Combet v Commonwealth

224 CLR 494

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(Judgment by: Gleeson CJ)

Combet
vCommonwealth

Court:

Judges:
Gleeson CJMcHugh J
Gummow J
Kirby J
Hayne J
Callinan J
Heydon J

Legislative References:
Acts Interpretation Act 1901 - s 15AB; s 15AB(2)(g)
Workplace Relations Act 1996 - The Act
Financial Management and Accountability Act 1997 - s 26; s 27
Audit Act 1901 - The Act; s 34(3)
Auditor-General Act 1997 - The Act

Case References:
-

Hearing date:
Judgment date: 29 September 2005

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Judgment by:
Gleeson CJ

[1] Section 83 of the Constitution provides that no money shall be drawn from the Treasury of the Commonwealth except under appropriation made by law. The Special Case says that, in May 2005, the Government announced its intention to introduce a "workplace relations reform package". In response, the Australian Council of Trade Unions instituted "a national campaign opposing the [r]eforms". The Government "has ... engaged and proposes to continue to engage in advertising the purpose of which is to provide information about and promote the [r]eforms". The advertisements have been, and will be, paid for by moneys drawn from the Treasury. The appropriation by law relied upon is that made by the Appropriation Act (No 1) 2005-2006 (Cth) ("the Appropriation Act"). The plaintiffs contend that the Appropriation Act does not cover such drawings. The defendants contend that it does. That is the principal issue to be decided. The question is one of the construction of the Appropriation Act.

[2] It is not contended that the Appropriation Act is invalid. Nor is it argued that expenditure of public money, by way of advertising or otherwise, upon the promotion of government policy is inherently unlawful or unconstitutional. In a variety of ways, politicians, in and out of government, constantly engage in publicly funded activity promoting or opposing government policy. Costs of travel undertaken for purposes of political advocacy provide a simple example. Such expenditure may sometimes attract political controversy. Complaints of unfair or inappropriate use of public funds are part of the cut and thrust of political debate. If seen as justified, they may have an electoral impact. Our concern, however, is only with justiciable issues.

[3] The issues for decision have been put before the Court in a number of questions formulated in the Special Case. I agree with the answers proposed in the reasons of Gummow, Hayne, Callinan and Heydon JJ ("the joint reasons"). I will, however, state my own reasons.

[4] Questions of construction of the Appropriation Act are to be resolved by reference to text and context. The language of the text is controlling, but the meaning of that language is to be understood in a context which includes the Constitution, parliamentary practice, accounting standards, and principles and methods of public administration. The most relevant provisions of the Constitution are ss 53, 54, 81 and 83. The matter of parliamentary appropriation goes to the essence of relations between the Parliament and the Executive, and of relations between the Senate and the House of Representatives. Parliamentary practice comprehends procedures relating to budget estimates, audit, expenditure review, and performance assessment. Such procedures operate in a dynamic, political environment. In public administration, theory and practice change and develop. The Constitution was designed to allow for a necessary degree of flexibility in administrative arrangements ^[1] .

[5] The Constitution, consistently with the background of constitutional history and parliamentary practice with which the framers were familiar, reserves to the Parliament, and especially the House of Representatives, the power associated with control of funding through appropriation. It is for Parliament, consistently with the Constitution, to decide how it exercises that control. One factor of practical significance is the degree of specificity with which appropriations are made. Section 81 of the Constitution provides for the Consolidated Revenue Fund "to be appropriated for the purposes of the Commonwealth". It is for the Parliament, in making appropriations, to determine what purposes are purposes of the Commonwealth ^[2] . It is also for the Parliament to determine the degree of specificity with which such purposes are expressed. "Provided that purposes are stated it is a matter for the Parliament how minute and particular shall be the expression of purposes in any particular case." ^[3] "The purpose of any appropriation may be indicated generally. 'One-line' appropriations are valid." ^[4] In 1936, the Supreme Court of the United States, speaking of the provision of the United States Constitution that corresponds with s 83, said ^[5] :

The contention that there has been no constitutional appropriation, or that any attempted appropriation is bad, because the particular uses to which the appropriated money is to be put have not been specified, is without merit. The provision of the Constitution ... that 'No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law' was intended as a restriction upon the disbursing authority of the Executive department, and is without significance here. It means simply that no money can be paid out of the Treasury unless it has been appropriated by an act of Congress. ...

The validity of the act disposing of the tax is also attacked as constituting an unlawful delegation of legislative power. That Congress has wide discretion in the matter of prescribing details of expenditures for which it appropriates must, of course, be plain. Appropriation and other acts of Congress are replete with instances of general appropriations of large amounts, to be allotted and expended as directed by designated government agencies.

[6] A recent development in the theory and practice of public administration is the trend towards "outcome appropriations" as a means of stating the purposes for which governments spend public money. This was implemented in the Commonwealth in 1999-2000. "Outcomes are the intended effects of government programmes, whereas outputs -- the goods and services delivered by government -- are the means of achieving those outcomes." ^[6] A suggested benefit of changing the focus of appropriations from outputs to outcomes is the placing of greater emphasis on performance in the public sector ^[7] . Outcome appropriation is related to issues of performance assessment. Furthermore, the Financial Management and Accountability Act 1997 (Cth) forms part of the context in which the system operates. The practical manifestation of the system of outcome appropriation in the Appropriations Act will be examined below. Typically, outcomes are stated at a high level of generality. Furthermore, they are commonly expressed in value-laden terms which import political judgment. Parliament is appropriating funds for use by a government, and the outcomes pursued may involve controversial policy judgments.

[7] While the generality of statements of outcome may increase the difficulty of contesting the relationship between an appropriation and a drawing, appropriations are made in a context that includes public scrutiny and political debate concerning budget estimates and expenditure review. The higher the level of abstraction, or the greater the scope for political interpretation, involved in a proposed outcome appropriation, the greater may be the detail required by Parliament before appropriating a sum to such a purpose; and the greater may be the scrutiny involved in review of such expenditure after it has occurred. Specificity of appropriation is not the only form of practical control over government expenditure. The political dynamics of estimation and review form part of the setting in which appropriations are sought, and made.

[8] Section 53 of the Constitution provides that the Senate may not amend proposed laws appropriating revenue or moneys for the ordinary annual services of government. Legislation appropriating funds for the costs and expenses of maintaining the ordinary annual services of government is dealt with separately from legislation dealing, for example, with extraordinary charges and appropriations. Quick and Garran wrote that "[t]he ordinary annual services include the various public departments manned and equipped to carry on the general work of the Government departments, such as customs and excise, posts and telegraphs, light-houses, light-ships, and quarantine, naval and military defence, the money to pay for which is voted by Parliament from year to year" ^[8] . The authors were writing at a time when the role of the Commonwealth was more modest than at present, but the idea they convey remains true. The Appropriation Act, in its long title, is described as an Act to appropriate money out of the Consolidated Revenue Fund for the ordinary annual services of the Government, and for related purposes. The scheme of the Appropriation Act is built around Sch 1, which identifies 16 portfolios including, relevantly, Employment and Workplace Relations, and allocates sums to various agencies within those portfolios, dividing the sums between "Departmental Outputs" and "Administered Expenses".

[9] Some insight into the distinction between "departmental" and "administered" items or expenses may be gained from Australian Accounting Standard 29 concerning Financial Reporting by Government Departments, written in June 1998:

12.9.1 A government department's operating statement only recognises revenues and expenses of the government department. Similarly, a government department's statement of financial position only recognises assets which the government department controls and liabilities which involve a future sacrifice of the government department's assets.

12.9.2 However, the responsibilities of a government department may encompass the levying or collection of taxes, fines and fees, the provision of goods and services at a charge to recipients, and the transfer of funds to eligible beneficiaries. These activities may give rise to revenues and expenses which are not attributable to the government department. ... These administered revenues, expenses, assets and liabilities are not recognised in the government department's operating statement or statement of financial position.

[10] In the Summary of Appropriations in Sch 1 to the Appropriation Act, the total sum of $47,371,218,000 was divided into $33,788,542,000 for departmental outputs and $13,582,676,000 for administered expenses. The allocations were broken down further into portfolios, and, within portfolios, into agencies. For some agencies, there were departmental outputs but no administered expenses. For some agencies, there were administered expenses but no departmental outputs. For some agencies, there were both.

[11] The Appropriation Act, in s 4, refers to Portfolio Budget Statements. This is a defined term, meaning the Portfolio Budget Statements that were tabled in the Senate or the House of Representatives in relation to the Bill for the Appropriation Act (s 3). Those statements, prepared by Ministers for the budget estimates process, contained information on proposed agency activities in support of spending proposed by the Appropriation Bill. Such statements explain and seek to justify the appropriations proposed. They are scrutinised as part of the budget process. They reflect government policy as it affects budgetary planning. Government policy, however, is not frozen over a given budget period. Policies constantly change and develop. Indeed, governments may change during a budget period. Nor is there a clear distinction between "new" policies and modifications of existing policy.

[12] In Sch 1 to the Appropriation Act, for each agency of each portfolio there is a statement of an outcome, or a number of outcomes. Reference has already been made to the generality, and political content, of some of these objectives. Furthermore, in most cases, neither departmental outputs (goods and services provided) nor administered expenses could possibly be the sole sources of influence contributing to or bearing upon the stated outcome. For example, within the Foreign Affairs and Trade portfolio, an amount of $49,334,000 is appropriated for the Australian Centre for International Agricultural Research. The relevant outcome is: "Agriculture in developing countries and Australia is more productive and sustainable as a result of better technologies, practices, policies and systems". Plainly, that outcome is likely to be affected by a host of factors beyond the control or influence of the Australian Government. Furthermore, opinions may be divided upon whether agriculture at one time is "more productive and sustainable" than at another, or upon whether certain technologies, practices, policies and systems have been made "better". This is a description, in the broadest political terms, of an objective of governmental activity. Whether a particular form of expenditure on goods or services (output) is likely to contribute to that objective might be contestable. For such a contest to give rise to a justiciable issue, as distinct from a political or scientific controversy, the issue could not be formulated appropriately by stating the outcome and asking whether the expenditure would contribute to it. The generality, and the value-laden content of the outcome would make that impossible. It would be possible to frame an issue in terms of relevance. A court might ask whether a particular expenditure could rationally be regarded as having been made in pursuit of, and as being in that sense related to, the stipulated outcome. A negative answer to that question would need to have due regard to the breadth of expression of the outcome, and to the consideration that the court's capacity to make a judgment about issues of policy formation and implementation is likely to be limited. A judge's intuition may be an insecure foundation for a denial of any rational connection between an output and an outcome.

[13] The relevant provisions of the Appropriation Act begin with s 3, a definitions section. The term "administered item" is defined to mean an amount set out in Sch 1 opposite an outcome of an entity under the heading "Administered Expenses". The term "departmental item" is defined to mean the total amount set out in Sch 1 in relation to an entity under the heading "Departmental Outputs". The term "entity" is defined to include an Agency.

[14] To give relevant content to those definitions, it is necessary to refer to the first agency item relating to the Employment and Workplace Relations Portfolio in Sch 1. (References to the earlier budget period, 2004-2005, included in the Schedule in italics for purposes of comparison, will be omitted.)

EMPLOYMENT AND WORKPLACE RELATIONS PORTFOLIO

Appropriation -- 2005-2006

[ 15 ] Applying the definitions in s 3, the relevant departmental item is $1,447,552,000, and the administered items are $1,970,400,000, $90,559,000 and $560,642,000.

[16] Section 4 of the Appropriation Act provides:

4

(1)

The Portfolio Budget Statements are hereby declared to be relevant documents for the purposes of section 15AB of the Acts Interpretation Act 1901.

(2)

If the Portfolio Budget Statements indicate that activities of a particular kind were intended to be treated as activities in respect of a particular outcome, then expenditure for the purpose of carrying out those activities is taken to be expenditure for the purpose of contributing to achieving the outcome.

[17] Sections 7 and 8 effect what are described as the basic appropriation for departmental items (s 7) and the basic appropriation for administered items (s 8).

[18] The language of s 4(2) ties in with the language of s 8(2). Section 8 relevantly provides:

8

(1)

For an administered item for an outcome of an entity, the Finance Minister may issue out of the Consolidated Revenue Fund amounts that do not exceed, in total, the lesser of:

(a)

the amount specified in the item; and

(b)

the amount determined by the Finance Minister in relation to the item, having regard to the expenses incurred by the entity in the current year in relation to the item.

(2)

An amount issued out of the Consolidated Revenue Fund for an administered item for an outcome of an entity may only be applied for expenditure for the purpose of carrying out activities for the purpose of contributing to achieving that outcome.

[19] As a note to s 4(1) indicates, s 4(1) is intended to relate specifically to s 15AB(2)(g) of the Acts Interpretation Act 1901 (Cth). The Portfolio Budget Statements may be considered to confirm that the meaning of a provision is the ordinary meaning conveyed by the text, or to determine the meaning of a provision when the provision is ambiguous or obscure or where the ordinary meaning conveyed by the text leads to a result that is manifestly absurd or is unreasonable.

[20] The focus of argument in the present case has been the departmental item of $1,447,552,000. The basic appropriation of that item is found in s 7, which relevantly provides:

7

(1)

For a departmental item for an entity, the Finance Minister may issue out of the Consolidated Revenue Fund amounts that do not exceed, in total, the amount specified in the item.

(2)

An amount issued out of the Consolidated Revenue Fund for a departmental item for an entity may only be applied for the departmental expenditure of the entity.

[21] The term "expenditure" is defined in s 3 as meaning payments for expenses, acquiring assets, making loans or paying liabilities. The composite expression "departmental expenditure" is undefined.

[22] Unlike ss 4 and 8, s 7 makes no reference to outcomes. Its only reference to purpose is "for the departmental expenditure of the entity." If the plaintiffs are right in their contention, it must be because payment of the advertising expenses in question, out of the amount of $1,447,552,000, involves an application of part of that amount otherwise than for the departmental expenditure of the Department of Employment and Workplace Relations.

[23] I accept that the expression "departmental expenditure", in s 7(2), does not mean any expenditure that the Department chooses to make, or incur, or even any expenditure for the purposes of the Commonwealth that the Department chooses to make or incur. Description of the expenditure as "departmental" imports a purposive, as well as a factual, element. That follows from the constitutional context, a matter to which I shall return.

[24] At the same time, I do not accept that expenditure cannot be supported under s 7 unless it is referred to in the Portfolio Budget Statement. Such a conclusion would be contrary to the terms of s 4, which are facultative, not limiting. Subsection (2) of s 4 refers to what Portfolio Budget Statements "indicate". That word itself reflects the practical political context in which such statements are prepared, with the potential for developments and changes both in policy and in circumstances. The Appropriation Act characterises the statements as indicative, and says that if it is indicated that activities of a particular kind were intended to be treated as activities in respect of a particular outcome, then expenditure is taken to be for the purpose of contributing to the outcome. Such a question might arise most clearly in the case of administered items, having regard to the terms of s 8(2). Whether it could also arise under s 7 is an issue. In any event, to say that, if an activity is related to an outcome in the Portfolio Budget Statements, expenditure on that activity is to be taken to be for the purpose of the outcome is very different from saying that it is only expenditure on activities covered by Portfolio Budget Statements that may be taken to be expenditure for the purpose of contributing to achieving the outcome. As to the latter possibility, s 4 says no such thing. Putting to one side the practical difficulties that would arise from treating the Portfolio Budget Statements as definitive of the purposes of the appropriations effected by the Appropriation Act, such a conclusion cannot stand with the language of the Act.

[25] In the case of administered items, the relationship between outcome and appropriation is clearly spelled out in the definition of administered item and the terms of s 8, read together with Sch 1. In the case of the Department of Employment and Workplace Relations, there are three administered items (amounts) and three outcomes, and an amount issued out of the Consolidated Revenue Fund must be related (in the sense explained in s 8(2)) to one of those items and to the outcome for which it has been appropriated.

[26] We are, however, presently concerned with s 7(2). For the Department of Employment and Workplace Relations there is only one departmental item as defined, $1,447,552,000. An amount issued for that item may only be applied for the departmental expenditure of the Department. Such expenditure must, of course, be for a purpose of the Commonwealth (Constitution, s 81). The long title of the Appropriation Act, understood in the light of s 53 of the Constitution, shows that the expenditure referred to in s 7 is for the ordinary annual services of Government. That, however, is an expression of wide import. Are the outcomes stated in Sch 1 relevant to the characterisation of expenditure as "departmental expenditure" within the meaning of s 7? In my view, they are. The constitutional context in which the Appropriation Act was enacted was one of parliamentary appropriation of funds, under the control of Parliament, to be made available to the Executive for stated purposes. The statement of purposes may be broad or narrow. In Sch 1, amounts under the heading "Departmental Outputs" are related in each case to a statement of outcome. The total of those amounts, for an entity, is a departmental item. It is unlikely that the statements of outcome were intended to be relevant only to administered items, because in the case of some entities or agencies there are statements of outcome, but no administered expenses. I acknowledge that the contrast between the language of s 7(2) and that of s 8(2) could support a view that outcomes are irrelevant to s 7(2). Against that, however, is the wider context, together with the specific textual consideration that Sch 1 identifies outcomes even where there are no relevant administered expenses. In the case of departmental items, the relationship with outcomes is not identical to the relationship between outcomes and administered items spelled out in s 8(2). There is only one departmental item, to which a number of outcomes may be relevant. Taken together, however, outcomes towards which the Department of Employment and Workplace Relations is working assist in considering what is meant by "departmental expenditure". They may exclude expenditure which is so clearly unrelated to the business of the Department that it could not rationally be regarded as expenditure for the purpose of that business. There are probably many aspects of the routine business of the Department, undoubtedly included in the ordinary annual services of the Government, which could be regarded as contributing to one or other of outcomes 1, 2 or 3 only in the most indirect fashion. No doubt much departmental expenditure is of a kind that would be incurred even if the Department were pursuing different policy objectives. Such expenditure may be directed to outputs of a kind that a government of any political persuasion would expect the Department to provide. Policy development and advice to the Minister is an obvious example. Such advice might be directed towards a wholesale re-definition of the outcomes themselves, and yet the cost of providing it would qualify as departmental expenditure.

[27] The plaintiffs, in their submissions to the Court, acknowledged that the outcomes listed in Sch 1 "are statements of purpose at a very high level of abstraction". So much is clear. Provided such statements are not so general, or abstract, as to be without meaning, they represent Parliament's lawful choice as to the manner in which it identifies the purpose of an appropriation. To the extent to which it is necessary to have regard to those statements of purpose in order to decide whether expenditure bears the character of departmental expenditure referred to in s 7, then the generality, and the political character, of a statement may make it difficult to establish that particular expenditure is not related to the relevant purpose (in the sense earlier discussed). It does not follow that the purpose should be confined, or stripped of its political content. By what process might such a narrowing legitimately take place? The plaintiffs argued, quoting the Portfolio Budget Statements, that outcome 2 might be narrowed to "providing policy advice and legislation development services to government" and "supporting employers and employees in adopting fair and flexible workplace relations practices". It has already been pointed out that the use of the Portfolio Budget Statements to restrict the generality, and thereby alter the meaning, of the language of the Act, including Sch 1, is inappropriate. If Parliament formulates the purposes of appropriation in broad, general terms, then those terms must be applied with the breadth and generality they bear. Furthermore, if (as appears to be common ground) "providing policy advice and legislation development services to government" serves a purpose described in Sch 1 as "higher productivity, higher pay workplaces", then it is instructive to consider why that is so.

[28] If it be accepted (as it is) that "providing policy advice and legislation development services" is one way in which the Department pursues the outcome of "higher productivity, higher pay workplaces", that must be because the outcome is contributed to by development of policy, and formulation of legislation in accordance with such policy or, more precisely, because such activities could rationally be regarded as contributing to the outcome. It is not suggested that this result depends upon whether the policy advice, or proposed legislation, enjoys the approval of the person making the judgment. In the terms of outcome 2, "higher" must mean "higher than would otherwise be the case". Productivity and rates of pay in workplaces are influenced by many factors in addition to government action and legislation. Yet the assumption of Sch 1 is that they may be contributed to by departmental outputs, and the assumption of the Portfolio Budget Statements, and of the plaintiffs' argument, is that policy advice and legislation development services may reasonably be regarded as contributing to that outcome, regardless of the content of the advice or the merits of the legislation. If formulation and development of policy and legislation on the subject of workplace relations is related to "higher productivity, higher pay workplaces", then it is difficult to see why promotion of public acceptance of workplace relations policy and legislative change is not so related. It cannot be the case that it depends upon whether the policy is wise, or the changes constitute genuine reforms. These are political judgments, and the value-laden statements of outcome throughout Sch 1 invite differences of opinion on such questions.

[29] In a representative democracy, governments, oppositions, politicians of all persuasions, and interest groups are constantly engaged in political struggle. Public, as well as private, funds are spent, in a variety of ways, on advocacy supporting or opposing proposals for executive action and legislative change. Persuading the public, or a sufficient number of members of the public, of the merits of government policy may be as important to successful formulation and implementation of policy as the drafting of advice and legislation. Persuading the public of the merits of policy and legislation may be vital to the achievement of the desired policy objective. There may be many grounds of political objection to the advertising in question, such as that the proposed changes will not result in "higher productivity, higher pay workplaces", or that a publicly funded advertising campaign is an inappropriate means of advocating such changes. The legal question, however, is whether the drawings in question are covered by the appropriation. The relevant outcome is stated with such breadth as to require an answer to that question adverse to the plaintiffs.

[30] Reference has already been made to the long title of the Appropriation Act, the reference in the long title to "the ordinary annual services of the Government", and the constitutional significance of that expression. An argument was advanced with respect to that matter, with particular reference to a history of communications between the Senate and the Minister for Finance on the contents of the annual Appropriation Bill (No 1). The relevant history is traced in the joint reasons. The concept of running costs, and the relationship to that concept of "advertising and public relations services" and "information services" was examined in argument. I agree that the boundaries of the running costs included in departmental expenditure are unclear, and the parliamentary history and practice relied upon does not advance the argument of the plaintiffs. Counsel for the defendants pointed out that the development of new policy cannot be excluded from running costs, especially when regard is had to the possibility of a change of government during a budget period, and the fact that "information activities" may be an integral part of the development of new programmes.

[31] It is unnecessary to deal with the questions of the standing of the plaintiffs to bring these proceedings or the form of relief that might have been available had the plaintiffs made good their primary contention. Those questions involve issues of importance and difficulty, but on the view I have taken on the principal question of construction they do not arise.

[32] For those reasons I agreed in the order that was made on 29 September 2005.