers, and is especially relevant at a time where governmental powers are being used to respond rapidly to the COVID-19 crisis.

Key takeaways

• Powers exercised by public officers, such as Government Ministers, are not unlimited.
• Even in circumstances where governmental powers appear to be broad, consideration needs to be given to the purpose of those powers and the proportional exercise of those powers.
• Any exercise of a governmental power, even where the authorising legislation does not contain express qualifications or limitations, must be reasonable and rational in all of the circumstances.
• It may constitute the tort of misfeasance if a public officer acts with reckless indifference to whether the exercise of a power is valid, and to the damage which may result from that exercise.

The facts of the case

• The case was brought by lead applicant, Brett Cattle Company, as a class action involving farmers and other businesses affected by the suspension of live export of Australian cattle to Indonesia in 2011.
• The export ban was imposed on all livestock exports to Indonesia, initially intended to be in force for a period of six months.
• The ban was revoked on 6 July 2011, after the introduction of a new Export Supply Chain Assurance System, designed to ensure that livestock transport, handling, slaughter and related operations were in accordance with the relevant code.
• The applicant claimed the Minister committed the tort of misfeasance in public office, first, as the ban order was outside of power because it was unreasonable or lacked proportionality, and second, the ban order was made recklessly.
• The applicant claimed losses of up to $2.5 million resulting from the ban, comprised primarily of the loss of a commercial opportunity to sell cattle through the live export market to Indonesia. Losses by other group members are expected to have arisen in similar circumstances, and the questions resolved in this proceeding are likely to be common to the other claims.

Misfeasance by government

The elements of the tort of misfeasance were considered by the Federal Court, which required the claimant to establish that a public officer abused or misused his or her office intentionally, by either intending to cause harm or knowingly acting in excess of his or her power. The state of mind of the public officer is critical in considering whether such an abuse or misuse of office has occurred. 'Malice, knowledge and reckless indifference' are states of mind which have been held to amount to abuse or misfeasance.

The Minister was found to have acted without obtaining the appropriate legal advice as to the form of order made and, therefore, was recklessly indifferent to both the availability of the power to make an order, and to the injury it would cause. The court found the Minister had been 'quintessentially reckless' in exercising his power, knowing that there was a risk the order would be invalid but not caring whether it turned out to be so or not. In addition to this, the Minister was found to have been recklessly indifferent and 'shut his eyes' to the consequences that persons in the live cattle export industry would suffer economic loss whether the order was valid or not.

Unlawful exercise of power

In reaching its decision, the court was required to consider whether the ban was unlawful or beyond the power of the Minister. Justice Rares applied a three-step test to determine the proportionality of the ban order, in order to assess whether the order was a valid exercise of power. The court considered first whether the order was suitable, second, whether the ban was necessary, and third, whether the ban was adequate in its balance.

1. Suitable: At the first step, Justice Rares found that the ban was 'suitable' as an interim step towards Australia developing a system under which Australian cattle could be exported to Indonesia in a manner which complied with the relevant code.
2. Necessary: At the second step, however, Justice Rares concluded that the absolute prohibition was not necessary. As evidenced by a departmental minute presented to the court, the then Minister knew the ban would have a 'dramatic' effect on the industry, and the practical operation of the ban was to prohibit live exports to Indonesia even in circumstances where the inhumane treatment of livestock would not have occurred. A key issue raised in this case was that the order banning live exports to Indonesia did not include any exceptions power, which might otherwise have allowed the Minister to make an exception for exports to facilities which were able to comply with the relevant code of conduct for the treatment of cattle. The Minister's failure to include such an exceptions power meant the ban was found to be 'capricious and unreasonable'. If the Minister had been acting lawfully and proportionately, the court found, certain operators would have been able to obtain approvals and continue to export cattle to Indonesia.
3. Adequate in its balance: In considering whether the ban was adequate in its balance, the court rejected the Government's submissions that the order was valid because the power to make it was purposive, and that the order was reasonably capable of being seen as being within a prescribed purpose and sufficiently connected to the authorising legislation (in this case, the Export Control Act 1982 (Cth)). Despite the fact that the Act did not expressly identify the circumstances in which, or purposes for which, the Minister's powers could be exercised, or impose any express qualification on the scope of the power, the powers were not absolute. They needed to be exercised within proper limits and needed to be reasonable, appropriate and adapted. The court found that there was no rational or reasonable justification for the order, and the absolute prohibition imposed on exporters who were able to meet the relevant codes was an 'undue and impermissible burden on the common law right to carry on business'. It therefore did not satisfy the third stage of the proportionality test. The 'true character' of the order was found to be that of an unreasonable overreach.

Damages

The court observed that the quantification of damages in this case is difficult to assess, in part because no evidence was presented by the Minister regarding possible alternatives to the ban. The court rejected the applicant's submission that damages should be calculated on the basis that no action would have been taken, and instead considered the likely impact of a hypothetical order which included an exceptions clause, which would have allowed exports to continue to compliant abattoirs in an 'assured export system scenario'.

The court recognised that compensation may be payable for the loss of a commercial opportunity and found, therefore, that the loss was quantifiable based on a 'lost export period' during which a number of Indonesian importers would have been able to accept cattle in a compliant manner, in addition to claims from the applicant for losses resulting from costs incurred for agistment, cartage of cattle and extra bank charges. The appropriateness of the methodology employed by the court to consider the number of cattle which might have been exported to Indonesia is to be considered by the parties.

What's next?

To date, the Federal Government has not confirmed its position as to whether an appeal of the decision will be made. The Government has stated it will 'carefully work through the judgment' before commenting on the matter, although an appeal is certainly a real possibility. If the outcome is accepted by the Government, commentators have suggested that compensation payable to class members might reach up to $600 million.

This decision also serves as a timely reminder to Government that the exercise of powers must be proportional, reasonable and consistent with the purpose for which the powers are conferred. Even seemingly broad powers are not unlimited and a cautious and considered approach to the exercise of those powers should be taken. 

It remains to be seen whether the decision also means that Government will be more inclined to deal with emerging issues by amending existing legislation, instead of exercising discretionary governmental powers which could be subject to challenge like in this case.