Williams v Commonwealth of Australia

[2011] HCATrans 199

[2011] HCATrans 199

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S307 of 2010

B e t w e e n -

RONALD WILLIAMS

Plaintiff

and

COMMONWEALTH OF AUSTRALIA

First Defendant

MINISTER FOR SCHOOL EDUCATION, EARLY CHILDHOOD AND YOUTH

Second Defendant

MINISTER FOR FINANCE AND DEREGULATION

Third Defendant

SCRIPTURE UNION OF QUEENSLAND

Fourth Defendant

FRENCH CJ
GUMMOW J
HAYNE J
HEYDON J
CRENNAN J
KIEFEL J
BELL J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 10 AUGUST 2011, AT 10.19 AM

(Continued from 9/8/11)

Copyright in the High Court of Australia

____________________

FRENCH CJ:   Yes, Mr Solicitor.

MR McLEISH:   If the Court pleases, we wish to make submissions in relation to the benefits, power and also the corporations power, but precede that with the propositions we advance in relation to the scope of executive power.  In our submission, there are two negative compositions which suffice together, but alone or in combination to dispose of this case, in favour of the plaintiff.  The first of those is along the lines that were said by Justice Gibbs in the AAP Case 134 CLR 379 and, in our submission, supported by the other judgments in that case, albeit expressed in positive terms in some cases.

I paraphrase that proposition as follows, that the Executive cannot do things without a statutory mandate, if it would be beyond the power of the Parliament to give it that statutory mandate.  That is the negatively expressed proposition for which we contend.  We submit further that it is inherent in the system of responsible government that the Executive cannot take it upon itself to do things which the Parliament could not authorise.  It follows that, like our friends from Western Australia, we withdraw the first sentence at paragraph 6 of our written submissions which is to the effect that the executive power extends ‑ ‑ ‑

GUMMOW J:   The first sentence at paragraph 6?

MR McLEISH:   The first sentence at paragraph 6, which is a positive form of the proposition.  We submit that is not necessary for the Court to decide in this case.  In any event we rely on the negative form of the proposition.

I will be submitting that neither the benefits power nor the corporations power could give the statutory mandate which is absent in this case and that, therefore, this case falls within that first negative proposition. The second negative proposition we advance concerns Commonwealth executive power in the area where section 61 is said to intersect with section 51(xx). That is a matter to which I will return and develop. In short, our submission is that the special nature of section 51(xx) and other persons powers means, for reasons which I will come to, that those heads of power cannot be used as devices by the Commonwealth retracting legislative executive power in areas where it would otherwise not have been able to exercise it. If I can start first then with the benefits power.

GUMMOW J:   What other examples are there of what you have called persons power.

MR McLEISH:   Only two, your Honour, the aliens’ power and conceivably the race power, although, we submit that is a collective set of persons.  The others, we would submit, are subject matter powers.  Your Honour Justice Gummow referred to Justice Dixon’s judgment in Stenhouse v Coleman yesterday.  His Honour there draws the distinction between purposive powers, such as the defence power and others, but does not advert to the particular persons powers which we say are necessarily in a special category because of the nature of executive power.

In relation to the benefits power, there are three limbs to our argument. The first is that we submit that benefits to students does not extend to services provided to students. We rely for that submission on the text of section 51(xxiiiA) itself. The particular matters to which we draw attention, the references to dental or medical services which is the only place where services are referred to in that provision which we contrast with the references to pensions, child endowment and benefits to students and family allowances which it is submitted are benefits in the nature of financial assistance and conceivably assistance in the nature of goods.

Certainly the history to which your Honours have been taken in relation to the Education Act supports the notion that section 51(xxiiiA) was intended to enable the Commonwealth to provide financial assistance to students. The second aspect of the text of section 51(xxiiiA) on which we rely for this submission is the exclusion or the preclusion of laws with respect to the provision of medical and dental services “so as to authorize any form of civil conscription”.

It is held in the British Medical Association Case 79 CLR 201 at the particular page references to which we have referred in paragraph 1.1 of our written outline that the words in parentheses qualify only the expression “medical and dental services”. Accordingly, we submit that to read “benefits to students” as encompassing, for example, educational benefits or services to students would be to read the provision without the restriction as to civil conscription which, we would submit, is a surprising result if benefits to students were intended to encompass services. It is submitted, then, the words in parenthesis ought to, one would have expected, be found at the end of the provision rather than before the reference to “benefits to students”.

The second argument we make in relation to benefits is that even if it does extend to include some services, the services which it extends to would only cover the provision of the material benefits.  That is supported by what Justice McTiernan described as the meaning of benefit in the section, again in the British Medical Association Case at page 279, and this was the definition which was picked up in the Alexander Private Hospital Case by the whole Court; both, of course, in the context of benefits in the medical context in which there is an expressed power to make provision for medical services, therefore not directly applicable in the context of benefits to students but nonetheless of assistance, in our submission.  The words we particularly rely on in this context are the opening words of what Justice McTiernan says in the second paragraph on page 279 where his Honour refers to “The material aid given pursuant to a scheme”.

KIEFEL J:   Is the Alexandra Case at 162 CLR 281 to be taken to accept that a benefit may extend to a service in the reference to the benefit perhaps being identified as accommodation, sustenance and care?

MR McLEISH:   It does, your Honour, and their Honours were, of course, relying on this passage in Justice McTiernan’s judgment.  We would submit that in the context of medical benefits, that is explicable by reference to the – or, in fact, did not need to be decided because of the express power in relation to services.  Their Honours were not addressing the notion of benefits to students which, for the reasons I have submitted, stands in a different category.  We adopt what was said for the plaintiff by my learned friend, Mr Walker, yesterday about the need for a test for benefits to students which is capable of judicial application and the criterion of materiality, or perhaps tangibility, in our submission, is a minimum requirement for such a test.

We would submit that although there may be agreement among governments, including the Victorian Government, as to the desirability of provision of services in the nature of the chaplaincy services, what this Court requires is a means of determining whether or not what is provided is a benefit.  In the present case, as we apprehend, that point is contested and there is no means for this Court to decide whether the constitutional fact necessary to attract the power exists in those circumstances, quite apart from what we submit is the difficulty in determining whether an intangible service amounts to a benefit. 

The further submission we make, as appears in our written submissions, particularly around paragraph 36, is that benefits to students, because of the requirement the benefits be given to students, must be directed to meeting the needs of students in their capacity as students or as Justice Dixon put it in the British Medical Association Case, the benefits must be provided to meet needs arising from the situation or pursuits of people as students.  In our submission, that test is not met in the present case because the benefits are provided to people irrespective of their situation as students.  They are provided to people who happen to be students but they do not, it is submitted, meet needs that arise from their situation as students.  Rather, the benefits in this case might aptly be described as benefits to children – benefits in some circumstances, benefits to children or young adults.  We would distinguish, therefore, the case of the provision of ‑ ‑ ‑

GUMMOW J:   If we were looking at legislation, a response to that submission might be, say, well, it could be read down, right?

MR McLEISH:   Yes, your Honour.

GUMMOW J:   When we are in the present universe of discourse, which is the executive power whose content is said to be attached in some way to the existence of a legislative power, is that process available to, say, the exercise of the executive power?

MR McLEISH:   Not in relation to this specific instance, your Honour.  The Executive has done what it has done and it is either good or bad, we would submit.  It has not sought to do something other than what it has done.  In short, if we are wrong in our first two arguments, it may be that counselling services, for example, to victims of bullying at school might stand in a different category, but the kinds of services which are provided pursuant to this agreement have, we submit, an insufficient connection with the situational pursuits of students. 

Allied to that submission is our third submission on the benefits question which is that even if these services were capable of being characterised as benefits of the kind that section 51(xxiiiA) envisages, what has happened in this case is the making of chaplaincy services available to the broader school community, which is a quite different thing. Both that point and the lack of connection between the services and the needs of students emerges clearly, it is submitted, from the funding agreement itself. If I can take the Court to page 638 of volume 2 of the special case book, under the heading “C Project” at C3 the essence of the services is set out. Firstly:

The chaplain/s employed under this project must deliver services to the school and its community –

which, it is submitted, is a much wider class than the students themselves.

FRENCH CJ:   That is not a defined term anywhere, is it?

MR McLEISH:   Not that I can see, your Honour, no.  The ways in which those services are then defined are of a quite intangible nature, it is submitted.  Firstly:

·providing general religious and personal advice to those seeking it, comfort and support to students and staff, such as during times of grief;

·supporting students and staff to create an environment of cooperation and respect, promoting an understanding of diversity and the range of religious affiliations and their traditions –

No doubt worthy aims, it is not disputed, but nonetheless not benefits and not benefits to students.  We can probably skip over the third dot point, which is about the way in which services are provided.  Fourthly –

·working in a wider spiritual context to support students and staff of all religious affiliations –

So it is utterly general in its application and –

·being approachable by all students, staff and members of the school community –

There is nothing in there, it is submitted, to tie the services either to students themselves or to require any connection with the students or the fact of being a student.  So, for those reasons, it is submitted that the benefits power would not be capable of authorising this funding agreement and therefore it does not provide support for the exercise of the executive power because of the first negative proposition that I advanced.

If I could then move to the corporations power and there are two limbs to our argument here, but the first is that even if the fourth defendant is a trading corporation, the contract would not be capable of being the subject of legislation, the contract in this question under the corporations power.  The second aspect of the argument is that, in any event, it is submitted that the fourth defendant is not a trading corporation. 

This point I want to elaborate on what I call the second negative proposition and that is that section 51(xx) cannot be the means of attracting power to contract and spend on the part of the Executive simply by the use of a constitutional person as the instrument of executive power or as the recipient of Commonwealth spending with or without conditions. If it were otherwise, if it were possible for the Commonwealth to attract executive power by the device of using a corporation as the instrumental party or the recipient of spending, subject to conditions, then it would be open to the Executive to act in any area in which the Commonwealth deemed it desirable to act.

The court has been at pains to deny that power to the Executive when it has come to look at what I might loosely call the nationhood power with the extent of powers peculiarly adapted to the national government.  The limits that have been identified in that context would be wholly undermined, it is submitted, if the negative proposition were not to be accepted and if it were to be held within legislative power for the Parliament simply to make a law permitting the entering into of contracts or the spending of money on particular conditions with trading corporations.

I do not need to get into the argument as to whether or not that would be a valid exercise of legislative power because the second negative proposition for which I contend applies irrespective of whether that would be a valid exercise. One reason why I make that submission is that, especially in the context of funding, section 96 provides the means by which the Commonwealth can fund purposes or programs which stand outside section 51. There are two conditions in section 96 which the second negative proposition preserves.

The first is that the funding is authorised by Parliament. The negative proposition preserves the allocation of the powers to the Commonwealth by preventing the use of executive power by the device of a corporation and therefore requires that there exist another, what I might call, substantive non‑persons power for the Act in question. The second condition, section 96, which is preserved by this second negative proposition is that the payment is made to the States. That again, it is submitted, is critical to the maintenance of the constitutional allocation of powers. It is the means by which spending outside section 51, it is submitted, is required to be undertaken by the Constitution.

Turning then to the question of trading or financial corporation. At paragraph 3 of the written outline we set out authorities for the proposition, which we take it is uncontroversial, but section 51(xx) presents a question of characterisation. The question in every case is whether or not a corporation merits description as a trading corporation; the expression “merits description” of course taken from the judgment of Justice Mason in Adamson’s Case 143 CLR 190 at page 234.

As to how the question of characterisation is to take place, the authorities establish that it is undertaken chiefly but, it is submitted, not exclusively by reference to the current activities of the corporation and that, it is submitted, involves looking at all its activities.  In particular, it involves forming a judgment as to whether the trading activity is ancillary or incidental to a principal non‑trading activity.  Support for that proposition is in Adamson’s Case 143 CLR 190. It is a matter on which, it is submitted, that five members of the Court were in agreement. Firstly, Justice Stephen at page 220, the bottom of the page, his Honour says:

I have laid considerable stress upon the incidental character of the trading activities of these corporations and have done so because I think that there may well be a distinction between trading which is incidental to, and is undertaken in the course of carrying out, some other principal non-trading activity and trading which is engaged in as a distinct and unconnected activity.

The differentiation there between incidental and principal activities is the one on which we rely for present purposes.  In this respect, Justice Gibbs and Justice Aickin agreed with Justice Stephen.  That appears at pages 213 and 240 respectively.  It is submitted that the same approach was endorsed by Justice Mason at page 234.  Your Honours will recall that Justice Mason had adopted a test, which appears on page 233, as to whether trading activities form a sufficiently significant proportion of the overall activities of a corporation as to merit its description as a trading corporation.  The content of that term “sufficiently significant” is what I will be seeking to give some extra substance to in these submissions and it is important, in that regard, to pay attention to the first paragraph on page 234 where his Honour says:

Not every corporation which is engaged in trading activity is a trading corporation.  The trading activity of a corporation may be so slight and so incidental to some other principal activity, viz. religion or education in the case of a church or school –

so it is apt to describe this case –

that it could not be described as a trading corporation.  Whether the trading activities of a particular corporation are sufficient to warrant its being characterized as a trading corporation is very much a question of fact and degree.

Justice Jacobs agreed with the judgment of Justice Mason at page 237.

GUMMOW J:   Mr Solicitor, looking at your 1.3 and 2.2, they seem to walk together, do they not, the point that is being made?

MR McLEISH:   They do, your Honour.  It is perhaps a different way of putting the point, that it is fortuitous or adventitious in this case that whether or not the fourth defendant is a trading corporation, but we go further to say that even if the contract provided that it must be a trading corporation, the second negative proposition would deny the attraction of executive power, at least to spend, in that context.

FRENCH CJ:   This is under the rubric of the general proposition, is it, that is at paragraph 9 of your submissions in the first sentence?

MR McLEISH:   Yes, 9 and 10, your Honour.

FRENCH CJ:   Just looking at that first sentence, you are accepting that “the executive power extends to agreeing to do things that could have been” – I presume you mean they are authorised by Commonwealth legislation.

MR McLEISH:   Yes, your Honour.  Thank you for drawing that to my attention.  That suffers from the same vice as the first sentence at paragraph 6 in that that is the positive form of the proposition which, we would submit, your Honours do not need to get to in this case. 

FRENCH CJ:   Perhaps when you have completed this limb of your submissions, you might tell me why we are not dealing with essentially a hypothetical question based on a premise which may be false.

MR McLEISH:   I am sorry.  I am not following your Honour.  The premise is to a trading corporation?

FRENCH CJ:   No.  The whole exploration of the scope of these powers in relation to the challenge to expenditure is only necessary if the executive power would extend to things that could have been authorised by Commonwealth legislation.

MR McLEISH:   I accept that, your Honour.  It may be that I am relying on areas where it does not extend.  It may be that there is a simpler route and a larger area to which it does not extend which others will make submissions in relation to.

FRENCH CJ:   Yes, all right.

MR McLEISH:   As far as the question of what is sufficiently significant, goes I would refer your Honours to the judgment of Justice Brennan at first instance in the State Superannuation Board Case, the relevant passage of which is set out in the judgment of Chief Justice Gibbs and Justice Wilson at volume 2, 150 CLR at page 292.  In this passage Justice Brennan brought together, it is submitted, the test of substantial activity and the notion of incidentality in a way which it is submitted the Court should endorse.  What Justice Brennan said there is that:

“In the light of the judgments in Adamson, it appears to me that the balance of judicial opinion would categorize as a trading corporation a corporation whose trading activity is its substantial activity or is among its substantial activities.  Trading need not be the corporation’s predominant or principal activity, but the substantiality of its trading activity cannot be determined without reference to the other activities of the corporation, if any.  Trading activity which is merely incidental to a predominant or principal activity is prima facie insufficient to confer the character of a trading corporation.”

It follows that the mere quantity of trading activity taken in isolation is not going to provide the answer to the characterisation test.  That point is made at page 296 of the same judgment and I do not need to take your Honours to that.

KIEFEL J:   Mr Solicitor, could I take you back to your negative proposition about the executive power?  Can it be applied to meet the argument put by the Commonwealth defendant at paragraph 41 in relation to the capacities in which the Executive Government possesses and the ability of it then to contract arguably – contract itself into further power?  Power further than you have indicated, that to which it would be referrable to legislative power.

MR McLEISH:   It can, it is submitted.  What that second proposition addresses is reliance on the corporations power alone.  There will be many areas in which, it is submitted there may be executive power by reference to other areas.  If your Honours do not accept the submissions to be made by those following me about requirement for legislation and a more confined approach, but ‑ ‑ ‑

HAYNE J:   You will have to speak up, Mr Solicitor, I am not hearing you, or lift up the lectern, one or the other.

MR McLEISH:   I am sorry, your Honour.  My first answer to your Honour Justice Keifel’s question is that those following me will address specifically this argument of the Commonwealth.  If it is the case

that there is a broader area of executive power outside the negative areas, as I might call them and I have contended for, then it would extend – and apart from the nationhood aspects of course - it would extend to many of the matters in the ordinary services of government and that is not surprising, the power to declare war and peace.  Some of those would necessarily be enveloped in a concept of the nationhood power and the status of the national government.  Clearly, there are administrative contracts and so on that, we would submit, would fall within that area.

FRENCH CJ:   And, perhaps, certain classes of agreement with the States.

MR McLEISH: Agreements with the States, yes, your Honour, subject to section 96 in particular cases. Finally, your Honours, on the question of trading corporation, Fencott v Muller of course, is authority for the proposition that the purposes of a corporation are never entirely irrelevant. That was a case, of course, where there were no activities but it also stands for the proposition that purposes are never entirely irrelevant. We have given the references there, volume 152 CLR 570. That ties in with the notion of incidentality and purposes - we would submit, are a way of identifying what activities are incidental and what are principal. Ultimately, our submission in relation to this aspect of the argument, is that the shorthand tests that have been used in judgments are not a substitute for the characterisation task and that, we submit, were not arguably intended to be such. Chief Justice Gibbs made that point in Fencott at page 588, warning against reliance on the words of those tests in substitution for the exercise that I have described above.

It is submitted that, similarly to the example given by Justice Mason in Adamson’s Case, page 234, the fourth defendant was not a trading corporation when the agreement was entered into, that its limited trading activity was merely incidental to its characteristic activity, namely, the promotion of the Christian religion.  Those are the submissions for Victoria, if the Court pleases.

FRENCH CJ:   Yes, thank you, Mr Solicitor.  Solicitor‑General for New South Wales.

MR SEXTON: If the Court pleases, we propose to say something about the executive power and the corporations power. If I can start with the executive power, and we wanted to really address the Commonwealth’s, what I describe as their broad proposition, which is essentially set out in section 41 of the Commonwealth’s submissions to which Justice Kiefel just referred. So we are looking at a position here where there is the absence of an empowering statute or an exercise of the prerogative power or an exercise of the nationhood power and, for the purposes of this argument, no intersection with a specific legislative power, such as in this case section 51(xx) or section 51(xxiiiA), and I will come back and say something about the corporations power in due course.

Looking at that broad Commonwealth proposition, it seems to us that.....matter of whether the payments are made by way of contract or by way of grants. An example that we used in our written submissions is that if payments of that kind were available under section 61, it would be possible for the Commonwealth to provide funds for an individual or a corporation to establish a university in one of the States, although that would have always been seen as a sphere of activity for State governments or, in more recent times, for private organisations as well. It would of course be open to the Commonwealth to provide funds to the States for that kind of purpose under section 96 of the Constitution with appropriate conditions attached, if necessary.

We would say that the broad proposition put forward by the Commonwealth was effectively rejected by a number of members of the Court in Pape.  Your Honours have been taken to these passages by my learned friend, Mr Walker, so I will perhaps just refer to the paragraph numbers, but we would say that it was effectively rejected by Justices Hayne and Kiefel at paragraph 357 and by Justice Heydon at paragraphs 567 and 569.  It was seemingly doubted, we would say, by the Chief Justice at paragraph 127 and it was discussed, but not conclusively, by Justices Gummow, Crennan and Bell at paragraphs 214 and 220.

We would also say that the Commonwealth’s broad proposition appears to have been the subject of contrary assumptions in various statements made by members of the Court over a period of time, particularly in the AAP Case to which your Honours have also been taken; Justice Mason at 396 – and I will not read that passage because it has just recently been read – but Chief Justice Barwick at 364 where he said that only:

some power of a special and limited kind may be attracted to the Commonwealth by the very setting up and existence of the Commonwealth as a polity –

By Justice Gibbs at 378 where he said:

the growth of the Commonwealth to nationhood did not have the effect of destroying the distribution of powers carefully effected by the Constitution.

To similar effect, Justice Deane in the Tasmanian Dam’s Case at 252 where he said that the executive power:

will be confined within areas in which there is no real competition with the States.

And Chief Justice Mason, Justices Deane and Gaudron in Davis at 93 to 94 where they said:

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.

Justice Brennan in the same case at 111 where he said:

whether an enterprise or activity lies within the executive power of the Commonwealth.  It invites consideration of the sufficiency of the powers of the States to engage effectively in the enterprise or activity in question and of the need for national action (whether unilateral or in co‑operation with the States) to secure the contemplated benefit.

Justice Mason noted in the APP Case at 397 that the view that he had stated at 396 concerning the executive power was consistent with that expressed in the Wooltops Case (1922) 31 CLR 421 and the Commonwealth v Australian Commonwealth Shipping Board Case (1926) 39 CLR 1.

KIEFEL J:   I think it is put, Mr Solicitor, that spending generally, but more particularly spending in the area with which we are involved, does not impinge upon the distribution of powers as between the States or put the Commonwealth in competition with the States.

MR SEXTON:   I think that is the Commonwealth’s position, your Honour, but we would disagree with that in the sense that – and in this case as an example – it is an area in which the States to some extent operate and may wish to operate, but it is really a question of that distribution of powers that in one sense if the power expands on one side, then to some extent it necessarily contracts on the other.

KIEFEL J:   Is that to assume then that the powers of which you speak are the legislative powers defined in the Constitution?  If so, that does not seem to take the argument any further, although that might be the beginning and end of it.

MR SEXTON:   I am sorry, is your Honour asking me, am I putting the proposition that the spending is limited to a specific basis in specific legislative powers?

KIEFEL J:   Yes.  When you speak of State powers and distribution of powers, you are going no further.  You are saying no more than your argument, which I understand to be that those powers are defined by the Constitution?

MR SEXTON:   I think that is right.  If your Honour is saying that is so, yes.

GUMMOW J:   The problem to some extent is that a number of the powers are concurrent, legislative powers are concurrent.  Quite limited ones are exclusive to the Commonwealth.

MR SEXTON:   That is so, your Honour, but the question in this case is whether the executive power will authorise spending to produce an activity, which is, in a sense, outside any specific or any implied Commonwealth powers.

GUMMOW J: The defence power and the external affairs power come to be seen as exclusive, I think. But, by and large, there are a lot of other powers there that are concurrent, which is a difficulty in this wholesale proposition that the executive power of the Commonwealth is one that derives its content by the presence of powers in section 51 where some of them are exclusive and the majority of them are concurrent, including benefits to students and trading corporations actually.

MR SEXTON: I am going to come to corporations power. Perhaps, your Honours, if I can put it this way, that what we say follows from the authorities in relation to the Commonwealth’s broad view is that there are two possible positions that follow from the statements in this Court – or perhaps one of them does not follow directly from the statements that have been made in this Court. The narrow view is or might be that spending requires a legislative basis within one of the defined powers in the Constitution, section 51, 52 or 122.

GUMMOW J:   Insofar as they are concurrent powers, they can engage section 109.  There is no such mechanism where there would be concurrent executive powers.

MR SEXTON:   That is so, your Honour.  I am talking about a situation where we are looking – the absence of prerogative power and nationhood power.  That is essentially the submission that was put by the Victorian Solicitor‑General in the AAP Case.  The dicta, however, in the AAP Case perhaps support an alternative view which is that spending requires the capacity to legislate as a basis for the spending.  I think your Honours have been taken to some of those passages, but in the AAP Case Chief Justice Barwick at 362, Justice Gibbs at 379, Justice Mason at 396, Justice Jacobs at 405.  So that that would be a broader view than the view that was put forward in submissions by the Victorian Solicitor‑General.  But the statements in the judgments themselves tend to reflect that alternative view that spending requires capacity to legislate rather than specific legislation itself.

HAYNE J:   I do not want to harp on about AAP, but there may be two important points to make about it by reference to what appears in paragraph 41 of the Commonwealth’s submission.  Paragraph 41 of the Commonwealth’s submission seems to assert that there is a class of spending that may be undertaken by the Executive of the Commonwealth which is the concern only of the Commonwealth in the sense that the spending does not, as the last few sentences say:

involve interference with what would otherwise be the legal rights and duties of others. 

Now, those sentences are written, I think, directed specifically to the rights and duties of individuals, but, as emerges in AAP, most notably in the judgment of Justice Stephen, there is a question of whether spending by a government is a matter which can generate – it was described variously in the AAP as a justiciable issue, as an issue in which the States or the Attorneys of the States have standing to complain.  The point that may lie behind paragraph 41 – and we will no doubt hear of this in due time – can be described twofold. 

Firstly, does paragraph 41 assume rather than demonstrate the existence of power but, secondly, does paragraph 41 assume the correctness of the view expressed by Justice Stephen to the effect that when a government spends pursuant to lawful appropriation, that is an end of the matter?  Because the other consideration that underpinned what happened in the presentation and argument of AAP was the notion, perhaps quite wrong notion, that there was great difficulty about intercepting spending.  Unless you got in quickly enough and sought injunction to preclude it, the money was spent, you could not claw it back, therefore the focus of the attack in AAP was directed at the appropriation.  But what emerges from Justice Stephen’s judgment is this question of whether spending itself is to be treated somehow differently in questions of validity. 

MR McLEISH:   I take what your Honour says about the AAP Case that the Court was looking at these questions in a slightly different context so that statements have to be taken in that light, but, in one sense, it is still one of the very few authorities in this area, which is why we quote some of the statements.  But the point about spending, in a sense, is that it is said it leads to an activity and the question then becomes whether that activity is something that requires, in the light of the spending, a legislative basis or the capacity to legislate at any event, which then raises the questions of interception with specific powers.

We would prefer the narrow view, that is in a sense the view that was put forward in submissions by the Victorian Solicitor General, but we recognise that the statements that are made in the AAP Case tend to look at the question of capacity rather than the question of actuality in terms of legislation but still recognising that there are other questions in that case that have influenced the way in which those statements have been made, which is really perhaps only a way of saying that this is, to some extent, an open question.

Paragraph 41 of the Commonwealth’s submission seems to us to be in many ways an assertion but in the absence of any authorities, partly because there are few authorities, but it also seems to us to be a very broad proposition, which would lead to Commonwealth activities in areas that seem to be well removed in many cases from the specific powers, and the implied powers even, that are given to the Commonwealth under the Constitution.

Your Honours, I was going to say something about the corporations power.  I just need to take your Honours to the Work Choices Case 229 CLR 1 and to paragraph 178 which is, in a sense, the key paragraph in the majority judgment. I will not read it. It is in front of your Honours. We would say that Justice Gaudron here was essentially speaking of the regulation of a class of corporations, in some circumstances through legislation operating on persons having a particular relationship with a corporation in that class.

But that, we would say, does not describe the entry into a contract by the Commonwealth with an individual trading corporation which confers rights and obligations on that corporation only, and not by way of regulatory legislation but as a consequence of a commercial transaction, and we would say that it, in the same way that the payment of money to a trading corporation under such a contract does not fall within the kind of regulation that is being described there by Justice Gaudron and has been adopted by the majority.

So that, in those circumstances, we would say that the contract in this case with the relevant corporation, whether or not – we have not considered the question or made submissions on the question of whether it be a trading corporation for the purpose of section 51(xx) but even if it were, we would say that that does not supply even the capacity to legislate and, of course, there is no specific legislation, so that on either view of the executive power that we have put forward it would not provide a basis for the spending of the funds that has taken place in this case.

The second point in relation to 51(xx) is the question of what is a trading corporation. As I say, we have not made submissions on the particular corporation in this case but we would make a more general submission which is to say that it might have been possible to approach the question of the characterisation of a corporation for the purposes of section 51(xx) wholly or partly by reference to its general purposes, so excluding, for example charitable, educational or municipal corporations but the current of authority in this Court has rather focused on the day to day activities of the corporation in question. In State Superannuation Board (1982) 150 CLR 282, I do not really need to take your Honours to the report but the majority Justices Mason, Murphy and Deane said at 304:

that a corporation whose trading activities take place so that it may carry on its primary or dominant undertaking, e.g., as a sporting club, may nevertheless be a trading corporation . . . these activities do not cease to be trading activities because they are entered into in the course of, or for the purpose of, carrying on a primary or dominant undertaking not described by reference to trade.

This in some ways reflected the statement of Justice Mason.  Then Justice Jacob has agreed in Adamson 143 CLR 190 at 233 to 234 that the term “trading corporation” was as Justice Mason said:

a description or label given to a corporation when its trading activities form a sufficiently significant proportion of its overall activities as to merit its description as a trading corporation.

That statement was quoted with apparent approval by the majority in State Superannuation Board.  It may be, however, that these tests have been applied too literally by some of the decisions in this area in the Federal Court in one of two ways, either by attributing too much significance to actual trading activities in the context of broader non‑trading activities or by finding some activities to be trading when that is not the real character.  We have just given two examples in our written submissions in our outline that as an example of the first, the decision of Justice Wilcox in E v Australian Red Cross Society (1991) 27 FCR 310 where $2 million in fundraising was held sufficient to make the Red Cross Society a trading corporation, although it received almost $45 million from governments in relation to what were agreed to be non‑trading activities in that case, blood transfusion services. That is set out at 339 and 343 of the report.

As an example of the second problem where characterisation of activities is trading when that might not be their real character. We point to Bankstown Handicapped Children’s Centre Association Inc and Another v Hillman and Others (2010) 182 FCR 484 where the full Federal Court

held that the Association was a trading corporation in circumstances where in relation to the activities under consideration it provided public welfare services on a cost recovery rather than a profit making basis albeit through a system of government payments under contracts rather than by way of direct government grants.  The incumbent question here being about a third of the Association’s revenue for the relevant periods.

We would point to those, accepting the test broadly, the activities test that has been put forward in this Court in relation to trading corporations, but to propose that that test perhaps needs to be applied in a realistic way, and we do not say that that is contradicted by the formulations that had been put in this Court in relation to that question. Can I just say finally, in going back to Justice Gummow’s question about concurrent powers, it is really, I think in relation to our submissions, looking at a situation where there is no legislative power on the Commonwealth’s side, or no legislation, so that in that situation, we would say that the distribution of powers becomes relevant as between the Commonwealth and the States under the Constitution.

KIEFEL J:   But can the exercise of executive power broaden the incidental power?

MR SEXTON:   The problem with the incidental power in this context is that it perhaps can be used to extend the executive power rather than vice versa, and that is one of the reasons, we would say, for a narrow view in relation to the executive power because otherwise on a broad view, it can then be further expanded by the incidental power, by way of perhaps by legislation.  There is a nexus between those two, as your Honour says, but we say it is a reason why for arguing for and accepting a narrower construction of the executive power.  If the Court pleases.

FRENCH CJ:   Yes, thank you, Mr Solicitor.  Solicitor‑General for Tasmania.

MR SOFRONOFF:   Your Honours, I have been volunteered by my learned friend to precede Tasmania and South Australia.

FRENCH CJ:   I see.  Very well, Mr Sofronoff.

MR SOFRONOFF: Thank you, your Honour. Your Honours, Mr Owen Dixon, KC, is recorded as having told his young protégé Robert Menzies that the way to approach a constitutional case is first to read the Constitution and the relevant legislation and determine what it means and then go to the cases and see if the cases agree with what you think it means and, if they do, then you rely on those cases to support the meaning that you advocate as the correct meaning, and if you do not and think the cases are incorrect, then to attempt to persuade the Court to that view. I confess that I did not follow that advice because what we have done, and I think what everybody has done, is to look at paragraph 2(a)(i) of the plaintiff’s submissions, which poses one of the questions in terms of the executive power of the Commonwealth, the scope of it being defined by the potential legislative power of the Commonwealth and I think it is correct to say that everybody has assumed that that is the appropriate description of executive power.

If the Court comes to the view that that is not a concluded question, or is not correct, then we would wish to make these submissions.  It appears, your Honours, that the view that is implicit in the submissions of all parties has come from the dicta of particularly Chief Justice Barwick in the AA  Case, and to a degree, the dicta of Justice Gibbs in that case.  Could I take your Honours to the AAP Case (1975) 134 CLR 338. That case, your Honours, was a challenge to an Appropriation Act and if your Honours would go to page 343, that is set out at the beginning of the Chief Justice’s reasons. There is a challenge to:

the validity of an appropriation of $5,970,000 . . . by the Appropriation Act –

that is mentioned there, and an injunction is sought –

to restrain the Commonwealth and the Minister for Social Services from expending any of that amount of money for the purposes of what the schedule to the Act designates as “The Australian Assistant Plan”.

In supporting the validity of the law on the preceding page we can see that Mr Byers, the Solicitor‑General for the Commonwealth, at about point 6 first argued that the scope of the power to appropriate, insofar as the words “the purposes of the Commonwealth” are concerned, are unlimited.  That appears about 10 lines from the foot:

It is for Parliament and not the courts to determine what are purposes of the Commonwealth.

The alternative proposition was five lines from the foot –

Alternatively, the expression comprises those purposes for which Parliament may make laws –

under the Constitution –

Once money has been appropriated by a valid law its devotion to the purpose of the appropriation may be secured by executive action –

So the argument, at least in part, concerned which of those two views was correct.  But the discussion by the Court thereafter assumed the correctness of the last part of what Mr Byers said, namely, the words:

Once money has been appropriated by a valid law its devotion to the purposes of the appropriation may be secured by executive action or by legislation.

If your Honours would go then to page 361 of the report, the Chief Justice, at about point 2 in the sentence beginning “I should at this point call attention”, set out his view, in the middle of that paragraph, that the Appropriation Act:

furnishes the authority of the Executive to spend money upon or in connexion with some specific activity.

Then at the foot of the page his Honour went on to consider the question:

What then are purposes of the Commonwealth within s 81? 

He considered there, and in some later passages, the constitutional history of the country.  Then at the foot of page 361 –

The Commonwealth is a polity of limited powers, its legislative power principally found in the topics granted by ss 51 and 52 –

He then referred to the executive power, and in the last paragraph on page 362 he said:

However, to whatever source it be referred, any act or activity of the Commonwealth must fall within the confines of some power, legislative or executive –

That led, without further analysis, to the conclusion at the foot of page 362 –

With exceptions that are not relevant to this matter and which need not be stated, the executive may only do that which has been or could be the subject of valid legislation.

It is understandable that his Honour came to that view because it was assumed that an Appropriation Act would confer the legal authority upon the Executive to spend the money.  If that is so, and if the Appropriation Act is one for the purposes of the Commonwealth, and purposes is to be regarded as in conformity with the legislative powers of the Commonwealth, then it would be difficult to limit upon those assumptions the executive power in any other way.  If your Honours then go to the reasons of Justice Gibbs, as his Honour then was ‑ ‑ ‑

HAYNE J:   Just before you leave that, is that reading – Sir Garfield Barwick is saying that the Appropriation Act, in the particular operation that he is focused on, is a law with respect to the particular head of power that is said to support the activity?

MR SOFRONOFF:   I am sorry, your Honour?

HAYNE J:   Do you read what Sir Garfield Barwick says at 362 as amounting to the proposition that the Appropriation Act (No 1) is authority to spend the money, in the operation of the particular Appropriation Act authorising spending on a particular activity it is a law with respect to the head of power that is found in 51 or 52 that relates to that activity?

MR SOFRONOFF: I am not sure that his Honour would have put it quite that way, because the source of the power to make an Appropriation Act is in section 83 itself and it is an Act to appropriate money for the purposes of the Commonwealth. That being so, one need not then have recourse to the proposition that the Act itself is an Act with respect to, for example, lighthouses. It is an Act for the purposes of the Commonwealth and furnishes authority to the Executive to spend money for any of those purposes.

HAYNE J:   To spend on lighthouses. 

MR SOFRONOFF:   Quite. 

HAYNE J:   Yes.

MR SOFRONOFF:   If your Honours then go to page 378.  The question before the Court or, rather, the conflict that the Court was to resolve between the opposing views, wide or narrower, about the meaning of purposes of the Commonwealth, Justice Gibbs, at the foot of page 378:

It follows from what I have said that the expenditure of the moneys of the Commonwealth for the purposes of the Plan would be unlawful.

Then his Honour went on to consider section 61. He recited the section, and at the top of 379 –

Those words limit the power of the Executive and, in my opinion, make it clear that the Executive cannot act in respect of a matter which falls entirely outside –

I notice, your Honours, that that is expressed in negative terms.  It does not state what falls inside and it would be to commit the fallacy of the undistributed middle to say that if something falls within the legislative competence of the Commonwealth, therefore, by reliance upon that dictum, it falls within the executive power.  His Honour did not consider that.  Indeed, then went on a little lower down on 379, in that paragraph –

We are no way concerned in the present case to consider the scope of the prerogative or the circumstances in which the Executive may act without statutory sanction. 

Once it was concluded that public moneys of the Commonwealth could not be spent, if there had been legislation, then, for the purposes of that case, it was enough to find that the proposed activity would not have been within the power of the Executive, which does not answer the question that the Court is concerned with in this case. 

In Pape, this Court decided that an Appropriation Act does not itself confer legislative authority to spend money and that had, indeed, been a view expressed earlier.  We have given your Honours a citation to Commonwealth v Colonial Ammunition (1923) 34 CLR 198. Could I take your Honours there. Your Honours, the case concerned this. There were heads of agreement which anticipated entry into a contract pursuant to which the Commonwealth would take over the business of the respondent, the ammunition making business. The actual agreement was never entered into and there was a dispute between the parties whether the heads of agreement was a contract or was a precursor to a contract. It was held that it was a contract.

The next question was this.  The Commonwealth had gone into possession, had taken over the business and pursuant to the heads of agreement, so it was said, had employed employees of the former owner of the business and then sacked one of them who sued his former employer.  The question was whether under the contract the Commonwealth was liable or not.  Firstly, on a construction of the contract, the Court held that the Commonwealth was not liable purely on interpretation of contract grounds.  But then the other question was whether, in any event, the contract was one which had validly been entered into?  If your Honours would go to page 219.  At the top of 219, Justices Isaacs and Rich, in the last sentence of the paragraph beginning at that page, said:

The answer depends on the effect of two classes of Commonwealth legislation –

firstly, the Defence Act.  Their Honours then found, over the page, 220, at the top, that according to its terms an administrative act could be justified only if there had been an Order in Council made under that Act, and just below halfway:

The establishment of this factory and the employment of persons in a civil capacity in this factory, therefore, cannot be justified as a legal exercise of ministerial authority, and the agreement made in fact by the department officers and sanctioned by the Minister cannot be regarded, so far as the Defence Act is concerned, as warranted by law or as binding on the Crown.  There is no other parliamentary prior authority suggested.  For the reasons given at length in the Wool Tops Case, to which we refer without repeating them, we hold that no authority short of parliamentary authority could sustain the bargain.

So I will come to the Wool Tops Case in a moment, your Honours, but what that case reflects is that in order for the Executive to enter into a contract, there must be an available legislative authority or the Constitution itself, for that matter. Their Honours then went on to consider the Appropriation Acts and whether they furnished authority. It begins at the foot of 220 but, relevantly, at 222, about 10 lines down, after referring to the proposition that Parliament must then be taken to be the principal if by Appropriation Acts it is taken to have ratified these agreements:

Parliament is not the Commonwealth.  It does not represent the Commonwealth in the making of contracts.

After some other discussion about ratification, at halfway –

The only way in which Parliament could be said to have ratified the contract – that is, to have made the contract binding on the Commonwealth – is by having expressly or impliedly validated it.

Then in the passage that follows and over the page their Honours conclude that an Appropriation Act does not do that because of the nature of an Appropriation Act.  Could I invite your Honours to read to halfway down 223.  At 224, about a third of the way down:

Whether the matter be regarded from the aspect of ratification as “ principal,” which we deem to be impossible, or of ratification in the sense of validation ex post facto, we hold that the well‑established nature and function of the parliamentary grant of supply and appropriation of funds to meet the grant, and that only, is merely as between the Crown and the people as taxpayers.

which is, in our respectful submission, remarkably similar to what the Court said in Pape.  If I can then take your Honours to the Wool Tops Case (1922) 31 CLR 421. In the Wool Tops Case the Commonwealth had entered into a series of agreements with the company.  Pursuant to one of them, which is described at page 436, the Government would pay the company some money.  Pursuant to another one of them, the Government would receive – the Commonwealth would receive money from the company.  That contract was held to be invalid upon grounds that are only of peripheral importance.

But as to the power to enter into a contract by which Commonwealth moneys are to be paid away, at the top of page 437 Justice Isaacs identified three sources of executive power; the first, Commonwealth legislation, in the first line, then imperial statute law and then authority derived from the Constitution itself. He then set out section 61 and broke it into three parts, the third part being:

extends to the execution and maintenance of this Constitution, and of the laws of the Commonwealth.

At the foot of the page he observed, six lines from the foot, that that was very important –

It marks the external boundaries of the Commonwealth executive power . . . but it leaves entirely untouched the definition of that power and its ascertainment in any given instance.

Over the page, his Honour observed, in the third line, that that third limb of the section is an essential starting point, and importantly, he referred to one of the arguments that the words:

embraced all the common law powers of the Imperial Government -

and he rejected that, as it must be rejected, and as will appear in later passages, it has been accepted by this Court at least since then, that the executive power is not the power of the Queen or the King at Federation, exercised by the Governor‑General, but rather the powers conferred upon the Governor General by the Constitution, which constitute the executive power of the government. If your Honours then go to page 440, his rejection of that proposition appears just above halfway:

It is clear now that there cannot be laid down as a rule of law that here is an unlimited application of the common law as exercised by the King’s Government in England.

Then further down, about 15 lines from the foot:

To make my meaning quite plain:  Executive action in relation to a Commonwealth law is clearly outside State jurisdiction and clearly within the field of Commonwealth jurisdiction.

Could I pause there.  That is why there could not be a concurrent right of the Commonwealth Executive to do something which might collide with the right of a State Executive to do something, and consequently when one identifies the scope of executive power of the Commonwealth, it must in its operation preclude any such possibility.  Five lines from the foot:

Executive action to execute or maintain the Constitution is clearly in the exclusive field of Commonwealth power -

So there are two limbs, maintenance and execution of laws of the Commonwealth, and maintenance and execution of the Constitution, each of which are exclusively within the province of Commonwealth Executive power, as they must be by definition, when one has regard to those words. Then at page 441, his Honour looked for the sources of legal authority, but notice, your Honours, he is not assuming an authority on the part of the executive to do whatever it likes or to spend whatever it likes, but rather that there must be a legal authority.

First, there is Commonwealth legislation, second, there is an imperial statute, and third, there is some authority derived expressly or impliedly from the Constitution. Dealing with the implication from the Constitution, just above halfway, his Honour referred to the “implication” that the existence of the Executive Government of its nature must import certain powers. We would respectfully suggest that perhaps the time has come, if the Court has not already said so in other cases, that when one speaks of the executive power of the Commonwealth in that respect, it is to be regarded as a power drawn from the terms of the Constitution which in the context of the unwritten Constitution of England and the history of England was described as the prerogative power but here one can look at the Constitution and infer everything necessary in terms of executive power other than that which is expressly authorised by a statue, Commonwealth statute, or by an expressed term of the Constitution itself.

Thus, for example, to take the most extreme case, it must be the case that it is implicit in the nature of an executive established by the Constitution that it may declare war without the need for a further law, and that being the government of a nation, it may have relations with other nations, and being the Executive of the Federal Government of the Federation, it may have relations with State executives and enter into agreements with them.

So whatever expression one uses to describe that, in our respectful submission, all of those things arise implicitly from the creation of the nation by the Act that gave effect to the Commonwealth, and the establishment of the Executive by the terms of the Constitution itself. Indeed, nobody would be so foolish or brave as to try to define all of the incidents of that power, nor is it necessary to do so, but some have been well accepted. Otherwise, one then looks to the terms of a Commonwealth statute expressly or implicitly, or the terms of the Constitution expressly or implicitly. At the foot of 441, Justice Isaacs made this observation:

One feature of outstanding importance, when the three first‑mentioned agreements come to be carefully scrutinized, is that they relate to internal trade of the States . . . Prima facie, at all events, that would be beyond the permitted region of the Commonwealth executive power –

At the foot of the page –

Legislation, if valid, might at the time have brought it within the jurisdictional area and (being now unconcerned with legislation) it has been contended that, at the time the March 1917 agreement was made, the state of war itself entitled the Government to make it by virtue of the Crown prerogative –

His Honour went on to consider that, and at the top of page 443:

No imminent national danger is suggested as the motive force for the agreement of March 1917 - none such is pleaded or shown –

and so the war power was not applicable.  There was no authority within the prerogative, or as we would submit it ought to be called, that part of the executive power that is implicit in its status as the government of a nation.  Then at page 445, his Honour went on to consider the potential effect of the appropriation legislation, and he is dealing here, of course, with that agreement by which the Commonwealth agreed to pay about £64,000 to the company.  If your Honours then go to page 446 at the foot, his Honour is about to move on to an analysis of why legislation is necessary to justify expenditure and he begins it at page 446, six lines from the foot:

The doctrine of responsible government, for instance, is invisibly but none the less inextricably and powerfully interwoven with the texture of the written word, and any interpretation of the document which disregarded the implication of that doctrine would be false and misleading.

Your Honours, in that respect, it must be remembered that in the case of an Appropriation Bill, the Senate has limited powers to deal with it, whereas with respect to general legislation which might authorise the Executive to spend money in specific ways, it has much greater powers, and consequently when considering the scope of executive power, in our respectful submission, insofar as the doctrine of responsible government which secures to the Lower House, the principal power over money bills, but to both Houses, equal power in respect of other legislation.  That must not be forgotten.  If your Honours then go to page 447, at about point 3:

It has long been an accepted thesis of the Constitution, as declared by the Committee on Public Moneys in 1857, that “it is essential to a complete parliamentary control of the public money that no portion of it should be arrested in its progress to the consolidated fund, from which alone it can be issued and applied with parliamentary sanction.” . . . And, leaving aside any implication of indemnity to the Company in case of loss -

that is to say, any claim for damages –

the specific provision as to £64,000 a year, not by way of deduction from proceeds, not limited to a profit fund, but a straight‑out liability out of unspecified Government moneys, differentiates this bargain from the three prior agreements, and leaves it, not one of “taxation,”  . . . but one of “payment” to the Company of public money.  How can that be justified without legislation?  In my opinion it cannot.

At the foot of the page his Honour referred to the decision in Mackay v Attorney‑General for British Columbia, the decision of the Privy Council and the dictum which he quotes at the top of page 448:

A contract which involves the provision of funds of Parliament requires if it is to possess legal validity, that Parliament should have authorized it, either directly, or under the provisions of a statute.

His Honour accepted that.  After dealing with the history of parliamentary supremacy, parliamentary control over money beginning – I will not take your Honours to it – but beginning at the top of page 449 and continuing over to page 451 where his Honour concluded that as a result of that modern constitutional practice:

the Crown’s discretion to make contracts involving the expenditure of public money would not be entrusted to Ministers unless Parliament had sanctioned it, either by direct legislation or by appropriation of funds –

Now, your Honours will notice the words “appropriation of funds” and that appears to read as though his Honour would view an Appropriation Act as conferring sufficient authority upon the Executive to spend the money.  That does not appear to be so because of the views that his Honour expressed in the Colonial Ammunition Case and it is not so, anyway, because of the views the Court has expressed in Pape.  If your Honours would then go to page 453, Justice Higgins addressed the same question but more succinctly.  First, in relation to the powers of the Governor‑General, at the top of the page his Honour posed the question and then in the fourth line of the paragraph:

The Executive Government has no powers except such as are conferred by or under this British Act . . . In short, the Governor‑General is not a general agent of His Majesty, with power to exercise all His Majesty’s prerogatives; he is special agent with power to carry out the Constitution and the laws, and such powers and functions as the King may assign to him.

Thus his Honour emphasised the source of executive power as the Constitution. His Honour, at page 455, then cited Mackay with approval.  Then if your Honours would go to the reasons of Justice Starke at 459 in the paragraph beginning on that page:

We are to assume that these agreements cannot be supported under any legislative provision.

That is to say, there was not any law that was pointed to.  At the foot of the page:

The question, then, for the consideration of the Court is whether the King – the Executive Government of the King in the Commonwealth – can, without parliamentary sanction, exact the payment of the moneys mentioned in these agreements, as a condition of or as consideration –

His Honour then also spoke about the history of the struggle between the King and Parliament in relation to money.  At the foot of the page he concluded, in referring to Mackay’s Case:

If that agreement involves the provision of funds by Parliament, then the authority of Parliament is necessary –

I want to take your Honours to three other cases in relation to those propositions.  The first of them is Kidman v The Commonwealth (1925) 37 CLR 233. In Kidman there was a contract by which the Commonwealth asked somebody to build ships for it.  The contract was signed by the Prime Minister.  There was a dispute between the parties and it went to arbitration.  The arbitrator made an award in favour of the Commonwealth.  Only after that award had been made against it did the defendant take the point in the Supreme Court that the contract had not been validly entered into because it was not supported by any law. 

The purpose of taking your Honours to this case is that the Court in Kidman accepted that statutory authority was required for the contract and held that statutory authority was available in the sense that provisions of the Defence Act could have been availed of and the point not having been taken below, the questions of fact as to whether indeed authorities had been invoked under that Act had never been litigated and it was too late for the company to take the point now.  Could your Honours go to page 240.  At the foot of the page, halfway down the reasons of Justice Isaacs beginning on that page, his Honour identified that the defects in the award relating to the invalidity of the contract because of a lack of Parliamentary authorisation.  His Honour then observed that:

there can be no moral doubt that the contracts were for the purpose of aiding the naval defence of –

the Commonwealth and that there was available, at the top of page 241, a provision of the Naval Defence Act 1910 which would have covered the contract. At about point 3:

As has been stated, there was no lack of legislative authority to the Commonwealth to make such contracts . . . The only question is one of fact, namely, the actual purpose of the Government and the existence of a formal Order in Council.

Which was not agitated at the trial, at the arbitration and, hence, his Honour concluded, not available now.  To the same effect are the reasons of Justice Rich at the foot of page 251.  Then if your Honours would go again to Colonial Ammunition (1923) 34 CLR 198 at 220, halfway down the page in the reasons of Justices Isaacs and Rich:

The establishment of this factory and the employment of persons in a civil capacity in this factory, therefore, cannot be justified as a legal exercise of ministerial authority, and the agreement made in fact by the departmental officers and sanctioned by the Minister cannot be regarded, so far as the Defence Act is concerned, as warranted by law or as binding on the Crown.  There is no other parliamentary prior authority suggested.  For the reasons given at length in the Wool Tops Case –

Then one comes, in the State’s sphere in the case of State executive power, to the State of New South Wales v Bardolph (1933) 52 CLR 455. This was a New South Wales case where there was a department of State, the Tourist Bureau, which conducted activities and part of its business involved advertising and somebody on its behalf entered into a contract for advertising. A new government was elected and when it came into office it refused to honour the contract and it said, by way of seeking to avoid the contract, that there had been no Appropriation Act which would have justified the contract and the question was whether an Appropriation Act was a condition precedent to validity of a contract otherwise entered into validly and it was held that it was not. If your Honours would go to page 496. At the top of the page Justice Rich observed that:

Apart from the question whether parliamentary appropriation of moneys is a prerequisite of the Crown’s liability to pay under a contract made by it, the Crown has a power independent of statute to make such contracts for the public service as are incidental to the ordinary and well‑recognized functions of Government.

Could I make some observations about that sentence, your Honours? The Executive of a State, of course, is a creature of a different nature from the Executive of the Commonwealth. Nevertheless, the existence of the Executive as a body established by the Constitution would inherently involve executive power to enter into contracts, for example, to execute the Constitution insofar as the establishment of the Executive itself is concerned and to maintain the Constitution in that respect as well, which would involve authority for the Executive to enter into contracts relating to the day‑to‑day running of the Executive itself. So in that respect there is no difference between State and Commonwealth except that the source of the power is different.

What Justice Rich observed there was that first you find a power independent of the Appropriation Act and then the next question is whether the Appropriation Act is a precursor, precondition, to the exercise of that power.  The Court held that that was not so.  At the top of page 507 Justice Dixon observed that, whether the Crown was bound by the contract:

it is a matter of primary importance –

in concluding that question –

that the subject matter of the contract, notwithstanding its commercial character, concerned a recognized and regular activity of Government in New South Wales.

That is to say, it is just part of the maintenance of the Government of New South Wales and, in fact, part of the maintenance of a department of State, and in the Commonwealth’s sphere there would always be a statute in relation to the existence of a department which would justify the entry into contracts to permit that department to be maintained.

At the top of 508 five lines down:

No statutory power to make a contract in the ordinary course of administering a recognized part of the government of the State appears to me to be necessary in order that, if made by the appropriate servant of the Crown, it should become the contract of the Crown –

At page 509 in the middle of the page:

The Crown’s advisers are answerable politically to Parliament for their acts in making contracts.  Parliament is considered to retain the power of enforcing the responsibility of the Administration by means of its control over the expenditure of public moneys.  But the principles of responsible government do not disable the Executive from acting without the prior approval of Parliament, nor from contracting for the expenditure of moneys conditionally upon appropriation by Parliament and doing so before funds to answer the expenditure have actually been made legally available.

That is, in our submission, we respectfully submit, correct.  If the Executive has the power to enter into a contract, as it did in Bardolph, then it may do so before there has been an Appropriation Act because, of course, the Appropriation Act does not confer power, but enables performance in due course. In our respectful submission, it follows from those authorities and the text of the section in the Constitution that in order for the Executive to do an act, which involves the expenditure of money it must point to a Commonwealth law or a provision of the Constitution or something which inheres in itself, as the Executive, which would permit it to do so.

GUMMOW J:   You may be right about that, Mr Solicitor, but the contrary view is one of long‑standing, I think.  It starts, I think, with an opinion by Alfred Deakin, when he was Attorney‑General in 1902, to the effect that he said he found it impossible to resist the conclusion that the Commonwealth has executive power, independently of legislation, with respect to every matter to which its legislative power extends.  That seems to be the root of the idea.

MR SOFRONOFF:   Yes.

GUMMOW J:   You challenge that, I understand?

MR SOFRONOFF:   We do, your Honour, and of similar long‑standing status, was the idea that the purposes of the Commonwealth – until the AAP Case – that the purposes of the Commonwealth were anything that the Commonwealth thought fit should be. But, the text of the Constitution is there and nowhere in the Constitution do we find words, which expand the power of the Executive in the way that Chief Justice Barwick described it in the AA  Case.  We can see why his Honour came to that view, having regard to the way that case came forward, and the view of the effect of the Appropriation Act that was current at the time that the Court assumed, without deciding.

But, we are conscious that in the article that we have referred to at paragraph 10 of our oral outline the author referred to the dictum that I took your Honours to in Bardolph.  The contract has to be:

made, “in the ordinary course of government administration” ‑

So, that is a very difficult test to apply.  That is not the test though , but ‑ ‑ ‑

GUMMOW J:   The question is administration of what?

MR SOFRONOFF:   I am sorry?

GUMMOW J:   The question of what?

MR SOFRONOFF:   Exactly, your Honour, that is right, and it must be the administration of an Act, the execution or maintenance of an Act.  Of course, one must accept that the scope of the executive power of the nation must be regarded as one that is broad and is not to be meanly or narrowly construed.  Having regard to that, it ought never be difficult to point to a statute which either expressly or implicitly creates a power in the – invokes the Constitutional authority of the Executive to execute or maintain that law.

Now, it may be that in the maintenance of a department of State, everyday contracts for supplies and so on would fall within that test, giving no trouble at all, but the entry into a contract which, like this one, does not appear to be the carrying out of any Commonwealth legislative program, and is not backed up by a statute which can implicitly authorise it, can easily be detected by those whose office it is to administer these matters, can easily be detected as one probably beyond power.

So, in our submission, in answer to the concern that your Honour Justice Gummow has raised, is that not much would change, we apprehend, by pointing out that the Executive, in order to act, must be acting in terms of the Constitution to execute or maintain the laws of the Commonwealth or the Constitution or must point in those other cases to its existence as an Executive as justification for doing what it is going to do.

HEYDON J:   Mr Solicitor, in your written submissions you submitted that the plaintiff’s claims should be dismissed, but if this argument is accepted it must follow ‑ ‑ ‑

MR SOFRONOFF:   If your Honours do not accept our written submissions, if you reject those and open up the question, then the consequence would be that the plaintiff’s claim is allowed.

HEYDON J:   So that – I am not sure which is the fall back position, but one position is that they should be dismissed and the other that they should be allow.  Is that a rational stand?

MR SOFRONOFF:   We have come here advocating the validity of the scheme on the footing of what has been regarded, in common with all other parties, as the orthodox test of the scope of executive power.  If that view of the scope of executive power is regarded by the Court as neither orthodox nor correct then the question being open, I make the submissions that I am making now, with the obvious consequence.

FRENCH CJ:   Your submissions are not in any sense contingent.  You are contending for the view that the executive power does not extend to matters simply by reference to Commonwealth legislative heads of power.

MR SOFRONOFF:   Yes.

FRENCH CJ:   And that would involve necessarily the withdrawal of 6(b) in your ‑ ‑ ‑

MR SOFRONOFF:   Yes.  Well, it would involve your Honours having taken the step that written submissions are wrong, and then they are put to one side and your Honours will then consider what is the scope of executive power.  Could I make three or four further submissions about the contention that is raised by the Commonwealth that at least its authority to spend is unlimited.

First, of course, at an overarching conceptual level, such a construction of the scope of the executive power does not in terms of Justice Isaacs’ words in the Wool Tops Case assure to the people effective control of the public purse. There would be no control of the public purse. Second, it would for all practical purposes, and probably for all legal purposes, put beyond the scope of judicial review any decision of a Minister or even a low‑level public servant to spend money because it would be impossible to determine the confines of the jurisdiction in order to determine whether there had been an error. In addition, there would be no class of factual criteria that could conceivably ever be closed. In addition, if one opens executive power to an unlimited degree to spend, then one can see an unlimited scope for section 51(xxxix), because the Executive would have unlimited power to spend, and laws could be passed:

incidental to the execution of any power vested by this Constitution in the Parliament or in either House thereof, or in the Government of the Commonwealth –

and it would be necessary to address what possible limits there could be. Finally, there is the problem which would arise when the Executive of the Commonwealth seeks to exercise its powers under section 51 when a State Executive seeks to exercise those powers in the same sphere which cannot be answered by the formulation of the test heretofore or by the Commonwealth in its submissions. The Constitution, section 61, answers that though because, as Justice Isaacs pointed out, the executive power to execute and maintain the laws of the Commonwealth are exclusively within the province of the Commonwealth Executive and there can never be any question of collision or overlap.

FRENCH CJ:   Do you exclude the possibility, or prefer not to comment on it, that a Commonwealth Executive might enter into an agreement with the State Executive Government to, for example, provide funding under contracts with entities such as the Scripture Union to schools?

MR SOFRONOFF: Could I answer that partially, your Honour? There would be no doubt in my submission that the Executive of the Commonwealth, because of its status, can enter into agreements with other polities, including States. The extent to which the carrying out of those agreements would have to find their source in an express power under section 51 is something I would have to think about very carefully. I would not leap to the acceptance that it is like the external affairs power, and brings in everything that is the subject of the agreement.

GUMMOW J:   In your oral outline, where do we find a paragraph dealing with what you have just been putting to us?

MR SOFRONOFF:   You do not, your Honour.  They were a couple of points that came to me as I was listening to argument.

GUMMOW J:   Right.  But I take it that what you have been saying is a rejection of the Deakin position.

MR SOFRONOFF:   Yes.  Those are our submissions, your Honour.

FRENCH CJ:   Thank you, Mr Solicitor.  Solicitor‑General for South Australia.

MR HINTON: If the Court pleases, there are, it would seem, two approaches to the consideration of the content of the executive power. In both cases quite obviously the starting point must be section 61. The dicta to which my learned friend – if the Court pleases, I will hand up my three‑page outline in a moment. I am about to make some brief submissions on the issues that arose out of yesterday and they are not included in there. I will come to the submissions in the outline of propositions in a moment. Two approaches it would seem. The starting point, as I said, must be section 61.

The dicta to which my learned friend, Mr Walker, took the Court to in the AAP Case yesterday can be understood, in my submission, as being based on the view that where section 61 vests the executive power in Queen, it vests the same power as enjoyed by Her Majesty as Queen of Britain subject to any express or implied limitation to be drawn from the Constitution. Hence, in Pape, at paragraph 220, it is understandable, with respect, when your Honours Justices Gummow, Crennan and Bell state against the background of considering the relationship of the respective spheres of executive power, but:

Otherwise there appears no good reason to treat the executive power recognised in s 61 of the Constitution as being, in matters of the raising and expenditure of public moneys, any less than that of the executive in the United Kingdom at the time of the inauguration of the Commonwealth.

Now, I appreciate that that is to latch onto one sentence, but it is also consistent with the breakdown of the executive power provided by Justice Brennan in Davis v The Commonwealth 166 CLR 79 – I will not take your Honours to it – at page 108. On that analysis of section 61, the executive power would include the conferral of non‑prerogative, personal capacities, if you like, subject to any express or implied limitation to be drawn from the four corners of the Constitution. That would mean, on that construction, that the Executive does have a power to spend and a power to contract. It explains Bardolph’s Case.  Admittedly, Bardolph’s Case relates to the Crown in right of New South Wales, but statements made in that case that my learned friend, Mr Sofronoff, took the Court to indicate that they are capable of a broader application. 

On this approach to the construction of section 61, limitations on the power are to be found in the federal framework, hence the conclusion that the executive power of the Commonwealth Government is co‑extensive with the legislative power. You add to that the prerogative powers and powers implicit in the character of a national government. That is what, in my submission, at the Bar table, has been treated as the orthodox position, to use that characterisation made by my learned friend, Mr Sofronoff.

The alternative put this morning is that where section 61 refers to the executive power, it vests only what is necessary for the purposes of the new polity. This would include the prerogative. This would include powers implicit in the character of a national government and would include power conferred by the Constitution itself or by statute. Nothing more is required in the way of personal capacities because it may be conferred by legislation. The HB pencils of yesterday can be purchased by means of legislative authority. Contracting can be controlled by means of legislative authority. Borrowing can be controlled and is by means of legislative authority.

Questions of validity where the first approach is applied will turn on the competence of the Executive. Questions of validity where the second approach is applied will turn upon whether or not one of the heads of power is engaged, unless of course it is the prerogative that is exercised or the power characteristic of the Federal Government. The first approach, the orthodox, includes a person or non‑prerogative capacity which may mean that section 75(v) of the Constitution is not attracted. The second, where one Act is.....to statutory authority may bring the decision‑maker within section 75(v), the greater protection.

Your Honour Justice Hayne referred to the judgment of Justice Stephen in AAP and the relevance in teasing out these issues of the interest of the Attorney‑General in the appropriation in spending.             There is a very real interest in one sense and totally unreal in another sense, and that is, of course, section 94.  Section 94 provides, as your Honours know ‑ ‑ ‑

GUMMOW J:   It gives you an interest and some surplus.

MR HINTON:   Exactly, your Honour, the cheque that we undoubtedly will receive.

HAYNE J:   It is in the mail, Mr Solicitor.

MR HINTON:   If the second approach, though, is the correct approach, then of course that interest is protected, that financial interest, that ability to challenge through the legislative process is available.  In our submissions, for the same reason as the plaintiff ‑ ‑ ‑

GUMMOW J:   Section 94 is not referred to by Justice Stephen, is it?

MR HINTON:   No, your Honour.  I was raising it in the context of ‑ ‑ ‑

GUMMOW J:   Yes, I understand what you are saying.

MR HINTON:   In our submissions, for the same reason as the plaintiff, we have operated on the basis that the first approach is applicable and our written submissions proceed on that basis.  The alternative approach raises large questions as to the way in which the States on a daily basis, or agencies or instrumentalities of the States, do business with the Commonwealth.  It was first raised yesterday.  I do not point the finger or blame anybody for that, but we have been unable to obtain instructions.  I can put no position then for the State of South Australia with respect to the first approach and seek leave to file a note, if we are instructed to do so, either for or against it within 10 days of today.

If I can move then to the orthodox.  Here we were just dealing with the executive power.  The assumption is that there is no legislative head of power that is picked up.  In this particular case, the trading corporations power is not picked up nor the benefits to students power.  We adopt the plaintiff’s submissions and New South Wales submissions.  The submissions of the Commonwealth, in our submission, ignore the federal framework and the delineation of power between the integers of the Commonwealth most recently set out in significant detail by your Honours Justices Hayne and Kiefel in Pape – I will not take your Honours to it – at paragraphs 324 to 339.

At this point I move to the oral propositions, if the Court pleases. The Commonwealth contends that the power to spend does not intrude upon the executive power of the State because it is non‑coercive. In answer to that, we allude, at paragraph 3, as was submitted yesterday by the Solicitor‑General for Western Australia, to the fact that section 61 can operate with the incidental power such that there can be a coercive law made, such that there can be a law that affects rights, liabilities and duties, a law to which section 109 will apply and a law which operates in a law area in which the Commonwealth has no head of power.

The Commonwealth counters by saying, well, if they do resort to the incidental power, then, of course, any law made in support of the exercise of the power to spend, the broad power to spend, must be one that does not change the underlying exercise of the executive power. There, in our submission, arises questions of responsible government in that, if that is right, the Parliament is either shackled as to what it can do, in which case the Executive has a broader power or, with respect to my learned friend, the Solicitor for the Commonwealth, he is incorrect and the Parliament has that greater power. Whatever, there is an expansion of legislative power by virtue of the incidental power operating upon section 61.

We move to section 96 in our written submissions. It is an argument that is relatively simplistic. The Commonwealth’s contention ignores, in our submission, the implications to be drawn from section 96. It is through that non‑coercive power, limited to consensual grants to States, that the Commonwealth may resoundingly affect matters beyond the sphere of its legislative power. Whatever the reason for section 96, it has never been suggested that it is unnecessary because of an executive power to spend, but if the Commonwealth’s contention is right, it is unnecessary. Further, the Executive has a power equal to that of the Parliament, a power that may be exercised and not scrutinised by both Houses of Parliament with the obvious protections. That tends to undermine the section 96 grant scheme and renders it otiose. In our submission, that implication is strong and surely it cannot have been intended.

Lastly, with respect to the orthodox approach, we refer to section 94 and the implication to be drawn from it.  It governs the notional distribution of surplus revenue.  Now, granted the operation of this section is somewhat frustrated by the power that the Commonwealth has to appropriate in advance and to place money in trust accounts.  New South Wales v The Commonwealth (1906) 7 CLR 179 is the authority for that.

GUMMOW J:   That was bad news for section 94.

MR HINTON:   It was, your Honour.  But the section is still there, and it suggests – but it is contrary to an unfettered power to spend.

GUMMOW J:   So I take it all of this is an exegesis to the effect that you dispute the Deakin proposition, namely, that there is an executive power to spend with respect to every matter to which the legislative power of the Commonwealth extends?  Do you challenge that or not?

MR HINTON:   No, your Honour.  With respect, that is the orthodox.  We accept that in our primary submission.  What we challenge is the extension of that proposition by the Commonwealth, a power to spend, with respect, the personal capacities that are not subject of any head of power.

GUMMOW J:   The question that would arise if the corporations power and the benefits power cannot be put in place.

MR HINTON:   Yes, your Honour.  Hence I commenced my submission by saying “assume they do not apply”. 

GUMMOW J:   Yes. 

MR HINTON:   Secondly, on section 94 it is implausible that the framers would have considered it appropriate to confer a specific discretion on the Parliament to decide how much you get after the expiry of five years, whilst also conferring upon the Executive a power to make whatever payments at any time it may wish.  The Commonwealth’s contention is not only inconsistent with the delineation then of power between the integers of the Commonwealth, again referring to what your Honours Justices Hayne and Kiefel said in Pape’s Case, but to pick up on something Chief Justice Barwick said in the AAP Case, it is also inconsistent with the financial federalism.  That is to be found, in particular, in sections 87, 94 and 96.

You will find the Chief Justice’s discussion on financial federalism in the AAP Case 134 CLR 338 at 355 to 358. It also links in, potentially, with your Honour Justice Hayne’s reference to Justice Stephen’s point and the use of financial federalism as a means by which the interest of a State in that surplus, therefore, in the actions of the Executive, can be found.

HAYNE J:   My focus was more on the proposition at 387, which I would put as being that control of federal funds is a matter purely for the federal polity and none other.  That seemed to be the view that is the root underpinning Justice Stephen’s opinion.

MR HINTON:   Yes, your Honour.  The answer to that is financial federalism and the interest through section 94.  It might give us the branch.  In any event, in my submission, the extended notion of this spending power is inconsistent with the delineation of executive power, legislative power and indeed, financial federalism.  If the Court pleases, there are two very brief submissions with respect to trading corporations and benefits to students made in the document handed to the Court today.  I do not intend to elaborate upon them.  Save what we have said, South Australia adopts its written submissions, other than the question of leave.  If the Court pleases.

FRENCH CJ:   Yes, you can have that leave.

MR HINTON:   If the Court pleases.

FRENCH CJ:   Solicitor‑General for Tasmania.

MR SEALY: Your Honours, we can be very brief. Can I say, firstly, I seek to affirm that the Attorney‑General of Tasmania adopts the written submissions and the oral submissions made on behalf of the Attorney‑General of New South Wales. In addition to that the Attorney also adopts paragraphs 22 to 25 inclusive of the written submissions made on behalf of the Attorney‑General of South Australia. Those submissions concern the operation and effect of section 96 of the Constitution and were quite recently addressed by my learned friend, the learned Solicitor‑General for South Australia.

Thirdly, your Honours, and I do not know quite how to put this but can I say that we are strongly inclined to associate ourselves with the submissions made by the learned Solicitor‑General for Queensland this morning in relation to the matter of the scope of the Commonwealth executive power, but like our learned friends from South Australia find ourselves in a position where we do not have instructions on what is a very large question.  We likewise seek leave in the same terms granted to South Australia to file some further written submissions in relation to that matter.  Beyond seeking that leave, your Honour, we do not seek to make any other oral submissions today.

FRENCH CJ:   Yes, you have that leave.  Thank you, Mr Solicitor.

MR SEALY:   May it please.

FRENCH CJ:   Solicitor‑General for the Commonwealth.

MR GAGELER:   Your Honours, what was until sometime yesterday morning, the common assumption of the parties and the interveners has become by just before lunch today, in the words of my learned friend the Solicitor General for Tasmania, a very large question.  That very large question is something that I will need to spend some time addressing and I will do so.  I will do so slightly out of order from the order that is indicated in our outline of oral submissions where the assumption is still an assumption.

In addressing that very large question and in seeking to justify what had been the assumption, there is some slight difficulty in identifying precisely what the alternative to that assumption is.  It has not emerged in any clear form in any of the submissions that have been made to your Honours, orally or in writing, and that is a difficulty which I will seek to deal with in the course of my address, but the absence of any clear identification of the alternative to the common assumption is something that we invoke to justify that common assumption.  Your Honours I will come to that – the very large question – in a very short time.  To be somewhat structured, however, in the submissions we wish to make orally, we do wish to deal with standing first and we do wish to deal with appropriations second and it is after that I will come to the question.

Your Honours, standing is usefully addressed by turning to the funding agreement, volume 2 of the special case book beginning at page 635, which, as your Honours are aware, is the subject of the variation at page 712 and, in particular, page 719.  Within the funding agreement at page 646, Schedule 2, clause 3.1, your Honours see the obligation and the only obligation of the Commonwealth which is an obligation to pay certain amounts at certain times, the last of the amounts to be paid being the figure at the time identified in the variation at page 719. 

That single obligation of the Commonwealth is expressed to be subject to conditions. One is, sufficient funds being available for the program, the availability of funds turning necessarily on the existence of an appropriation under section 83 and on the existence of a drawing right under section 26(a) of the Financial Management and Accountability Act.  The other funding is compliance by SUQ with the agreement.

As your Honours are aware is disclosed in the amended special case at paragraphs 72 and 73, that single obligation of the Commonwealth has in fact been fully performed with the payment by the Commonwealth to SUQ of the final amount specified in the variation at page 719 on 11 October 2010.  Now, that was a payment that was made under the authority of the 2009 drawing right that your Honours would see – I do not ask you to turn to it – in volume 3 at page 1360 and in reliance on the 2010 to 2011 Appropriation Act. 

The relevant obligation, using the language of this document, of SUQ remains in clause 2 of Schedule 2 at page 646 to carry out the project until its completion date which as varied is 31 December 2011.  The only consequence of a failure of SUQ to do so would be to trigger the contractual right to repayment that one sees in clause 5.1 over the page, page 647.  So the position is the single obligation of the Commonwealth is fully performed, but the Commonwealth retains a contractual right to recover an amount if the conditions of payment are not fulfilled by SUQ. 

Taking the test for standing in a case such as the present where relief is sought by way of declaration or an injunction against executive action said to be in breach of a statute or the Constitution as that set out in Australian Conservation Foundation and in Onus v Alcoa, what needs to be shown for standing is either an interference with a private right or a special interest in the subject matter of the action, acknowledging that the question whether a plaintiff has a special interest or, in some cases, a sufficient interest within the second limb of that test, is a question of degree.

We are prepared to accept that the position of the plaintiff as a parent of children at the school where SUQ is now carrying out the project and who objects to SUQ carrying out the project, gives the plaintiff a sufficient interest or special interest in having a judicial determination of the validity or invalidity of the funding agreement, the conditions of which SUQ is now fulfilling and, also, a sufficient interest in having a judicial determination of the validity or invalidity vires or ultra vires of the payment made by the Commonwealth on 11 October 2010 which SUQ is using and if it does not use, is liable for contractual remedy under clause 5.1 of the contract.  The relevant parties are before the Court and a declaration would not lack utility.

That special interest of the plaintiff, however, informs the scope of the matter and the availability of the relief in the proceedings and that link your Honours have made in the number of cases but most usefully for present purposes, in Bateman’s Bay , your Honours recall, 194 CLR 247. I do not want to take your Honours to it. But that special interest of the plaintiff is not sufficient to allow him – using language drawn from Pape, which was drawn from an earlier case – to roam at large.  That is Pape, paragraph 156, over the National Schools Chaplaincy Program.  It does not extend to having a judicial determination of the validity or invalidity of any other funding agreement with SUQ or with any other party and it does not extend to having a judicial determination of any other earlier payment to SUQ.  In all of those respects the plaintiff is in no different position, that is, that is the validity or invalidity of any other agreement or as to the vires or ultra vires of any other payment.  The plaintiff is no different position from any other member of the public.

Now, that standing and that matter defined in those terms is sufficient to raise the questions of executive power.  It does, however, have implications for standing to raise the availability of an appropriation and that is something to which I will turn.

GUMMOW J:   Once the States are here and they have intervened and become parties, to the extent that they support the plaintiff, does that not put to one side the question of the plaintiff’s stand?

MR GAGELER:   No, your Honour.

GUMMOW J:   Other than as to costs?

MR GAGELER:   Your Honour is talking about the appropriation?

GUMMOW J:   He does not have the support of the question of the appropriation.  Is that not then the ground for the standing debate?

MR GAGELER:   Your Honour, for the States to intervene – this is quite an important point and it is not something I picked up until your Honour put it.  For the States to intervene there must be a matter.  The States intervene in the matter.  They do not create the matter or expand the matter by their intervention.  That is really the scope of section 78A of the Judiciary Act.  The short answer to your Honour’s question is no.  The presence of the States does not change the scope of the matter before the Court.

HEYDON J:   Can you tell me if your standing argument is correct, which orders would it relate to?  Which orders in the amended writ of summons?

MR GAGELER:   I will identify them precisely after lunch, your Honour. 

FRENCH CJ:   That might be a good time to adjourn.  The Court will adjourn until 2.15 pm.

AT 12.47 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.16 PM:

FRENCH CJ:   Yes, Mr Solicitor.

MR GAGELER:   Your Honours, my submission before lunch was that the plaintiff’s interest as a parent at the school where SUQ is providing chaplaincy services in fulfilment of a condition of the payment of 11 October 2010 is in standing to challenge the validity of the agreement and the lawfulness of that payment.  Your Honour Justice Heydon asked me then what are the consequences for relief in the amended writ of summons.  We would accept that if the plaintiff were right the plaintiff would be entitled to the relief sought in paragraph 9(a).

This is at page 5 of the supplementary special case book.  That is the declaratory relief paragraph 9(a), the injunctive relief in paragraph 10(a) and in the alternative, on the 116 point, the declaratory relief in paragraph 13(a).  We would also accept, your Honours, that paragraph 15 would be sufficient to allow an appropriately framed declaration relating to the validity or, more appropriately, lawfulness of the payment of 11 October 2010.

In terms of the formal questions on standing before your Honours, which your Honours see at page 143 of the same volume, in our submission, the answer to paragraph 1(a) is yes and the answer to paragraph 1(c)(4) is yes and the answer to the other parts of paragraph 1 is no.  So far as the appropriations are concerned, your Honours, that special interest of the plaintiff in the way in which the conditions of payment are being fulfilled, if capable of extending at all to raising a question about appropriations, in our submission, could go no further than to raise a question about the particular appropriation and, indeed, a particular drawing right which were relevant to the payment of 11 October 2010, and, that is the 2010‑2011 Appropriation Act and the 2009 drawing right and I will take your Honours to those in due on the merits.

However, in our submission, there is a no case in which a special interest of a plaintiff in determining the validity of a payment.  Putting it another way, the special interest of a plaintiff arising from the way in which moneys are being spent, has been seen to flow over into a special interest in determining the availability of an underlying appropriation or the validity of a drawing right.

Now Mr Pape, and Mr Brown in Brown v West, were in a very different category.  They were within the first limb of the Onus v Alcoa test.  They were each people to whom a payment was to be made, and if they were correct, as Mr Brown was held to be correct, in saying that there was no appropriation to make that payment then their legal interests would have been directly affected in that they would have been liable to repay the money which they were paid in accordance with the principle in Auckland Harbour Board.  Pape and Brown are within the first limb of the Onus v Alcoa test.  There is no case in which a person has been found to fall within the second limb of the Onus v Alcoa test such as to have standing to challenge an appropriation in Combet.  Your Honours will recall the point was left open by the majority, paragraphs 164 and 165.  Justice McHugh in dissent drew a distinction between the position of Ms Roxon, who he saw as having a special interest as a member of Parliament, and therefore involved in the parliamentary process of appropriation.  Mr Combet and his organisation, the ACTU, Justice McHugh said did not have standing.

In our submission, in the light of Pape and particularly in the light of the analysis in paragraph 177 of the joint reasons of three members of the Court, which is, as we read it, entirely consistent with the analysis at paragraphs 291 to 292 of two members of the Court, that explanation of the highly peculiar intramural nature of the Appropriation Act reinforces the narrow view of standing that was taken by Justice Stephen in the AAP Case.  Indeed, the analysis at paragraph 177 draws upon the analysis of Justice Stephen in the AAP Case 134 CLR 338 at pages 386 to 387.

In Davis v The Commonwealth 166 CLR 79 at pages 95 to 96, your Honours will recall, the joint judgment refers to the AAP Case and states at the top of page 96, and this is probably the only thing that the case stands as authority for, in the first full sentence at the top of page 96 that:

The case therefore stands as an authority for the proposition that the validity of an appropriation act is not ordinarily susceptible to effective legal challenge.

We would put it in terms that the validity of an Appropriation Act is not susceptible to effective legal challenge on the second limb of the Onus v Alcoa test.  Indeed, that is consistent with the way in which all other members of the Court in AAP addressed the question of standing.  The standing of the States in AAP, your Honours will recall, did not arise on the analysis of any member of the Court from the way in which the funds were to be spent.  The standing of the States arose from their peculiar position within the Federation, some judges placing particular weight on section 94, other judges placing particular weight on the position of the States as polities within a federal system. 

So, your Honours, for those reasons, in our submission, if there is standing to challenge an Appropriation Act or a drawing right at all, it is limited in this case to the 2010-2011 Appropriation Act and the 2009 drawing right but the better view is that the plaintiff, having nothing more than a special interest in the way in which the money is spent, does not having standing to challenge the existence or non‑existence of an appropriation.  Your Honours, moving though to the ‑ ‑ ‑

HEYDON J:   If that argument were correct, we would not have to bother about Mr Walker’s appropriations argument.

MR GAGELER:   No, that is right.

HEYDON J:   But we would have to concern ourselves with every other issue.

MR GAGELER:   That is exactly right, your Honour, and I am going to bother that relatively briefly with the appropriation argument, but it is important to give it a focus and, in our respectful submission, the focus is the 2010‑2011 Appropriation Act.  Your Honours need not, on any view, be concerned, except as a matter of history, and our learned friends rely on history, with looking at the detail of any of the other Appropriation Acts.  The 2010‑2011 Appropriation Act your Honours find in volume 3 of the special case book at page 1235 and your Honours will see it in a relatively familiar form.  At page 1249 in section 17 your Honours will see the familiar words:

The Consolidated Revenue Fund is appropriated as necessary for the purposes of this Act –

If one starts with an understanding that although the degree of specificity will be a matter for Parliament, an appropriation will always be of an amount for a purpose that understanding comes from section 83 of the Constitution and it is reflected in the cases mentioned in footnote 16 of our submissions. It becomes apparent that the appropriation effected by section 17 is of amounts and for purposes that are identified elsewhere in the Act.

Relevantly, those amounts and purposes are to be found in section 8, page 1240, which is concerned with what are described as “Administered items”.  Combet was concerned with departmental items, the subject matter of section 7.  Both section 7 and section 8(1) use the language of “may be applied”.  They identify an amount, being an amount specified, and they say that “the amount may be applied” for something.  That use of language, “may be applied” was referred to by Chief Justice Barwick in the AAP Case 134 CLR at page 361 as reflecting the traditional form of an Appropriation Act.

It is no more and no less than Parliament lifting the prohibition that would otherwise exist, or does otherwise exist, under section 83 of the Constitution against the withdrawal of funds from the Treasury. It is not language which is directed to the regulation of the further act of the expenditure of those funds as withdrawn. That is, the subject matter of the Financial Management and Accountability Act to which attention is drawn in the note to section 7 and in the note to section 8.  If you look at the language of section 8(1), the amount referred to is:

The amount specified in an administered item for an outcome for an Agency –

and the purposes, so specified, by the language “may be applied” is:

expenditure for the purpose of contributing to achieving that outcome.

Then your Honours see section 8(2) which, in our submission, makes clear that expenditure for the purpose of particular activities identified in portfolio budget statements, is:

expenditure for the purpose of contributing to achieving the outcome.

That is to say that if it contributes to the activity then it contributes to the outcome and is within the purpose for which the appropriation is made.  The portfolio budget statements, your Honours see from the definition in section 3, page 1238, are documents tabled in the Senate and in the House of Representatives.  The particular administered item in issue here appears at page 1252.

FRENCH CJ:   Section 8(2) really incorporates, by reference the amounts in the portfolio and to the expenditure referred to in subsection (1)?

MR GAGELER:   Yes, exactly.  The particular outcome in question is a page 1252, outcome 2.  The relevant portfolio budget statement begins at page 1271.  At page 1274, line 20 there is a statement in the “User Guide” that reflects their purpose within the scheme of the Appropriation Act.  At page 1281, there is the beginning of the relevant part of the portfolio budget statement dealing with the relevant department.  At page 1305 we zero in on “Outcome 2”, and at page 1314, under the heading “Program 2.3: Schools Support” towards the bottom of the page, one has the heading “Administered items” and at page 1315, line 30 your Honours see a specific activity identified, “National Schools Chaplaincy Program”.  That ties back through section 8(2) to identify expenditure for that purpose, as expenditure for the purpose of Outcome 2 that appears at page 1252.  The appropriation point, if the merits are to be reached, is in our submission, as simple as that, it resolves into a very simple matter, an extraordinarily simple matter of statutory construction.

The plaintiff’s case seeks somehow to read down the Appropriation Act by reference to the long title, that is, an Act to appropriate money for the ordinary annual services of the Government, and by reference to a supposed fixed parliamentary practice that apparently would not permit an expenditure of this nature to be included within an Act of that title.  There are three complete answers to that argument.  One is the point that I have already made.  The construction of the Act is clear on its face.  It is free from ambiguity, and indeed, section 8(2) is not only itself free from ambiguity but it is, in its very design, there to avoid ambiguity.  That is the whole point of the portfolio budget statements, as defined in section 3, and as tabled in the House and in the Senate is to ensure a detailed common understanding between the two Houses of the scope of the appropriation that has been enacted.

The second complete answer is that the supposed parliamentary practise upon which the plaintiff relies is, in fact, as disclosed by material in the special case, highly contentious and lends no support to the proposition that a new funding program is necessarily treated as outside the ordinary annual services of government so as to be outside Appropriation Act (No 1) and Appropriation Act (3) and necessarily within Appropriation Act (2) and Appropriation Act (4).

It is true - if your Honours have to hand the special case book – the supplementary book which contains a special case beginning at page 107 that - if you look at page 136, paragraph 106 there has been since 1965 what has been described as a compact and what was discussed in the joint judgment in Combet and within that compact as described in perhaps subparagraph (106.2) there has been a broad consensus that new policies – I am sorry your Honour, I am referring to the wrong paragraph. - it is 98, your Honours, page 133.  There is a setting out of the compact of 1965 and it is subparagraph (e) at the top of page 133.  So, there has been since 1965 a consensus that new policies are to be found in Appropriation Bills Nos (2) and (4), not Appropriation Bill (1) or (3), Nos (1) and (3) being for the ordinary annual services of government.

The difficulty is, that since the introduction of accruals budgeting in 1999 which is the subject matter of paragraph 106 and following, there has been no clear consensus between the Houses as to what amounts to a new policy.  What you see in paragraph 106.2, probably what you see more clearly if your Honours were to turn to annexure 63 which is in volume 4 of the special case book at page 1547, is that the Minister for Finance in ‑ ‑ ‑

CRENNAN J:   Do you mind giving me the page again?

MR GAGELER:   I hope it is 1547, your Honour, volume 4, page 1547, which is part of a letter from the Minister for Finance to the President of the Senate in 1999 which announced the change to accrual budgeting.  It was the subject of some discussion in the judgments in Combet.  What it does at page 1547, line 40, is address how new administered expenses were to be dealt with in the light of that change.  So your Honours see there that it says:

New administered expenses previously appropriated in Bill 2 would be moved to Bill 1 if they fall within an existing outcome. 

Relating that back to the compact, what was being said was that, so far as the Minister for Finance was concerned, a new administered expense that fell within an existing outcome was not to be treated as a new policy and therefore it could be dealt with in an Act for the ordinary annual services of government Act No 1 or No 3, and that position has remained the position of the Lower House and the Minister for Finance through the years.  There was a clarification in 2007.  I do not ask your Honours to turn to it.  It is at page 1663, but it did not make any difference. 

The Senate, on the other hand, has proceeded on an understanding, not always particularly clearly articulated, that for the purposes of the 1965 compact any new activity, or at least a substantial new activity it seems, would be a new policy.  So there is general adherence to the broad concept that a new policy is not to be included in Acts No 1 or 3, but there is a difference as to what amounts to a new policy.  The view that has been acted upon for a decade, more than a decade, by the Lower House and by the Executive has been that a new activity within an existing outcome is not a new policy and can be included in Acts No 1 and 3 for the ordinary annual services of government.  The Senate, your Honours will see from the material in the special case book, has repeatedly protested but has passed the legislation in any event.  That is the second complete answer.

The third complete answer is this, that even on the view taken by the Senate, the National Schools Chaplaincy Program was not as at 2010‑2011 a new policy.  It was not at that time, in fact, a new activity.  It was introduced in 2007, as your Honours have seen, and interestingly in this respect, in the special case book at pages 360 to 361 of the supplementary special case book your Honours will see a letter from the President of the Senate to the Minister for Finance, which is fairly typical of the sort of correspondence that occurs, complaining about items in the 2010‑2011 Appropriation Bill by reference to activities referred to in the portfolio budget statements and tellingly there is no complaint about the National Schools Chaplaincy Program.

So for all those reasons, your Honours, if the plaintiff were to have standing to challenge an Appropriation Act, it is limited to the 2010‑2011 Appropriation Act and on its true construction.  That Appropriation Act covers expenditure for the purposes of the National Schools Chaplaincy Program.  At this point in the outline that your Honours have of our submissions, there is a reference to an assumption which was a good assumption until some time in the course of argument yesterday.  Therefore, before I turn ‑ ‑ ‑

FRENCH CJ:   It was a tautologically unquestioned assumption, but it was a good one.

MR GAGELER: It was the common ground, if I can put it that way, until yesterday. What I then need to do is before I turn to discuss benefits for students and corporations, I need to make good what had been a matter of assumption and for that reason I need to address the provenance, the correctness and the application of the proposition that the power of the Commonwealth Executive to pay money and to bind itself by contract to pay money extends at least to the payment of money to persons and on terms and conditions that could be authorised or required by an exercise of legislative power of the Commonwealth under section 51. That is the proposition and I will seek to make it good.

HAYNE J:   Is that the proposition that you advance in paragraph 41 or a different proposition?

GUMMOW J:   I thought 41 might be wider?

HAYNE J:   So did I.

CRENNAN J:   So did I.

MR GAGELER:   You are both right. 

CRENNAN J:   Or all right.

MR GAGELER:   Paragraph 41 is wider and your Honours have seen the structure of our submissions.  We have a narrower basis upon which we can succeed, in our submission, and a broad basis on which we can succeed. 

CRENNAN J:   A very broad basis, if one looks at what is written after footnote 79.

MR GAGELER:   Yes.  What has been questioned is our ability to proceed on the narrower basis.  That is the assumption upon which the narrower arguments have been formulated and the assumption upon which issue has been joined and I am about to address that point.  But to return to your Honour Justice Hayne’s question, to deal with that narrower assumption I do need to bring forward in my argument elements of what one sees in paragraph 41 and I will do that.  Your Honours, I will also address, as best I understand it, the arguments that have been advanced orally this morning, particularly by the Solicitor‑General of Queensland.

HAYNE J:   That method of putting it, Mr Solicitor, raises this question in my mind.  Do you advance the arguments in paragraph 41?

MR GAGELER:   Yes.

HAYNE J:   Then it is for you to make them good.

MR GAGELER:   Of course.

HAYNE J:   Yes.  Not a case of responding to what you understand the other side have put, but is 41 on the table or is it not?

MR GAGELER: Your Honour, it is. What I am seeking to do, your Honour, is bring forward part of the argument that, in the structure of our submissions, was to be dealt with at a later point. To meet the questions that have been raised about the validity of the assumption upon which issue had been joined I need to bring forward some of those concepts, and I am about to do that. What I ask your Honours to do is to have the Constitution in one hand and Pape in the other.  Pape, we accept, has resulted in a significant change in the way in which we must all now think about the scope and provenance of the Commonwealth executive power to spend. 

It sits, however, and, in our respectful submission, sits comfortably with certain bedrock principles that one draws from the scheme of the Constitution and that are made good by a number of cases to which I will come in my explanation but, in particular, Mewett, the Defence Housing Authority Case and Bardolph.  All of those, in our submission, stand for propositions that are entirely consistent with the constitutional scheme as explained in Pape and which bear upon the nature of the executive power to spend.

Now, if your Honours turn to section 61, the executive power of the Commonwealth, using the language of the cases, is described but not defined. In that sense, it is like judicial power to which reference is made in section 71 and it is impossible to understand the executive power of the Commonwealth except against the background of the common law and except in the context of those provisions of the Constitution that define the structural relationship between the Executive Government referred to in Chapter II and the Houses of Parliament and, more generally, the Parliament referred to in Chapter I, on the one hand, and on the other hand, the judicature and, in particular, this Court referred to in Chapter III.

In respect of the relationship between section 61 executive power and Chapter I parliamentary structure, a number of sections should be highlighted. One is section 64 which establishes political accountability. Another is section 51(xxxix), the scope of which I accept is controversial at one level but which, at the very least and sufficiently for present purposes, allows for legislative control over the execution of the executive power and therefore allows for legislative control over any spending by the Executive.

Another is section 97, to which reference was extensively made in Pape, which is to be read of course with section 51(xxxvi) allowing for a specific form of control, originally reflected in the Audit Act, now reflected in the Financial Management and Accountability Act, read together with the Auditor-General Act, and section 83 which is the whole purpose of the prohibition of the drawing of money from the Treasury except under an appropriation made by law, which is subject to the particular procedural constraints then set out in sections 53 through to 56.

So far as this Court is concerned in the relationship between the Executive and the judicature of critical importance, and I will make more of this in a moment, is section 75(v) and 75(iii). There is in the exercise of executive power, including in the exercise of an executive power to spend and to contract for expenditure, an ability to maintain the Executive within any statutory or constitutional limits and its ability that is required of by the constitutional structure.

Your Honours, can I then ask you to turn within Pape 238 CLR 1 to note two paragraphs within the judgment of the Chief Justice. I want to say something about each of them because they identify what can be described as two aspects or two dimensions of executive power that become intertwined in the cases and which, for the purposes of analysis, really need to be separated. One paragraph is paragraph 126 and the other paragraph is paragraph 132 and your Honour makes a link between those two paragraphs in paragraph 127.

What your Honour deals with in paragraph 126 might be described imperfectly as the non‑federal dimension of executive power and what your Honour deals with in paragraph 132 can be described again imperfectly as the federal dimension of executive power.  For the purposes of analysis, it is useful to draw those apart and to examine them individually because it is only by examining the nature, the non‑federal nature of executive power that a true grip on the scope of the federal dimension of the power can be properly ascertained.

In paragraph 126, what your Honour is doing in common with Justice Brennan in Davis, who is footnoted in footnote (268), is referring to three aspects of the non‑federal dimension and what your Honour is there saying is that apart from what you see described in section 61 as:

the execution and maintenance of this Constitution, and of the laws of the Commonwealth.

The executive power of the Commonwealth extends to the extraordinary powers of the Executive as defined by the common law and capacities held by the Executive in common with natural persons.  Now, within that trichotomy, that is, legislative or execution of laws prerogative and capacities, the payment of money, once lawfully appropriated, falls within a capacity.  Indeed, so analysed in the joint judgment at paragraphs 222 to 223, that language is used. 

Similarly, one sees in the case law, really beginning with Justice Evatt in Bardolph – and I will take your Honours to that, not now but in due course – a reference to contracting by the Executive as being nothing more than an exercise of a capacity.  That language of capacity or faculty you see also in the joint judgment of the Court in KL Tractors 106 CLR 318 at 355. That is the nature of the executive power that is being exercised when the Commonwealth contracts or when the Commonwealth pays money. It is the exercise of a capacity, and that is critical because the rights ‑ ‑ ‑

CRENNAN J:   It is a legal capacity as a person.

MR GAGELER: A legal capacity as a person. Now, the rights and obligations that might or might not flow from the exercise of that capacity in any particular case are not the creation of section 61. They are the creation of the common law as supplemented, modified or displaced by a valid law of a State or of the Commonwealth. That is the critical point that one draws from Mewett for present purposes and that is that the exercise of a capacity to enter into a contract or to pay money by reason of section 75(iii) will result in the operation of the common law to create rights and obligations. That is when the Commonwealth acts in the exercise of this capacity. It is the common law except to the extent displaced by legislation that operates to create rights and liabilities that are then enforced in the exercise of the judicial power of the Commonwealth.

KIEFEL J:   Except that the Commonwealth does not just contract as an individual, does it?

MR GAGELER:   Pardon, your Honour?

KIEFEL J:   The Commonwealth does not just contract as an individual.  There are repercussions to – not all, but if you take the contracting power to contract generally as a juristic entity, repercussions may be much wider.

MR GAGELER:   So far as the Commonwealth in contracting enters into legal rights and legal obligations, those legal rights and obligations are the creation of the common law.

KIEFEL J:   That is all you are saying at this point.

MR GAGELER:   That is all I am saying.

KIEFEL J:   I see.

MR GAGELER: But it is an important point, because there is, by virtue of section 75(iii) as well as section 75(v), no such thing as Crown immunity in Australia. That is the point made in Mewett, very usefully in the joint judgment, page 542 at about point 5, page 545 at about point 3 and in the last three lines on page 550, and across to the end of that paragraph at page 551, particularly at the top of page 551:

the liability is created by the common law. In respect of that liability, the Constitution applies to deny any operation to what otherwise might be doctrines of Crown or executive immunity ‑ ‑ ‑

HAYNE J:   At this stage in the argument, have you addressed at all the question of power to create an agreement which would then be enforced according to the common law?

MR GAGELER: What I am doing at this stage of the argument is taking the word “power” and breaking it down and saying that although it is an aspect of executive power, it is the exercise of a capacity. What rights and obligations flow from the exercise of that capacity do not come from section 61 and so when you are asking what is the scope of the power, you are asking what are the constraints that exist within section 61 on the scope of that capacity.

KIEFEL J:   When you say capacity, you are talking about the capacity in which the Commonwealth has a relationship with third parties which are governed by the common law?

MR GAGELER:   Yes.

KIEFEL J:   That does not address the question of authorisation.  I mean, as I read your paragraph 41, it is more a question of why not power, question mark.  It does not give me the answer.

MR GAGELER:   Your Honour, it addresses the nature of what is being authorised because the nature of what is being authorised is to do that which is permitted by the general law of the land, to assume rights and obligations only as are created by the common law and not displaced by legislation.  That is the whole point here.  That is the sole orientation of this part of my argument. 

HAYNE J:   The relevant capacity is unbounded.  That is the necessary essential premise to this branch, is it not?  The relevant capacity is unbounded.

MR GAGELER:   No, your Honour.  That is where I want to go ‑ ‑ ‑

CRENNAN J:   The capacity to do something otherwise not prohibited by law.  That is what you are getting at?

MR GAGELER:   Exactly, and that is all that it is.  It is a capacity to do something not otherwise prohibited by law.  The scope of that capacity I am still to come to.  It is, when exercised, governed by the common law, that is the whole point of Mewett, and when exercised, governed by the operation of valid State laws, that is the point in Residential Tenancies Tribunal 190 CLR 410. The particular passage that I wanted to refer your Honours to there ‑ ‑ ‑

CRENNAN J:   This, of course, is not a Pape point, strictly speaking, because it is not a fiscal polity point at all, is it?  It is completely ‑ ‑ ‑

MR GAGELER:   I have not got there, your Honour.  I am breaking it down, yes.  I am breaking it down to this one dimension, the non‑federal dimension which, in our respectful submission, has to be understood before you get to ‑ ‑ ‑

CRENNAN J:   I meant federal polity.  So you are going to somehow link this to the federal polity reasoning in Pape? 

MR GAGELER:   I am.  I am taking paragraph 126 of the Chief Justice’s judgment in Pape.  I am breaking it down and I will move to paragraph 132, which is the other dimension of ‑ ‑ ‑

GUMMOW J:   Insofar as you are enlisting the common law, common law does not give unlimited capacity to artificial legal persons, does it?

MR GAGELER:   No.

GUMMOW J:   It does not give them to natural persons either.

MR GAGELER:   No.

GUMMOW J:   There is…..and so on, for example, insolvency.  What is the unlimited nature of the Commonwealth capacity as an artificial person?

MR GAGELER:   Pardon, your Honour?

GUMMOW J:   The Commonwealth is an artificial legal entity, obviously.

MR GAGELER:   Yes.

GUMMOW J:   In what sense does the common law endow it with any capacity?  You cannot use a natural person as an analogy and if you use other artificial persons as an analogy, you run into the problem which Justice Hayne has been asking you about, I think.

MR GAGELER:   Your Honour, the common ‑ ‑ ‑

GUMMOW J:   You can call it power or you can call it capacity at common law but that is what it comes to.  I think you want to invoke some lack of limitation which I do not quite understand at the moment.  Before you get to the federal dimension, I understand that, but before you get to that.

MR GAGELER:   No.  I am not there.  It is when you get to the federal dimension that is the only point, in our respectful submission, that the limitation occurs.  Before that, what one has in the spending of money and in the entering into a contract is the exercise of a capacity in common with a natural person.

KIEFEL J:   But that  is to view spending as ‑ ‑ ‑

FRENCH CJ:   I am sorry.  Does the concept of capacity collapse into power?  Can you have the capacity without a power or a power without a capacity?

MR GAGELER:   No.  All I am saying is perhaps ‑ ‑ ‑

FRENCH CJ:   We are just talking about power, are we not?

MR GAGELER:   Yes, but it is not a power that is, in any sense, a power to effect rights or liabilities.

FRENCH CJ:   I am just looking at how we label it.

MR GAGELER:   It is a power to do something that then by operation of law may or may not affect rights or liabilities.

KIEFEL J:   You want to imbue some sort of neutral characteristic to the Commonwealth so that it just appears like a person where spending has no – it can be seen as innocuous and has no real ramifications.  You will leave that to discuss in the federal element of this?  Is that how you are approaching it?

MR GAGELER:   There are constraints and considerable constraints on Commonwealth Executive spending.

KIEFEL J:   But, if you are viewing this capacity argument in it acting this way as one which is unbounded except as prohibited by law.

MR GAGELER: Your Honour, it is not unbounded. You start with the capacity that would exist of a natural person and it is then bounded by the provisions of the Constitution requiring an appropriation – section 83. It is bounded by the political accountability of the Executive to the Parliament and it is governed by ‑ ‑ ‑

KIEFEL J:   And, by laws made by the Parliament which the Executive may take to Parliament.

MR GAGELER:   Your Honour, before we get to that, and by the common law and by valid State law.  That is the point.

HAYNE J:   But, why do we start at the natural person?  Is that not where you started that chain of answer?

MR GAGELER:   Yes.

HAYNE J:   You start with the capacities of a natural person?

MR GAGELER:   Yes.

HAYNE J:   Why? 

MR GAGELER:   Your Honour, this is one of the ‑ ‑ ‑

HAYNE J:   In the case of a polity like this.  Why?

MR GAGELER:   This is one of the fixed points of reference I wanted to come to which was Bardolph’s Case 52 CLR 455.

Of course, this is dealing with the power of the Executive of the State of New South Wales, but your Honours will see at page 475 in the third line, the judgment of Justice Evatt, a reference to the general perception of the scope of executive power to contract, that is, that it has never been regarded as “less powerful” than that of an ordinary citizen.  That view is then reflected, in our respectful submission, in the judgments in the Full Court, in particular, in the judgment of Justice Starke at the top of page 502, and in the judgment of Justice Dixon at page 509, particularly in the judgment of Justice Dixon at page 509, the middle of the page where his Honour says:

It is a function of the Executive, not of Parliament, to make contracts on behalf of the Crown –

and this is the fundamental difference, of course –

The Crown’s advisers are answerable politically to Parliament for their acts in making contracts.  Parliament is considered to retain the power of enforcing the responsibility of the Administration by means of its control over the expenditure of public moneys.  But the principles of responsible government do not disable the Executive from acting without the prior approval of Parliament –

GUMMOW J:   This was addressing an argument, was it not, that the contract would be ineffective in the absence of a current appropriation at the time of the contract?

MR GAGELER:   Yes.

GUMMOW J:   I think so.

MR GAGELER:   I think it was being deployed, though, on ‑ ‑ ‑

GUMMOW J:   I do not think they were directing themselves to a proposition that the power, or capacity, or whatever you like to call it, of the Executive is unlimited as to the species of contracts which it can enter into, because it will always be up to the Parliament to appropriate or not appropriate, and the other party to the contract takes the contract with an implied term that it is only of as much worth as there is available in the appropriation to meet it.

MR GAGELER:   Yes, and of course, the entire case deals with the position of a State Executive, and it is not directly dealing with the Commonwealth Executive but ‑ ‑ ‑

HAYNE J:   In particular, Justice Dixon was concerned to identify which element of the polity makes contracts.  It is the Executive.  It is not Parliament that makes contracts.

MR GAGELER:   It is the Executive, exactly.

HAYNE J:   But does his Honour anywhere address the generality of the contracts that may be made?  It just says it is the Executive that does it.

His Honour at page 515 invokes the reasoning of the Privy Council in Kidman’s Case.  Your Honours were taken this morning by the Solicitor‑General for Queensland to the reasoning of the High Court in Kidman’s Case.  The judgment of the High Court was the subject of an application for special leave to appeal to the Privy Council.  Your Honours have a copy of the judgment of the Privy Council which never made its way in to the Commonwealth Law Reports.  Your Honours will see that the judgment of the Privy Council, although brief, draws upon an exchange that occurred in the course of argument where comments were made by Viscount Haldane which were then – and this is concerning particularly the scope of Commonwealth executive power and these comments were picked up by Justice Dixon at page 515.  I will not read them out.  They are in the left‑hand column, page 2 and substantially quoted by his Honour at page 515.

Contrary to the submissions being made this morning, the approach of the Privy Council as picked up in Bardolph is an approach that says the Executive – it does not say anything necessarily about the scope of the executive power to contract or to spend money but it says that it is not a prerequisite to the exercise of that power that there be Parliamentary authority to enter into the contract whether it be by way of appropriation or some other specific grant of authority to contract.  That view of a narrower capacity to contract which was limited by the necessity for parliamentary authorisation of the contract was a view that had commended itself to some members of the Court in the Wool Tops Case and this point is well traced in the article by Professor Campbell that we have referred to in our written submissions, but in effect, what happened in Kidman’s Case in the Privy Council was that the view that it commended itself to the majority in the Wool Case was departed from and in Bardolph it was that broader view that came to be accepted.  That is, no prior parliamentary sanction is required for an exercise of executive power to contract or to commit to the expenditure of funds.

That is what we draw from Bardolph and that understanding, your Honours, has prevailed since Bardolph, indeed really the subject of judicial comment, but it was picked up and usefully stated in a judgment of Justice Beaumont in a case called Commonwealth v Ling 44 CLR 397 at page 430. If your Honours do not have that, it will be provided. At this point I am responding to it as one that ‑ ‑ ‑

FRENCH CJ:   Whose judgment was it, did you say?

MR GAGELER:   Pardon, your Honour?

KIEFEL J:   Federal Court Reports, perhaps?

MR GAGELER: Yes, Federal Court Reports - 44 FCR 397 at page 430.

GUMMOW J:   What is the point you want to get from Ling?

MR GAGELER:   The point I want to get from Ling is that the narrow view – I am quoting – the narrow view of section 61 taken in the Wooltops Case is now obsolete.  That is the narrow view that would require a prior legislative approval for an exercise of Commonwealth executive power to contract.  Indeed, if your Honours have to hand the Clothing Factory Case, 52 CLR 533, a case decided very soon after Bardolph, a question was raised as to whether the Commonwealth could carry on the business of a clothing factory.

It was held by the majority that there was statutory power for that to occur, and argument was made, but did not have to be dealt with, to the effect that, even if the statutory power was insufficient, there was executive power outside the statutory authorisation to enter into this particular set of activities.  That argument is noted but seen as unnecessarily to be addressed at the bottom of page 559 in the paragraph beginning at the bottom of that page.

In the dissenting judgment of Justice Starke at page 567, his Honour addressed that argument and would have held that the executive power did not extend to the conduct of these activities.  Nowhere, either in the judgment of the majority or in the judgment of Justice Starke, however, does one get any sense, after Bardolph, that the absence of prior parliamentary approval entering into the contract would have been an impediment. The way in which Justice Starke approached the question is one which saw the limitation, such as it was, as arising from the federal dimension of Commonwealth executive power. His Honour said at page 567 in the second sentence on that page:

It may well be that the executive power “is co‑extensive with the responsibility and power of the Commonwealth” and not limited “to matters connected with departments actually transferred . . . But there is nothing in the Constitution, or in any law of the Commonwealth, which enables the Commonwealth to establish and maintain clothing factories for other than Commonwealth purposes.

His Honour was taking a federal constraint view of the scope of the executive power. 

GUMMOW J:   As I understand it, the immediate significance of the Bardolph Case, for example, is that your opponent’s reliance on this alleged absence of appropriation is beside the point if they really want to challenge the contract and the spending.  So it would be inappropriate to answer their question about that, unless they can get a favourable answer on their other questions.  If they get a favourable answer on their other questions, the earlier question about appropriation does not matter.  But you want to get something more out of Bardolph, which I do not quite understand.

MR GAGELER:   I may be jousting at shadows and it may be that I have not fully grasped the argument that was sought to be put this morning by the Solicitor‑General for Queensland.  As I understood it, however, the argument sought to draw from the Wool Tops Case, a proposition that the executive power of the Commonwealth to contract was limited not only by a requirement that there be an appropriation but also by a requirement that there be a specific authorisation for entering into a contract or for the expenditure of money contracted by statute, in addition.

GUMMOW J:   By statutes.  Yes, I see.  If he is wrong about that ‑ ‑ ‑

MR GAGELER:   If he is wrong about that, your Honour, and I ‑ ‑ ‑

GUMMOW J:   ‑ ‑ ‑ the question then arises is, what is the ground beyond that on which you can rely and what is its content?

MR GAGELER:   That brings me really to the other dimension and that is paragraph 132 of his Honour the Chief Justice’s judgment in Pape.  What your Honour was doing here was quoting the passage from Duncan accepted by the joint judgment in Hughes. That passage being that the scope of the executive power is to be ascertained from the distribution of legislative powers effected by the Constitution and the character and status of the Commonwealth as a national government. We do submit and I will develop in due course the proposition that a relevantly unlimited power to pay and to contract to pay money is to be found in the character and status of the Commonwealth as a national government just as it would be inherent in the character and status of the Commonwealth were it a natural person.

Textually, we would locate that in the reference in section 61 to executive power. If it were necessary, we would locate it in the extended words “maintenance of this Constitution”. If we are right in that proposition, which is the paragraph 41 proposition which I will address but I will address further in due course, then it is not necessary to look to the distribution of legislative power.

KIEFEL J:   I might be misunderstanding you, but the capacities that you have referred to in paragraph 41, are we now to understand them to be that of the Commonwealth as a national government?

MR GAGELER:   Which are no less than they would be if the Commonwealth were a natural person.

KIEFEL J:   But rather different as well.

MR GAGELER:   Rather different because they are constrained by political accountability and they are constrained by the need for an appropriation.

KIEFEL J:   I must admit I am just struggling with the analogy between capacity or character as a national government and the average person in a contractual setting.

MR GAGELER:   Your Honour, the point is that the character and status of the Commonwealth as a national government ought, subject to the constraints that I have referred to, not be less than what is pertinent to the character and status of a natural person.  It is no less.

FRENCH CJ:   In the arguments that you are advancing in relation to spending, are they quarantined to the issue of spending or are they unavoidably applicable to the whole range of executive activities?

MR GAGELER:   This is a case which can be confined to spending, to the payment of money and to the payment of money subject to conditions, that is, conditions which, if breached, result in the repayment of the money paid.  This is a case that can be confined to spending.  One does not get into the area of discourse touched upon by Justice Mason in the AAP Case concerning the broader conduct of Commonwealth activities.

FRENCH CJ:   I am just wondering whether it is a necessary implication to what you are saying about spending.

MR GAGELER:   It is not a necessary implication, your Honour, but the arguments can be transferred to have a broader operation. 

CRENNAN J:   When you pick up on the words “character and status of the Commonwealth as a national government”, are you not blurring an important distinction between powers which might have been historically exercised as part of the prerogative and what you are referring to as quite separate from that as a capacities power, that is, the capacity of the Commonwealth to spend  ‑ ‑ ‑

MR GAGELER:   No.

CRENNAN J:   I mean, there is a distinction between those two activities.

MR GAGELER:  I am not blurring that distinction.

CRENNAN J:   Well, perhaps, you are conflating them.

MR GAGELER:   I am saying within that verbiage there are at least the two dimensions that his Honour the Chief Justice, identified at paragraph 126.

CRENNAN J:   Well, his Honour had previously been discussing Davis which is concentrating on those powers which historically might have been exercised as part of the prerogative, not on what you will call the capacities of the Commonwealth as a person to spend money and enter contracts.

MR GAGELER:   I put it this way, that the character and status of the Commonwealth as a national government encompasses the capacities of a natural person as well as those extraordinary powers which were admitted by the common law to the Crown within the sphere of Commonwealth responsibility.

HAYNE J:   Well, the expression “a national government” is carrying a lot of freight, is it not, because it is an expression which does not explicitly recognise that the Commonwealth is a national government in a federal system of government and it is the fact that it is a national government with a federal system of government that presents the question, I would have thought.  Simply ascribing the term “national government” to it, does not necessarily answer it.

MR GAGELER:   Yes.  Your Honour, in the scheme of my argument I wanted to make good that proposition at a later time and it really is addressing the point, and I will need to address specifically some of the points that your Honour in your Honour’s joint judgment in Pape made with some power. What I am seeking to do at the moment is do no more than make good the assumption which had existed until yesterday that the executive power extends at the minimum to what can be ascertained from the legislative distribution of powers effected by the Constitution.

That is the other limb of what his Honour the Chief Justice quoted at paragraph 132 from Duncan, that is, the executive power is to be ascertained, in part, from the distribution of the legislative powers effected by the Constitution. That language did not originate with the judgment of Justice Mason in the AAP Case.  It has a much longer provenance and it can be seen, for example, at page 116, paragraph 328, to have been used by his Honour in Barton v The Commonwealth in slightly different terms where his Honour spoke of spheres of responsibility vested by the Constitution and ‑ ‑ ‑

GUMMOW J: That notion of distribution of federal/State responsibility tends to, with respect to the spending power which was what was just put to you, obscure the relationship between Chapter I and Chapter II of the Constitution, namely, the powers of the Senate.

MR GAGELER:   No, because the Senate, by virtue of the critical provisions of sections 53 and following, is necessarily intimately and integrally involved in the determination of whether or not there is to be under section 81 an appropriation by law ‑ ‑ ‑

GUMMOW J:   Once the spending power is unhooked from sections 81 to 83 this problem arises, does it not?

MR GAGELER:   No, because the point of sections 81 and 83 is to create a precondition to expenditure and it is the creation of that precondition to expenditure in the form of an appropriation where the Senate is critically involved in the passing or not passing of an Appropriation Act that creates ‑ ‑ ‑

GUMMOW J:   It depends on the nature of the Appropriation Act.

MR GAGELER: Your Honour is seeing the nature of the Appropriation Act. Your Honour has seen in the special case book, for example, the correspondence between the Senate and the Minister and one only has to be aware of what ordinarily occurs in the Senate Estimates Committee to be conscious that the role of the Senate is, in practice, a very active one in controlling executive expenditure and in monitoring executive expenditure. So the role of the Senate, your Honour, is there in two respects. It is necessarily there in the detailed provisions of section 53 and following, leading to the existence or non‑existence of an appropriation which is a precondition to any executive expenditure and it is also there in the enactment and monitoring of legislation under section 51(xxxix) to control the exercise of executive power to spend or to contract for expenditure. The argument does not leave that out at all.

Your Honours, the notion that the executive power of the Commonwealth extends at the very least to the subject matter of Commonwealth legislative power, as your Honour Justice Gummow pointed out, can be seen in the Vondel opinion of Mr Deakin from the earliest days of Federation, but it can be seen also in the drafting history of section 61 itself which your Honour the Chief Justice considered in Pape at paragraphs 115 and following.

FRENCH CJ:   Deakin wrapped it up in the prerogative, did he not, in that opinion?

MR GAGELER:   Probably written by Garran, actually, but ‑ ‑ ‑

GUMMOW J:   He talked about executive power.

MR GAGELER:   He talked about executive power ‑ ‑ ‑

FRENCH CJ:   Executive power, but he saw it as ‑ ‑ ‑

MR GAGELER:    ‑ ‑ ‑in surprisingly modern terms.

FRENCH CJ:   Yes, but he spoke of it as though it had an envelope of the prerogative powers around it or informing its content in some way.

MR GAGELER:   To some extent, and nobody would deny that, your Honour, that aspects of it are informed by prerogative.  Of course, it depends how you use the term “prerogative”.

FRENCH CJ:   I think he might have been using it more broadly.

MR GAGELER: Yes, rather than in the dicey and more marrow sense. At paragraph 115, particularly at paragraph 116, your Honour set out the original form of the 1891 draft of what became section 61 and it then provided that:

The executive power and authority of the Commonwealth shall extend to all matters with respect to which the legislative powers of the Parliament may be exercised –

excepting only certain matters.  Then that was amended in debate to become what is seen in the next paragraph, that is that:

The Executive power and authority of the Commonwealth shall extend to the execution of the provisions of this Constitution, and the Laws of the Commonwealth.

And you get no sense from the explanation that was there given that there was any intention to narrow what had been stated in the previous draft.  Indeed, the intention was to state in positive terms what may have been seen to be negatively stated in the latter part of the earlier draft.  That captures, in our respectful submission, the notion that in determining the scope of executive power one looks at the very least to the scope of what could be achieved in the exercise of legislative power.  Your Honour completes the historical analysis at paragraphs 120 and 121 by referring to the circumstances in which the words or reference to “maintenance of the Constitution” was added in the drafting committee in 1898.  So the very narrowest draft, the 1891 draft, only became wider through the passage of time and at the narrowest it encompassed at the very least what could be seen to fall within the matters with respect to which the Parliament could make laws.

You also see that same understanding reflected not only in the Vondel opinion, but also in the differences of views which your Honours Justice Hayne and Kiefel note at paragraph 306 in the second sentence where the narrower view is stated, but your Honours see that the narrower view is one that is tied to the heads of legislative power.  For that reason, your Honours, in our respectful submission, the common assumption of the parties and the interveners before yesterday, as reflected in paragraph 2(a) of the plaintiff’s outline of submissions yesterday, is correct. 

At the very minimum the executive power to spend where there exists an appropriation and to contract for expenditure extends to what could be authorised in the exercise of legislative power.  The executive power is no less extensive than what falls within the subject matter of Commonwealth legislative power.  The subject matter of Commonwealth legislative power marks out the minimum area of the spheres of responsibility, to pick up some of the language in some of the cases, of the Commonwealth. 

Now, the fact that those spheres of responsibility are broad and overlapping is really just to state the nature of Commonwealth legislative power.  The fact that they are broad and overlapping does not make them incontestable or unlimited nor does it make the scope of the Commonwealth executive power, on this minimalist view, incontestable or unworkable.  The nature of the inquiry is, on this minimalist view, no different from the nature of the inquiry that would be involved in determining the validity of a Commonwealth law.

HEYDON J:   Mr Solicitor, if it is convenient, could I ask you a taxonomical question?

MR GAGELER:   Yes, of course.

HEYDON J:   Your best position is that reflected in paragraph 41 of your written submissions?

MR GAGELER:   Yes.

HEYDON J:   We do not have to bother about 51(xx) and 51(xxiiiA).

MR GAGELER:   Of course, yes.

HEYDON J:   Your second best position is the one which was the common assumption position as of yesterday.

MR GAGELER:   Correct.

HEYDON J:   Can I leave the third position on one side.  The fourth position is Queensland’s position.  Now, the common assumption yesterday says that, among other things, the executive power extends up to the limits of legislative power even though there is no legislation.

MR GAGELER:   Correct.

HEYDON J:   One view is – although either way it is controversial – one view is that that is a misreading of the AAP Case and that the real position on the AAP Case is that the Executive cannot spend beyond the heads of legislative power, but it is not necessarily empowered to spend fully up to them.  Now, have you a submission in that third area which enables you to win the case?

MR GAGELER:   Your Honour, my difficulty with the way in which your Honour has very helpfully identified that third area, is that implicit within it is that there is some impediment, or limitation ‑ ‑ ‑

HEYDON J:   Yes.  I am not advocating it, but it is in the ether.

MR GAGELER:   No, but your Honour, may I say this, this is the problem I have in responding because nowhere in the arguments, written or oral, has the nature of that impediment or limitation been articulated.  This is the difficulty of casting out shadows emerging on the run.  I am prepared to meet any argument but I have to know what it is.

HEYDON J:   Yes, but the problem is we have an extreme position – one extreme, your 41.

MR GAGELER:   Yes.

HEYDON J:   We have another extreme position which is that of the Attorney‑General for Queensland.

MR GAGELER:   Yes.

HEYDON J:   We have the common assumption, but maybe the common assumption needs to be qualified.

MR GAGELER:   It is the qualification that has not been articulated.

HEYDON J:   Yes, I appreciate your difficulty, but I am just wondering if you have any submission which would enable you to win the case, if it were the correct.

MR GAGELER:   No, I do not.  If the qualification were identified I would respond to it.

HAYNE J:   Well, whether or not this is the qualification, can I ask you, this branch of the argument began from the premise that the Executive Government has a relatively unlimited power to pay and to contract to pay money, and that is found in the character and status of the Commonwealth as a national government.

MR GAGELER:   I have not developed that argument, your Honour.

HAYNE J:   You are coming to it?

MR GAGELER:   Well, I have said that there are the two ways in which I seek to win the case.  One is, the broad proposition that your Honour has just stated that is in paragraph 41 of our written submissions and which I seek to develop in due course.  There is, though, the narrower view based on the common assumption and I have sought to justify the common assumption.

HAYNE J:   I understand that.

MR GAGELER:   I have gone no further than that.

HAYNE J: I put to you earlier in the argument, that the character and status as national government carried with it some freight. I suggested that it carried with it freight of the system of government being a federal system of government and Justice Gummow pointed out – if I may say so – rightly that the notion of nation government may carry, either in addition to or instead of, that freight that the system is one in which the legislature has the powers and characteristics that are identified in Chapter I of the Constitution.

MR GAGELER:   Of course.

HAYNE J:   In particular, the place at the Senate and also what is found in Chapter I about money bills.

MR GAGELER:   Yes.

HAYNE J:   Is there an intermediate ground in which the capacities of the Executive to spend are bounded by reference to the existence of the legislature with the powers and characteristics identified in Chapter I, as well as by the heads of legislative power that are found in Chapter I?

MR GAGELER: Our answer to that is that the limitations on spending that flow from the legislative structure in Chapter I flow very precisely through the particular provisions of Chapter I that deal with appropriation. It is the essence of responsible government that the Executive maintains the confidence of the Houses and if it is able to secure a vote of supply. That requirement in section 83, your Honour, is the manifestation of that parliamentary control.

There are other manifestations, though, too, and I really sought to identify those. There is the political accountability through section 64. There is the required auditing and review in section 97, and there is section 51(xxxix). All of those are significant parliamentary controls over Commonwealth expenditure, combined with the entrenched jurisdiction of this Court in section 75(iii) and section 75(v). There is no unbounded executive power to spend. It is tightly controlled by a parliamentary process, and it is subject to limits that can be tested in the court. That is my answer to your Honour’s question.

May I repeat in answer to your Honour Justice Heydon’s helpful articulation of a possible limitation, the nature of that limitation has not been identified in any of the arguments that have been put against us and, in the absence of a clear identification of an argument, the response is somewhat difficult.

Your Honours, if I can proceed then on the narrower – what I have called the common assumption to benefits to students. I propose to deal with that, and then with corporations, and then address properly the wider view in paragraph 41 of our written submissions. Adopting then the assumption that the executive power extends at least to doing consensually what could be done in the exercise of Commonwealth legislative power, the question becomes whether the Executive acts of entering into the funding agreement and making the final payment under the funding agreement could be authorised by a law with respect to the provision by the Commonwealth of benefits to students under section 51(xxiiiA).

The argument against us here has a number of strands, but they combine, as we understand them, as follows. They say that the provision by the Commonwealth of benefits to students under section 51(xxiiiA) is limited to the payment of money to or on behalf of an individual student to meet an individual need of that student, as a student, and it is added by at least some of the interveners, as we understand them, that the existence of that need and the meeting of that need involve questions of materiality or tangibility, which they turn into a question of constitutional fact. Those are the strands of argument.

Can I take the first, that is the proposition that a benefit is limited to a payment of money to, or in respect of, a student - as a student.  That, in our submission, is contradicted by the travaux for the 1946 constitutional alteration and it is foreclosed, in any event, by authority.  Can I start with the travaux?  Your Honours have the Western Australian materials, which helpfully bring together the relevant documents.  At tab 31 your Honours have the second reading speech for the constitutional alteration.  At page 222 towards the bottom of the page on the right‑hand column there is a reference to obtaining a number of opinions about the consequences for Acts already on the Commonwealth statute book of the decision in the Pharmaceutical Benefits Case.  Across the page there is a table of Commonwealth Acts, seen to be in jeopardy.

One of them, about point 3 of the page, is the Education Act and seen to be in jeopardy, you will see, by at least Mr Maughan and Mr Barwick is section 14(b), as well as section 14(c).  At page 223 in the left hand column after the table it is said, in the last sentence in that column:

The proposed alteration embodied in the bill is, therefore, limited to benefits of a social service character and, in the main, to benefits of a type provided for by legislation already on the statute‑book.

Clearly enough it was not so limited, but it at least extended to those provisions of a social service nature which had been identified as being in jeopardy.  If you then turn to tab 28, page 205, you see sections 14(b) and (c).  Your Honours have been referred particularly to section 14(c) which is concerned with the provision of financial assistance, but your Honours need also note 14(b) which is concerned with assistance not limited to financial assistance.  So the notion that what was intended was limited to money payments is falsified by consideration of one of the very provisions that was identified as in need of shoring up.

BELL J:   That does not seem to falsify the submissions that the Solicitor for Victoria, in particular, advanced.

MR GAGELER:   No.  I am just dealing with benefit being among the payment for the moment.  I will move on to his submission, your Honour.

HAYNE J:   Is the proposition borne out by consideration of the relevant regulations?

MR GAGELER:   No.

HAYNE J:   Which, I think, prescribed the ‑ ‑ ‑

MR GAGELER:   The regulations were those made for the purposes of section 14(c) there are page 218, tab 30.  So there were regulations for the purposes of section 14(c) which were financial assistance regulations.  There were no regulations for the purposes of section 14(b).  The point is simply this, that section 14(b) was not limited in its scope to financial assistance.  It was not limited to the provision of money payments. 

HAYNE J:   I thought what appeared at tab 30 may have been earlier forms of regulation made under some other legislation, but I may be mistaken.  I thought that the ‑ ‑ ‑

MR GAGELER:   No, this is the correct regulations but they are made in respect of financial assistance under 14(c).  They were money payments.  My point is simply we need to go beyond 14(c) and note also 14(b) which was not limited to money payments.  In addition, your Honour, there is this point, and it really deals with the students as students point.  If you look at the financial assistance that was conceived by the regulations at tab 30, the financial assistance included at page 220 in the second schedule, item 2, not only payment of tuition, et cetera, peculiarly student needs, but also the payment of what was clearly enough a living allowance, that is 2(b).  So to say that there needed to be identified a need that was differential to a student was simply falsified by these financial assistance regulations.  If you move to the yes case ‑ ‑ ‑

BELL J:   I am sorry, I may have misunderstood the submission, Mr Solicitor, but a living allowance to enable a person to study at a university or some other educational institution would seem to be a benefit to that person because they are a student.

MR GAGELER:   Of course, but there is nothing unique, your Honour.  If I am understanding the argument against us, is that the need has to be somehow uniquely related to the character of the student as a student.

BELL J:   I think perhaps one might approach it another way, which is to say some of the benefits with which this scheme is associated, bereavement, counselling, promoting a feeling of well-being and coming to terms with one’s spirituality, are things, no doubt, of benefit to everyone, but what is the nexus to them qua being a student as opposed to a living allowance to enable you to pursue studies?  I think that is the point.

MR GAGELER:   What, in our submission, is sufficient for there to be a benefit to a student is that one finds a payment or a service or the provision of goods that in its design is to meet a need or a want of a student or a group of students.  In the case of a living allowance, it is to meet the need for them to live while pursuing studies.  In the case of the provision of the services in the present that are the subject of the funding agreement and in issue in the present case, it is a need or a want that has been identified by the school, and I will take your Honour to that in due course, but beyond that, it is necessary to go no further.  Your Honours, I referred to authority ‑ ‑ ‑

BELL J:   Could I just take up one further aspect of the submissions against you which related to the civil conscription point.  If one were to describe the benefit as the provision of counselling to students, one would have expected that exemption to apply.  In other words, there is a limitation on benefit relating to the provision of services as distinct from money or moneys worth or goods that is taken against you.

MR GAGELER:   That, I have sought to show, is not consistent with the scheme of section 14(b) and 14(c) which had money in section 14(c) but assistance at a general level in section 14(b), nor is it consistent with authority.  In the BMA Case everyone accepted that the word “benefits” was not confined in the way that your Honour has just suggested it might be and has put against us.  Indeed, if you look at Alexandra Private Geriatric Hospital 162 CLR 271 at page 279, in the paragraph at the bottom of that page, it is said in the unanimous judgment of the Court:

A number of matters touching the meaning to be given to the words “the provision of . . . sickness and hospital benefits” in their context in s 51(xxiiiA) of the Constitution may be taken as settled.

One of the things that can be taken as settled is at the top of page 280 is that:

the concept intended by the use in the paragraph of the word “benefits” is not confined to a grant of money or some other commodity.  It may encompass the provision of a service or services.

The nature of those services I will come to in a moment, but the proposition that the benefit encompasses the provision of a service or services is not only stated here to be something to be taken as settled, but the application of that proposition forms part of the ratio of this case and at page 281 you see that where, in the paragraph at the top of page 281, it is said that “the benefit can be identified” in the circumstances of that case in either of two ways, that is, as a payment or as the provision of what is described simply as sustenance and care as a service and it matters not, said the Court, which view is taken.  The lack of a need to choose between those two possible approaches to identifying the benefit is an essential part of the reasoning of the Court.  So not only as a matter of authority is it said to be settled by what one sees in the BMA Case, but in the application of that settled principle in this case.  The Court adopted that view of benefit as part of the ratio of the case. 

Now, if one then goes to the question of what is the nature of a service that qualifies as a benefit, that is identified in the joint judgment at page 280 by reference to the language of Justice McTiernan which is said to be consistent with the language of all other members of the Court.  As we understand it, the Solicitor‑General for Victoria seizes on the language “material aid” and seeks to read into that some element of tangibility or materiality rising to the level of constitutional fact. 

Now, in our submission, when one reads what is there said in context and considers the context of a benefit of a social security nature, the

material aid that is being referred to is the service or the attendance or the pecuniary aid, or whatever it might be, but the question of the relationship between that service and what is described there as the promotion of social welfare or security, if you like, meeting the need really lies simply in the identification of the design of the service.  That is, if it is a service that is designed to meet a perceived need, then it is a benefit.  It is material aid of the kind that is being referred to.

KIEFEL J:   In that regard, Mr Solicitor, would you say that in the Alexandra Case at page 281 that the notion of care may for occupants of a nursing home imply, perhaps, the need for comfort and security and intangible benefits of that nature?

MR GAGELER: Yes. You can call them intangible benefits, but the what is tangible, what is material is the service and the beneficial nature of the service for constitutional purposes, in our submission, lies in its design to meet a need. There is an analogy in this respect to the way in which the Court has approached that element of section 51 dealing with the racist power that refers to laws deemed – to a person for whom it is deemed necessary to make special laws. The necessity and the specialty of the laws has been said are matters of value judgment for the Parliament and it would only be an extreme case of manifest abuse that a judgment of that nature would be seen to be beyond legislative power. The relevant passage your Honours may consider in this respect is in the Native Title Act Case 183 CLR 373 at 460 to 461, applied relevantly in Kartinyeri 195 CLR 337 at paragraph 82 in the joint judgment of your Honours Justices Gummow and Hayne.

FRENCH CJ:   Mr Solicitor, that will be a convenient moment I think.  We will adjourn until 10 o’clock tomorrow morning.

AT 4.16 PM THE MATTER WAS ADJOURNED
UNTIL THURSDAY, 11 AUGUST 2011