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High Court finds Commonwealth funding arrangement invalid

Today, the High Court handed down its decision in Williams v Commonwealth of Australia [2012] HCA 23. The case involved a challenge to the Commonwealth’s authority to fund the National School Chaplaincy Program (NSCP).

The High Court held that both the funding agreement, and the payment of funding, in question were not supported by the Commonwealth’s executive power under section 61 of the Constitution.

The decision is significant for Commonwealth agencies that are administering or establishing funding programs.

Background to the case

The NSCP was announced by the Howard government in 2006 to provide funding for the provision of chaplaincy services in schools. In 2007, the Darling Heights State School (School) applied for, and was successful in obtaining, funding under the NSCP. This resulted in the Commonwealth entering into a funding agreement with Scripture Union Queensland for the provision of chaplaincy services at the School (Funding Agreement).

The plaintiff, a father of children enrolled in the School, commenced proceedings challenging the authority of the Commonwealth to fund these services.

The High Court’s decision

The Commonwealth was not authorised by an Act of Parliament to enter into, or pay money under, the Funding Agreement. In the absence of statutory authority to do those things, the Commonwealth relied on its executive power under section 61 of the Constitution.

The High Court rejected the Commonwealth’s position that the executive power was sufficient for this purpose.

In the absence of an authorising Act of Parliament, the High Court held that:

  • the Funding Agreement was invalid by reason of it being beyond the executive power of the Commonwealth under section 61 of the Constitution; and
  • payments by the Commonwealth under the Funding Agreement were not supported by section 61 of the Constitution.

This decision was reached even though the Commonwealth may have had the power to establish the NSCP under an Act of Parliament, had it chosen to do so.

Implications for Commonwealth agencies

The High Court’s decision in this case can be seen to continue a trend towards a more literal approach to constitutional constraints on the powers of the Commonwealth to spend public money.

At its extreme, the decision could mean that Commonwealth agencies must ensure that their funding programs are backed by specific legislation and not merely by an appropriation of funds under an appropriation Act. The fact that the subject matter of a funding agreement or funding payment falls within a head of Commonwealth legislative power may, of itself, not be sufficient to authorise the funding.

Given the potential significance of the High Court’s decision in this case, we will be issuing further commentary on the implications of this decision in the near future.

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