Williams v Commonwealth of Australia & Ors

[2011] HCATrans 200

[2011] HCATrans 200

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 THURSDAY, 11 AUGUST 2011, AT 10.02 AM

(Continued from 10/8/11)

Copyright in the High Court of Australia

____________________

FRENCH CJ:   Yes, Mr Solicitor.

MR GAGELER:   Yesterday, I had advanced two submissions drawn from BMA and accepted as settled and applied in the reasoning in Alexandra Private Geriatric Hospital.  The first of those propositions was that benefit can include a service and the second of those propositions was that a service has the character of a benefit if it is designed to meet a need or a want.  In respect of that second proposition, I had drawn your Honours’ attention to the definition of “benefit” given by Justice McTiernan and accepted in Alexandra Private Geriatric Hospital at page 280 as representing the view accepted by the majority of the Court in BMA, and that definition includes the sentence that when the word – that is, the word “benefit” – is relevantly applied:

it signifies a pecuniary aid, service . . . designed to promote social welfare or security

May I also take your Honours to some passages in the judgment of Chief Justice Latham in BMA 79 CLR 209. At the bottom of page 221 in the last three lines his Honour said this:

In determining the meaning of the word “benefits” the Court will be guided by the view that has been expressed by the legislature and if, in the opinion of the Court ‑ ‑ ‑

HEYDON J:   This is from 221, did you say?

MR GAGELER:   Page 221, your Honour.

HEYDON J:   This is from the argument, is it not, previously?

MR GAGELER:   This is the argument that was in essence accepted.

HEYDON J:   I see.  All right.

GUMMOW   You substitute “executive” for “legislature”, do you?

MR GAGELER:   I am not doing that, I am looking at the possible scope of the power, your Honour. 

GUMMOW J:   I see.  Well, you have to translate the one to the other.  It is that conjunction that we are agitated about.

MR GAGELER:   Of course.  Chief Justice Latham, dealing with the argument to which that earlier argument was responding said this at page 229, in a sense in essence accepting it - his Honour is dealing with section 6(2) at the top of the page:

Section 6(2) provides that the formulary shall be deemed to include certain specified permitted variations of the formulae.  These provisions are attacked on the ground that they are so wide that any material or appliance whatever could be added to the formulary and that any variation could be made in the formulae.  It would be possible, according to this argument –

for certain articles to be added.  The answer is in the next paragraph:

Section 6, however, must be read with the rest of the Act, and other provisions, especially s. 8(1)(b), . . . show that pharmaceutical benefits can be supplied and obtained in accordance with the Act only upon the prescription of a duly qualified medical practitioner.

Dealing with another strand of the argument at page 233, and again essentially accepting that the earlier argument to which I had drawn your Honours’ attention, his Honour at about point 2 said this:

A further criticism of s. 7A(2) was that where a patient was incapable of making a request it could not be said that the patient wanted the benefit, but only that in the opinion of the doctor he needed it.  It was suggested that in such a case the provision of the alleged benefit would not be a real benefit, and that therefore the provision for the supply of such an alleged but not real benefit was outside the power to make laws with respect to the provision of pharmaceutical or other benefits.  An answer to this contention is to be found in the fact that no pharmaceutical benefit can be provided under the Act except in accordance with the prescription of a legally qualified medical practitioner.  It is in my opinion quite reasonable for Parliament to accept the opinion of the doctor treating a patient with respect to the drugs and medicines –

which will be beneficial in the treatment of that patient.  Your Honours, if the propositions as we have put them are correct as to the meaning of the word “benefit”, then we move to section 51(xxiiiA) of the standard principles of constitutional interpretation.  The words to be construed with all the generality that they admit are the words “benefits”, plural, to students, plural.  They ought not, in principle, be restricted to a single benefit to a single student.  If, for example, a transport service to take a student to a school could be treated as a benefit to that student it must be the case that the provision of a bus for a group of students can be treated as a benefit to students or as providing benefits to students.

The second point is this, that the words “with respect to” which one looks at in asking as to the scope of the Commonwealth legislative power encompass any substantial connection with the provision of benefits to students.  The third point is that, if something is properly described as being with respect to benefits to students, it is quite irrelevant that it might also be described in some other way.

Your Honours, if those propositions are correct then the only question of constitutional fact is whether the services to be provided by SUQ in fulfilment of the conditions of the funding agreement are services designed to meet the needs or wants of a group of students, in this case, the students at Darling Heights State School.  In that respect, may I take your Honours back to the agreement, volume 2 of the special case book page 638.  The agreement incorporates the program guidelines and incorporates the code of conduct.

GUMMOW J:   Now, do we read this as if it is a statute under this hypothesis?

MR GAGELER:   No.

GUMMOW J:   Why not?

MR GAGELER:   Because the only question is whether what ‑ ‑ ‑

GUMMOW J:   Are we not asking ourself, could this be made a statute?

MR GAGELER:   No.

GUMMOW J:   I see.

MR GAGELER:   You are asking could a statute authorise or require the entering into an agreement which has these incidents.  You go no further than that.

CRENNAN J:   What about Mr McLeish’s point in relation to this part of the agreement which, as I understood it, was that even if one accepted that counselling for bullying occurring in school, for example, was within a benefit to students, this goes much wider than that in ‑ ‑ ‑

MR GAGELER:   It goes much wider ‑ ‑ ‑

CRENNAN J:   I mean, in a sense that - severance is something one can do with a statute.

MR GAGELER:   It goes wider because it is dealing more generally with welfare and your Honours see in paragraph B.1 it is dealing with what is described as “spiritual wellbeing of their students”.  They are the concluding words paragraph B.1. 

CRENNAN J:   But it is also delivering services to the community and to the school.

MR GAGELER:   But for a purpose.  Schools exist for a purpose.  The community surrounds the school and the purpose of the program is to provide – your Honours see the last sentence paragraph B.1 captures it well and I will give it more content in a moment:

It is a voluntary Programme that will assist schools and their communities to support the spiritual wellbeing of their students.

GUMMOW J:   The problem is, Mr Solicitor, to get down to tin tacks, this is somewhat garbled.

MR GAGELER:   It is not a matter syntax, it is a matter of substance, and the content of that identified purpose right at the beginning of this agreement is given ‑ ‑ ‑

GUMMOW J:   I do not think you overcome the notion of garbled by talking about substance.

MR GAGELER:   ‑ ‑ ‑is given by the guidelines which are then incorporated by the very next paragraph.  The guidelines, if your Honours will turn to them, are at page 656, and spelling out that language, to which I have already drawn attention on page 659, line 20, you see:

It is a voluntary Programme that will assist schools and their communities to support the spiritual wellbeing of their students.

The same expression –

This might include support and guidance about ethics, values, relationships, spirituality and religious issues; the provision of pastoral care; and enhancing engagement with the broader community.

Two paragraphs further on:

The nature of chaplaincy services to be provided, including the religious affiliation of the school chaplain, is a matter which needs to be decided by the local school and its community, following broad consultation.  However, students will not be obliged to participate –

At page 668 in the same document ‑ ‑ ‑

FRENCH CJ:   So the content of the services may vary from school to school.

MR GAGELER:   May vary from school to school depending, as your Honour will see, on the needs identified by that school.  At page 668, under the heading on the previous page “How to Apply for Funding”, about line 20, there is a heading “School community need for chaplaincy services” and it is explained that:

Applicants will be required to identify areas of demand and/or priorities within their school community for chaplaincy services.  Applicants will be required to provide a supporting statement addressing the specific issues affecting student wellbeing and spirituality, and the wellbeing of the school community, that would benefit from the provision of chaplaincy services.

Then there are some examples given.  Forming an essential part of this agreement is the application itself in the case of this school.  If you go to page 688 where it begins, and at page 692 there is a heading about the middle of the page “School Community Need for Chaplaincy Service” and it begins, I will not read it all, but it begins:

Over recent years, many changes have occurred at this School and these changes are having a detrimental impact on how the students are achieving academically as well as how they are adjusting socially.  These factors –

Then it goes on to list them.  Then on the next page ‑ ‑ ‑

GUMMOW J:   Wait a minute.  You took us to 692, line 30:

PROVISION OF PASTORAL CARE TO STUDENS, STAFF & PARENTS –

MR GAGELER:   I did, yes.  These are factors identified by the school as impacting on how students are achieving academically, including – your Honour can read on –

PROVISION OF INDIVIDUAL SUPPORT FOR PARENTS –

and the explanation is –

An ever increasing number of students are requiring one‑on‑one assistance in dealing with family/domestic break up -

These are complex social welfare issues affecting the wellbeing of students which, in turn, are identified by the school community as affecting how they are achieving academically.  The list goes on.  Then on the next page, page 693, as identified by the school as capable of contributing to meeting those identified needs is a detail of the nature of the chaplaincy service being sought to be funded.

FRENCH CJ:   The description of it would appear to cover with equal facility a purely secular pastoral service, would it not?

MR GAGELER:   Of course.

FRENCH CJ:   There is no reference to religious issues or spirituality, so far as I can see in that.

MR GAGELER:   In that particular list, no, but someone qualified as a chaplain is identified by the school as capable of contributing well to the delivery of that service designed to meet the needs identified by the school at page 692.

GUMMOW J:   Then one goes back to 638, letter C.1, and we are told:

The purpose of the Funding is . . . to assist Your school and community and supporting the spiritual wellbeing of students –

MR GAGELER:   Absolutely.

GUMMOW J:   That does not seem to reappear.

MR GAGELER:   It is not going to go away, that is what it is about, and the content is, as I had explained – it is well explained in the guidelines – and your Honour has to read then paragraph C.2:

You must provide the chaplaincy services as described in Your application to Us for funding under the National School Chaplaincy Programme which is at Attachment B –

The program has, as part of its very design - essential to its design – the identification of need on the part of the school, and then the identification by the school itself, of how that need might be met by services within this broad category, and it is in accordance with the identified need and identified means of meeting that need by the school itself, that the funding is then provided, and within the scheme itself, there is provision for ongoing monitoring and evaluation by those who might be expected to have the capacity to form the appropriate judgments about student wellbeing.  You can see within the scheme at page 677, line 20 a reference to “Programme monitoring”, a reference, line 40, to “Evaluation”, and going back to the “Overview” overview, to which I have taken your Honours already at page 659, about line 40.

GUMMOW J:   When we are told at 687 in the “Code of Conduct that the appointee:

Will not perform professional or religious services for which they are not qualified -

Which contemplates that they will if they are.

MR GAGELER:   In the “Code of Conduct” at page 681 there is a prohibition clause 9 against proselytizing but the essential role of the chaplain within the scope of responsibilities given to the chaplain by the school is that which is set out at 680, line 20 which is to:

provide pastoral care, general religious and personal advice, and comfort and support to all students and staff, irrespective of their religious beliefs.

The “chaplain’s role” – this is not legislative language but the focus is clear enough:

is to support school students and the wider school community –

Now, is it supporting the “wider school community” for the sake of it? Obviously not.  It is to support, as necessary, the wider school community for the purpose of delivering the support identified by the school as being needed for the welfare of its students.

FRENCH CJ:   I suppose from a point of view of your submission that this could be characterised as benefit in the constitutional sense.  It does not matter that the particular service being delivered to this school on the basis of its application is indistinguishable from a secular pastoral service.

MR GAGELER:   It does not matter at a constitutional level but part of the recognised need – the broader need that is being addressed here - is an awareness that such a secular service may not be enough to meet needs.

FRENCH CJ:   Just looking at in the terms of this particular agreement, this particular school and what is being delivered to it, as I say, whether it has or has not a religious or spiritual dimension does not matter for the sake of your argument.

MR GAGELER:   It does not matter for this purpose, no.  It is a service which in its design is a service conceived to meet an identified social welfare need of students.  That is, in our submission, more than sufficient to characterise it as a benefit to students or with respect to benefits to students and as well within the subject matter – which is a relevant inquiry - of section 51(xxiiiA).

HAYNE J:   That is to say, the provision to a school of another, in this case, part‑time member of staff whose particular focus is on what an educator might call the pastoral care of students is the provision of benefits to students, is it?

MR GAGELER:   That is what it is to say.  The argument would be the same if it were an entirely secular service  and‑ ‑ ‑

HAYNE J:   That is to say ‑ ‑ ‑

MR GAGELER:   I am sorry – and, if your Honour would permit me ‑ ‑ ‑

HAYNE J:   Yes.

MR GAGELER:    ‑ ‑ ‑ if it were an entirely secular service and it were designed to meet a need relating to the welfare of students, yes.

HAYNE J:   But even without relating to the welfare of students the argument would continue, would it not, that the provision of another part‑time member of staff with a particular focus on the teaching of mathematics in the school for the assistance of those who find mathematics a difficult subject would be a benefit to students.

MR GAGELER:   The argument need not drift, your Honour, to benefits to students encompassing the provision of a Commonwealth teaching service.  We have here existing students at an existing school.  We are not talking about a service of a nature that makes a student a student.  We are not talking about teaching services.  We are not talking about tuition services, so the argument need not drift, your Honour, to that second ‑ ‑ ‑

HAYNE J:   I do not what the distinction is that you are drawing, Mr Solicitor, because I cannot see a distinction between this and provision of a part‑time member of staff who will assist those who are finding it difficult to study the subject of mathematics or any other subject you care to name.

MR GAGELER:   If your Honour is talking about special disabilities, a special needs student, that there is exactly the same ‑ ‑ ‑

HAYNE J:   I do not think those who are challenged by maths are necessarily special needs students, I hope not, Mr Solicitor.

MR GAGELER:   I am talking about my own experience, your Honour, more with handwriting than with maths, actually.  There may be a question as to whether the service that is capable of being a benefit to students includes the service that makes the student a student.  It may be, we can accept, and it need not be decided for present purposes, that you first have to find a student or a group of students.  One can accept that as a possible limitation that need not be addressed in the present case.  But having found the student, and having found a welfare need of the student, a service provided to meet that welfare need is within the scope of the power, in our respectful submission.

There will be at some point, if there is such a distinction between the service that makes a student a student and the service that relates only to the welfare of an existing student, a grey area. We are not in that grey area in the present case. Your Honours, for those reasons, if what started out as the common assumption is a correct assumption, the exercise of executive power here is within the scope of section 61 because it falls within the subject matter of the legislative power in section 51(xxiiiA).

I move to the subject matter of the other specific head of legislative power in play in the present case and that is section 51(xx).  There are here, in the way the arguments have fallen out, essentially four issues.  There is an issue concerning what has been described variously as the adventitious or fortuitous, maybe serendipitous nature of the availability of the power.  There is an issue, perhaps, although it has not particularly been articulated as to the scope of the power, as to the status of SUQ as a trading corporation and there was issue advanced yesterday by the Solicitor‑General for Victoria concerning whether the corporations power, along with other people powers as he described them, should be carved out of any proposition that Commonwealth executive power extends generally to subject matters within Commonwealth legislative power.  I want to dwell a little on that last issue, but may I deal with the other issues relatively briefly.

The first issue concerning what is said to be the adventitious nature of the availability of the power is, in our submission, answered in part by the scope of the matter in respect of which the plaintiff has standing and in part by the nature of executive power assuming the common assumption to be a correct one. Answering the first part, if the matter is limited to the validity under section 61 of the executive acts of entering into this funding agreement and of making the final payment under this funding agreement, then the only question is as to the existence of executive power to do those particular acts. There is no question before the court as to the source of power to do any other acts that may or may not be capable of taking place in accordance with the broader scheme set out in the program.

Taking the second part of the answer, if executive power to pay or agree to pay money on conditions extends, as was assumed until yesterday, to the subject matters of Commonwealth legislative power, then the only question is whether ‑ ‑ ‑

GUMMOW J:   You keep saying was assumed until yesterday.

MR GAGELER:   Yes.

GUMMOW J:   It has become some sort of obsession with you.

MR GAGELER:   I am sorry, your Honour.

GUMMOW J:   It seems to me it was assumed before yesterday.  It was assumed but never fully explored and that is what the Solicitor for Victoria was endeavouring to do.

MR GAGELER:   That is what I have attempted to respond to and I will come back – not for my hat – but to part of the argument in due course.  But if that assumption were correct, then the question is whether this agreement and this payment could be authorised by a law with respect to trading corporations under section 51(xx), not whether the guidelines or the program as a whole could be enacted as such a law.

Your Honour, so far as the second issue is concerned, that is the scope of the power, it is not necessary for present purposes to go beyond the holding in Work Choices 229 CLR 1 at paragraph 178. The majority there accepting as sufficient for the purposes of that case the formulation of Justice Gaudron in Pacific Coal.  This is not a case where the Commonwealth in any exercise of legislative power would need to be creating a trading corporation.  It is not a case of the Commonwealth conscripting or commandeering a trading corporation and it is not a case of the Commonwealth simply commanding a trading corporation to do something.

It is a case of the Commonwealth conferring a benefit or a right on the trading corporation, the benefit being the money, or the right being the right to money, and the trading corporation, as a condition of receipt, electing to engage in a particular activity subject to particular restrictions.  There is simply no doubt that once the choice was made by SUQ, assuming it to be a trading corporation, to engage in the provision of chaplaincy services, then there is really no part, in our respectful submission, of the contractual limitations as to how that is to occur that could not be imposed legislatively through section 51(xx). 

HAYNE J:   Just before you part from that, is the making of this agreement in some sense said to be the regulation of the activities, functions, relationships in the business of the corporation?

MR GAGELER:   No.  It is said that it involves ‑ ‑ ‑

HAYNE J:   That is, you sever what appears in the second part of the quotation from what appears in the first, is that right?

MR GAGELER:   That is correct, yes.  But the proposition is none the worse for that.  The conferral of a benefit extends to conferral of a conditional benefit.  Your Honours, the third issue concerning the status of SUQ involves a challenge by some of the interveners at a number of different levels to what ought be regarded as settled doctrine.  The settled doctrine that comes from Adamson overruling St George and as accepted in the State Superannuation Board Case, is that a corporation sufficiently answers the description of a trading corporation if it engages in trading to a substantial extent and the reason why it engages in that trading is simply beside the point.  State Superannuation Board 150 CLR 282 at page 304, in the judgment of the majority, the proposition being worked out in a series of cases says that, in the middle of the page, second sentence of the paragraph there appearing:

Indeed, it was essential to the majority’s approach –

speaking for Adamson –

and to its rejection of St George that a corporation whose trading activities take place so that it may carry on its primary or dominant undertaking, eg, as a sporting club, may nevertheless be a trading corporation.  The point is that the corporation engages in trading activities and these –

and that is the point, that it engages in trading activities –

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.

There is no formal application to reopen that settled doctrine and, in our respectful submission, there is no warrant for tinkering with it in the present case.  It has stood for 30 years.  It has been applied repeatedly in courts at all levels and it has been relied on my myriad corporations and persons dealing with corporations in ordering their affairs.  As to the application of that settled test in the present case, I will leave that to Mr Merkel. 

If the activities test were to be reopened, and it ought not, then the Western Australian resort to history should be accepted for what it is, that is of no avail.  Some of your Honours in Work Choices at paragraphs 120 to 121, having surveyed the history, made the point that corporations law was still in a state of considerable development in the last part of the 19th century and to attempt to pursue a framers’ intent approach to section 51(xx) is, and I think I am quoting directly, to pursue a mirage.  Picking up the language of Chief Justice Barwick in the St George Case 130 CLR 541 and of Justice Mason in Adamson 143 CLR 233, a trading corporation had in 1900 no specialised or technical meaning and it is and never has been a term of art.

If you are then left at the level of constitutional principle with simply reading the words “trading corporation” in section 51(xx), then you read them broadly and consistently with other provisions of the Constitution. You do not read into the word “trading” in section 51(xx) any notion of purpose of profit or gain any more than you read that purpose of profit or gain into the word “trade” as it appears in section 51(i) or in section 92. You would not say, according to settled principles of interpretation, that a corporation needs to be identified uniquely as a trading corporation, that is, a trading corporation and nothing else. It is sufficient that it be a trading corporation. It can also be something else.

So then if you are then at the point of attributing meaning to the adjective “trading” and giving the word a meaning consistently with “trade” in section 51(i) and section 92, then the choices are, as we see them, between what a corporation does, an activities test, and what a corporation is able to do, a capacities test, which we have set out in our written submissions.  If it were open at this stage to make a choice, one would lean towards the broader capacity test as one readily capable of being employed, as encompassing the activities test, but also addressing in a broad and principled way the scenario addressed in Fencott v Muller and that is of a corporation that has not yet begun to trade, or perhaps it has had a lapse in trading, is not a test that would be in any way dependant on the happenstance of what a corporation is doing just at the moment.

Your Honours, the fourth point, and that is whether the proposition that Commonwealth executive power extends generally to the subject matters of Commonwealth legislative power, should be subjected to some carve out, some limitation or some qualification.  We do accept that the proposition needs to be subjected to a qualification, a qualification not relevant for the purposes of the present case.  There may be a broader qualification to which I will come, but the qualification is that insofar as the executive power of the Commonwealth extends to the exercise of those extraordinary powers, sometimes labelled as prerogative powers in the narrow Diceyan sense, that is powers to affect rights or liabilities, then within the concurrent spheres of Commonwealth and State legislative responsibility, the executive power cannot be used to alter rights or liabilities arising under State law. 

That is simply something that flows from the nature of the power and the absence in the Constitution of any equivalent to section 109 in relation to the exercise of Commonwealth executive power.  The Governor‑General could not, in the exercise of the prerogative of mercy, grant a pardon in respect of a person convicted of a State offence simply because that person was the person of another race any more than he or she could grant a pardon in respect of a person convicted of a State offence that occurred in a lighthouse.

It is a qualification of that nature flying from the nature of the power and from the absence of the provision of the kind at section 109 that best explains a dictum that your Honour Justice French in Ruddock v Vardalis 110 FCR 491. The nature of the power your Honour was there concerned with ‑ ‑ ‑

GUMMOW J:   Any particular page?

MR GAGELER:   There are two pages.  At page 544, paragraph 197, your Honour identified the nature of the power in issue in that case.  It is power – in the first sentences:

absent statutory authorisation . . .to exclude or prevent the entry of a non‑citizen to Australia and [coercive] powers incidental thereto.

That is the nature of the power your Honour was considering and your Honour considered that power as flowing from, being extraordinary in its nature, the nature of the Commonwealth under section 61 and considered against the background of the common law in the Diceyan sense, a prerogative power.

GUMMOW J:   Does the include the use of force?

MR GAGELER:   Yes.

GUMMOW J:   So, it will be an answer to an action for assault.

MR GAGELER:   Yes.  So if you go then to paragraph 192 where your Honour admits an impossible qualification.  Your Honour said:

It is not necessary for present purposes to consider the full content of Executive power and the extent to which it may operate upon the subject matter of the heads of Commonwealth legislative power.  Given that the legislative powers conferred by s 51 are concurrent with those of the States, subject to the paramountcy of Commonwealth statutes –

Your Honour refers to section 109 –

it could not be said that, absent statutory authority, Executive power may be exercised in relation to all those matters.

GUMMOW J:   What paragraph are you reading from?

MR GAGELER:   Paragraph 192 and I just read the second sentence.  Executive power insofar as it extends to the alteration of rights or liabilities or status is, we would accept, qualified in the way we have expressed and qualified in a way that falls comfortably within the sort of qualification that meets your Honours’ concern.

The Commonwealth Executive has no power to dispense with the operation of any law, and has no power to alter the content of State law and, for that reason, in those areas of concurrent legislative power, those extraordinary aspects of Commonwealth executive power may have no, or a very limited operation.  Your Honour, that qualification, however, has no application or relevance to the executive power to spend or to contract.  There is another qualification to which I will come  and it‑ ‑ ‑

GUMMOW J:   The reference in the second last sentence of 192 to “the structures of representative democracy” indicates that there are not only considerations of federalism involved but as scholars like Professor Winterton and Professor Saunders have emphasised from time to time there are questions within the Commonwealth structure itself in the relationship between the Parliament and the Executive.

MR GAGELER:   Yes.

GUMMOW J:   The greater the executive power, the less of the latter, except insofar as, I think it is accepted that the executive power does not include an authority to create offences.  For that, you would need legislation under 51(xxxix).

MR GAGELER:   It does not include authority to create offences.  It does not include authority to raise taxes, another aspect of the Wool Tops Case, and does not include authority to dispense with the law. All of those things would be truly extraordinary. None of them are included within section 61.

GUMMOW J:   That immediately indicates that there is no general proposition that the Executive can hook in section 51.  It certainly cannot impose taxes.

MR GAGELER:   No, and your Honour, it was never any part of our case to suggest that the executive power extends to doing executively everything that the legislature could do legislatively.  That is not, and never was, the point.  We are looking at the scope of the subject matters of the exercise of executive power.  The qualification that I have accepted, or suggested ‑ ‑ ‑

FRENCH CJ:   Does that go so far as to say that you would not contend that the executive power authorises the Executive to do anything which the Executive could be authorised by statute to do, pursuant to one of the powers in section 51?

MR GAGELER:   Your Honour is right.  The only way to fully capture the point is by accepting that one has to think of the executive power as having dimensions.  When I make the general proposition that the executive power extends to the subject matters of Commonwealth legislative power I am making a proposition about the federal scope of that power; I am not making a proposition about the inherent nature of that power and the limitations on that power, which, yes, of course, are informed by the relationship between the Parliament and the executive and the relationship between the executive and the Court.

That is why, perhaps starting at the wrong end, yesterday I attempted to make clear that any exercise of executive power is subject to the Mewett removal of any executive immunity.  It is necessarily subject to review under section 75(v) and to the jurisdiction under section 75(iii) and it is limited in the way identified in Henderson’s Case.  That is, it is subject to the law of the land including valid State law and to the common law when it is exercised.

CRENNAN J:   One can also imply limitations cannot one, just arising out of the system of responsible government and I have in mind a passage in Egan v Willis (1998) 195 CLR 424 and that passage is at 451, paragraph 42:

A system of responsible government traditionally has been considered to encompass “the means by which Parliament brings the Executive to account” so that “the Executive’s primary responsibility in its prosecution of government is owed to Parliament”

Then you have, of course, sections in the Constitution which would come to mind, section 6, section 83, section 84, section 62, 63. It is just difficult to come to terms your argument as expressed, broadly, that in the absence of statute there is this power to make contracts which is as wide as you described it yesterday.

MR GAGELER:   Perhaps I will now return to the way I described it yesterday, the controversial paragraph 41.  I re‑read this overnight, your Honours.  I now realise that the heading to paragraph 41 “no relevant limit”, can too easily be read as a provocative statement, no limit, and I also realised that introductory nature of paragraph 41, critically to paragraphs 42 and 43, was insufficiently highlighted, and starting by putting my own submissions in that perspective, can I go to that question that your Honour, together with other members of the joint judgment in Pape, raised in the passage that we have set out in paragraph 42.

If that is the question and, in our submission, it is a very good starting point, it is the question, in our submission, acccepting that there will be some constraints that flow from the vertical structure within the Commonwealth on the exercise of executive power and critically with the exercise of executive power to spend, the critical constitutional mechanism is found in section 83, the requirement for an appropriation. Sitting behind that the Parliamentary controls over appropriation and involvement of the Senate elaborately set out in the Constitution and subject always to Parliamentary control under section 51, under the incidental power and also to review under 97 in legislation based on section 97 the question becomes is there some further federal constraint and the way to put in paragraph 42, in our submission, is the correct way.

This is the Pape paragraph 220 way.  Is there some constraint having its source in position of the executive governance of the States that operates to deny to the executive government of the Commonwealth the same power to spend appropriated funds that the Executive Government of the United Kingdom has?  In that respect, we answer yes, there is a constraint.  We do not say there is no constraint.  There is a constraint of an extremely important but relatively confined nature.  A constraint that we recognise was insufficiently highlighted in paragraph 43 but intended to be expressed in our paragraph 43, and the constraint, extremely important but also confined one finds in the articulation of the Melbourne Corporation principle.  If your Honours turn to Clarke 240 CLR 272 at page 306. I could pick out numerous passages. I am just going to pick out two. Paragraph 64, the middle of the paragraph:

The more general consideration, emphasised by Dixon J, was that State and federal governments being separate bodies politic, “prima facie each controls its own moneys”.

The prima facie position is that the Commonwealth can spend and the State can spend and the two do not collide.  You then go to paragraph 66 which, in our respectful submission, expresses a limitation which can be generalised as a limitation also on Commonwealth, and indeed State, Executive capacity, expressed here as a limitation on the legislative power.  It is said:

“There is, in our view, but one limitation, though the apparent expression of it varies with the form of the legislation under consideration.

One could say with the form of the nature and extent of the power being considered -

The question presented by the doctrine in any given case requires assessment of the impact of particular laws –

we would say particular action –

by such criteria as ‘special burden’ and ‘curtailment’ of ‘capacity’ of the States ‘to function as governments’.  These criteria are to be applied by consideration not only of the form but also ‘the substance and actual operation’ –

of the measure.  Now, your Honours, we can conceive of an extreme case where a payment, or series of payments, or a scheme for payment, subject to conditions, might in some significant way curtail or impair the capacity of States to function as governments.  Indeed, on one view, perhaps the better view of the matter, that was the real point of the AAP Case.  If your Honours look at the AAP Case 134 CLR 338 at 400 in the paragraph beginning, “The documents indicate” in the judgment of Justice Mason, there is a highlighting of a concern that gets into the territory for debate, in our submission, about the application of that principle as expressed in Clarke, as more generally applied to an exercise of the spending power of the Commonwealth Executive.  The last sentence says:

So it is that the establishment of regional councils has not been undertaken as an experiment but as a deliberate step in a social welfare scheme which calls for the setting up of regional councils throughout Australia, operating not under the aegis of the States, but independently of and perhaps in competition with them and their institutions.

That, your Honours, may be within the territory where there would be some real room for the application of a Melbourne Corporation type limitation.  In our submission, that kind of limitation – and we would not necessarily limit it to Melbourne Corporation, I am going to state it in more positive terms in a moment – that is the kind of limitation that is the limit, the constraint that should be identified in response to the question set out in Pape at paragraph 220.

If I can put the proposition more positively and perhaps a little more generally, we put it like this, the proposition we advance is that – and this is the broadest proposition – located textually within the reference in section 61 to “executive power”, or if necessary, within the reference in section 61 to “maintenance of this Constitution”, and inherent in the character and status of the Commonwealth as a government, as a polity – I think the word “national” may have been a distraction when I used it yesterday – is a capacity to pay money and to contract as to the conditions on which money is paid, that is not unlimited, that is subject to the parliamentary constraints set out in Chapter I and Chapter II of the Constitution, but that is limited federally only by the requirement that a particular payment, or particular condition or series of payments or series of conditions, not contravene an express or implied limitation in the Constitution.

It is our expression of the limitation that some of your Honours highlighted in ICM relatively recently in considering the limitations on the capacity of the Commonwealth Executive to agree with a State. Your Honours looked at this in 240 CLR 140 at paragraph 29, in the joint judgment of three members of the Court.

KIEFEL J:   Not all of us have copies in Court, Mr Gageler.  Could you read it?

MR GAGELER:   I am sorry, your Honour.

KIEFEL J:   It might not have been on the list.  I am not sure.

MR GAGELER:   I thought your Honours did.  Your Honours see the passage from Hughes.  It is a reference to the executive power to enter into governmental agreements.

GUMMOW J:   I am sorry, which paragraph?

MR GAGELER:   Paragraph 29, at the top of page 165.  Your Honours see the italicised qualification at the end of that statement, that is, that the power to enter into agreements exists:

so long at any rate as the end to be achieved and the means by which it is to be achieved are consistent with and do not contravene the Constitution.

It may be difficult to express a limitation in any more precise terms, but it is a negative limitation of that essential nature, that is, contravention of an express or implied term of the Constitution, that is the limitation that ought be found to answer the question in some of your Honour’s judgment in Pape. 

KIEFEL J:   Does the passage you have just referred to suggest that a proportionality test might be applied to executive power?

MR GAGELER:   No.  The passage that I have read suggests that purpose and end ‑ ‑ ‑

KIEFEL J:   Ends and means.

MR GAGELER:    ‑ ‑ ‑and means, need to be taken into account.  Those would all be relevant to an assessment of contravention of a Melbourne Corporation type limitation which we accept.  That limitation has never been addressed in terms of proportionality, but means and ends are relevant to the analysis. 

So, your Honours, of course, having advanced that wider view, if it is necessary to – I am sorry – on any view we accept that the executive power is subject to a limitation of that nature, that is, whether it is subject matters of Commonwealth legislative power or more broadly that which the United Kingdom Parliament can do and could have done in 1900.  It is subject to a limitation of that nature not easily expressed but perhaps the AAP Case went close to the line.

GUMMOW J:   Looking at Sir Anthony Mason’s judgment at 396 at the bottom of the page in 124 CLR, the sentence beginning “Although the ambit”, what his Honour was responding to was a suggestion of lack of limitation.  That is correct, is it not?  He says, “Its content does not reach beyond”.  He is not saying that it is necessarily contained within.  In order words, when he talks about area of responsibilities ascertainable from a distribution of powers, including legislative powers, that is true at a general level.

MR GAGELER:   It is true at a general level, yes.

GUMMOW J:   Yes.  But, his Honour, I think, is not to be read as foreclosing considerations we have just been looking at.

MR GAGELER:   Yes.  We so submit and perhaps a difficulty with the way in which issue was earlier joined in the case was that there were unexpressed qualifications that were implicit, certainly in the way that we ‑ ‑ ‑

GUMMOW J:   The fact that he was responding to the, hopefully, broad submission by Mr Byers, I think, that we looked at yesterday at 342.

MR GAGELER:   Yes.  Your Honours, with that general qualification, in our submission, the proposition is, picking up the language of the last sentence of paragraph 220, that there is:

no good reason to treat the executive power recognised in s 61 of the Constitution as being –

relevantly in respect of the expenditure of public moneys –

any less than that of the executive in the United Kingdom at the time of the inauguration of the Commonwealth.

There are a number of points of constitutional coherence that suggest that proposition should be so.  One flows from the relationship between sections 81, 83 and 61.  If it accepted, as it was in Pape at paragraph 185 that the words “purposes of the Commonwealth” in section 81 are not words of limitation, then it would be an awkward constitutional structure that would allow the Commonwealth Parliament under section 81 to appropriate money for purposes in respect of which the Executive Government had no power to spend.  There is also, as highlighted in the very sentence in paragraph 220 in Pape that we invoke, some symmetry between the raising of money and the expenditure of money.

Of course, the Executive has no power to tax, but at a level of the polity the ability of the Commonwealth Parliament to raise money is not limited, except in very specific ways, as to who can be the object of taxation or what conditions a tax will be levied upon. I know this is a peculiarly Commonwealth perspective, but there is something in the view of Sir Robert Garran, that it would be very odd if the Commonwealth legislatively had the power to tax broadly but did not through the combination of legislative power in an appropriation in sections 81 and 83, and then the executive spending power have the power to spend to the same extent. There is a third consideration, a lesser consideration but, nevertheless, worthy of note, that is mentioned in the joint judgment at paragraph 226 and that is the relationship between sections 61 and 52(ii).

CRENNAN J:   I think this topic was touched upon by Sir Owen Dixon in the Communist Party Case when he discussed subversive activities.  Sorry I cannot give you the page number off the top of my head.  He did so by reference to the position in relation to the United States Constitution and the way in which the power to spend was seen as working in parallel to the power to tax. 

MR GAGELER:   That particular passage I do not have to mind, your Honour.  It is a very long judgment which I have read many times for different purposes but not with that purpose in mind.

CRENNAN J:   Of course.

MR GAGELER:   Again, perhaps reflecting a peculiarly Commonwealth perspective, in our submission, there is a consistency or coherence between that view and the status of the Commonwealth Executive as a national government politically answerable to a national Parliament for the expenditure of money.

HEYDON J:   I think the reference to Mr Justice Dixon in the Communist Party Case is 83 CLR 1 at 187 to 188 on subversion.

MR GAGELER:   Thank you, your Honour.  There is a concern which is raised in the judgment of your Honours Justices Hayne and Kiefel in Pape which I ought specifically address and that is a concern that a wide approach to Commonwealth executive power to spend consistently with the way that I have articulated it may result in, I think the words were, unbounded Commonwealth power through a combination of the incidental power section 51(xxxix) and section 109. The answer to that concern, in our respectful submission, lies in the scope of what can be achieved under section 51(xxxix).

Your Honour Justice Hayne with Justice Gummow in Wakim 198 CLR 511 at paragraph 122 – your Honours need not turn to it – made the point that what is incidental is informed by what is within the scope of the main power and the main power with which we are concerned here is executive power – I prefer to put in terms of executive capacity to spend or to contract for spending – which then of its nature takes any legal effect from the operation of the general law. That is the nature of the main power with which we are here concerned.

It is incidental within the language of section 51(xxxix) for the Commonwealth Parliament to prescribe the conditions on which the Commonwealth Executive is permitted to execute that power, that is, exercise that capacity. It is within the scope of the power to say an executive officer shall or shall not contract or pay money in particular circumstances. It is incidental to the exercise of that main power to prescribe the legal rights and obligations, vis-à-vis the Commonwealth, and the person who is the recipient of the funds. The rights and obligations flowing from a Commonwealth contract as between the parties could be the subject of a Commonwealth contracts law and, indeed, section 64 of the Judiciary Act goes a very long way already to prescribing the rights of parties in a Commonwealth contracting situation. 

It is, however, in our submission, not incidental to the execution of the power by the Commonwealth Executive to remove the person with whom the Commonwealth contracts and to whom it pays money from the operation of a State law simply because that might better facilitate the performance of the obligation to the Commonwealth.  We accept that limitation because we were told of such a limitation in the Uniform Tax Case (No 2) 99 CLR 575, holding invalid section 221(1)(a) of the Income Tax Assessment Act.  Your Honours see that section set out at page 612 of the judgment where it was said and upheld in the Uniform Tax Case (No 1):

For the better securing to the Commonwealth of the revenue required for the purposes of the Commonwealth – (a) a taxpayer shall not pay any tax imposed by or under any State Act –

et cetera.  The Chief Justice said, in the last two lines of page 613, that in the argument:

Inevitably there is added the power conferred by s 51(xxxix.) with respect to matters incidental to the execution of any power vested and so on.

And it was unnecessary for the purposes of the argument before him to distinguish between that power and what was incidental to the taxation power.  His Honour said, at page 615, in a number of rhetorical phrases, but I will pick up just after the reference to “Dixon CJ” on the right‑hand side, the next sentence is:

The resources of a taxpayer are as certainly diminished by making any other payment of like amount, whether it be to a mortgagee, to a vendor, a landlord or anybody else.  But is it not sufficiently obvious that the incidental power cannot extend to authorising laws postponing the payment of civil debts until all or some particular indebtedness to the Commonwealth is discharged?

His Honour went on at page 616 to explain a number of cases, but sufficiently and relevantly for present purposes, Commonwealth v State of Queensland, about the middle of the page, where:

the Court upheld the validity of the federal enactment providing that income derived from stock or Treasury bonds should not be liable to State income tax.  I regard this case as depending entirely on the power conferred by s 51(iv). 

There are numerous cases where specific heads of Commonwealth legislative power have been upheld as capable of being relied upon to confer immunity for the operation of State law in the carrying out of particular activities.  Telstra v Bayside was a recent but not the only recent example of that.  The point is simply this, for present purposes, that the incidental power does not have within it a general ability for the Commonwealth to immunise Commonwealth contractors from the operation of ordinary non‑discriminatory State laws.  That, in our submission, ought be sufficient to meet a concern about the possibility of unbounded Commonwealth power.  It is not unbounded.  It is always within the scope of the legal system established by the common law, State law and validly enacted Commonwealth laws.

KIEFEL J:   Could I take you back to paragraph 43, to your submissions concerning what I would call the innocuous nature of Commonwealth spending, vis-à-vis, States.  You say that:

no threat to the “position” . . . of the executive governments of the States arises from the mere expenditure of Commonwealth money.

I have in my mind by way of example, if the Commonwealth Government in the exercise of its executive power determined to make payments to victims of crime when the States have, of course, their own systems and structures under legislation for these things, would that be an area where there might be an impact on the States?

MR GAGELER:   Your Honour, any question of that nature, of course, does not arise here.  We are concerned with an extremely co‑operative scheme.

KIEFEL J:   In fact, I think it has arisen in England.  I think in the capacities issues of executive power that is one of the examples in which it has occurred.

MR GAGELER:   Your Honour, if it were to arise, then the correct analysis, that is, the relevant limitation, would be found in asking whether the particular payments and conditions of payment by the Commonwealth went so far as to curtail a capacity of a State to function as a government.  In the bare scenario that your Honour has indicated, the answer would be no.

KIEFEL J:   Why?  It has established its own scheme, it has its own relationships with the citizens of the State concerning compensation that they would have.  Why would not the Commonwealth payments, if they differed, cut across it?

MR GAGELER:   Your Honour, can I take legal aid as an example?  There is a Commonwealth legal aid scheme.  There is a State legal aid scheme.

KIEFEL J:   I do not think there is much of them any more, is there?

MR GAGELER:   Your Honour, they exist in every State now.  There may be concurrent schemes, I do not know, for compensating victims of crime, but the mere fact of the existence of concurrent executive schemes allowing for payment of people in similar circumstances does not involve any challenge to any State capacity to govern.  It would be an extreme case, and as I said, it may be that the AAP Case, which could have been seen as the tent to set up a new tier of government within States, got to that level.  There may be less extreme, more particular cases, where conditions of Commonwealth funding in some way froze out State action or required persons not in some way to take advantage of State Government institutions.  It is possible that ‑ ‑ ‑

KIEFEL J:   It just seems to me that the argument always proceeds upon an assumption that if Commonwealth money is made available, the States will withdraw to the extent of the provision of the funds, but then there may be situations where the provision of funding could impact upon how the State Governments wish, as I say, in the area of compensation of crime, which the States seek to set the level of compensation.  But, in any event, I have understood your ‑ ‑ ‑

MR GAGELER:   Your Honour has the point.  It would only rise to the level of breaching a constitutional constraint if it were to impair the governmental capacity of a State ‑ ‑ ‑

KIEFEL J:   Well, that is where the question lies.

MR GAGELER:    ‑ ‑ ‑and merely providing compensation through the use of Commonwealth money in circumstances where a State compensation scheme does not reach – which I can assure your Honour is a common scenario – does not get anywhere near that point, in our submission.

HAYNE J:   Would it be incidental to the exercise of the spending power in this case to legislate for the guidelines to become enforceable?

MR GAGELER:   Perhaps not, your Honour.

HAYNE J:   Why not?

MR GAGELER:   For this reason. The contract is with SUQ and the guidelines govern the conduct of an employee of SUQ insofar as the legislation attached consequences to the relationship between the Commonwealth and SUQ for any breach of the guidelines clearly within section 51(xxxix). Insofar as the Commonwealth legislation were to give legislative and prescriptive force to the guidelines in requiring the chaplain positively to act in that way, there may be a line that is crossed, your Honour.

HAYNE J:   It is not evident to me what the line is that you are drawing.

MR GAGELER:   A line drawn from what is incidental to the execution of the capacity of the Commonwealth to contract and the regulation of the activities of the contractor, vis-à-vis, the persons with whom the contractor deals may be going too far.

HAYNE J:   Would, therefore, would it, you say, not be incidental to the Commonwealth’s power to extend moneys on a program of this kind to enact a law that said that the moneys may be applied only to institutions approved by the relevant federal Minister?

MR GAGELER:   Yes.

HAYNE J:   That would be beyond power?

MR GAGELER:   No, that is within power.

HAYNE J:   Within power?

MR GAGELER:   Yes.  It is what the contractor can do with the money, yes.  That is more a question of what are the consequences of breach, your Honour, rather than what the prescriptive element of the law is.

HAYNE J:   But the Commonwealth could erect a legislative scheme for approval of recipient institutions with the bureaucracy that stands behind it supervising and enforcing?

MR GAGELER:   Well, when you say enforcing, certainly supervising and enforcing through available contractual remedies, yes.

CRENNAN J:   What about coercive when ‑ ‑ ‑

MR GAGELER:   No.  I am sorry – vis-à-vis the recipient, yes.

HAYNE J:   Making it an offence for the recipient to apply at otherwise than in accordance with whatever the – whether it be guideline, regulation ‑ ‑ ‑

MR GAGELER:   I would be surprised if there is not a provision of the Crimes Act that already deals with that, your Honour, but, yes.

FRENCH CJ:   But nothing to prevent statute giving, in effect, statutory force to contractual obligations?

MR GAGELER:   No.  That is really what I am saying.

FRENCH CJ:   Yes.

GUMMOW J:   To the code of conduct, for example, at 680?

MR GAGELER: Yes. Giving statutory force to the contractual obligation to comply with this code of conduct clearly falls within the scope of section 51(xxxix). To give some form of immunity for compliance while ever there is compliance with the code of conduct, immunity from State – in the operation of State laws – would go too far. That is where the line is breached. Your Honours, that completes what I wish to say about executive power. If your Honours will permit, Mr Kennett will address on the section 116 point.

FRENCH CJ:   We are of the view that we will not need to hear from the respondents on section 116.  I am sorry to deprive Mr Kennett of his moment in the sun.

MR GAGELER:   Your Honours have, I think, already granted at least one of the interveners an opportunity to put in written submissions.  We do not seek general leave to put in written submissions but we do seek an opportunity to respond to whatever is raised in writing.

FRENCH CJ:   I think a further 10 days beyond the time allowed.

MR GAGELER:   If your Honour pleases.

FRENCH CJ:   Yes, Mr Merkel.

MR MERKEL:   If the Court pleases.  Can we commence by indicating that we adopt our learned friend the Solicitor for the Commonwealth’s submissions save in one respect and that is with respect to standing.  We go one step further.  We say that the standing relates entirely to what may happen next year rather than what has already happened.  We will address that briefly.  Otherwise, we adopt what my learned friend has said.  We only differ in one respect as we do offer a suggested alternative position to my learned friend’s position on the extent of the executive power.  We say that while we adopt those submissions, there is an alternative which we have put in our submissions which puts some further constraints on that power but constraints that would have the exercise of executive power in the present case fall within the limits that my learned friend puts or the alternative view that we put.

Can we go straight to the issue of standing.  The challenge here is to the expenditure of money under the Darling Heights Funding Agreement which has now all taken place.  There is no further obligation on the part of the Commonwealth in respect of that agreement.  The plaintiff has sought relief and if I can just give your Honours the paragraph numbers in the supplementary book at pages 5 to 7.  In paragraphs 7A(b), 8(b), 11 and 13 relief has been sought in respect of the agreement being renewed or extended beyond 31 December.  We say that that relief having been sought and the Appropriation Act (No 1) 2011‑2012 having appropriated money for the continuation of the program into 2012, there is a special interest in the plaintiff on the assumption his daughters are likely to continue at the school in respect of challenging the validity of the grant that would be made on the extended date of the agreement which would be next year on the assumption that it would be on the same terms as the current agreement. Relief has not been appropriately framed or tailored to meet that exigency. We did raise it in our submissions but if it is sought, we do not object to that kind of relief arising as a matter of standing.

We have put our submissions in terms of standing and entitlement.  Can we indicate that because the special interest arises solely in respect of a challenge to a payment that is said to be ultra vires that is the wrong which asserted by the plaintiff.  Insofar as it relates to payments that have been made, there is no real question or any real interest that the plaintiff has in raising it.  There could not be said to be any benefit achieved by a declaration in respect of what has already taken place, and we would say that the relief is not called for in the sense indicated in the authorities which were cited by Chief Justice Gibbs in Forster v Jododex at 439.

The other issue that we wanted to take your Honours to is the serious uncertainty that would be created by relief being given in the past in respect of what your Honours know is the situation throughout Australia about these contracts which are in various states of performance, and which have numerous parties to them, including local chaplaincy committees for each school at which a chaplain is appointed, chaplains appointed, different organisations providing the service on funding that has been contracted to be provided, and that really raises the question, if there was a declaration that the Darling Heights payment that has already been made, was ultra vires, what legal consequences would flow from it?

It is that area that there is serious and grave uncertainty, and can I just take your Honours to how that issue was considered by the Court in K.L. Tractors to show the nature and extent of the uncertainty that would be created by the declaratory relief which needs to be weighed up against the benefit that might be said to be obtained from it, particularly given that the entirety of the relief that the plaintiff really seeks can be granted in respect of payments yet to be made.

FRENCH CJ:   Is this a question going to standing or a question going to the discretion to grant or withhold relief?

MR MERKEL:   This last part, your Honour, goes to discretion.  We say he has no standing because he has no interest in respect of the matters we have set out in paragraphs 3(a) to (c).  Paragraph 3(d), in our oral outline, deals with what probably may be more accurately called a discretionary matter, but we say it is a very important one and in Pape at 69, paragraph 158, reference was made to the conscience of the Court to the consequences in a case such as the present where there is a standard form agreement of making a declaration.  K.L. Tractors concerned a constitutional ultra vires claim by a debtor in respect of the debt owed to the Commonwealth to pay for goods sold and delivered by the Commonwealth.

So, the Commonwealth had performed its obligation, the debtor then tried to contend that the conduct of the Commonwealth in selling the goods was beyond its power and therefore claimed that it was not liable to repay the debt.  In the judgment of Chief Justice Dixon and Mr Justice McTiernan and Mr Justice Kitto, starting at page 334, their Honours said:

But what is claimed is that the company need not pay for them –

that is the goods –

because the Commonwealth in supplying them exceeded the limits of its constitutional “powers”.  The word “powers” here really means “capacity”, for we are dealing with the “capacity” or a “faculty” of the Crown in right of the Commonwealth.  Had the company received the money of the Commonwealth for purposes outside the province of the Commonwealth, that would have been considered a reason for paying it back rather than for making it irrecoverable.  In fact the money was applied in the manufacture of goods which at all events for the most part if not in every case became when produced the property of the Commonwealth in point of law.  For no support in constitutional principle can be found for the suggestion that the Crown in right of the Commonwealth rested under such an unqualified legal incapacity even to acquire raw material or employ servants or agents if the ultimate end was the manufacture and supply of clutches to the company that the servants or agents could not be considered to have been employed by the Crown or the raw material to have become the property of the Crown.  Is it possible for the purchaser of goods to resist payment on the ground that in producing and selling them to him the Commonwealth exceeded the limits of the province assigned to it by the Constitution?  There is no decided case upon constitutional limitations which suggests such a doctrine.  Nor, if the analogy be at all appropriate, does there appear to be any decided case in the law of ultra vires, whether of companies or of other corporations, which suggests that the company or corporation cannot recover the price of goods it has sold and delivered or of services it has rendered because it exceeded its powers in selling the goods or giving the services.  The correct view seems to be that this amounts to an inversion of the whole doctrine . . . 

We say the similar type of complexity is raised in the present case. There is no claim for repayment and had there been such a claim it would raise a serious question about section 64 of the Judiciary Act, which I will come to in a moment, but also whether there were equitable defences and whether, in any event, if the company had provided the services contracted for, as it is doing, there was a right in the Commonwealth under this constitutional ultra vires doctrine to require the repayment, but that is not in issue.

What is sought by the declaration is, in effect, to have the Commonwealth not enforce, or not monitor, or not exercise its rights in respect of any repayment that hypothetically might become due.  We say that is not related to the wrong, in any sense, about which the plaintiff is complaining.  No relief can be sought to stop the chaplaincy program because the Commonwealth is not a party to that agreement. That is an agreement between SUQ and the Queensland Government which gives access to the schools and is taking place under the direction of the principal at the request of the local committee.

I will not take your Honours to it but also at pages 337 to 338, Justice Fullagar also discusses the complexity of the kind of issues, including equitable relief, that might apply in respect of a contract that is constitutionally ultra vires.  The real point is that the doctrine is there to protect the Commonwealth, to protect – like the corporators – the public from having the Commonwealth exceed its powers.  It is not there to protect debtors of the Commonwealth.  It is not a distant analogy in the present case that the Commonwealth has paid its money to SUQ to perform its obligations.

It is not said SUQ’s obligations are unlawful or ultra vires, but what is sought to be intercepted by the declaration is the Commonwealth monitoring or enforcing such rights as it has.  We say, for the reasons set out in our oral submissions and also in our written submission, it cannot be really said that the plaintiff has any interest in that relief whatsoever, and the mischief that would be created by that relief, we say, would be a good reason for the Court to exercise discretion before entertaining it, particularly in view of the fact that if the plaintiff makes out his case on any of the points that he has put forward, the real relief he is entitled to seek is one that would not be rendered nugatory in any way, it would be to restrain a future payment being made under this agreement on its present terms, which would be the offending terms, such as your Honours may find them to be.

That is not hypothetical, but it would have to be carefully framed to ensure that it was limited to what was found to be ultra vires the Commonwealth.  That has not yet been put forward by our learned friend appearing for the plaintiff, but we say that is the limit of the interest that he has, both in the constitutional sense of the matter and in the discretionary sense as to his entitlement.  We also refer to Evans Deakin at pages 262 to 6, and again I do not want to take your Honours there, but that deals with section 64 of the Judiciary Act, putting the Commonwealth as nearly as possible in the same position as any other litigant, so that if there were proceedings the substance of Evans Deakin is that section 64 creates substantive not procedural rights.

So on those substantive rights, if the Commonwealth were to be sued, the obligations of the Commonwealth under that doctrine may well be binding by reason of the Judiciary Act, even though there may be an ultra vires claim concerning the Commonwealth.  Those matters are yet to be worked out but the uncertainty as to outcome and the myriad of possibilities we say is such that your Honours should not entertain, as a matter of discretion, if your Honours are against us on the question of standing and declarations sought.

FRENCH CJ:   Just going back to something you mentioned a little earlier to make sure I understand the position, is it the case that SUQ provides chaplaincy services pursuant to its agreement with the Commonwealth within the framework of the Queensland procedure or outside that framework.

MR MERKEL:   I will be coming to that in some detail, because your Honour asked that of my learned friend on the first day, but I will take your Honours through the documents.  In summary, the money provided in the present case was for the expansion of an existing program of two days to four days.  The existing programs are funded by the local chaplaincy committees.  The Queensland Government and the Commonwealth added the expansion refunding.  The funding is to SUQ as an accredited education authority under the system of Queensland procedures which accredit authorities under the Queensland process entirely and under Queensland law, although it is through an executive process rather than a legislated process, to get access to the school for its chaplains provided they comply with the code of conduct that Queensland prescribes and also there is an ‑ ‑ ‑

FRENCH CJ:   There is an array of Queensland legislation as well mentioned in the Queensland procedure, I think.

MR MERKEL:   Yes, although that is legislation, like the Commonwealth legislation, that is of general application.  It is not geared to the chaplains.  It protects privacy, it protects confidentiality, it protects certain areas of State regulation of the schools which would apply to probably any teacher or any person accessing the school.  But importantly, it is only through the right of access SUQ gets as an accredited authority that a chaplain gets an entitlement to go to the State school and there is an entire regime by which the accredited education authority gets accreditation on application in Queensland to provide ‑ ‑ ‑

GUMMOW J:   Is that under statute in Queensland?

MR MERKEL:   I will check that, but I do not think it comes under a statute that they get accreditation.  It seems to be under the Queensland procedures, but I will have to check to see if there is some regulation that gives that a legislative force.

FRENCH CJ:   These services could not be delivered pursuant to the Commonwealth agreement without the agreement of the Queensland Government.

MR MERKEL:   That is correct.  It is the Commonwealth, and we say this is a matter of some importance when it comes to this question in this matter of the nature and extent of intrusion on any State capacity.  It is really the other way around.  The entirety of this program is dependent upon Queensland procedures and Queensland laws that permit access to the school and the Commonwealth merely superimposes an additional code of conduct and guidelines which is not in any way inconsistent with the Queensland code.  So it goes through the Queensland system into the State school at which the plaintiff’s daughters attend.  We will take your Honours to the precise framework shortly.

Could we move now to address the question of the nature and extent of executive power. We would point out at the outset that our learned friends, the Solicitors’ submissions and my learned friend for the plaintiff, have really identified submissions by reference to their solution to the problem without really identifying what the problem is that is being addressed. In other words, by offering a solution that executive power is confined to conduct authorised by statute, there is really no analysis of the nature of the problem that is being addressed by section 61 and, also, there is an assumption that somehow the State executive power is in contest with federal executive power which is not the case. There is no section 109 operative in respect of executive power, but the States’ submissions would appear to assume that the expansion of federal power corresponds to a limitation in State power.

We say, the true spectrum is not really that which was put, I think, by your Honour Justice Heydon to my learned friend, the Solicitor for the Commonwealth yesterday, between the narrowest view of statutory authorised conduct to the widest view qualified this morning of an unlimited capacity.  We say the spectrum goes at three levels.  The first is, obviously, that any conduct authorised by statute is at the core of what the Executive is authorised to do and is beyond question.  The second relates to what Justice Mason considered in the AAP Case that was taken up by Justice Brennan, in particular, in Davis and adopted and applied by four of your Honours – certainly three, but possibly the Chief Justice –in Pape, and that is when we come to consider the activities or enterprises of the Commonwealth which are not authorised by statute under the nationhood or the national polity concept, Justice Mason’s test of peculiarly adapted to the national government and not otherwise achievable was employed in Davis and certainly formed a criterion that your Honours ‑ ‑ ‑

GUMMOW J:   We know here it is otherwise achievable because of the engagement ‑ ‑ ‑

MR MERKEL:   The engagement?

GUMMOW J:   We know here that this scheme is otherwise achievable because of the engagement of Queensland.

MR MERKEL:    I will come to later, your Honour.  That is our final fallback, that it is a national scheme, but I do not really want to address that.  All I want to say is that because we are concerned here with an expenditure of money, a grant, not the Commonwealth engaging in an activity or an enterprise and we distinguish between – and it is a very important distinction to make.  If you look at ‑ ‑ ‑

GUMMOW J:   It is payment of money on terms, is it not?

MR MERKEL:   Yes.  It is a grant on ‑ ‑ ‑

GUMMOW J:   It is for the recipient to do something with it.

MR MERKEL:   It is a grant on conditions, but we would expect that the large overwhelming majority of all Commonwealth grants will be for purposes and the minimum condition would be that the grant must be applied for a purpose.  But we say what is an important distinction to make between the Commonwealth’s grants power and the Commonwealth engaging in activities or enterprises is this important distinction, and it is one that came out in the questions I think your Honour Justice Hayne asked my learned friend, the Solicitor for the Commonwealth, at the very end, what legislative power is attracted to this activity? 

What we found on the enterprise activities approach is there was an independent legislative power under sections 61 and 51(xxxix) to enact the Bicentennial Authority legislation and enact laws giving effect to the enterprise or the activities. We say that was a broad statutory power founded on the notion that the Commonwealth was engaging in a series of activities or enterprises which went far, far beyond merely granting money. We say that that attracted quite a substantial legislative intervention and as a result, because of the recognition by Justice Mason, but also in Davis and further in Pape, that this could constitute a substantial interference with the distribution of power. 

The threshold was set at quite a high level.  One may argue how it was applied in Davis, but the threshold was peculiarly adapted to the national government and not otherwise achievable. The reason for that was because it was a gateway through sections 61 and 51(xxxix) to quite a wide ambit of legislative power because the incidental power could enable you, as we saw with the legislation in Davis, to make quite far‑reaching and wide‑ranging legislation to give efficacy to the bicentennial celebration because it was an enterprise of the Commonwealth Government. We say that is what might be called the middle of the spectrum but is itself an answer as to why Commonwealth executive power cannot be confined to the headings under section 51 unless 51(xxxix) attaches to section 61. So it must go wider than that.

But there comes, we say, the grants power and I would rather say grants power than expenditure because we are dealing here with a grant for a purpose in which the sole obligation of the Commonwealth is to grant money.  It has no other obligation.  It is not engaging in an activity or an enterprise other than that related to the efficacy of the grant which is to ensure it is used for the purpose for which the grant is made.  It is that area of capacity of the Commonwealth with which we are concerned in the present case.  We want to make it very clear that ultimately where we are heading is that does not in any way interfere with the distribution of power in the manner that was a matter of concern in AAP and a matter of concern in Davis because the only attribute of legislative power that would be attracted is that which protects the efficacy of the grant.  It does not go wider than that. 

There may be argument at the fringes as to who gets enforceable rights in relation to ensuring the money is applied for the purpose for which it was granted.  There may be arguments about who might be able to enforce it.  For example, should the school principal have a role in insisting that the code of conduct which he ultimately is responsible for, could be enforced by him.  But it does no more than protect the efficacy of the grant, which are the words used by Justice Brennan and picked up in the judgments in Pape as the limit of the incidental power in a situation like the present.  What we would seek to do is to make good our central submission that the ‑ ‑ ‑

HEYDON J:   You said there were three categories.  Have I missed the third?

MR MERKEL:   The three are, your Honour, statutory authorised conduct, enterprise and activities ‑ ‑ ‑

HEYDON J:   Mr Justice Mason in AAP.

MR MERKEL: The third is a grant, a conditional grant, which involves no more than an obligation to pay money which falls short of any notion of activities or enterprise that should attract the Justice Mason test which itself was formulated as a high barrier to prevent section 51(xxxix) becoming a back door to undermine the distribution of power in the Constitution. But we say that approach has never been adopted, as far as we are aware, to the concept of a conditional grant on the part of the Commonwealth which will almost always have, save in unusual situations like possible flood relief, an agreement which requires the grantee to apply the money to the purposes for which the grant is made.

So we say the contractual capacity comes in and we, with respect, agree with your Honour Justice Hayne when this was raised I think yesterday or the day before yesterday, that even though there may be a contract attached to the grant, this case is really about the grant power of the Commonwealth and goes no further than that.  Now, we say, seen in that way, there is no real competition with any of the legislative powers, prerogatives or capacity of the State.  As it turns out, this case is a good example of why that is so in the present matter. 

Our starting point is the paragraph which I will not take your Honours back to in Pape, which my learned friend, the Solicitor for the Commonwealth, finished on, which is paragraph 220, when your Honours Justice Gummow, Justice Crennan and Justice Bell raised the question, why would not the granting or expenditure power be that of the sovereign in 1901 unless some capacity of the State is identified which is interfered with by that capacity.  We would add certain well known cases, and I will only give your Honours ‑ ‑ ‑

HAYNE J:   Before you come to those, part of the premise that underpins that proposition is, is it not, that the quantum of spending by the Commonwealth and –perhaps it is or, but – and the range of purposes for which it is spent, is irrelevant to the capacity of the States, an argument that would not have been available, I think, had the surplus revenue provision operated according to its terms?  But leave that out of account, take it to today where surplus revenue, if we regard that as a dead letter, the underlying premise is, as I said yesterday, founded in what Justice Stephen said in AAP at 387, that the importance of federal expenditure is “essentially confined to the polity in question”.  In particular, quantum and range of federal expenditure matters not to the States.

MR MERKEL:   When your Honour says “matters not”, in practical terms the form and quantum of expenditure that the Federal Government makes will matter, but we say that the constitutional issue is, does it in any way detract from the legislative power, prerogative or capacity of the State, and the answer to that, we say, is no, because there is no 109 concept in respect of that power and save for very limited prerogative powers, we say that the expenditure of money alone cannot have that effect, because the expenditure remains subject to, and is governed by State law.  If the State Parliament has a view about the activity generated by the expenditure it can regulate it.  Nothing the Commonwealth can do by its executive power can prevent that.

I put to one side any matters that might be within the exclusive prerogative of the Commonwealth because that is far removed from anything we are talking about here, but insofar as the two prerogatives are operating and the capacities are operating side by side, there is no real competition in the distribution of power sense. We say that was decided in Farley’s Case and was recently referred to by your Honours in Cadia Holdings which I will come to in a moment.  Cases that have thrown this issue up in a parallel sense were the Royal Commission cases.  It started in Clough v Leahy, which is reported ‑ ‑ ‑

GUMMOW J:   We are familiar with the Royal Commission cases.  What do you get out of them?

MR MERKEL:   What we get out of Clough v Leahy and McGuinness is that the Executive had the same power to inquire, and we say necessarily to expend moneys to inquire, as any individual might have, because the mere fact of inquiry did not interfere with anyone’s rights.

GUMMOW J:   No, but it needed a statute to compel attendance.

MR MERKEL:   Correct, because there was interference with rights, and the statute then gave an authority, but in the BLF Case when there was a challenge to both a – that is 152 CLR 211, but can I just say that what we derive from Clough v Leahy and McGuinness is the acceptance of a Commonwealth prerogative power – capacity in Clough v Leahy but McGuinness would suggest it is a prerogative power – to inquire in the same many as any individual or other person would be entitled to inquire, but when coercive power is raised, then statutory authorisation is required with it.  In McGuinness there was an issue about whether that might attract privilege which raises a different sense, because that is something that might arise from the prerogative.

But then when it came to a joint Royal Commission created under letters patent in Re Winneke; Ex parte Gallagher 152 CLR 211, there was challenge on the basis that the two prerogatives could not be exercised side by side and together. What was held in that case – was that there as nothing about the Royal Commissions Act (Cth) which precluded the conduct of an inquiry under the authority of State law in combination with an inquiry under the Act.  In other words, the prerogative powers were able to exist side by side.  Of course State law governed the State coercive rights in respect of the commission, and Commonwealth law governed the Federal coercive rights.

Because there was no statutory inconsistency, section 109 did not arise, but as we know from many other instances, there is simply no interference with the distribution of the powers between the State prerogative and the federal prerogative in respect of the right of each to conduct Royal Commissions under letters patent.  They are just examples but they can be spread far and wide of why there is no such notion in this area of expansion of the federal capacity in any way that results in a diminution of the State capacity, that is, in terms of distribution of powers.

The fact that the federal polity may have financial primacy is a consequence of the distribution of powers.  It is not part of the distribution.  It arises from how the taxation laws have evolved.  That it has a larger purse string just goes to the quantum that it may be able to grant and the range of causes that it may wish to undertake as a national polity, as one would expect.  The same issue came up in a very stark form in Farley’s Case 63 CLR 278. I wanted to go to the judgment of Mr Justice Dixon, but the issue there was both the State and the Federal Government wished to rely on their right to a preference of the Crown prerogative in respect of a debt.

The question was, did the Commonwealth have priority over the State or vice versa, and the answer was no, each had an equal right to stand in line with each other and share equally whatever their right was, and the way it was dealt with by Mr Justice Dixon at page 304, and can I go down to point 7 where his Honour said:

But when two governments are in competition with one another and not with their subjects, whose claims are ex hypothesi postponed to those of both governments, then their ranking inter se, unless a legislature has power to regulate the priorities between them and has done so, must depend upon the consequences deduced from the establishment within one territory of two governments under the Crown, neither subordinate to the other.  The fact that one is not subordinate to the other is enough to negative any priority depending on the nature and character of the creditor.  The question is of course confined to debts amounting to obligations in personam.  It assumes that neither government claims a right of property. In debts of equal degree due to the respective governments there is, in my opinion, an equal right, and, accordingly, when the Crown in right of the Commonwealth and the Crown in right of the State come into competition in respect of such debts, the two treasuries are entitled to a ratable distribution –

Then at page 312 to 313, his Honour addressed an argument as to whether section 59 of the federal Act gave rise to a preference or priority to the State.  His Honour, as a matter of interpretation, said no, but at about point 7 again:

The right of the State to receive payment of its debts before the subject springs from a prerogative of government; and the State’s claim to stand on an equality with the Commonwealth in respect of demands upon the same fund is the consequence of the Federal system by which two governments of the Crown are established within the same territory, neither superior to the other.

They are not rights conferred by the Federal Constitution, but they do depend on the existence of the State as a separate government.  The Federal Constitution does not imply as a matter of meaning or intention that debts due to the Crown in right of the State shall, in a distribution of assets, stand on an equality with debts due to the Commonwealth.  If it did so, there would, of course, be an end of the matter.  But it does mean to establish two governments, State and Federal, side by side, neither subordinate to the other, and it is this that gives rise to their equality in a competition of claims to be satisfied ‑ ‑ ‑

GUMMOW J:   All this is before the First Uniform Tax Case, is it not?

MR MERKEL:   Yes, your Honour.

GUMMOW J:   So the Commonwealth can legislate to give itself priority.

MR MERKEL:   We have no problem with that in this case, your Honour.  This question is really directed to a much narrower issue and that is, is there any reason why the ‑ ‑ ‑

GUMMOW J:   Indeed, Farley stimulated the first Uniform Tax Case (No 1), I would have thought.

MR MERKEL:   I follow that your Honour, but that then finds itself into the area of contest in which we are not, which is legislative power.  They could only bring about that outcome, not because of the sections with which we are concerned, but because of the tax power.  Now, of course, that is the point that we make stands in stark contrast to executive power.  There is section 109 – there is Commonwealth superiority provided the legislation is within a head of power.  The point we derive from Farley and the more recent reference to it - it was cited in Cadia Holdings (2010) 94 ALJR at 599 in New South Wales by your Honour the Chief Justice but I do not need to take your Honours there.

It was a recognition of Farley in your Honour the Chief Justice’s judgment at paragraphs [30] to [32] and in the joint judgment at paragraph [86]. That is the accepted doctrine which, we say, is the starting point and indeed arises from the question that your Honours specifically raised at paragraph 220. Is there anything in the nature of the executive power of the State under the Constitution that should detract from the principle that Commonwealth capacity should be that of the sovereign in 2001. The answer in respect of the State Executive, we say, is clearly not. We say that the matter – and if I can just take your Honours to it briefly again in Pape – is your Honours again picked up the earlier observations to the effect that the clearest criterion in favour of federal executive power is where it will not be in diminution of state power.  Your Honour the Chief Justice at page 62, at paragraph 131, from the joint judgment of Davis in the middle of the page – the passage where their Honours said:

“On this footing . . . s 61 confers on the Commonwealth all the prerogative powers of the Crown except those that are necessarily exercisable by the States under the allocation of responsibilities made by the Constitution and those denied by the Constitution itself.  Thus 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.”

Your Honours also cited the same passage at paragraph 90 at 239.  We say that this is such a case.  Your Honour the Chief Justice in Pape at 127, the last sentence after referring to Mr Justice Dixon in the Pharmaceutical Benefits Case, commented:

But to say that is to say no more than that there are broadly defined limits to the power which must be respected and applied case by case.  As for this case, it is difficult to see how the payment of moneys to taxpayers, as a short-term measure to meet an urgent national economic problem, is in any way an interference with the constitutional distribution of powers.

We say, and we will come in a moment if we might to the facts of the case, there is not only no interference with any State prerogative, legislative or other power, including capacities, but this Commonwealth program dovetails entirely into and is governed by the terms and conditions of the State program.  We say that follows not just from any drafting applied in the particular case, but it follows from the nature of the program itself.  The Commonwealth is not engaging in an activity or an enterprise.  Access to schools is not able to be achieved by anything the Commonwealth is doing or can do under this program.  Employment of chaplains is not a step taken by the Commonwealth.  It is merely granting an amount of money to enable another person to achieve that outcome.

GUMMOW J:   I think in quoting paragraph 220 in Pape it is probably prudent to read what follows finishing up in paragraph 228 and following.

MR MERKEL:   We, of course, accept that and we believe we have done so by distinguishing, but if it is not be a maintainable or sustainable distinction, then the answer to your Honour’s question lies in 228.  We say, when his Honour Justice Brennan in 228, picking up Mr Justice Mason’s test in AAP, talks about section 61 conferring on the Government the power to engage in enterprise and activities of the kind being there addressed and also of the kind being addressed in Pape, to say Pape was just a financial grant shows that the grants power, in fact, may – it was not a grant.  It was to deal within a national economic emergency and it was a program by the Commonwealth Government which may and was treated as one that should be governed by the Davis test because it was not just a grant of the kind that we are identifying.  But to say the same test should be applied to federal grants is a step that has not really been suggested in any of the cases discussing Justice Mason’s test, indeed, in AAP itself.

GUMMOW J:   You keep saying federal grant.  Federal grant on terms.  There were not any terms in Pape actually, apart for encouragement to go and spend it.

MR MERKEL:   But that, with respect, makes good our point.  The purpose of the financial exercise in Pape was a macroeconomic resolution to an economic crisis which involved the Federal Government being the sole player in the distribution of funds to the taxpayers throughout the country.  We say that a grant for a purpose falls into a very, very different category and we do not challenge the use of the higher test in Pape.  Indeed, we would say that if the grants power were used as a device to escape the higher test, the Court would have no problem in identifying that in truth what was really lying behind this was an activity or an enterprise by the Commonwealth Government. 

So we are not saying the Court must put blinkers on see if it is a grant therefore, but we say grants of this nature, of the usual kind which are being made daily by the Government on a major basis for a huge range of enterprises, and I will come in due course to the enterprise or the grant that immediately followed the national chaplaincy program which would likewise fail on our learned friend’s arguments against us, which was to deal with autism in schools.  But these grants are the daily business of Government to fund particular matters perceived to be in the national need which do not require a legislative response by making grants on conditions, which much, by definition, attract a contract, but as an incident of the grant, not as a reason for it.

So we say that the real contest in the present matter is not that raised by the States about whether we should go back to the 1920s view in Wool Tops and say that any conduct not specifically authorised by statute is outside the Executive capacity, but the real contest is whether the test devised by Justice Mason dealing with a major Commonwealth enterprise in AAP, which opened up, by definition, a major doorway or gateway to section 51 through section 51(xxxix), should have the threshold that his Honour applied and your Honours adopted.

It was adopted and applied in Davis, again, for a major enterprise by the Commonwealth Government, the Bicentennial Authority, which had intruded on even the right of the public to use certain words and then applied in Pape whether that test, tailored to meet the exigency of a major backdoor route to interfere with the distribution of powers under the Constitution, should be applied to the grants capacity which has no way of intruding on or upsetting or interfering with the distribution of powers and if a case arose where it were able to be hypothesised that it did, probably the real answer is that is not a grant of the kind that this capacity was intended for. But we cannot think of a case of that kind that would not have to meet the test of Mr Justice Mason in AAP.

I wanted to take your Honours also to the way in which the test was accepted in Hughes and cited by your Honour the Chief Justice in Pape, the plurality judgment at paragraph 228, which we have adopted which is at the bottom of the page.  Could I start at the fourth last line at page 87:

The formulation, and the qualifications to be made, together emphasise a point made by six-members of the Court in the joint reasons in R v Hughes. This was that while s 51(xxxix) authorises the Parliament to legislate in aid of the executive power, that does not mean that it may do so in aid of any subject which the Executive Government regards as of national interest and concern.

Now, what we say is Justice Brennan in Davis adopted a criterion, that I will come to in due course, but it is that in the Davis context, 51(xxxix) does no more than entitle you to go through the gateway to enact a law to give it efficacy to the exercise of executive power. The exercise of executive power in the present case is a grant. Section 51(xxxix) does no more than empower you under 51(xxxix) to take steps under the incidental power to give efficacy to the grant. So we say that the very problem identified in AAP, in Davis and in Pape in respect of activities or an enterprise and the gateway that opens simply has no application in the present context.

The last introductory matter I wanted to go to before taking your Honour to the facts to show how, in the present case, this lack of intrusion ‑ ‑ ‑

FRENCH CJ:   Introductory is a rather threatening adjective, Mr Merkel.

MR MERKEL:   Sorry, your Honour.  Introductory to the factual summary.  It has been said time and again by a number of our learned friends in support of the narrowest view that there is somehow a lack of parliamentary involvement or a parliamentary sidestepping by the use of this process, this grants process, but we say, and my learned friend, the Solicitor for the Commonwealth, articulated this and we would adopt it, the complete answer lies in sections 81 and 53 and 54 ‑ ‑ ‑

GUMMOW J:   No, it does not.  How does it?  How is it a complete answer?

MR MERKEL:   Because that is the ‑ ‑ ‑

GUMMOW J:   Given the role of the Senate with respect to ordinary annual services of Government.

MR MERKEL: Because, your Honour, the Senate is not powerless. It may not amend, but it can return or pass or return until the House amends. But, that, your Honour is a provision of the Constitution as to the limited role of the Senate which is there, in effect, in substance to protect State interests with which this particular grants power is not interfering with any distribution of power under the Constitution. But we say that that is the way in which the Constitution has restricted the Senate but it is not as if the Senate can be bypassed in respect of this process. We say that is a consequence of the provisions to which we refer. But to say there is no parliamentary approval or sanction for the expenditure, we say, is not to really describe the process at all.

There can only be parliamentary approval for the grant to take effect because that process, set out in the Constitution, is what the Constitution prescribes. One might say that the words in section 53 could have been chosen, and 54, differently but that is the way in which it was described. So we say that that is the constitutional answer and the Senate does pass the appropriation law or return it and if it passes it, it has approved it, and that is the process, your Honour. If that were less than perfect, that is the problem with the Constitution, not the problem of any view that one might have on executive capacity.

GUMMOW J: The problem with the Constitution is the vague language of section 61.

MR MERKEL: That is so, your Honour, but that may not be surprising that section 61 does not seek to define executive prerogative power and executive capacity. It may describe it because there was no reason to see it as being limiting if it operate in the way in which it has as it has evolved in Davis, Pape and, we say, as it should involve in the present context in relation to the grants power.  What is interesting about the case that is really put here is the mischief that this case is said to address is a chaplaincy program requested by schools throughout Australia as being regarded as assisting and needed by children in the education system and what we would expect would fall over with this same argument is the autistic claim, because the benefits view of affairs would knock out the autism program just as easily as it would knock out the chaplaincy program.

So we say the mischief said to be inherent in our approach has never really been identified by any of our learned friends and some 110 years of experience has not seemed to have thrown up the issue and is extraordinary that it has come before this Court in a case as benign as this, which has no potential to interfere with the distribution of powers in any way.  But I will take, your Honours, if I can, to just the agreements and I will not spend long on them.

FRENCH CJ:   If it is of assistance, Mr Merkel, we will be sitting through until 1 o’clock.

MR MERKEL:   Yes, thank you, your Honour. 

GUMMOW J:   But we need to leave some time for Mr Walker to reply.

MR MERKEL:   Yes, I will certainly do that, your Honour.  Can I take your Honours to volume 1 at page 411, which is the agreement between the State of Queensland ‑ ‑ ‑

HAYNE J:   What is it we are meant to get out of this journey?

MR MERKEL:   It is answering his Honour the Chief Justice’s question about how this program works in relation to Queensland law and the Queensland Government’s procedures.

FRENCH CJ:   Well, I thought, with respect, that you had answered the question by telling the Court in response that the delivery of these services by SUQ is done within the framework of the Queensland procedure. 

MR MERKEL:   Yes, your Honour.

FRENCH CJ:   And subject to all the controls that that procedure imposes, but with the superadded controls set out in the guidelines and the code of conduct and so forth which are embedded in the agreement with the Commonwealth. 

MR MERKEL:   Your Honour, I will just give your Honours the references if I can.

FRENCH CJ:   That is really all one needs to know, in a sense, to get the point of the ‑ ‑ ‑

MR MERKEL:   Can I just give your Honour references to identify where these are to be found, because the document runs to some ‑ ‑ ‑

FRENCH CJ:   Incidentally, I think there was a provision, was there not, in the Queensland procedure, the Queensland Minister has to be invited to any launch or promotional activity. 

MR MERKEL:   I missed that, your Honour.  Possibly before Queensland adopted a different position, your Honour, before your Honours.  I will give your Honours just the page references.  It is at volume 1.  It starts at page 409 and the definitions at 412 “Contracted Services” which identify the chaplaincy services to be provided by SUQ at 414.  The guidelines which are general State guidelines rather than chaplaincy guidelines are at 430.  Page 431 is the definition of “chaplaincy services” and 431 to 432 they are described.  The legislation that is relevant is at 443 and a general code of conduct, I thought I may not have mentioned that, at 453.  Queensland’s third procedure, which is the most current procedure, is annexure 13A.  That sets out the procedures that govern accreditation. That is at the supplementary court book at page 179 and the accreditation processes are at page 190, 193, 195 and accredited education authorities are at 210 and 211. 

Can I just indicate, I understand your Honours are not hearing us on section 116, but just so the point does not get overlooked in our submissions, which I will not address but I was going to take your Honours to the passages in our oral hand up this morning, the submissions on 116 at paragraphs 30 and 31 are to the effect that there is not a religious test required under the Queensland procedures.  So the argument put by our learned friend based on the Commonwealth guidelines which themselves pick up the Queensland accreditation as an alternative route, does not, as we have understood them, require a religious test.  We have set that out at paragraphs 30 and 31.

Can I just take your Honours briefly to the funding agreement between the – the Darling Heights funding agreement between SUQ and the Commonwealth.  That is at volume 2 at page 635.  My learned friend, the Solicitor for the Commonwealth, took your Honours to the provisions but I just wanted to identify to your Honours that the project which is the subject of this agreement is identified through the application.  That comes out in clause 2.1 at page 646.  SUQ must carry out the project “at the times and in the manner specified in item C” which is this schedule in accordance with the agreement.  If one goes to 638 at C.2, which is picked up in clause 2.1:

You must provide the chaplaincy services as described in Your application to Us for funding under the National School Chaplaincy Programme which is at Attachment B.

Then one goes to the application at 688 which my learned friend took your Honours to but particularly at 692 to 693.  I would ask your Honours to read those passages carefully because they do answer a number of questions asked by your Honours.  I think your Honour Justice Bell asked late yesterday about what is the nature of this service that relates to well‑being.  We say that the way in which this works in practice is to set the guidelines and standards at the higher level, but a school based on its assessment of its own school children’s needs, not the parents’ needs, not the community’s needs, not the teachers’ needs but the children’s needs, has to fill out an application form which is the prescribed form which set out the school community’s need for chaplaincy services.  They are carefully articulated; children at risk, children suffering stress, children suffering psychological problems or emotional problems and needing to have these addressed in a specialised way.  That is the school’s identification to the Commonwealth of the need it sees arising for its students.

Then at page 693, the details of how to address that need are set out, again with specificity, and they all relate to the – and this is the project, “Working with Students”, “Reading Groups/Classroom Assistance”, “Girls Stuff and Boys Stuff”, “Boys Mentoring Program” and:

Working with Teachers/Staff/Parents: Ensuring that all stakeholders are able to access the services provided –

That is clearly in the context of the school for the purpose of assisting the problems identified on the previous page with the students, so for arguments to be put that this is a program to benefit the school community or the teachers or parents is really to overlook the fact that this is entirely conducted within a school environment where, in accordance with modern understanding of psychology about problems confronting children, the problem in the school is not just in the schoolyard, it is picked up at home, it is picked up with their own sense of self‑identity, their own self esteem, and this is an important way of dealing with problems for children – not problems at large, but problems that may come from grief, from trauma, that require special assistance.

BELL J:   The matter that I was taking up with you was not the general value of considerations of this character to the development of children, but rather whether there is the requirement for some nexus, looking at the power under (xxiiiA), between the provision of the benefit and the individual as a student and looking at point 4 on page 693 where boys are to have mentors to help them appropriately control their emotions and things of that character.  No one would dispute that there may well be social utility in that but it is just the question of if there is a degree of nexus beyond the fact that the program applies to the school community ‑ ‑ ‑

MR MERKEL:   Your Honour, I will give your Honour other references to the material, but we say that when your Honour looks and reads 692 to 693 - and can I indicate to your Honour that – can I give your Honour in our written submissions at paragraphs 38 to 39, and in evidence referred to at footnotes 38 to 39, it is inescapable that the primary purpose, or the substance of this program, is to assist children to deal with these problems as students at the school to better enable them to learn.  That was the purpose of the education outcome in the appropriation papers.  It was the identification in the material of the need for the chaplaincy program, and the identification in the application shows that this is solely designed to assist the children as schoolchildren to have a learning environment so that they are better able to achieve in the classroom.

It is only for that reason, your Honour, that it is conducted in schools and the only involvement of teachers and the involvement of parents and whoever would be called the school community, by definition is, because of their relationship to the school, the raison d’etre of which is educating the children and we say it is really no different but it deals at a psychological and emotional sense, or a self esteem sense, than the program in respect of autism which I will come to, which if anything is one step removed, because in this program there is an ability of parents to opt out of the program; the children are not required to be part of this program so in a sense it is a parental decision as to whether they want the child to be within or outside the program, but not to help the child in some abstract sense, but to help the child solely better cope with school as a student at school.

We say that properly understood, that is an inescapable conclusion from the evidence in the present case, and if there is an incidental benefit for teachers, although we say the incident is an incident of benefiting the children, then that arises because of the primary purpose and cannot in any way subsume or change the character of the primary purpose.  We say when you look at those matters, and we would say there would be nothing about the present case as an example of no interference with any role, function, capacity, power of the State, so in terms of the test that the Commonwealth executive power will be clearest when it does not interfere with any of the State’s power, we say this is a primary example and one that is not unusual.

Can we go to the gravamen of what we really want to come to in terms of is there any constraint on the power and we have tried to address this in paragraphs 14 and 15 of the written outline we handed up to your Honours this morning.  Out the outset we adopt the Commonwealth’s position but we say that there is a fall back and we have tried to identify it in those two paragraphs.  We say that in answer to the question posed at paragraph 220 of Pape:

no real constraint having its source in the position of the Executive Governments of the States can be identified.

We do, however, say that there are some constraints.  My learned friend pointed out a Melbourne Corporation restraint which is far removed from anything that we are really likely to encounter in respect of a grant. We do say the constraints arise from the establishment of the Commonwealth so that we do not go to the common law, we go to the Constitution to look at the nature and extent of executive power. We do accept the distribution of powers as able to produce a constraint. So, in this area, there should be no wide operation or approach to how section 51(xxxix) might operate.

We do recognise there must be a parliamentary appropriation and, therefore, the purposes of the Commonwealth – while that may not be a source of legislative power in section 81 – it does help inform what may be within the realm of executive power, what may be in the realm in the sense of not being unlimited.  We do say the powers of the two Houses in respect of appropriation bills are to be taken into account and we say ‑ ‑ ‑

GUMMOW J:   We can read this, Mr Merkel.  What is the point?

MR MERKEL:   I am sorry, your Honour.

GUMMOW J:   It is 10 to 1.

MR MERKEL: Your Honour, the last point we wanted to say is that we say that the assumption upon which we arrive at this inquiry, in the present, case is the response to a perceived national need. We say, that, therefore, the constraints which one may imply which go a little further than the Solicitor‑General for the Commonwealth, are that there must be an appropriation. The grant must not be inconsistent with any implied limitations or prohibitions. We say the grants must be for public purposes. That arises out of the nature of the national government established under the Constitution and calculated here to the national interest. We say, likewise, that applies and if it be thought necessary to prevent any misuse or to suggest that the grants could be used as a device, we suggest in the final step, that the grants, and the conditions on which they were made, must be reasonably appropriate and adapted to achieving the public purposes.

We say that is a more limited capacity not set quite as at large as the Solicitor for the Commonwealth would suggest, but we say that that more limited capacity would protect against all of the limitations or constraints we have sought to identify in paragraph 14.  We say that the grants in the present case meet each of those constraints.  The alternative approach, which was called the common ground position when this matter started, are that the grants, in any event, fall within subject matters under section 51.  But can we identify the conceptual basis on why section 51 is relevant.

One of the problems that has beset this case is that section 51 was approached, in a sense, in the common ground as a definition of what is accepted to be within the executive power and the problem your Honour Justice Gummow raised at the outside of section 51 being definitional because of the observations of Justice Dixon in Stenhouse obviously showed the shortcomings of an approach that would see the kind of test that has been applied in the present case can in law, with respect to corporations, accommodate the funding agreement, or are these benefits within the meaning of 51(xxiiiA)? 

What we say conceptually can be done or should be done in a case such as the present is when section 81 identifies purposes of the Commonwealth, one goes to section 51 and the distribution of powers within it to inform what are the purposes of the Commonwealth and the subject matter with which the Commonwealth may be concerned.

One also goes to the rest of the Constitution which has a vast array of provisions where the States and the Commonwealth interact and one can identify out of the Constitution matters that fall necessarily within the purposes of the Commonwealth. We say section 51 can be approached through the route of section 81 as containing subject matters that can be identified as falling within purposes of the Commonwealth and we say, therefore, may be the subject of an appropriation under section 81 and it is an appropriation in respect of which the executive powers and capacities under section 61 are attracted.

So we say that any narrower view would disregard the purposive approach of a purposive view that should be taken to the power in section 81. We say that whilst it can be accepted it does not of itself constitute a source of power, in the present case the source of power is to be found under section 61, but the subject matter or the breadth of that source of power is informed by section 51. If there is a definitional problem in a particular case, that is a consequence of the difficulty of seeing how a particular subsection of section 51 might apply in the present case. We say that definitional problem does not give rise to any difficulties, certainly with respect to section 51(xxiiiA) and we say that it is in that conceptual realm that we go to address 51(xxiiiA).

We have set out in our submissions, and I will not read them to your Honour, that the approach put by our learned friends, the Solicitors, and also the plaintiff, in opposing the program falling within benefits to students is to read words in or to read words down, both of which are impermissible in a provision intended to be beneficial.  There is simply no basis in the legislative history or in the second reading speech to think that a constitutional amendment, which in the second reading speech was designed to ensure that access to social services in the future in Australia should not depend upon the accident of where a person resides, so the Federal Government had the capacity to ensure all will get the benefit of these services and there was nothing in that legislative background referred to, and nothing in the second reading speech that would suggest benefits to students were intended to have some limited or narrow meaning. 

Certainly embraced under the heading of “Social Services for Students”, the idea of setting up universities or the kind of examples taking over education generally are just not within the realm of the intended operation of section 51(xxiiiA) and have not really been suggested to be.  What is within the realm of the intended operation of (xxiiiA) is a program of the present kind.  Can I just take your Honours now at this point to the kind of program that on the approach to construction of our learned friends would be ‑ ‑ ‑

FRENCH CJ:   Is this a kind of in terrorem argument?  I am not sure that it adds anything to the legal argument, does it?  You are talking about the autism program.

MR MERKEL:   Well, except for this, your Honour.  We say that the approach to construction – I will put it this way, your Honour.  If the program which is set out at volume 3, page 1315, which sets out in the middle of the page at line 28, which is the National School Chaplaincy Program, is outside the definition of “benefits to students”, the very same arguments would have to be addressed to a program that is slightly more concrete but has the same function and same purpose and same modus operandi.

We say that when this is tested against the programs that are the subject of funding, we say that when you read the words “benefits to students” and read the second reading speech embracing the kind of social services that were intended to operate, there is simply no basis whatsoever in principle or in the words to read benefits to students down to a benefit to a student individually or a benefit that must be provided by the Commonwealth or by and on behalf of the Commonwealth.

FRENCH CJ:   I understand the submission that you are putting.  One can imagine all manner of beneficial programs which might fall inside or outside the scope of the power depending upon the construction that one took of it.  I am just suggesting it is not really to the point to take us to a particular program and say look at the terrible consequences that will occur if you take such and such a construction of 51(xxiiiA).

MR MERKEL:   It is not to do that, your Honour, it is to show that the simplistic approach that has been put against us of saying, well, you are giving help to parents or you are giving help to teachers is somehow not giving providing a benefit to the students.  The autistic program works in exactly the same way.  The point about it is that it demonstrates the error in the construction that has been put forward by reading words in it.  Really, as a matter of substance, the constructions put forward are really tailored more to try and side step this program to say it falls outside the definition and to put a proper conceptual basis. 

In Alexandra Private Hospital itself, the Court cited with approval Justice Smithers where his Honour said that the Government can take a private enterprise approach to the provision of services which, by definition, is getting service providers to provide them, not provided by the Government or not providing necessarily for or on behalf of the Government.  So we would say that that narrow approach that has been taken is one that should not be accepted by your Honours.  The last part of our submissions are to travel to the trading corporation point, which we will now address your Honours on.

FRENCH CJ:   Yes.  How much longer are you likely to be, Mr Merkel?

MR MERKEL:   I am nearly finished, your Honour.  I just wanted to address the trading corporation point which I will be quite short on.

FRENCH CJ:   Yes, roughly how long will you take on that?

MR MERKEL:   I think about 10 to 15 minutes, your Honour.

FRENCH CJ:   All right.  We will adjourn until 2 o’clock.

AT 1.00 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 1.59 PM:

FRENCH CJ:   Yes, Mr Merkel.

MR MERKEL:   If the Court pleases.  The last matter I wanted to address is the matter dealt with at paragraph 24 of the outline we handed up this morning, which is the evidence as to why SUQ is a trading corporation.  We had handed up to your Honours some figures, three pages of figures.  Could I ask your Honours to have that before you?  These figures are taken from the supplementary case book at pages 110 to 119 and they are explained, but there was an accounting method which involves some double‑counting in respect of the levy and we have brought these figures together to remove the double‑counting on both the revenue and the expense side of it so that these are the accurate figures and the accurate percentages each of the amounts come to - and I will just deal if I can with the 2010 year.  The passages from the special case where these items are explained are in the supplementary special case book, and the equivalent tables are set out at page 110, but the descriptions of each of the categories are at 112.  Can I just start by, before going to the figures, identifying in the objects of the Scripture Union at, volume 1, page 69, object 2.1(k) which is at line 48, is the object that gives rise to the commercial activities:

do all such other lawful things as are incidental or conducive to the attainment of the objects –

That is at the very bottom, your Honours. There is no doubt that the Scripture Union is a religious institution that would qualify as a charitable institution and its purposes are religious and therefore charitable in the same way as Word Investments was in the matter recently before the Court, Word Investments v Commissioner of Taxation.

We did want to emphasise – and I do not need to take your Honours there - in paragraph 24 of that judgment, a plurality judgment, there was a reference to a dichotomy sought to be drawn by the Commissioner between a religious or charitable institution and a commercial organisation because the subsidiary in that case traded, but traded solely for the purpose of raising money for religious purposes and was found to be a religious institution and therefore a charitable institution.  In the judgment that was referred to as a false dichotomy.

Now, the inquiry in that case was as to the purpose, not the activities.  We now have the reverse.  We have an inquiry as to activities, not as to purpose.  We say the dichotomy sought to be made by our learned friends in relation to SUQ as a religious or charitable rather than a trading body equally is a false dichotomy.  The question of activities – and we, with respect, adopt the Solicitor for the Commonwealth’s submissions concerning the test to be applied – we say this is clearly a body that engages in substantial trading activities, but we wanted to go back to that passage I mentioned briefly this morning about benefits and Justice Smithers’ observation which was adopted in the judgment of the Court in Alexandra Private Hospital 162 CLR at page 282.  There seems to be a view that – and it has certainly been put against us by our learned friends – that an organisation that receives grants, or subsidies from a government, may somehow not be engaging in trading activities in the activity subsidised or the subject of a grant.  We just wanted to point out at about point 6, in middle of the page, their Honours said:

If it be accepted, as the plaintiffs accept, that the Parliament could legislate for the establishment of Commonwealth hospitals to provide nursing home care directly to patients in need of such care, there can be no objection to it adopting what Smithers J described as “a private enterprise approach to the problem” . . . by inviting proprietors of private nursing homes voluntarily to undertake to provide the necessary services in return for a government subsidy.

We say that is precisely what has occurred in respect of the grants in the present case.  The Government has made grants to SUQ.  SUQ has, in return for those grants, employed in excess of 500 chaplains who attend over 600 schools in Queensland and that is conducted, notwithstanding its charitable objects, as a commercial activity.  Can I make that good by taking your Honours now to the table of trading figures which sets out the revenue and expenses.  The first categories are donations and the school ministry fund which is DGR status and, therefore – we have the percentage and I will just confine myself to the last and most recent figures which would be the established trading figures.

Then they have got a non DGR donation fund, Commonwealth funding, Queensland Government funding and local chaplaincy committee funding and that comes to a total of $22 million.  Then, we have a deduction for chaplaincy levies.  This is the amount that was double counted in the special case figures.  That is described at the supplementary book at 114 in paragraph 15.5.4 and that is:

SUQ’s service fee for managing and administering chaplaincy services in schools as an employing authority.  Revenue in this category relates to the amount SUQ levies in respect of each chaplain provided to a school.  This amount includes all chaplaincy services, NSCP funded, State funded and community funded services.

The levies are drawn from the Commonwealth and State grants which were referred to earlier.  We say that is the amount taken by way of reward for the services provided in addition to, or as part of, the total amount granted.

HEYDON J:   Charging a profit on the administration of donations does not really sound like trading.

MR MERKEL:   I think it comes out of the State – it is said to come out of the Commonwealth and State Government funding and it is the service fee – not a profit your Honour - it is a service fee for the administration of the program.  Administering 500 or so chaplains is not something is able to be done free of all charge.  There is no suggestion there is any profit motive here.  It is not suggested this is a trading company for the purpose of carrying on business at a profit but the levy is a substantial revenue earned as a fee to pay for the administration and management of the chaplaincy program and that comes to $2.3 million.  Then we come to what I will call the trading figures which are not really disputed by our learned friends.

They have sales income.  I will just ask your Honour to note the paragraphs that explain it at pages 114 to 115, 15.2 and 15.3 explains the sales income.  “Interest Received” is explained at 15.4. “Motor Vehicle Levies” charged to employees who use the cars, that is at 15.5.6, the “YMIS Income” which is fees charged for teaching accredited courses as a training organisation is 15.5.7, “State Conference Fee Income” is 15.5.8, “Stock up for Hope Income” is 15.5.9 and there is no income in the most recent year because a subsidiary was set up to run that part of the enterprise.  There is the fundraising event, the “Build the Future Dinner” at 15.5.10., the “Genesis Grant Income”, which is a one‑off grant, and then “corporate fundraising” events and then the “Camps and Mission Income” fees charged to attendees of camps run by SUQ.  The total amount of the revenue earned in the 2010 financial year was 25.6 million and I would just ask your Honours to note 5.5 million, including the service fee was not donations or grants, that was the service fee plus the amounts that are not challenged as trading income and that was a total of 22 per cent of the total of revenues.

We go then to page 3.  We outline the costs incurred and they are the sort of costs one would expect of any organisation running these commercial activities or activities on this scale.  Finance costs are explained at 18.1, marketing expenses of almost 1.2 million at 18.2, chaplaincy salaries and expenses, 18.3,of 16.6 million, administration expenses of

2.5 million, ministry expenses of 4.3 million and other operating expenses, leaving a total on the expenditure side of $25 million. 

What we say is picking up the test in State Superannuation Board is that putting to one side the area of contest, which is whether or not the grants to conduct these services are to be treated as trading income, the figures of 5.5 million and over 20 per cent or 22 per cent of the total income being what, on any normal view would be trading income, does satisfy the State Superannuation Board test of trading activities on a significant or substantial scale.  They could not be said to be trivial or insignificant as to the characterisation of SUQ. 

We do say the proper principled approach is to treat the fundraising in the same way as was suggested in the Alexandra Hospital Case when Government gives an organisation of this size funding to provide a service.  That does not make the service any less a commercial activity.  We mentioned in our submissions the example if it were a private organisation carrying out the service in the normal course of its business such as was the case in Alexandra Hospital, then that would clearly be a trading enterprise.  It should not make any difference because this is being conducted by a religious institution not seeking to make a profit from those trading activities.

So we would say that this does satisfy the test and is a trading corporation.  Otherwise we adopt the submissions of our learned friend, the Solicitor, concerning section 51(xx) and the trading corporation point.  We would just conclude by saying that we would seek to have the questions on the special case answered as set out in paragraph 104 of our written submissions and we have also set out a submission on costs orders if the plaintiff succeeds.  If the Court pleases.

FRENCH CJ:   Thank you, Mr Merkel.  Yes, Mr Quinlan.

MR QUINLAN:   May it please the Court.  I propose, clearly in light of my learned friend, Mr Walker’s, need to reply, to be very brief.  Members of the Court should have an outline of propositions for oral submissions which we provided to the Court this morning and I do not propose to go through all of those but to make three points by way of amplification of the submissions that we make in that document.  Your Honours, the first five paragraphs of our oral propositions identify what we say is a proper conceptual framework for dealing with this question of what has been described as the common assumption upon which many of the written submissions were made.  I do no need to take your Honours through those and in large part they deal with matters that your Honours have already heard addressed.

Can I just make reference to one matter in that respect, and it relates to paragraph 2, which concerns the position of the spending power of the Executive in the United Kingdom as it relates to the authority by Parliament, and in that respect we have referred in paragraph 2 to the passage from his Honour Justice Isaacs’ judgment in the Wool Tops Case 31 CLR 394 at page 541 – I do not ask your Honours to go to it – where it referred to payments and contracts which involve payments needing sanction by Parliament by direct legislation or by appropriation of funds.

Can I add in relation to that point, your Honours, that the learned Solicitor for Queensland yesterday made a submission that his Honour Justice Isaacs’ reference to “or by the appropriation of funds” in that respect was not to be understood as a reference to an Appropriation Act in light of what his Honour Justice Isaacs had said in the Colonial Ammunition Company Case.  In that respect, your Honours, can I just refer in particular – and I will not take your Honours to it – to the passage in Justice Evatt’s judgment in New South Wales v Bardolph, 52 CLR 455, particularly the passage from page 468 to 469 where his Honour Justice Evatt discusses both the Colonial Ammunition Case and the Wool Tops Case. 

His Honour explains the Colonial Ammunition Case by reference to the fact that that was a case in which there were other legislative conditions on the Executive’s capacity to contract which had not been satisfied.  His Honour makes the point from page 468 to page 469 that – the discussion in that case was concerned with whether merely being in an Appropriation Act avoided the need for other legislative conditions to be satisfied.  It was not authority for the point that in the absence of some legislative condition or prohibition, an Appropriation Act would not be sufficient and his Honour described that as the correct understanding of his Honour Justice Isaacs’ decision in the Wool Tops Case towards the middle of page 469.

HAYNE J:   In respect of paragraph 2, if it is thought relevant and useful to consider UK practice, there is a convenient summary of UK practice in the argument of counsel in Combet.

MR QUINLAN:   Yes, if it please your Honour, and there is also a summary of the UK practice that appears in pages 472 to 475 of his Honour Justice Evatt’s judgment in Bardolph itself. What we really say about that, and that forms part of the submission we make there, is that that power in the United Kingdom is, in effect, the default position from which one then applies the limitations which are express or implied in the Constitution and it is for that reason that we say that the kinds of limits which are described in AAP and Davis being expressed in the negative, nevertheless have the consequence that if something is not wholly or entirely outside the legislative power of the Commonwealth, it will form part of the subject matter to which the executive power of the Commonwealth will extend.

Then if I can make two brief points in relation to the question of benefits to students. The first, your Honours, which is at the bottom of page 2 of our oral hand up relates to the Constitution Alteration Social Services Bill. Your Honours were taken yesterday by the learned Solicitor for the Commonwealth to the Education Act as it existed at the time of the proposed amendments.  We have provided to your Honours a copy of the Re‑establishment and Employment Act 1945 which, in our respectful submission, provides an even clearer example of services falling within the conception that the amendment had of benefits.

In that respect, your Honours, and I do not need to take your Honours to it but can give you the reference.  In the second reading speech, which appears at tab 31 of Western Australia’s material, at page 223, your Honours will recall that various counsel had expressed doubt as to the validity of various provisions.  In relation to this Act, the Re‑establishment and Employment Act, Messrs Maughan, Barwick and Ham and Dr Coppel all expressed the view, in effect, that section 48 of the Re-establishment and Employment Act which fell within Division 5 of Part II was of doubtful validity except insofar as it applied to former Defence personnel. That is, it would seem implicit in that, that in relation to those persons, it could be described as a law under the Defence power, but your Honours will see that they otherwise doubted the validity of it. The particular provision itself in Division 5 of Part II referred to the functions of the Commonwealth employment service, this is in section 48, being:

to provide services and facilities in relation to employment for the benefit of persons seeking to become employed –

We make the point that that reference to services happens in the context of benefits in respect of employment which is the same operative term that is applied to both employment and students in section 51(xxiiiA).

HAYNE J:   How in (xxiiiA) is it applied to employment?

MR QUINLAN:   We would say that the section (xxiiiA) refers, where it begins, “unemployment, pharmaceutical, sickness and hospital benefits”, he word “benefits” must control, we would say, in that sentence unemployment, pharmaceutical, sickness and hospital, that is, it does not refer to unemployment services or unemployment endowments or unemployment allowances as some of the other provisions do. 

Finally in relation to that particular head of power, and this is not in our outline of oral propositions but arose in the course of argument

yesterday, at page 149 of the transcript yesterday your Honour Justice Bell raised the question as to whether, if one were to include counselling services within the meaning of benefits, whether one would have expected the exception in relation to civil conscription to apply to such benefits as well.

What we submit in relation to that is that the fact that there is not an exception for civil conscription in relation to employment, pharmaceutical, hospital or sickness benefits, does not affect the construction of the words “benefits” in light of the history of that particular exception, which is clear from that history it was included as an amendment by the then Leader of the Opposition, Mr Menzies, specifically to address a concern in relation to the nationalisation of health services.  For that history we just give your Honours the reference.  It appears in the judgment of your Honour the Chief Justice and Justice Gummow in Wong v The Commonwealth (2009) 236 CLR 573 from pages 588 to 591. Those are our submissions, your Honour.

FRENCH CJ:   Thank you, Mr Quinlan.  Yes, Mr Walker.

MR WALKER: May it please your Honours. Your Honours, on the last point first, it would be, in our submission, no way at all or a very dangerous way to construe the breadth of the words “benefits to students” in the Constitution by drawing to attention an antecedent statutory provision, section 48 of the Re-establishment and Employment Act, which used the expression and showed the draftsmen were familiar with the expression, “services and facilities”, and yet the argument that you have just heard on the point says, well, they were providing services and facilities and by that description, by that very terminology and thus, where you see the word “benefits” you should read “services and facilities”.  There are many steps missing in that form of reasoning and we do not suggest they could be supplied.

More generally, in relation to the benefits arguments that your Honours have heard from the Commonwealth and from the fourth defendant, we submit as well that it is just not possible to say of the particular language chosen to be placed before the people at the referendum that that equates to all and any means by which that which was generally comprehended within the political description “social service legislation” was therefore to be construed as within the very general possibilities of the abstract noun “benefit”. 

Could I then move briefly to make these comments concerning what my friend, Mr Merkel, said in relation to the character of his client for the purposes of the possible attachment of an argument under 51(xx) of the Constitution. In our submission, it is simply not correct to equate the receipt of fees, including for services, whether with a margin or not over and above reimbursement of expenses, as being an indication, let alone a universal indication, of activities being commercial. A moment’s thought of ordinary life involving the transfer of money between entities or persons would suggest that must be true.

It is equally untrue to point to financial accounts and statements to note the existence of revenue and expenditure and the tallying of one against the other, for example, costs of sales, and therefore to take the step that that means there must have been trading.  There may or may not have been, depending upon far more than simply the demonstration of the receipt of revenue or the making of expenditure. 

Finally in relation to 51(xx) – not factually but in relation to the argument – it is not correct, with respect, to attribute to us and argument that there is a dichotomy, that is, mutually exclusive categories, you are either a charity or a trader and you cannot be a bit of both, we do not put that, we did not put that and the case comes down, factually, simply to the question whether the constitutional characterisation has been effected.

The words of 51(xx) do not supply, as this Court has notoriously noted from time to time, tight definitional parameters within which one can move to make the decision in a particular case on its facts as to whether a corporation has the constitutional character.  That does not mean that there does not have to be some attempt at definition and starting with the words, one understands that a participle used adjectively such as “trading” could be used in a number of different ways.  One way to be avoided and, in our submission, one way for which there is no support in any reported case is to read the word “trading” before corporation in the same way as one might read the word “singing” if one was to say there is a singing boy. 

Now, unless one is talking about a full‑time chorister, you may be simply talking about someone who has squawked from time to time.  That would not characterise the boy as a singing boy.  It would simply describe what he is in the course of doing at the time of being spoken of.  That cannot, surely, suffice for a corporation to say that from time to time something is done, for example, selling of surplus asset or getting rid of second‑hand bibles and say, well, that is trade.  There could be expectations in the ordinary way of implied obligations on a vendor imposed on a person who sells second‑hand bibles.  There is trade.  They are a trading corporation.  That would be, in our submission, fatuous, but it is in that direction that attention to financial statements to record the fact of revenue and expenditure inevitably tends.

Your Honours, could I then come to the question which, as matters now stand in this hearing, the critical matter in terms of whether we can succeed or not.  I say that leaving to one side the appropriations argument that is concerning the interpretation of section 15 of the (No.1) Act about which I wish to say nothing in reply.  But if there be an appropriation, as has been argued against us, and there is no breach of section 116, then the question still remains whether the funding agreement under which the Commonwealth provides funds for the chaplaincy at my client’s children’s school is lawful in the sense of being made pursuant to legal authority and, in our submission, the answers should be, as we contend in our written submissions, but for reasons which have undergone some refinement during this hearing.

Without changing or abandoning anything we said in‑chief and upon reflection on the matters that have fallen out in argument concerning the executive power, we would reply to the arguments against us in summary as follows.  The first is that this is an argument not assisted by an expression like “the grants power” used by my friend, Mr Merkel, an expression which is, in our submission, as unhelpfully tendentious as the former expression “the appropriations power”. 

The second is to note that when one finds the word “grant” in the Constitution, it is of course in section 96, and that brings me to a matter which links this executive power argument to the question of (xxiiiA). It has been put against us by reference, one must suspect, to the sympathetic nature of a program to assist children who are autistic, or their teachers and parents, it is put against us that a reason why there should be both an interpretation of (xxiiiA) in extension of the executive power to make grants in aid of such projects that there would otherwise be an incapacity of the Commonwealth. That cannot be right.

There must be, as your Honours would no doubt be able to identify with very few minutes reflection, a huge number of projects, schemes or initiatives, to use language that has been used from time to time, in relation to the health of the country’s citizens and in relation to the schooling of some of them, not to mention many other fields, some of which have bipartisan support, quite a few of which seem to be relatively popular judging by their long‑lived nature, which are carried out not under (xxiiiA) it not being a general banner of social service or social welfare provision, but under section 96. In our submission, there is absolutely no support textually or contextually, let alone from what might be called argument’s convenience or national expedience, to be gained by reference to the fact that there are some programs that might not fit with the arguments that we advance concerning what is called tendentiously the grants power, that is, the bare section 61 exercise of a power to spend money, or a reading of (xxiiiA).

Your Honours, when I refer to the common assumption, by now of course that is pretty much a valedictory expression.  There is something left in it and I am going to come to not a rump, but a core which, in our submission, your Honours may find helpful in addressing what is thrown up as the decisive question in this part and it may be either the major or only real part of this case, and that is whether assuming appropriation and with no breach of section 116, so no relevant constitutional prohibition, whether the Commonwealth Executive, as it has done, may bind itself by contract to make payments from the appropriated funds for the purposes and on the terms which are set out in the documents to which you have been taken exhaustively, and whether it has power to do so, the particular question, in the absence of enabling legislation.

Once upon a time, that question would not have made sense, at least to Sir Robert Garran and those who were of his mind, once there is granted the availability of appropriated funds. But now that section 81 is not pace part of Mr Merkel’s address today, once section 81 is not available as the source of a spending power – or more properly, a law made under section 83, being that which is required by section 81 – is not available as a spending power, then all the weight in the critical question comes down to section 61 itself. The metaphor of section 61 intersecting, which has been used in, I think, all the arguments your Honours have heard, is, with great respect, most obviously or usefully deployed when one is talking, and talking only about, section 61 and section 51(xxxix), because section 51(xxxix) refers, of course, to that which includes section 61. But if à la the common assumption or otherwise, there be any value in considering the so called intersection between section 61 and other heads of power in section 51, and I suppose one would add 52, it must first be noted – and this is, we think, against the common assumption as stated at least by us in our written submission, being an adequate statement of the law – it must first be confronted that it is in danger of falling out simply as follows.

The Constitution by section 61 empowers the Commonwealth Executive to do things that have been authorised by legislation made under a section 51 power, the first step. The second step, therefore, section 61 empowers the Commonwealth Executive to do things that have not yet and may never be authorised by legislation made under a section 51 power. We hope that is not a travesty of one way in which to see something of which I am as guilty, or more guilty than any of the advocates in this case, of having stood up to advance by the written submission when the case started. I hope that is not a travesty. It certainly is intended to identify at the heart of the matter why there ought to be the scrutiny that your Honours have acquired.

It obviously cannot be right when one considers, to start with an obvious one, 51(ii). It may be said of 51(ii) that the taxation power is one where the Constitution by its specific attention to motive legislation is enough to show that it has to be by legislation. One might also say that about matters referred by the States, I suppose. But, in our submission, that cannot do, as a reason, to say “Oh, well, one exempts from the common assumption taxation”. You cannot tax by executive fiat by saying “I could make a law under 51(ii). I have not. I impose it under section 61, and if I need to have a power to break your door down to levy execution, then I will do that under 51(xxxix)”.

The reason why that will not suffice to call tax special is that, in our submission, it could not be stated seriously by anyone concerned to construe the Constitution as a whole, that the Executive can create offences punishable by exercise of Chapter III power without legislation, that is. That is not to say that an action of the executive, classically by a disallowable instrument, may not provide the content of an offence, which itself is created by Parliament and then adjudicated and upon conviction punished by Chapter III power, but that is a different thing altogether. That is simply an attribute of delegated legislation.

One might also say, and surely for similar reasons, that the Executive could not, by noting grounds available under section 51 quite a few of the heads of power, for powers of restraint of personal liberty, be they quarantine or otherwise, one surely could not say that by executive fiat, section 61, there could be imprisonment, that is, lawful imprisonment. And then expanding more generally from that and considering trespass, both to inanimate property as well as to person, in our submission, there ought to be long pause before it is determined that under section 61, in the absence of any legislation, a tort may be authorised.

FRENCH CJ:   Some of these problems would be avoided – and this reflects a question I put to the Solicitor‑General for the Commonwealth but it may not be an answer – if the proposition were that the Executive has power to do that which it could be authorised by statute to do under a head of power in section 51.  That necessarily would not involve the imposition of liabilities.  It is a question of what the Executive could be authorised to do and then one narrows the class of executive action.

MR WALKER:   Yes, quite.  What the Chief Justice has raised with me is something that, as I recall it, I, in-chief, and my learned friend for the Commonwealth, was in my case, seeking to refer to when noting that there were areas which would not impinge upon other people’s legal rights or obligations, so as to classically simply assuming a voluntarily relationship by contract with a person, which would not give rise to any jarring concern about whether the executive was purporting to authorise a tort, for example.

Your Honours, against that general background one notes that which has been raised several times by your Honours with not only me but my friends, and that is what does one draw from the applicability of section 109 to inconsistency between enacted laws if one is positing a very broad area of executive action under section 61 limited only by the contours, say, of section 51, that is, of legislative competence with the understood addition of those things peculiarly appertaining to a sovereign – treaty making – and those things that can only be done nationally in what I will call an emergency.

If I can lump those two together for convenience of speech as nationhood matters – I do not mean to be proposing a third or different source but just call them nationhood – and then concentrating on the contours of legislative competence argument, in our submission, there is a means by which a puzzle that would otherwise be created, what do you do about an inconsistency between what the Executive promulgates under this bare section 61 underneath the umbrella of potential but not exercised legislative competence. What do you do about that when it is different from, perhaps calls for different conduct from, a person subject at one and the same time to a dealing with the Commonwealth and a dealing with a State.

It will not quite do, with respect, to say, well, Commonwealth executive action is, and by definition - see Mr Justice Stephen in AAP or you could also see Mr Justice Isaacs in Wool Tops on this point- it does not quite do to say it is by definition always outside the sphere of State control because as in section 109 for clashes between enacted laws and their commands or prohibitions, that is no comfort to the person who is caught in the floodlight.  The polities may not be treading on each other’s feet but they may be treading on a person’s freedom of conduct and in different ways.  Nor, would it appear, that the approach in Henderson concerning what happens when the Commonwealth, as it were, takes it upon itself to act in a way regulated as for ordinary legal persons by State legislation, nor will that provide a form of reconciliation because many of the matters – this chaplaincy program being an excellent one by way of example – in question are those that are peculiarly governmental.  That is, they are putting into play – as natural persons cannot – policy decisions made by government.

Matters submitted, or not, as the case may be, debated or not, as the case may be, as matters of politics that is among citizens and voters and by their representatives who by majority in the Lower House have created the controllers of the executive power of the Commonwealth.  That brings me to the next of the general propositions and that concerns what Justice Gummow drew to attention in the course of argument, namely, the phrase to be found in a number of the authorities in various forms, references to the structures of representative democracy.  One can add to that responsible government, of course, but it is not just federalism which is important and clearly that is critical and fundamental.  We submit, as your Honours will recall from my repeated references to the role of the Senate by reasons of sections 53 and 54 there is also bicameralism which is part of the structure of representative democracy for the national polity, and there is, or course - and in both Houses but in different senses - executive responsibility to the Houses of Parliament, to both of them.

It is a different form of responsibility to the Senate than it is to the Lower House where governments are made or broken but it is still a form of responsibility.  In our submission, when one puts all of that together, it is not to be decried as of itself and always an inconvenience that there would need to be legislation to carry out what we will call an new initiative, to promulgate and execute a new policy at the expense of the taxpayers, many of whom are voters - to put it the other way, many voters being taxpayers.

In our submission, the way in which one should approach the question, therefore, of executive power under section 61 is to seek, if possible, to describe it rather than to adopt what has most recently been called a default position said to be a mirror of the unlimited position of the Crown in the right of the United Kingdom at the time of Federation and then to see some limits. In our submission, if possible, it would be better never to adopt a default position which amounts to no limit, bearing in mind that so far, at least, even if I may say so facetiously in light of some of the things my learned friend for the Commonwealth has put, it has not so far been said that the Executive lacks limits on its power under section 61. If there are limits, it might be better to be able to describe them.

My learned friend the Solicitor for Queensland has been criticised, albeit most courteously, by my learned friend for the Commonwealth for promulgating not only an opposite outcome to the case from that which he arrived to argue but doing so on the basis of a test which was not then sufficiently brought to light to enable a proper contest. In our submission, without wanting in any way to seek to emulate or touch upon the rhetorical pungency of my learned friend for Queensland, it is important to note that the beginning and end of his argument and, we would submit with great respect the middle as well, is to seek to answer the question of description of the power by an argument concerning the meaning of the words of section 61 itself and, obviously, “the execution and maintenance of the Constitution of the laws of the Commonwealth” is the phrase in question. Of course, “execution” calls in mind, obviously, the notion that this is the executive power.

In our submission, trying to synthesise matters that have a reason in the course of argument and on the basis of the common assumption does not survive as a matter of persuasion, could we attempt the following sequence of reasoning.  One starts with the notion that the activity in question here is spending which is a larger field of activity in one sense than contracting.  Thus, one can spend by the making of gifts, by meeting a demand for judgment for tortious damages or by paying just termed compensation.

But in another sense, of course, contracting is capable of requiring different and wider forms of conduct than mere spending. 

So spending and contracting both need to borne in mind when considering the nature of the executive power said in this case to support the making, without any enabling legislation, of the funding agreement and the expenditure of money and the supervision of their terms under the funding agreement.  Both spending and contracting, of their nature, are executive acts, by which I mean they are not legislative.  They are, if authorised by an Act of Parliament, classically those things which will be done by agents of the Commonwealth, mostly by members of the Executive or servants of the executive.  So that the activities of spending and contracting are actually conducted, that is carried out, by the Executive not the legislature. 

Both of the kind of activities, contracting and spending, are of their nature controllable. They are obviously controllable, capable of regulation in the sense of permission, conditioning or prohibition by statutes. They are susceptible to that affectation. Any such statute, all such legislation, will of course be limited as to their scope, what they may provide, by the terms of the relevant head of legislative competence possessed by the Commonwealth Parliament. So the controls on contracting and spending by statute is self‑evidently limited by reference to the statute, and at this point we think – this is not a common assumption, but I think it is common ground – we think it is common that no one is urging that the intersection of sections 61 and 51(xxxix) provides for some infinitely leap frogging capacity always to have legislative competence so soon as the Executive determines that something is fit to be done by the Executive, hereupon engaging the incidental power under 51(xxxix). No one argues that, and as I kept count, everyone protested that was not the law and could not be a starting point for any argument about the scope of section 61 power.

We would prefer to put that matter as follows, that it is the essentially limited nature of the governmental powers, Commonwealth, State and, to the extent it is contemplated, Territory, that is addressed in the Constitution. It is that that means that section 61 and section 51(xxxix) cannot be read as a means of abolishing any definition of Commonwealth legislative competence. We submit, with great respect, that a statement of that position which certainly puts the argument as we seek to advance it is to be found in the reasons of Justice Heydon, paragraph 397 of Pape.

The step reached in the sequence of reasoning so far means, we submit, that on any view, the power in section 61 is not unlimited, a matter which seems beyond dispute – see, for example, in Pape page 87, paragraph 228, pages 90 to 91, paragraph 239, pages 118 to 119, paragraphs 335 to 338.  I am not going to take your Honours to those passages.  You have had them read several times.  May I, in relation to 228, note that it is a sequence of 220 to 228 that needs to be read.  It culminates in 228.

There is no statute pointed to in this case and the admonition to and obligation of the efficiency and economy on departmental heads in the Financial Management and Accountability Act is not said in this case to provide any power to spend the money or to contract to spend it and supervise its expenditure, which is the subject of this case. That statute raised by Justice Hayne with me in-chief is, of course, likely to be a law of the Commonwealth in execution or maintenance of which a deal of executive action under section 61 can and must be taken, quite apart from that which would be within its very authority or pursuant to which very command, but not in this case.

GUMMOW J:   Does this include the Financial Management and Accountability Regulations?

MR WALKER:   That last proposition did not, no, your Honour. The question in this case is whether the section 61 power exists in the absence of enabling legislation. We put aside, as I say, the Appropriation Act as enabling legislation. It appropriates, it does not authorise the spending. But adapted to the requirements of sections 81 and 83, the principle or notion in Bardolph pronounced in that case with respect to the States does mean that the enforcement of any agreement made by the Commonwealth or, we would add, its lawful performance by expenditure on the part of the Commonwealth is naturally conditional on the availability of appropriated funds. 

Now, that does not matter in this case on the basis of argument I am now putting because the argument I am putting about executive power accepts for the sake of argument that we have failed to persuade your Honours on the meaning of the Appropriation Act.  But having noted that conditionality, which is not a pre-condition of being able to make the contract but only being able to perform it, we can put it to one side.  It is of no more importance in reality than the hope a private contracting party has – the counterparty, also a private contracting party, will be sufficiently solvent come the time to pay any money required.

So then coming back with this assumed appropriation to the question of power, we submit that even if funds have been appropriated for the chaplaincy program, the question remains whether spending to perform the obligations assumed by it is lawful without enabling legislation, and only section 61 is posited. There is nothing else. Once the common assumption is exploded or abandoned and the statements in AAP are read as expressing limits without describing the extent of power, so an outer limit but not the extent of power in any particular case within those limits, the question is, how should the section 61 power be described if one were moving to explicate rather than simply quote the words of section 61 in the absence of enabling legislation? Why one should try to do that is that that is the best way then to be able to decide a concrete case, such as presented here, as to whether the chaplaincy program fell within a power so described.

Insofar as common ground exists, notwithstanding farewell to the common assumption, there is of course the two aspects that I have called nationhood that one can put to one side immediately in this case. First, their existence is not in doubt, even if from time to time and case to case more precise or more adapted language may be called for in light of different facts. So neither of those is available in this case. We understood, perhaps, some of the argument from my learned friend Mr Merkel this afternoon to indicate the possibility of a national response – my term, not his – argument to justify section 61 in the case of this program.

In our submission, that ought to be briskly dealt with and disposed of by asking, how can it be said there is any observable incapacity of the States to do this and how could it be said that there is anything truly national, apart from the Dr Evatt sense as politician not judge that is, namely, it is better to do things nationally than to put up with differences between States, how could it be said there is any national aspect to this when the scheme itself bespeaks that it will only be available to such local communities as volunteer to take advantage of it?  So there is nothing of the universality that might indicate nationality and there is nothing of the uniformity of approach that might indicate nationality. 

That then only leaves the execution and maintenance of laws of the Commonwealth. According to the text of section 61, you have got the unspoken nationhood with its twin aspects, you have got the execution and maintenance of laws and it has been established there are no laws in the sense of enacted statute. It is not available here, but of course it is a very important part of possible exercise of executive power in the absence of enabling legislation, because there will very likely often be a lot of section 61 conduct without enabling legislation, for example, policy consideration and inquiry about changes to enacted law, the sheer administrative necessity or convenience that will be raised by the existence of much legislation for a deal of Commonwealth expenditure on general administration not specifically averted to in a statute.

In relation to what might be called powers proper to a national executive, the second limb of the nationhood aspect, the Davis or Pape approach, treaties or flags at the highest level, that obviously is not available here but it will supply an answer to most if not all of the complaints that I might shoot home to the Commonwealth side, as it were, that a limited reading of the section 61 power would hobble the nation. If what I have tagged the nationhood powers are understood to inform the scope of section 61 power in the absence of enabling legislation according to their various descriptions in the cases that have been touched on in the argument of this case, by definition the nation will not be hobbled.

So we come then to the possibility that, in our submission, the cases and a structural reading of section 61 within the Constitution as a whole produces, namely, that possibly added to the execution and maintenance of laws of the Commonwealth perhaps as a form of a form of penumbra to that, perhaps also as a penumbra to the nationhood aspect, there is what Sir Owen Dixon called the ordinary course of administering a recognised part of government.

CRENNAN J:   Bardolph is it?

MR WALKER:   I quote from Bardolph (1934) 52 CLR 455 at page 508, about point 3 on the page.

CRENNAN J:   Also, I think Justice Rich at 496:

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.

MR WALKER:   Your Honour anticipates me.  Page 496, point 2, there is also 494, point 4 by Sir George Rich.  With Justice Crennan’s helpful quotation added to what I have quoted from Sir Owen Dixon, one sees that there are of course variant ways one can express this by words, but that is no reason to disqualify it as a constitutional prescription.  It reminds one, with respect, of that which your Honours Justices Gummow, Heydon, Kiefel and Bell quoted in Clarke 240 CLR 272 at 307, paragraph 66, as drawn to attention earlier this afternoon, quoting from Austin, namely, that as to the Melbourne Corporation doctrine, which is avowedly a constitutional limit to be observed and applied by this Court when necessary, that it of course:

inevitably turns upon matters of evaluation and degree and of ‘constitutional facts’ which are not readily established by objective methods in curial proceedings.

Nonetheless, that is the important task given to this Court in relation to Melbourne Corporation doctrine and, in our submission, the way in which Justices Rich and Dixon saw the matter in Bardolph should commend itself to this Court as a very useful way of describing that which, if I may put it this way, intuitively appears appropriate for the existence of executive power under section 61 without enabling legislation.

There is a textual reason to support that as well, in our submission.  That is suggested by Chief Justice Knox and Mr Justice Gavin Duffy in Wool Tops (1922) 31 CLR 421 at 432, point 8. I say suggested because it went no further. Their Honours said:

It is true that sec 64 of the Constitution directs that the Sovereign through his Ministers shall administer such departments of State as the Governor-General in Council may establish –

It has to be said that is a paraphrase –

and they would probably be authorized to make such contracts on behalf of the Commonwealth as might from time to time be necessary in the course of such administration; but it is not pretended that the contracts now in question come within that category. 

We submit quite so, exactly so, in this case and there must be many things that could have been done in relation to the chaplaincy program such as investigating whether it is worthwhile and examining methods of co‑operation with the State which would not have then needed enabling legislation for the Commonwealth to spend money on carrying out those ordinary acts of a recognised form of government, which includes, of course, considering new ways to spend money for the good of the country.

HAYNE J:   But would that class extend beyond those matters that attend upon the departments of State mentioned in section 64 and again in section 69?

MR WALKER:   No, it would not and, by the way, in this textual argument I should add as well, if one recalls Kidman, the argument raised but not decided in section 68 the commander in-chief power as well.

HAYNE J:   At least to an extent there is an execution of the Constitution.

MR WALKER:   Exactly. What I draw to attention as words in section 64, of course, is the gerundival “to administer” and it is not coincidental, with respect, that once upon a time in terms of the Parliamentary practice, what is now called “departmental” and usefully called “departmental”, much of it was called “administrative” as distinct from “administered”. In our submission, that provides a sound textual basis to adopt the approach that we have suggested one thereby obtains to produce a position whereby much spending, perhaps most spending by the Commonwealth pursuant to contract would not need an enabling legislation for the contract or, indeed, for the spending. You still must have the appropriation, but you must have the appropriation with contract or not. In our submission, if I may put it this way, this solves the pencils problem completely, but, of course, it may involve much more major procurement than pencils assuming that they are no longer bought in the quantity they once would have been.

FRENCH CJ:   What part in this delineation of executive power does the execution of agreements between the Commonwealth and the State perhaps pursuant to which payments might be made to a third party, therefore, not a 96 situation at play?

MR WALKER:   Well, the first thing is that section 96 could include payments to a third party as part of the terms.

FRENCH CJ:   Yes.

MR WALKER: Indeed, it might be said that ought become if not de rigueur, very common. The second is that this is a case which, notwithstanding the mere presence of the State chaplaincy policy to the Commonwealth policy – indeed, it might even be said the Commonwealth funds are supplementing the capacity of the State to provide something – but leave that aside, in our submission, the nature of the federal Constitution creating one new and transforming former colonies, polities is to create the possibility of political accommodation recognised, of course, by the referred powers provision and recognised by financial agreements and it follows that there must be power to treat and if there is power to treat, it would be absurd to have the doormat without the door; there must be power to agree.

Is that an exercise of executive power? The answer is yes and if it is to be put anywhere, it will be in the execution of the Constitution insofar as it ends up in a referred powers or a section 96 agreement. If it results in an agreement which is neither of those forms of accommodation, then it would be, in our submission, that which appertains to the national polity in this federation.

HEYDON J:   You said that policy inquiries were within section 61. Are policy experiments within section 61?

MR WALKER:   They may or may not be, your Honour. In our submission, not all experiments are of novel expedience. If it is of a novel expedient, as one would hope, in a sense of efficiency, then no, it would be unlikely in the nature of things that that would be within section 61, as I suggest it might be described by your Honours. If it was a sufficiently humdrum or mundane experiment that did not really attract the description policy, then of course it might be within what I will call “the Bardolph, Justices Rich and Dixon approach”.  But if it were truly a policy departure, a novel program, then it would not evade the requirement for enabling legislation to call it a pilot, to call it a trial or to call it an experiment, insofar as it involves activities by the Commonwealth, including contracting or spending, it would need the enabling legislation.

CRENNAN J:   Is the end point this, spending on, or making contracts in respect of the activity or enterprise of chaplaincy in schools in Queensland does not fall within the ordinary and well‑recognised functions of the Commonwealth Government?

MR WALKER:   It does in this case, yes.  That is where it comes to ground so as to produce a win for us in this case, yes, your Honour.  That is because I started with describing the expression “grants power” as unhelpfully tendentious.  That is because it simply will not do to say that it is within that, for example, Dixon formulation to say “for governments to give money away”, whether pursuant to contract or by gift.  That is not the point.  If you call it a grant, you do not make it any better, it is still spending.

In our submission, it would be the height of cynicism and the evasion of Parliamentary control of the Executive simply to say, “Oh, well, executives give money away, spend money, therefore, all spending of money is something an executive may do without legislation.”  That, in our submission, is chop logic of the worst kind.  Your Honours, there are three final comments I want to make by way of observation about this.  The first is what I will call the Commonwealth adapted Bardolph approach, the Justices Rich and Dixon approach that we urge, has the advantage, of course, that matters that do not lie within that ordinary course of government business category, which is a very large number of contracts, one would imagine – much procurement would fall within that – it will be divided as to appropriation between Appropriations Act, in current usage, Appropriation Act (No 1) and (No 3), on the one hand, or (No 2), on the other hand, depending upon what I will call novelty.

It may also depend upon characterisation such as recurrent expenditure or capital expenditure.  So, the replacement lifeboat on the battleship is one thing, the new battleship is another thing altogether.  All of that, in our submission, is ultimately a matter for the Houses between themselves, pursuant to sections 54 and reading back into 53, to ascertain concerning appropriation, but thereafter, when it comes to the exercise of making the contract, there is, in our submission, a necessity for the Executive to be authorised by law, which can no longer be done in this country simply by pointing to a large lump of money in the Appropriation Act and saying it is within an outcome or activity.

GUMMOW J:   How does your adoption of Justice Dixon at 507 of Bardolph accommodate the result in Pape, “a recognized and regular activity of [Commonwealth] Government”?

MR WALKER:   In a sense, they are different universes of discourse because Pape was not asking could this be done without enabling legislation.  There was the Bonus Act and all I am putting is the Bardolph suggestion to deal with the situation where there is no enabling legislation.  I gather your Honour’s question raises the kind of decision which would need to be made from time to time if we were correct in suggesting that in place of the common assumption there should be an understanding of the kind I have sought to sketch.

GUMMOW J:   May that change over time?

MR WALKER:   Yes, and so much the better, in our submission.  Just as parliamentary practice may change over time, one hopes it is – I was about to say glacial but maybe glaciers are changing more rapidly than we would like nowadays, your Honours – but one would imagine that it is not subject to the frequency of, say, the electoral cycle.  That would be curious.  Certainly we would resist a “trapped in amber” approach of 1900 in relation to the formula that Justices Rich and Dixon essayed and there is nothing in the way their Honours expressed themselves to suggest that they were thinking in those terms either.

GUMMOW J:   So there are some species of executive power which exist only because, as an incident to them, there is an engagement of 51(xxxix), is that right?

MR WALKER:   No.  The argument I have been putting has nothing to do with 51(xxxix). 

GUMMOW J:   I thought you were putting Pape to one side.

MR WALKER:   Your Honour, that is what I am saying.  The argument I am putting does not involve 51(xxxix) because it is about what can you do without a statute?

GUMMOW J:   I know that.

MR WALKER: All I am saying is, from the words of section 61 plus nationhood, one derives as well those things which are either involved in the execution and maintenance of constitutional laws not directly but in the sense that you need the ordinary course of government business to go on or, separately, they are within that description which would exclude anything in the nature of a new initiative or program for activity, including spending, of the kind that presents itself in this case.

The next of the three comments is that this an approach that does not need any analogy with the powers or capacities of a natural person, but because the ordinary course includes the possibility of contracting, and that is with legal persons not with oneself, all one needs is the power to deal with other juristic or legal persons, be they natural or otherwise, corporations or individuals.  One way to put it is that it is an implication necessary in the relevant sense, that is, reasonably necessary and adapted to the requirements of execution and maintenance of constitutional laws and being the national polity, that one can deal on what I will call an equal, a fraught word but it means equal capacity relevantly, or perhaps more precisely a complimentary basis with other legal persons.  When I say more precisely complimentary, I mean you must be able to do a deal with them to have dealings with them notwithstanding you may never be equal, for example, because you may have either privileges or disabilities appertaining to your status as a polity.

HAYNE J:   Just reverting a moment, if I may, to the question Justice Gummow asked of you concerning the particular question of the Executive acting in matters of nationhood, emergency, et cetera, is not the accommodation to be found in the recognition that section 61 is cast in terms of and extends to?

MR WALKER:   Yes.  As I think my friend for Queensland put, yes.

HAYNE J:   And that we are here, you would have it, in the realm of – or in that part of the section which is appearing after “extends to” and you point to the fact that when you submit that, no one says we are ‑ ‑ ‑

MR WALKER:   No one says there is a law and no one says ‑ ‑ ‑

HAYNE J:   ‑ ‑ ‑ in the nationhood area.

MR WALKER: We are not nationhood, no one says there is a law, and in our submission, this is surely not within what Justices Rich and Dixon had in mind. The last comment is this, your Honours, if it is understood in this fashion, it is our submission that the section 61 power, and now I am returning to the common assumption, but to its core, must fall within the limits set, leaving aside the nationhood maters, of the contours of legislative competence, because apart from those sovereign or emergency implications, the notion of government is one of government by law and that therefore you cannot have the Executive Government under section 61 extending beyond what could be legislated. It is the legislature that controls the executive, not the other way around.

You could not have a section 61 power beyond the power, therefore, the Parliament to regulate it, and you cannot simply have, as I have put already, section 51(xxxix) as a constantly shifting, always leaping and limitless potential of legislative competence in that regard. It is not a free‑floating head of legislative competence, and the salutary effect therefore is that there will be expedience, such as this chaplaincy program, that the executive, that is the Government, the Ministerial party with the power given by the majority vote in the Lower House, will nonetheless have to submit the Parliament which will include the Upper House with a full power of amendment. May it please the Court.

FRENCH CJ:   Yes, thank you, Mr Walker.  Yes, Mr Solicitor.

MR GAGELER:   Your Honours, may I say something very briefly in strict rejoinder.  My learned friend, at the end of his reply, has taken a test stated by two members of the Court in Bardolph as a test for determining the authority of a Crown agent – read it in context, that is what they are addressing – and has turned that test into a constitutional test for ‑ ‑ ‑

GUMMOW J:   What, the Crown agent being the tourist bureau?

MR GAGELER:   Yes, and so the question was, was the carrying on of this tourist bureau an ordinary function of government?  Look at what has been happening over the years in practice.  That is where that expression fits into the analysis in Bardolph, and he has taken that and he has characterised it as a return to Wool Tops.  Sir Owen Dixon, who had argued against the correctness of Wool Tops, was not in Bardolph returning to that view.

HEYDON J:   Just because a barrister argues against something does not mean they do not believe in it.

MR GAGELER:   It would be an unlikely scenario, your Honour, and it would have him contradicting, at page 508, what he said in more concrete terms at page 509.  I read your Honours the passage before.  The other point to make is this, that as a constitutionally workable test, the ordinary functions of government or the ordinary and well-recognised functions of government has been rejected on numerous occasions.  The strongest language your Honours would find in the Professional Engineers’ Association Case 107 CLR 208. If the Court pleases.

FRENCH CJ:   Thank you.  The Court will reserve its decision.  The Court adjourns to 9.30 tomorrow morning in Sydney and 9.30 tomorrow morning in Canberra.

AT 3.24 PM THE MATTER WAS ADJOURNED