High Court Chaplaincy case and government contracting

By Legal Eagle

Just a few days ago, the High Court handed down a decision in Williams v Commonwealth of Australia [2012] HCA 23 in which the Commonwealth government’s school chaplaincy program was found to be invalid because the funding of it was beyond the power conferred by s 61 of the Constitution. However, the chaplaincy program was not in contravention of s 116 of the Constitution, the ‘freedom of religion’ clause.

To give a little history, the National School Chaplaincy Program was established by the Howard Government in 2007, according to which state schools were offered funding to introduce or extend chaplaincy services. This scheme was watered down somewhat by Labor, which allowed schools to employ a non-religious student welfare worker if they so chose. Ron Williams, a father of seven from Queensland, was unhappy with the scheme because he saw it as allowing for the proselyting of religion in state schools (a claim also raised by others in April 2011). Four of his children attended Darling Heights State School, and the Commonwealth paid Scripture Union Queensland (SUQ) to provide chaplaincy services at Darling Heights State School. The payments were made under the Darling Heights Funding Agreement (DHF Agreement) between the Commonwealth and Scripture Union Queensland for the purposes of the National School Chaplaincy Program. SUQ is a public company limited by guarantee and is registered in Queensland. It described itself in its Constitution as ‘the Mission’. As the High Court notes, its objects stated in its Constitution are “to make God’s Good News known to children, young people and their families” and “to encourage people of all ages to meet God daily through the Bible and prayer”. In order to achieve these objects, it is to “undertake … a variety of specialist ministries”, “shall preach the need of true conversion and of holiness in heart and life” and “shall aid the Christian Church in its ministries.”

The Department of Education, Science and Training issued NSCP Guidelines. The guidelines were administrative in nature and did not have statutory force. These guidelines were revised from time to time, and later brought under the responsibility of the Department of Education, Employment and Workplace Relations. From July 2008 DEEWR also made funds available under the NSCP for the provision of secular pastoral care workers in accordance with a Secular Service Providers Policy.

Williams argued that the hiring of chaplains was impermissible according to s 116 of the Constitution. Section 116 reads:

The Commonwealth shall not make any law for establishing any religion, or for imposing any religious observance, or for prohibiting the free exercise of any religion, and no religious test shall be required as a qualification for any office or public trust under the Commonwealth.

Williams argued that the position of ‘school chaplain’ qualified as an ‘office … under the Commonwealth’ and that the definition of ‘school chaplain’ in the (non-binding) Guidelines imposed a religious test for that office. To qualify as a ‘school chaplain’, a person must be recognised ‘through formal ordination, commissioning, recognised qualifications or endorsement by a recognised or accepted religious institution or a state/territory government approved chaplaincy service.’ The High Court unanimously found that he failed in this contention because school chaplains did not hold office under the Commonwealth. So, for example, at [109], Gummow and Bell JJ say:

The chaplains engaged by SUQ hold no office under the Commonwealth. The chaplain at the Darling Heights State Primary School is engaged by SUQ to provide services under the control and direction of the school principal. The chaplain does not enter into any contractual or other arrangement with the Commonwealth. That the Commonwealth is a source of funding to SUQ is insufficient to render a chaplain engaged by SUQ the holder of an office under the Commonwealth.

To be honest, this is not really a surprise. Traditionally, s 116 has been interpreted very narrowly by the Court. Nerdily enough, in my personal copy of the Constitution I have a pencil annotation next to the section saying, “can’t establish religion but cf DOGS case, can’t impede religious belief but cf Krygger v Williams and Jehovah’s Witness case“. The ‘DOGS case’ is Attorney-General (Vic) (Ex rel Black) v Commonwealth (1981) 146 CLR 559 in which the High Court held that Commonwealth funding of religious schools did not contravene s 116. Murphy J dissented. The majority distinguished s 116 from the more broadly worded equivalent in the US Constitution, and found that s 116 meant only that the Commonwealth could not require a particular religion to be the state religion. Krygger v Williams (1912) 15 CLR 566 held that a person could not conscientiously object to military service on the basis of religious belief alone, and that s 116 did not operate to prevent a law requiring compulsory military service. Adelaide Company of Jehovah’s Witnesses Incorporated v Commonwealth (1943) 67 CLR 116 (Jehovah’s Witness case) was a war-time case where the Adelaide branch of the Jehovah’s Witnesses was dissolved and its Kingdom Hall was acquired by the Commonwealth on the basis that it was prejudicial to the defence of the Commonwealth and the efficient prosecution of the war. The Court held that the Commonwealth could enact laws preventing subversive organisations in war-time notwithstanding s 116.

As noted above, Williams also argued that that chaplaincy funding scheme was in contravention of s 61 of the Constitution which reads:

The executive power of the Commonwealth is vested in the Queen and is exercisable by the Governor-General as the Queen’s representative, and extends to the execution and maintenance of this Constitution, and of the laws of the Commonwealth.

Essentially, s 61 confers executive power on the Commonwealth, and it has always been assumed to operate fairly broadly. This was where the surprise came in (for this non-public lawyer, anyway): a majority of the Court (French CJ, Gummow and Bell JJ, Hayne J, Crennan J and Kiefel J) held that the Commonwealth funding of the SUQ was beyond power. Essentially the Commonwealth did not have the power to enter into the DHF Agreement, nor did its performance occur in the course of the Secretaries of the relevant government departments performing a managerial function. The Financial Management and Accountability Act 1997 (Cth) did not give rise to a power to spend the money: instead this Act was directed to prudent conduct of financial administration. Nor was there any other statute which provided a source of executive power to enter into the DHF Agreement and to undertake the challenged expenditure. So, for example, French CJ concluded at [83]:

Neither the DHF Agreement nor the expenditure made under it was done in the administration of a department of State in the sense used in s 64 of the Constitution. Neither constituted an exercise of the prerogative aspect of the executive power. Neither involved the exercise of a statutory power, nor executive action to give effect to a statute enacted for the purpose of providing chaplaincy or like services to State schools. Whatever the scope of that aspect of the executive power which derives from the character and status of the Commonwealth as a national government, it did not authorise the contract and the expenditure under it in this case. The field of activity in which the DHF Agreement and the expenditure was said, by the Commonwealth, to lie within areas of legislative competency of the Commonwealth Parliament under either s 51(xxiiiA) or s 51(xx) of the Constitution. Assuming it to be the case that the DHF Agreement and expenditure under it could be referred to one or other of those fields of legislative power, they are fields in which the Commonwealth and the States have concurrent competencies subject to the paramountcy of Commonwealth laws effected by s 109 of the Constitution. The character of the Commonwealth Government as a national government does not entitle it, as a general proposition, to enter into any such field of activity by executive action alone. Such an extension of Commonwealth executive powers would, in a practical sense, as Deakin predicted, correspondingly reduce those of the States and compromise what Inglis Clark described as the essential and distinctive feature of “a truly federal government”.

Heydon J (as is his wont these days) dissented, starting out with the words, “I dissent” (in case there was any doubt about the matter).

What really interested me, of course, is the effect this will have on government contracting. It has always been assumed that the Commonwealth government’s power to contract is very broad, but this case may render a number of contracts beyond power. The High Court seems to imply that legislation is needed to back up such executive expenditure, and even then this may not always suffice. In immediate commentary after the case, I noted the following in the Sydney Morning Herald:

One of Australia’s leading constitutional lawyers George Williams said the implications of the case were massive and could potentially affect any program directly funded by the federal government.

This would include the local government Roads Recovery program and even direct funding of private schools.

”This sets down very significant limits on the ability of the Commonwealth to spend money,” Professor Williams said.

”I suspect this decision will embolden people to challenge Commonwealth expenditure in other areas.”

Professor Williams said that, while the Commonwealth could still provide funding, it may have to be through the states, rather than funding programs directly, which had been its preference.

”This may lead the Commonwealth to engage in a major rethink of its budgetary processes – what it spends money on and how it does that,” he said.

“This is very likely to be the biggest High Court case of the year.”

I can’t help wondering what the effect on government contracting will be. At the least the DHF Agreement and other chaplaincy contracts have been rendered ultra vires by the ruling. But what other contracts may be challenged? Naturally my mind considered the possibility of void contracts, and then went immediately to the potential for restitutionary actions in relation to payments under ultra vires contracts. I presume that most of the parties to government contracts will not want to challenge them and render them void — they will leave well enough alone — but there must be government contract lawyers scrambling to check numerous contracts in the light of all this.

There are a raft of cases in the UK (the ‘swaps cases’) involving a series of interest rate swaps agreements which were entered into by local councils, and later found to be ultra vires. Banks had advanced certain moneys on the basis that the councils would repay them, and suddenly found that there was no contract governing the repayment any more. Consequently, they had to have recourse to the law of restitution in the absence of an enforceable contract. The litigation from that is still ongoing.

In Australia, we had the case of Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516, where tobacco retailers bought products from licensed wholesalers under a series of contract which provided that the retailers would pay the wholesalers certain amounts representing ‘licence fees’ (or taxes) imposed on tobacco products by the NSW government. The wholesalers put aside licence fees to pay to the NSW government, but before the fees could be paid, in Ha v New South Wales (1997) 189 CLR 465, the High Court declared that the licence fee was a duty of excise within s 90 of the Constitution and thus invalid. The question was then who would get the licence fees? The retailers had already passed on the cost of the fees to individual consumers who had bought the cigarettes. Could the retailers seek restitution of the tax? It has always dissatisfied me that the persons who had ultimately paid the tax were the consumers, not the parties before the court. Ultimately the retailers were held to be entitled to the licence fees on the basis of failure of consideration, despite the fact that the contracts under which the moneys had been paid were still valid, so it is not precisely on point. Anyway, interesting times may be ahead for restitution lawyers. Roxborough seems to suggest that the relevant unjust factor for such an action would be failure of consideration.

Meanwhile, the government has vowed to continue with the chaplaincy program; however, I presume that it will enact a statute to buttress such payments, or perhaps make its payments to the State government who will then make them to the chaplains? Watch this space.

Update:

Anne Twomey blasts the legislation the Parliament proposes to pass to ‘fix the problem’.

Catallaxy is supportive of the decision (here and here).

20 Comments

  1. Posted June 24, 2012 at 4:49 am | Permalink

    LE, is it the case that the contracts are void? The Commonwealth has still entered into the contracts. I wonder whether this raises issues akin to the indoor management rule in company law? Couldn’t the parliament legislate to ratify existing contracts?

  2. Posted June 24, 2012 at 5:07 am | Permalink

    Having now read it, probably not, but love this from Heydon at [343]:

    The extent to which the Common Assumption was actually common began to break down when Western Australia began its oral address. It withdrew the relevant part of its written submissions. Victoria and Queensland followed suit. In due course, the plaintiff and most government interveners withdrew their assertion of the Common Assumption and lined up against the defendants. This great renversement des alliances created a new and unexpected hurdle for the defendants. So the Court was as on a darkling plain, swept with confused alarms of struggle and flight, where ignorant armies clash by night – although the parties were more surprised than ignorant.

  3. Posted June 24, 2012 at 6:49 am | Permalink

    So, the High Court does think the Constitution binds the Commonwealth. It was beginning to seem a bit moot in some areas.

    I wonder how many of the secularists celebrating the result (obviously, they would have much preferred a stronger ruling on S116) are going to like the implications.

  4. Posted June 24, 2012 at 6:59 am | Permalink

    Here is the poem to which Heydon was referring. I’d never heard of it, but it is very beautiful.

  5. Posted June 24, 2012 at 7:27 am | Permalink

    Often considered the first hint of modernism, Nick, and caused immense controversy at the time (irregular meter, odd scansion, pararhyme etc).

    That sort of stuff didn’t become standard until much later.

  6. Posted June 24, 2012 at 10:03 am | Permalink

    I tend to read 7-0 decisions as “and don’t darken our doorstep with this sort of argument again”.

    I love unintended consequences from judicial rulings. Such as the High Court ruling on the HREOC which said it could not be both a judicial and executive body.

  7. Posted June 24, 2012 at 11:57 am | Permalink

    Wow!!
    What does this do to quangoes,and particularly the funding of activist green groups.
    There is so much more to come and all this because a man couldnt abide by the state providing a window to another way.

  8. kvd
    Posted June 24, 2012 at 12:15 pm | Permalink

    LE, this may seem like a basic question, but I’m still confused about what the decision means so here goes: would it be fair to say that if Parliament had enacted appropriate legislation, and the chaplaincy grants were then made in accordance with that legislation, then all is ok? I’m placing that in contrast, say, to the Executive setting this scheme in motion without first going to Parliament.

    Or is it wider than that – i.e. that this scheme was basically not within the powers of the Commenwealth, even if it had been legislated? Hope my query is clear.

  9. kvd
    Posted June 26, 2012 at 3:17 am | Permalink

    LE, if it is possible to deduce “what it all means” from subsequent actions, then this news item seems to indicate that the Government sees it as basically a failure to legislate to give the Executive the appropriate authority.

    And turning to the other part of the case (religion and s 116) I’m wondering if the reason for failure under that heading now raises the possibility that Armed Services chaplains (those who are serving military personnel) might become moot – as they would seem to “hold office under the Commonwealth”?

  10. Posted June 27, 2012 at 9:49 am | Permalink

    Henry2 @8
    They don’t provide a window to another way, they indoctrinate young minds with supernatural nonsense about invisible, omnipotent, omniscient supermen, life after death, heavens and hells, homophobia, disbelief in evolution… all the insane beliefs of fundies… because the majority of chaplains are of the fundamentalist variety. As Bob Carr apparently said, the program is abhorrent.

  11. kvd
    Posted June 27, 2012 at 12:17 pm | Permalink

    Schedule 2 of that Bill lists the funding arrangements meant to be covered; I make it somewhere over 400, and maybe close to 500 programs. 4-500 sounds a lot until you realise that this is just a ‘possible problem pot’ – i.e. it seems as if the Act, like the police, is attempting to cover all possible exits. In a parliament over-representative of the legal profession, I think it is a worry that such a bill received cross-party, basically unqualified support.

    And I hope that I am never the subject of such an ‘interesting critique’; Ms Twomey has given our parliamentarians a right old blast.

  12. Ripples
    Posted June 27, 2012 at 2:34 pm | Permalink

    I must say I had hoped for some more review in the decision about s116 and maybe a little more broad interpretation of the section. Then my secular bias would be interested in that part of the decision.

  13. Posted June 27, 2012 at 7:03 pm | Permalink

    [email protected] Is not the High Court likely to say “the Parliament cannot legislate to make the Executive a legislator”?

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