The Capacity of State and Territory Legislatures to Impose Liability on Members of the Commonwealth Executive Government
BY
Chief Justice Michael Grant AO
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Monday 6th March, 2023
The Capacity of State and Territory Legislatures to Impose Liability on Members of the Commonwealth Executive Government
The capacity of State and Territory regulatory laws to bind Commonwealth entities and agencies has been a contentious and largely unresolved issue for at least two decades now. A large part of that controversy has concerned the capacity of state environmental laws to govern activity on the Defence estate. The debate centred on the discharge or escape of contaminants from military bases off-site into surface water, sediments and groundwater. The most high-profile examples have been the RAAF base at Williamtown in New South Wales and the site of the former Army Aviation Centre at Oakey here in Queensland.
In the civil context, the issue has been the subject of parliamentary inquiries, class actions and a Four Corners program in 2017. In the regulatory context, the Commonwealth position has essentially been that State environmental pollution laws have no application to Defence bases and Defence land. That position is advanced on two primary bases. The first is that as a matter of statutory interpretation State laws do not apply in their terms. The second is that State laws cannot apply where there is an “operational inconsistency” with Commonwealth law. The Defence position has not been the subject of any curial determination of which I am aware.
Rather, the Commonwealth and the States and Territories have sought to implement a rather uneasy arrangement under which activities on the Defence estate will, as far as possible, be undertaken in a way that seeks to achieve at least the equivalent requirements of State legislation.
The broader issue has recently arisen in proceedings in the Northern Territory involving the National Parks estate rather than the Defence estate. That matter would now seem destined for determination in the High Court.
Over the course of March and April 2019, the Director of National Parks performed construction works on a walking track at Gunlom Falls, in the Kakadu National Park. Those works included excavating and clearing trees, rock, soil and vegetation, and inserting concrete steps at various points. The area in which those works were performed is sacred to the Jawoyn Aboriginal people, and is a ‘sacred site’ as defined in the Sacred Sites Act.
That is Territory legislation which is designed to protect sacred sites, and which criminalises carrying out works without an authorising certificate.
It was common ground between the parties that the performance of those works would constitute an offence by the Director under the legislation and would attract criminal penalty – subject to any question of Commonwealth immunity or operational inconsistency with the Commonwealth Environment Protection and Biodiversity Conservation Act 1999 (Cth).
In September 2020, the Aboriginal Areas Protection Authority brought a criminal prosecution against the Director of National Parks in relation to the works. In October 2021, a special case was stated for the opinion of the Full Court of the Supreme Court. So far as is relevant for these purposes, the Director and the Commonwealth Attorney-General asserted in that special case that the offence and penalty prescribed under the Territory legislation did not apply to the Director as a matter of statutory construction.
The Commonwealth position is based on the general presumption that legislation regulating rights or conduct does not apply to the executive government. However, that presumption can be displaced by a contrary legislative intention – either by express words or implied from the statutory context. Where the question is whether regulatory legislation binds the executive government of another polity in the Federation, it is necessary to identify an intention to bind the executive of that other polity.
The Commonwealth position is based on the general presumption that legislation regulating rights or conduct does not apply to the executive government.
There is a related presumption – which is sometimes treated as distinct and sometimes not. It derives from the historical conception that criminal offences are breaches of the ‘King’s peace’, such that the Crown cannot itself be guilty of a criminal offence. While no longer cast in such absolute terms, the presumption is that a statute will not impose criminal liability on the executive – including government agencies and instrumentalities with the same legal status – without the clear indication of a legislative intention and purpose to do so. That presumption applies with perhaps even stronger force to the imposition of criminal liability on the executive of a polity other than the enacting polity.
The first detailed consideration of that presumption by the High Court appears in the 1946 decision in Cain v Doyle.[1] Commonwealth legislation designed to protect returning servicemen made it a criminal offence for an employer to terminate a reinstated employee without reasonable cause.
The legislation also provided that the term “employer” included the Crown and its statutory authorities unless the contrary intention appeared.
A criminal prosecution had been commenced against the manager of a Commonwealth munitions factory for aiding and abetting the termination of a reinstated employee in breach of the prohibition.
A majority of the High Court held that the provision did not create an offence of which the Commonwealth could be guilty, and the manager therefore could not be convicted of aiding and abetting the commission of that offence.
Justice Dixon (as his Honour then was) said that there was the strongest presumption against the imposition of criminal liability upon the Crown. That presumption was subject only to a clear expression of a contrary legislative intention to resolve upon so important and serious a course. While accepting that the definition of “employer” included the Commonwealth Crown, his Honour concluded that the legislative intention was only to subject the Crown to injunction, mandamus or ordinary civil remedies. It was not to impose criminal liability on the Crown. Chief Justice Latham and Justice Rich came to a similar conclusion.
That same distinction between civil and criminal liability was made in the 1996 decision of the High Court in State Authorities Superannuation Board v Commissioner of State Taxation (WA).[2] The Western Australian stamp duty legislation under consideration exempted instruments to which the Crown or any Crown instrumentality designated by the Minister was a party or otherwise liable to pay duty. The ‘Crown’ was defined to mean only the Crown in right of the State of Western Australia.
The question arising was whether the New South Wales Superannuation Board, which was an instrumentality of the Crown in right of the State of New South Wales, was liable to duty under the Western Australian legislation as the purchaser of real estate in Perth.
Chief Justice Brennan and Justices Dawson, Toohey and Gaudron found that the provision for exemption manifested a clear intention that the Crown in any of its other capacities should be bound by the provisions of the legislation.
Adopting a different approach, Justices McHugh and Gummow framed the question as whether the Western Australian legislature intended to tax agreements for the purchase of property in Western Australia by another State authority, and concluded that the legislation applied according to its terms. Accordingly, the New South Wales authority was bound to pay duty.
However, all members of the Court applied Cain v Doyle to find that the presumption that the Crown cannot be criminally liable ‘must prevail over anything but the clearest expression of intention’. No such intention was manifest in the stamp duty legislation – notwithstanding that the provisions imposing duty otherwise applied. Accordingly, any provision in the legislation which created a criminal liability for such things as failing to pay duty or failing to submit an instrument for stamping had no application to the New South Wales authority.
However, all members of the Court applied Cain v Doyle to find that the presumption that the Crown cannot be criminally liable ‘must prevail over anything but the clearest expression of intention’.
The statement of principle from Cain v Doyle was again endorsed in the 1999 decision of the High Court in Telstra Corporation Ltd v Worthing.[3] The New South Wales workers compensation legislation under consideration was expressed to bind ‘the Crown, not only in right of New South Wales but also, so far as the legislative power of Parliament permits, in all its other capacities’.
The Commonwealth telecommunications legislation provided that Telecom (as it was styled at the relevant time) enjoyed the same immunity from State law as the Commonwealth itself. A central provision of the New South Wales legislation was the requirement, under the sanction of a criminal penalty, that an employer maintain a compliant policy of insurance. The High Court stated unanimously that it would require the clearest indication of a legislative purpose to demonstrate that these penal provisions attach to the Commonwealth, and no such indication was apparent.
The 1990 decision of the High Court in Bropho v Western Australia[4] considered a situation with parallels to the one currently presenting in the Northern Territory. The question in Bropho was whether a statutory development corporation was immune from prosecution for a contravention of State heritage legislation.
The statute which created the development corporation provided expressly that it was an agent of the Crown in right of the State of Western Australia which enjoyed the status, immunities and privileges of the Crown.
The purpose of the heritage legislation was to preserve places and objects traditional to Aboriginal people, irrespective of where those things were found or situated in the State.
The plurality in Bropho identified the presumption to be that, in the absence of a contrary intention, the general words of a statutory provision do not extend to bind the executive government and its servants or agents.
However, the Court said that the requirement for a contrary intention did not import a formalised test of exacting stringency. That was because many of the considerations underlying the presumption have diminished in their relevance with the evolution of ‘the Crown’ to include a myriad of governmental instrumentalities with commercial and industrial functions.
The plurality said that a contrary intention could ‘be found in the provisions of the statute – including its subject matter and disclosed purpose and policy – when construed in a context which includes permissible extrinsic aids’. In that analysis it is possible that the legislation under consideration may evince a legislative intent not to impose criminal liability the Crown or an instrumentality, but to bind employees and agents.
The plurality in Bropho concluded that the heritage legislation evinced a clear legislative intent that the offence provision which proscribed damage to an Aboriginal site without the necessary authorisation or consent did have application to employees and agents of government instrumentalities in the course of their duties. That intention was discerned on the basis that the heritage legislation applied indifferently to natural persons, including government employees. It was unnecessary to decide whether the development corporation itself was also liable to prosecution and conviction. Once it had been concluded that the offence provision applied to the employees or agents who had carried out the work, neither the corporation nor the Crown had power to authorise the performance of proscribed activities.
The plurality in Bropho concluded that the heritage legislation evinced a clear legislative intent that the offence provision which proscribed damage to an Aboriginal site without the necessary authorisation or consent did have application to employees and agents of government instrumentalities in the course of their duties.
A number of matters should be recognised about the decision in Bropho generally, and specifically in its application to the Northern Territory case. First, the decision in Bropho is not authority for the proposition that the statutory development corporation was subject to the offence provisions in the heritage legislation notwithstanding its agency of the Crown. Second, the decision in Bropho was concerned with the imposition of criminal liability on the agents of the executive of the polity which enacted the legislation, rather than the executive of another polity. Third, the decision in Bropho predated the decisions in the Western Australian stamp duty caseand the Telstra Corporation case,both of which reaffirmed the strength of the presumption against the imposition of criminal liability on the Crown.
One of the matters in contention in the Territory case is whether the presumption against the imposition of criminal liability on the Crown is limited to the Crown itself, or whether it is capable of extension to agents and instrumentalities of the Crown.
The narrow view is based on dictum which refers to the presumption only in terms of its application to the Crown. This is said by advocates of the narrow view to limit the presumption in relation to criminal liability to the body politic in its narrowest conception.
The more expansive view is that it is not possible to draw rigid taxonomical distinctions based on the different manifestations and emanations of the Crown. On that view, the presumption extends to the executive branch of government represented by the Ministry and the administrative bureaucracy which tends to its business.
In the ordinary conception, that administrative bureaucracy includes authorities and instrumentalities of the Crown, including statutory corporations.
Although the question has not been authoritatively determined by the High Court, there are considered dicta which suggest that the presumption has application to government instrumentalities if on proper characterisation they are intended to have the same legal status as executive government in the relevant aspects.
Speaking specifically of the presumption against the imposition of criminal liability, the plurality in Bropho stated that it was not ‘confined to the Sovereign herself, but extends to confer prima facie immunity in relation to the activities of governmental instrumentalities or agents acting in the course of their functions or duties as such’.[5]
Similarly, in the 1999 Western Australia Mining Act Case, Chief Justice Gleeson and Justice Gaudron expressed the presumption with reference to ‘members of the executive government of any of the polities in the federation, government instrumentalities and authorities intended to have the same legal status as the executive government, their servants or agents’.[6]
That approach is also implicit, if not express, in the finding in the Western Australian stamp duty case to which I have already referred. That finding was that if the New South Wales Superannuation Board did form part of the Crown in the relevant sense, it could not be criminally liable for offences created by the Western Australian stamp duty legislation.[7]
The operative question is whether on proper characterisation the body in question is intended – either expressly or by implication – to have the same legal status as executive government in relation to the application of the presumption.
In the 1979 decision of the High Court in Superannuation Fund Investment Trust v Commissioner of Stamps (SA),[8] a question arose as to whether the Superannuation Trust could claim an exemption under South Australian stamp duty law for conveyances or transfers ‘to the Crown, or to any person on behalf of the Crown’.
The Trust was a body corporate established by Commonwealth legislation. Those members of the High Court who considered it necessary to decide the issue were divided on the result, but not on the basic principles to be applied in making the characterisation.
First, the fact that an entity is incorporated is not determinative of whether it forms part of the executive government for the purpose of privileges and immunities. It has long been accepted that governmental functions may be carried out through statutory corporations for the convenience and efficiency that affords in the management and enforcement of contractual rights in commercial transactions.
Secondly, the enquiry is one of statutory interpretation to determine the relevant legislative intent, rather than the mechanical application of any particular test.
Thirdly, the ability of the executive government to control the membership and activities of the entity in question is of central importance to the relevant legislative intention. The higher the degree of direction or control the more likely the legislative intention that the entity be treated as the alter ego of the Crown. However, that assessment turns upon the existence of a statutory ability to control, rather than an examination of the extent to which a particular action is the result of the actual exercise of control by the executive.
Fourthly, the interpretive process will also involve a consideration of whether the entity performs fundamentally governmental functions, whether it is funded by the executive government, and whether it is accountable to the executive government in terms of finances and outcomes.
The subsequent 1982 decision in Townsville Hospital Board v Townsville City Council[9] may be seen as an application of those principles. The question was whether the Hospital Board enjoyed the exemption from the building by-laws for buildings erected by or on behalf of the Crown. The land on which the building was to be erected was Crown land, and the Hospital Board required the Minister’s approval to borrow money for the proposed works. Those connections notwithstanding, Chief Justice Gibbs (with whom the other members of the Court agreed) determined that the Hospital Board did not enjoy the privileges and immunities of the Crown.
That conclusion was reached largely on the basis that the provision of hospital services is not necessarily a governmental function; the Hospital Board retained an independent discretion to decide whether to conduct building work; and the Board rather than the Crown bore responsibility for the repayment of any moneys borrowed for that purpose.
Going back then to the Northern Territory matter, the Full Court determined that the Director was intended to have the same legal status as executive government in relation to the application of the presumption.
It found that while the Director’s functions include commercial and developmental activity in National Parks, the entry by the Commonwealth into the management of national parks was not an expansion by government into commercial and developmental activities in the general marketplace in the same way as, for example, the establishment of a government development corporation.
It was not until the mid-1970s that the Commonwealth took a substantial role in the management of the national environment through the creation of the National Parks and Wildlife Service and the Australian Heritage Commission, and the enactment of uniform environmental protection legislation. Those initiatives invoked the implied nationhood power in support of a new field of Commonwealth governmental activity. The Director was established and incorporated as part of those initiatives.
The Director’s functions under legislation are intrinsically executive governmental functions directed to the stewardship and management of Commonwealth places. In discharging those functions the Director is clearly to pursue the national or public interest, and to follow policies determined by the executive government.
As the facts agreed for the special case disclosed, the Director is appointed by the executive government, the Director is generally subject to Ministerial control, and the Director is accountable to the executive government in terms of finances and other matters. Moneys appropriated by the Commonwealth government comprise the majority of the Director’s income.
Although the Commonwealth legislation imposes criminal liability on the Director under offence provisions involving narrowly defined activities in the management of national parks, that does not answer the question whether the Northern Territory Sacred Sites Act evinces an intention to impose criminal liability on the executive government of the Commonwealth.
The Sacred Sites Act provides expressly that, ‘[t]his Act binds the Territory Crown and, to the extent the legislative power of the Legislative Assembly permits, the Crown in all its other capacities’. However, that statement was not conclusive or determinative of the question whether there is a legislative intention to impose liability on government instrumentalities and authorities of the Commonwealth.
There was no corresponding provision made for the imposition of criminal liability on other polities in the federation.
Amendments enacted in 2005 incorporated a further provision stating expressly that if the Territory Crown ‘in any of its capacities’ commits an offence against the Act, the Territory Crown is liable to be prosecuted. The express purpose and intention of the amending legislation, at least in the subjective sense, was to clarify the liability of the Territory Crown to be prosecuted for offences against the legislation. There was no corresponding provision made for the imposition of criminal liability on other polities in the federation.
The Full Court determined that it was not possible to make the necessary implication that the Northern Territory legislation intended to impose criminal liability on the Commonwealth executive given the very deliberate legislative choice made to limit the imposition of criminal liability to the Territory Crown.
That determination is subject to an application for special leave to the High Court. In the event that leave is granted, these issues concerning the scope of the presumption and its extension to government agencies and instrumentalities will be subject to specific consideration by the High Court for the first time.
In the event that leave is granted, these issues concerning the scope of the presumption and its extension to government agencies and instrumentalities will be subject to specific consideration by the High Court for the first time.
As I said at the outset, the second basis on which the Commonwealth contends that State laws cannot apply is “operational inconsistency” with Commonwealth law. I want to deal very briefly with that and the Cigamatic doctrine.
The 1962 decision of the High Court in Cigamatic[10] held that a State could not validly enact legislation which abolished or controlled the Commonwealth’s priority of payment of debts by a company in liquidation. That decision was founded on the principle that the legislative powers of the States do not extend to the destruction, modification or qualification of the capacities of the Crown in right of the Commonwealth.
The doctrine expressed in Cigamatic was endorsed in the 1997 decision in Henderson[11] , which concerned whether the Defence Force Housing Authority could be subjected to State tenancy legislation. The plurality in Henderson proceeded on the basis that State laws cannot modify or restrict a power granted to the Commonwealth under Commonwealth law or a prerogative power conferred by the Constitution on the basis that such a law would be offensive to s 61 of the Constitution.
Once the Commonwealth has exercised a choice to enter into a field of activity, its executive power is not affected merely because the incidents of the activity are regulated by a State law.
However, the doctrine was said to be subject to an important limitation. Although the States have no legislative authority to interfere with the capacities of the Commonwealth, they do have legislative authority to regulate transactions and activities into which the Commonwealth instrumentality may choose to enter. Once the Commonwealth has exercised a choice to enter into a field of activity, its executive power is not affected merely because the incidents of the activity are regulated by a State law.
The modified Cigamatic doctrine is quite different to the notion of “operational inconsistency”. Cigamatic is a doctrine implied from the conferral of executive powers, capacities and prerogatives on the Crown in right of the Commonwealth by s 61 of the Constitution.
The principle of “operational inconsistency” is based on the express provision in s 109 of the Constitution providing for Commonwealth laws to prevail over State laws to the extent of any inconsistency. In the absence of some direct textual collision between the two laws, the determination of operational inconsistency will ordinarily involve contested matters of fact.
Where the Commonwealth Statute does not evince an intention to ‘cover the field’, the question will be whether the performance of functions under the Commonwealth law gives rise to some inconsistency or anomaly with the rights and obligations arising under the State law.
Going back to the Northern Territory case, it could not be said that the Commonwealth legislation is intended to cover the field in circumstances where it expressly recognises the obligations arising under sacred sites legislation.
In those circumstances, the inquiry must be whether the powers conferred under the Commonwealth law are intended to be exhaustive once exercised. In that event, the State law is inoperative only once the Commonwealth power is exercised, and only in relation to the person, thing or event over which it is exercised.
The Western Australian Mining Act Case to which I referred earlier provides an instructive example. The Commonwealth defence regulations under consideration made provision for the Commonwealth executive to authorise defence activities on defence practice areas. At the same time, the State mining legislation make provision for the State to grant exploration licences. A majority of the High Court held that an operational inconsistency would only arise once both the Commonwealth and State powers of authorisation and grant respectively were sought to be exercised over the same land at the same time.
Whether the exercise of power by the Director of National Parks to undertake the construction works in Kakadu National Park gave rise to an operational inconsistency with the Territory sacred sites legislation is not an issue which will be determined in the special case proceedings. Those proceedings are limited to the questions whether the Director enjoys the presumption against criminal liability on the part of the Commonwealth, and whether as a matter of statutory interpretation the Territory sacred sites legislation evinces an irresistibly clear intention to displace the presumption.
