On 20 June 2012, the High Court handed down its decision in Williams v The Commonwealth of Australia [2012] HCA 23 (Williams).

In this case, the Court heard a challenge to the constitutional validity of a funding agreement entered into between the Commonwealth and Scripture Union Queensland (SUQ) to provide chaplaincy services at the Darling Heights State School (School). The Court concluded that the Commonwealth did not have executive power under s 61 of the Constitution to enter into the funding agreement or make payments under the funding agreement because there had not been express legislative authorisation from the Commonwealth Parliament for the relevant Minister to do so. However, the Court held that the entry into the funding agreement did not contravene s 116 of the Constitution as it did not impose a religious test for an office under the Commonwealth.

Background

In 2007, the Howard Government introduced the National Schools Chaplaincy Program (NSCP). The NSCP was intended to support the spiritual, social and emotional wellbeing of students by funding chaplains to provide pastoral care in schools throughout the country. In broad terms:

  • schools would apply for funding under the NSCP and, if approved, would enter into a funding agreement with the Commonwealth by which the Commonwealth would agree to fund chaplaincy services at that school, and
  • students would only be able to participate in the NSCP if prior parental or guardian consent was obtained.

SUQ is a major provider of chaplaincy services in Queensland.

In April 2007, the School applied for funding under the NSCP. The Commonwealth subsequently approved the application and entered into a funding agreement with SUQ (Funding Agreement).

The plaintiff, Mr Williams, is the father of four children enrolled at the School. On 21 December 2010, he commenced proceedings in the High Court’s original jurisdiction, challenging the authority of the Commonwealth to draw money from the Consolidated Revenue Fund and to make payments to SUQ pursuant to the Funding Agreement. Mr Williams’ challenge had two primary bases:

  • the engagement of a school chaplain by SUQ to provide chaplaincy services at the School contravened s 116 of the Constitution because the definition of “school chaplain” under the NSCP Guidelines was an “office … under the Commonwealth” and that the definition imposed a “religious test” for that office within the meaning of s 116 of the Constitution, and
  • the Funding Agreement and the payments made by the Commonwealth (purportedly pursuant to the Funding Agreement) were invalid as they were beyond the executive power of the Commonwealth.

Section 116: religious test and “office … under the Commonwealth”

Mr Williams’ overarching objection to the NSCP was that it contravened s 116 of the Constitution.

The eligibility criteria for chaplains were set out in a set of Guidelines for the NSCP published by the Commonwealth (Guidelines).

Mr Williams’ challenge, however, failed at the threshold on the basis that the chaplains did not hold any “office … under the Commonwealth”. This is because the chaplains were engaged by SUQ and were under the control and direction of the School’s principal. The chaplains did not have any contractual or other arrangement with the Commonwealth. The word “under” in “office … under the Commonwealth” required a closer connection to the Commonwealth than mere provision of funding on the part of the Commonwealth.1

As chaplains did not hold an “office … under the Commonwealth”, the Court found it unnecessary to address whether the Guidelines imposed a religious test.

Executive power

The Commonwealth and SUQ submitted that the Commonwealth had the power or capacity to spend moneys on any subject matter within a head of Commonwealth legislative power, notwithstanding the fact that there was no express legislative authorisation by the Commonwealth Parliament.

By majority, the Court held that legislative authorisation (additional to an appropriation) was required before the Commonwealth could exercise power under s 61 of the Constitution. The Commonwealth lacked power in this case because there was no legislation authorising the entry into the Funding Agreement by the Commonwealth or legislation authorising the payments made under it.

The Court held that validly enacted legislation was needed to authorise the exercise of Commonwealth power under s 61 because of the text, context and purpose of s 61 informed by its drafting history and the federal character of the Constitution.2

There were two major common threads that ran through each of the majority judgments:

  • in ascertaining the ambit of Commonwealth executive power, it is necessary to take into account:
    • the position of the States (in the context of the federal system established by the Constitution),3 and
    • the position of the other branches of government, encompassing the principle of responsible government4
  • the Commonwealth’s capacity to enter into contracts is a public capacity, not a capacity of the type inherent to private persons like corporations and individuals.5

As to the first point, the Court observed that a wide Commonwealth executive power would have the potential to diminish, in a practical sense, the authority of the States.6 It would circumvent, to a large degree, the role of the Senate as a necessary organ of Commonwealth legislative power.7 Additionally, it would undermine the significance of s 96 (the provision that grants the Commonwealth power to make tied grants to the States) in the federal structure.8

Additionally, the Court observed that a wide Commonwealth executive power would undermine parliamentary control of the Executive and weaken the role of the Senate.9 After all, the Constitution proceeds on a “basal assumption of legislative predominance”.10

As to the second point, the Court observed that while the Commonwealth must have capacity to enter into contracts, such a capacity is not open-ended. This is because governmental action is public, and is therefore inherently different from private action.11 Additionally, the Commonwealth’s capacity to contract is constrained by the distribution of powers in the Constitution.12

Legislative power

Because the majority held that express legislative authority was required to authorise the Commonwealth to exercise executive power, it was not necessary for the Court to consider whether the Funding Agreement could have been the subject of valid Commonwealth legislation. Nonetheless, several Justices addressed the issue of whether the Funding Agreement could have been authorised by s 51(xx) or s 51(xxiiiA).

Section 51(xx): trading corporations

Section 51(xx) provides the Commonwealth with power to make laws with respect to “trading or financial corporations formed within the limits of the Commonwealth”. The Commonwealth and SUQ had submitted that since SUQ was a trading or financial corporation, it followed that a law regulating the activities of SUQ as a provider of chaplaincy services would be a law with respect to trading or financial corporations pursuant to s 51(xx).

Hayne and Kiefel JJ held (in obiter) that s 51(xx) could not have supported such a law.13 The Guidelines simply required that the chaplaincy provider be “a legal entity, affiliated with or working with a religious institution to provide a school chaplain and deliver chaplaincy services in schools”. It was not a criterion of funding that the chaplaincy provider be a constitutional corporation; indeed, the Guidelines were indifferent to whether or not the recipient of funding was a constitutional corporation. The mere fact that the recipient of funding could be a constitutional corporation would not have made the hypothetical law one that could have been enacted pursuant to s 51(xx).

Section 51(xxiiiA): benefits to students

Section 51(xxiiiA) provides the Commonwealth with power to make laws with respect to “the provision of … benefits to students”. The Commonwealth and SUQ had submitted that the provision of chaplaincy services fell squarely within the notion of “benefits to students” and accordingly the Funding Agreement could have been supported by a law enacted pursuant to s 51(xxiiiA).

Hayne and Kiefel JJ (again in obiter) held that s 51(xxiiiA) could not have supported such a law.14 This was for the following textual reasons:

  • there is a distinction between the provision of benefits and the provision of a service or services,15 and
  • the provision of benefits to students includes money paid to a third party for the benefit of students, but does not extend to a situation where the payments are made to the school to provide services to students and others in the school community.16

Additionally, to construe it so broadly would approach a general power to make laws with respect to education, which would be quite different from what was originally intended by the referendum that gave rise to s 51(xxiiiA).17

Heydon J (dissenting in the result) held that s 51(xxiiiA) could have supported the NSCP. This is because the materials leading up to the constitutional amendment inserting s 51(xxiiiA) and the authorities interpreting it since its insertion favour a broad construction to extend to the provision of funding via third parties to benefit students.18

Implications

The Court has emphatically decided that, subject to certain limited exceptions, the exercise of Commonwealth executive power must be supported by legislative authority.

This had such dramatic consequences for the exercise of Commonwealth power that the Parliament enacted the Financial Framework Legislation Amendment Act (No. 3) 2012 (Cth) (Act No. 77 of 2012) (Amendment Act) within eight days of the High Court’s decision.

The Amendment Act provided, in essence, for a general power for the Commonwealth to enter into contracts with respect to Commonwealth programs listed in the Financial Management and Accountability Regulations 1997 (Cth) (Regulations). The Amendment Act also provided that contracts that had been in place prior to the commencement of the Amendment Act that are the subject of the Regulations are assumed to have been made pursuant to the general power to enter into contracts.

The question of whether the Commonwealth Parliament has general power to enter into contracts was expressly left open by French CJ.19

Another important question is the scope of the exceptions to the principle that the exercise of Commonwealth executive power must be supported by legislative authority. According to French CJ, the exceptions include:

  • the executive power to do all things necessary or reasonably incidental to the execution and maintenance of a valid law of the Commonwealth once that law has taken effect
  • the administration of departments of State under s 64 of the Constitution
  • activities that derive from the character and status of the Commonwealth as a national government, and
  • the prerogative aspect of executive power.20

While those categories of exceptions are not closed, the majority’s comments:

  • on the need to take into account the federal nature of the Constitution, and
  • on the principle of responsible government as derived from the division between the Commonwealth’s legislative and executive branches discerned from Chapters I and II of the Constitution read in the context of Australia’s constitutional history,

strongly indicate that the High Court is looking to re-assert the position of the States as constitutional polities and to emphasise the primacy of the legislature vis-à-vis the Executive.

Another important question is the scope of the Commonwealth’s power to make laws with respect to “benefits to students” pursuant to s 51(xxiiiA). There is significant tension between the obiter comments by Hayne and Kiefel JJ and previous High Court authority in British Medical Association v The Commonwealth21 and Alexandra Private Geriatric Hospital Pty Ltd v The Commonwealth.22 The resolution of this tension awaits another day.