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Ministerial Directions to Statutory Corporations

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Research PaperNo.7 1998-99

ISSN 1328-7478

© Copyright Commonwealth ofAustralia 1998

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This paper has been prepared for general distribution to Senators and Members of the Australian Parliament.While great care is taken to ensure that the paper is accurate and balanced, the paper is written usinginformation publicly available at the time of production. The views expressed are those of the author andshould not be attributed to the Information and Research Services (IRS). Advice on legislation or legalpolicy issues contained in this paper is provided for use in parliamentary debate and for relatedparliamentary purposes. This paper is not professional legal opinion. Readers are reminded that the paper isnot an official parliamentary or Australian government document. IRS staff are available to discuss thepaper's contents with Senators and Members and their staffbut not with members ofthe public.

Published by the Department of the Parliamentary Library, 1998

INFORMATION AND RESEARCH SERVICES

Research PaperNo. 7 1998-99


Christos Mantziaris, ConsultantLaw & Bills Digest Group8 November 1998

Acknowledgments

This paper draws from material which will appear in a paper by the author entitled'Ministerial Directions to Statutory Corporations: What does a theory of responsiblegovermnent deliver?' forthcoming in (1998) 26(2) Federal Law Review. The author wishesto acknowledge Bob Bennett, Stephen Bottomley, Nick Seddon and Jane Stapleton fortheir comments on a draft version of this paper and reserves the responsibility for errors tohimself.

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Contents

Major Issues Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 1

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 1

The problem ofinfonnal Minister-board communication 1

The governance structure of statutory corporations . . . . . . . . . . . . . . . . . . . . . . .. 2

The evidence on infonnal Minister-board communication. . . . . . . . . . . . . . . . . .. 4

The propriety of infonnal Minister-board communication. . . . . . . . . . . . . . . . . .. 5

Structural reasons for the problem. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 5

Ministerial powers of direction as a solution . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 7

The position of statutory corporations in the framework ofresponsible government . . .. 8

The meaning ofresponsible government. " 8

The principle ofministerial responsibility , 10

The uncertain requirements ofresponsible government for statutory corporations. 10

Is ministerial responsibility for a statutory corporation required by the Constitution?! 1

The view of academics , 11

The emerging view ofthe courts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 13

Interpreting ministerial directions powers , 14

Litigation context , 14

The interpretative choices , 14

Parliamentary intention and the weak fonn approach , 15

Literal construction , 16

Purposive construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ., 16

Strong fonn approach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 17

Hughes v Airservices Australia. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 17

The strong fonn approach to responsible government in Hughes , 18

Responsible government and historical change - the problems of a strong fonnapproach , 21

Conclusion , 22

Endnotes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 22


Major Issues Summary

Over the past ten years, the Commonwealth Government has withdrawn from theoversight ofthe day-to-day operation ofmany of its business and statutory authorities. Themanagers have been allowed to manage, while government has concentrated on policyformulation and the overall steering of these entities.

Yet the government's withdrawal from the operational level has not been complete. Thegovernment is not an ordinary business owner and it has preserved its ability to intervene,where necessary, in the affairs of entities under its control. Needless to say, suchinterventions can be politically controversial.

Parliament has sought to regularise the means by which the executive may intervene in theaffairs of statutory corporations by granting the portfolio Minister a formal power to directthe corporation. The breadth of these powers varies. The power might extend to all of theactivities of the corporation, a specified range of activities, or specific transactions.

Two problems have emerged with this form of regulation. First, as the recent case ofHughes v Airservices Australia (1997) 146 ALR 1 illustrates, Ministers have ignored thestatutory power of direction, and have continued to exercise informal influence over thecorporation. These informal communications between Ministers and boards occur in azone of moral and legal uncertainty. No firm rule has developed for their regulation.Company law norms regulating this practice are difficult to apply, as it is difficult toreconcile the structure of the statutory corporation and the ministerial directions powerwith the governance arrangements of the private sector company.

The second problem lies in the judicial interpretation of statutory directions powers. Upuntil recently, the courts were quite content to interpret these provisions throughconventional methods of statutory interpretation (i.e. the 'purposive' and 'literal'construction methods). But the decision of the High Court in Lange v ABC (1997) 145ALR 96 and that of the Federal Court in Hughes, indicates that courts are now morewilling to interpret the accountability structures of statutory corporations by reference toimplications drawn from the Constitution.

The Lange case established that specific sections of the Constitution prescribed a systemof 'responsible government' for the Commonwealth. The court had little to say about therequirements of responsible government. Indeed, these requirements have been kept vagueby courts, so as to preserve the flexibility of Parliament to pass legislation allowing theexecutive to organise its activities in new ways.

The Hughes case appears to restrict this flexibility by adopting a much stronger andnarrower approach to the requirements of 'responsible government'. In particular, the casesuggests that the Constitution requires statutory corporations to be accountable toParliament through the principle of ministerial responsibility notwithstanding any

I


additional means that Parliament may choose (e.g. approval of corporate plans, financialreporting, dividend policy, imposition of directors' duties). This emphasis on ministerialresponsibility allowed the court in Hughes to interpret a ministerial directions power asbeing broad enough (i) to allow a Minister to intervene in any aspect of the board'sdecision making, provided he or she did so through the use of the statutory power; and (ii)to support the Minister's right to receive any corporate information he or she required(whether confidential or not) in order to exercise that power.

This strong form approach to responsible government gives cause for concern. First, itappears to lack constitutional foundation. Secondly, it runs the danger of placing undueemphasis on a particular form of relationship between Parliament and the executive, thatof ministerial responsibility. This emphasis might frustrate Parliament's ability to createother forms of executive accountability, which might better accommodate the changednature of contemporary social and economic phenomena. Private sector style corporategovernance techniques for statutory corporations are one example. The use of companiesincorporated under the Corporations Law are another.

This paper restricts itself to Commonwealth bodies which are cast in the form of thestatutory corporation rather than the Corporations Law Company. But the elucidation ofthe theory of responsible government is also relevant for the latter. The ability of a theoryof responsible government to remain flexible is critical to the evolution of the workingConstitution.

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Introduction

This Research Paper addresses the problem of informal communication between Ministersand the boards of statutory corporations and Parliament's attempt to regulate thesecommunications through the enactment of formal ministerial powers of direction over thecorporation. Directions powers are an attempt to reconcile two conflicting needs-theexecutive's need to delegate decision-making to an agent and the executive's need topreserve its capacity to intervene in the agent's decision-making. Formal directionsprovisions do not necessarily resolve the problem of informal communication. They areoften ignored by Ministers, and their interpretation forces courts to grapple with uncertainareas ofconstitutional law.

Judges interpreting ministerial direction provisions have generally approached the task byattempting to give effect to Parliament's intention through conventional techniques such asthe literal and the purposive construction of the statute. But the increased judicialrecognition of the system of responsible government prescribed by the CommonwealthConstitution1 has raised the possibility of a broader field of interpretation. This paperattempts to assess the merits of rival approaches to the requirement of responsiblegovernment in the conduct of the affairs of statutory corporations by reference both totheir constitutional underpinnings and to their ability to facilitate historical changes in theform ofaccountability Parliament might think appropriate.

Part 1 describes the problem of informal Minister-board communication and seeks tocontextualise it within the peculiar governance structure of the statutory corporation. Theenactment of ministerial directions power is treated as a response to these structuralproblems. Part 2 reviews the theory of responsible government as it is emerging from thecourts and constitutional scholarship in order to ascertain the background to the judicialinterpretation of directions powers. Part 3 reviews the rival approaches to responsiblegovernment and their implications for the construction of directions powers.

The problem of informal Minister-board communication

Statutory corporations possess governance structures which are idiosyncratic. In thestandard case, the statute which establishes the corporation will allocate formalresponsibility for decision-making between the board of the corporation and the executive(usually represented by the Minister) and defrne formal avenues of communicationbetween the two parties.

But behind this formal fayade, there is usually a high level of informal communicationbetween the Minister, the department and the board and management of the corporation.These communications occur in an area which is effectively unregulated by legal rules or

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conventions. Often, these infonnal techniques will be used by the Minister to influence theboard's decision-making.

Statutory powers of ministerial direction over a corporation must be understood as aresponse to this situation. Such powers attempt to satisfy two conflicting needs-theexecutive's need to delegate decision-making to an agent and the executive's need topreserve its capacity to intervene in the agent's decision-making.

The governance structure of statutory corporations

A statutory corporation is an artificial legal person with perpetual succession2 created bystatute. It has the right to sue and be sued and has such other legal capacity as Parliamentmay validly confer upon it. Beyond the possession ofthese basic characteristics, the highlymalleable nature of the fonn does not allow the statutory corporation to be conceived as afixed legal category.

Some statutory corporations are nothing other than a 'corporation sole' in which legalpersonality is conferred upon an office in order to distinguish it from the natural personwho is its temporal occupant.3 Other statutory corporations provide the governancestructure for the conduct of large-scale governmental activities, ranging from thecommercial (e.g. the sale of goods and services) to the non-commercial (e.g. regulation,industry representation and research).4 The historical uses of the fonn have differedenonnously.5

The Commonwealth Executive has also used Corporations Law companies to perfonnactivities. Some of these companies are proprietary companies, some are companieslimited by guarantee. Others, like the telecommunications carrier Telstra, are listed publiccompanies in which private investors may hold shares. Government Business Enterprises(GBEs) are simply a collection oflegal entities that have been categorised as such becausethey conduct substantial commercial activities. Some GBEs are statutory corporations.Others have been created as private-sector style companies incorporated under theCorporations Law. Parliament and the Department of Finance have imposed additionaloversight mechanisms and controls on GBEs which have been created in response to theircommercially-oriented character.6 Both statutory corporations and Corporations Lawcompanies controlled by the Commonwealth are subject to the Commonwealth Authoritiesand Corporations Act 1997 (Cth).

For the purposes of this discussion, the Research Paper will focus on the circumstances oflarger contemporary Commonwealth statutory corporations such as the CommonwealthScientific and Industrial Research Organisation (CSIRO), the Australian BroadcastingAuthority (ABA), the Special Broadcasting Service (SBS), the Australian TradeCommission (AUSTRADE), or the Grain Research and Development Corporation.7

These organisations conduct activities on a financial scale and with a labour force ofa size

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that would easily place them within the category of the large proprietary companl hadthey been incorporated under the Corporations Law. They are also the type of organisationthat is more likely to experience the problem ofinformal Minister-board communication.

In the case of these statutory corporations, the parent statute will create a memberlesscorporation comprising a board ofdirectors, to be appointed by the executive, with definedtenure and conditions for removal. Provision might be made for a 'government director'. Inpractice, this director is a nominee of the executive and is usually employed as a publicservant in the relevant portfolio area. Responsibility for the statutory corporation isgranted under the Administrative Arrangements Order to the Minister in charge of theDepartment ofState most closely related to the activities of the corporation.

The corporation is vested with a range of powers necessary for the conduct of statutorilydefined functions. But the statute will usually reserve, for the ministerial principal,authority over certain aspects ofcorporate decision-making. This will usually be through aseries of legal techniques which enable periodic flows of formal communication betweenprincipal and agent, e.g. the ministerial approval of periodic operational, financial andcorporate plans. The preparation ofannual reports and the corporation's subjection to auditby the Auditor-General further supplement the informational needs of both the executiveand the Parliament.

The parent statute will also regulate formal non-periodic communication between thepolitical principal and the board of the corporation. The statute may require the board toobtain the Minister's approval for a range of specified transactions (e.g. borrowing,investment, entry into a contract, price-setting). It may also require the directors to notifythe Minister of the occurrence of specific events or the general conduct of corporateoperations. Many of these requirements have now been applied generically to statutorycorporations through the Commonwealth Authorities and Companies Act 1997 (Cth).9

In the background of these controls lie other formal oversight mechanisms. Parliamentretains the right to inquire into the affairs of the corporation. lO Through statute, or the issueof administrative guidelines by the executive, other departments or agencies might begranted authority over specific aspects of corporate operations: for example, the Ministerfor Finance might be granted oversight of corporate borrowing and 'dividend' policy; theapproval of the Department of Foreign Affairs may be required for ventures outside thejurisdiction; or the approval of the Department of Industrial Relations for staff salaries andso on.

Depending on the character of the decision,II and the rules of standing,12 the board'sactions might be subject to scrutiny by the courts at the snit of a member of the public. Inthis circumstance, the review of board decisions will be based on the judicial review ofadministrative action rather than the general law goveming the director's fiduciary dutiesto the corporation. 13 Depending on the identity of the statutory corporation,14 corporateinformation may be examined by the public under freedom of information legislation

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(albeit in a manner limited by considerations of commercial competition and stateconfidentiality).

The evidence on informal Minister-board communication

Oversight and coordination is also established through informal communication betweenthe board (and management) and various parts of the executive. These communicationsrange froni the ongoing contact between senior management and members of the portfoliodepartment or the Minister's office, to the phenomenon which is the focus of this paper the direct intervention of the Minister in corporate decision-making over issues allocatedex ante to the board under the parent statute.

Within the Anglo-Australian legal system, the most systematic inquiries into ministerialintervention of this nature have been occasioned by the large scale nationalised industriesof post-war Britain. IS The British Parliament was so concerned by the visible growth ofextra-statutory ministerial control, and 'the lack of clarity about purposes, policies,methods and responsibilities' that ministerial intervention created, that it held a SelectCommittee Inquiry into the Ministerial Control ofthe Nationalised Industries (1967-68).16Evidence before the Committee by corporate officers and public servants confirmed theextent of de facto ministerial control over the industries. Variations were noted in thepattern of ministerial intervention between industries, in the personal styles of Ministers,in the extent ofministerial control and its historical background. 17

Empirical data on the frequency of ministerial interventions in Australian statutorycorporations is not available; nor is it ever likely to be available due to the inherentmethodological difficulties in ascertaining and measuring the exercise of politicalinfluence. The recent case of Hughes v Air Services Australia (discussed below) hasprovided some insight into the marmer in which Ministers will attempt to influence boardsand also the manner in which the senior management of statutory corporations willcooperate quite closely, on an informal level, with members of the portfolio Department.Ministerial interventions in board affairs have also been documented in the case of entitiessuch as the Australian Broadcasting Corporation, Telecom, the OverseasTelecommunications Commission and the Civil Aviation Safety Authority.18 Evidenceregarding ministerial intervention in respect of government companies is too limited tosupport firm conclusions.19

These events have often been the subject of political controversy.20 The relationshipbetween the Minister and the board is so deeply influenced by the location ofthe statutorycorporation within the political system that informal Minister-board communicationoccurs in a space governed more by political habit and expediency than by legal normsand conventions.

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The propriety of informal Minister-board communication

Both British and Australian administrative history reveal an absence of conventionsregarding ministerial intervention in the affairs of statutory corporations. Paul Finn's21study of the practice of colonial boards in New South Wales, Victoria and Queenslandfound that although British and colonial practices in relation to the accountability ofboards differed, the colonies presented no unifonn model for Minister-board relations.Each colony appears to have positioned its various 'Boards', 'Trusts', and 'Commissioners'in different degrees of proximity to the executive, represented variously by one or moreMinisters ofState, or the Governor-in-Council.

The failure of the British Select Committee on Nationalised Industries to formulateprinciples for the exercise of ministerial control is instructive.22 On the one hand, theCommittee accepted that, whatever the theoretical arguments in favour of making allexercise of ministerial control precisely formal and authorised by statute, some degree ofinformality was unavoidable. Indeed the informality of Minister-board relations made itpossible to respond flexibly to sudden changes in circumstances. The Committee proposedthat the respective responsibilities ofboard and Minister be discussed informally and thentabled in Parliament. On the other hand, the Committee could not forgo the need forformal statutory regulation. The Committee concluded that Ministers should use statutorypowers as their main instruments of strategic control. And in cases of ultimatedisagreement between Ministers and boards, the Minister should be required to actformally if his or her directions were to be put into effect. 23 This ambivalence towardsthe respective roles of boards and Ministers is also reflected in the international publicadministration literature.24

Structural reasons for the problem

Directors in the Corporations Law company owe their fiduciary duties to 'the company asa whole' and not to any particular shareholder, whether that shareholder is in a position tocontrol the company or not.25 Even the board of a wholly owned subsidiary company isnot bound to comply with the directions of the controllers of the company.26 Where acontrolling member of a corporation attempts to dictate informally a course ofaction to theboard, such a communication is legally ineffective. The directors are under no duty toobey such a communication, and indeed would be in breach of their duty if they were to~w? .

Company law has a very simple solution to the problem of informal communicationbetween the board and shareholders. Informal communication is tolerated provided that itdoes not breach the directors' fiduciary duties. Where company directors have habituallyobserved informal directions, the controller would be considered a 'shadow director' andwould be exposed to any liability that might arise as a result ofhis or her actions.28

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This solution cannot be applied to the statutory corporation due to its different legalstructure. These structural differences are also the source for much of the uncertaintysurrounding the problem of informal Minister-board communication. Three keydifferences may be noted in this regard:

First, the governance structure of the corporation derives from the combined exercise ofboth the legislative power (controlled by the executive in the Westminster system) and theexecutive power. Parliament's monopoly over the legislative power allows it enormouslatitude in defining the le~al incidents of the corporation and the general law enviromnentwithin which it operates.2 Significantly, legislation may be used to detennine the divisionof corporate powers between the board and Minister and may qualify the fiduciary duty ofthe directors to 'the corporation as a whole,.3o This aspect of the statutory corporation'sgovernance package deprives it of the benefit of the minimum company law normregulating the flow of informal principal-agent communication, viz, such communicationis pennissible provided that it does not undermine the fiduciary duties of the directors.

Secondly, the statutory corporation necessarily falls within the ambit of the doctrine ofresponsible government.31 As will be seen below,32 the precise character and content ofthis relationship of accountability is unclear. But its existence may require a Minister whohas been assigned responsibility for a corporation to intervene in its affairs in a manner notpennitted to the shareholder of a private company. The demands of responsiblegovernment may also generate additional informational needs (and associated costs) notexperienced by a shareholder private principal which might cut across fiduciaryobligations regarding the confidentiality ofcorporate information.

Thirdly, the executive is by its very nature engaged in the pursuit of multiple and oftenconflicting objectives. Within the statutory corporation, this internal conflict is realised inthe interplay between corporate profit objectives, corporate non-profit objectives (e.g. theprovision of loss-making services for reasons of social policy) and extra-corporateobjectives (e.g. the conformity of corporate action to the government's foreign policy andemployment policy). The pursuit of these objectives might be directed by different parts ofthe executive each of which is concerned with a particular policy,33 or by the same part ofthe executive in response to electoral pressures.

The inherent insecurity of the executive's term of office34 may force it to influence thecorporation in a direction which conflicts with the statutory corporation's own perceptionof its objectives. By contrast, the problem of a shareholder attempting to dictate to theboard of a company a non-profit or extra-corporate objective, rarely arises in theCorporations Law company. Large proprietary compauies are fundamentally driven bythe profit motive. The law has responded accordingly, by embodying the understandingthat a director's fiduciary duties may be breached if he or she puts a wider notion ofcorporate social responsibility before the financial interests of the company.35 This aspectof the directors' fiduciary duty is of little utility to the statutory corporation incircumstances where it is directed to pursue non-profit or extra corporate goals.

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Ministerial powers of direction as asolution

Attempts to regulate informal Minister-board communications have fOlUldered on a basicconflict between the need to delegate decision-making to an agent, while preserving theprincipal's capacity to intervene when it chooses

In Australia, Parliaments have turned to the grant of statutory powers of ministerialdirection.36 Although the device has been used in legislation enabling corporations forquite some time, there has been a dramatic increase in its use over the past fifteen years.37

This has been accompanied by the growth in manner and form guidelines for the use ofsuch powers.38 The most important reason for this development is the influence ofmanagerialism in the restructuring of the public sector. While govermnent has withdrawnfrom the control of operational detail in statutory corporations and departments, entrustingsuch control to seuior public sector management, it still requires devices such as theministerial direction in order to exercise control over this detail as the need arises.39

The statutory directions power is also a means for limiting informal Minister-boardcommunication. These provisions are an attempt to divert informal principal-to-agentcommunication into a transparent formal channel and aim at discouraging (informal)communication outside this channel.

The legislative results have been varied.40 Statutory powers of direction range from thegrant of a broad discretionary power of direction over the entire breadth of a corporation'sactivities to more limited powers circumscribed to particular corporate functions ortransactions. In some circumstances, the corporation's compliance with the ministerialdirection is mandated, but the corporation is granted indemnity from any legal liability thatmight arise from the implementation of the direction.41 Yet another variation is theimposition of an obligation upon the statutory corporation to comply with govermnentpolicies notified to it by the Minister,42 a formulation which raises the difficult legalquestion of how the board is to determine the precise content of the policy and itsapplication to the matters before it.43

These provlSlons no doubt offer guidance in determining which ministerialcommunications to the corporation fall squarely within or without the channel ofcommunication delineated by Parliament. Yet the experience of statutory corporations-aswith other, less autonomous parts of the bureaucracy--eomprises many incidents whichresist this neat dichotomy. The Minister might attempt to use the statutory power to directthe corporation on matters not covered by the power; or the principal may communicate itsdesire for a particular outcome, but refrain from an (otherwise valid) exercise of thestatutory power in order to achieve it.

A further difficulty with directions provisions, is their interpretation by the courts. As willbe seen in the remainder of this paper, when these provisions are litigated, judges will notonly have to decide questions such as 'How closely did Parliament intend the statutory

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corporation to be controlled by the executive?'. They may also have to answer thequestions 'In what manner ought the executive be accountable to Parliament for itsactivities?'. The second question forces the interpretation of directions provisions into themurky constitutional understandings of the requirement of a system of responsiblegovernment.

The position of statutory corporations in the framework ofresponsible government

It is clear that the affairs of the statutory corporation must be conducted within theframework of responsible government. What such a proposition entails in practice isdisputed. Traditionally, there was an expectation that the requirements of responsiblegovernment could be met through the principle of ministerial responsibility-whethersuch a requirement be imposed by the Commonwealth Constitution or not. But this mayno longer be an adequate way of addressing the question. The manner in which thisquestion is resolved is important for the interpretation of a Minister's powers of directionover a statutory corporation.

The meaning of responsible government

It is now clear that the system of government established by the CommonwealthConstitution is based on the assumption of responsible government. There had alwaysbeen support for this proposition in constitutional jurisprudence,44 but the matter was putbeyond doubt in Lange v ABC (1997) 145 ALR 96, a case which considered the impliedconstitutional right to freedom of political speech and its relationship to the law ofdefamation. In a unanimous judgment, the High Court identified the sections of theConstitution which prescribed a system ofrepresentative and responsible government. Thesections said to support the system of responsible government were sections 6, 49, 61, 62,64 and 83 of the Constitution.45 .

Section 61 of the Constitution vests executive power in the Queen and declares it to beexercisable by the Governor-General. The power 'extends to the execution andmaintenance of this Constitution, and of the law of the Commonwealth'. Section 64empowers the Governor-General to appoint Ministers to administer the departments ofState of the Cornmonwealth, makes such Ministers members of the Executive Council(established under section 62) and requires such Ministers to be elected representatives.Section 83 ensures that the legislature controls supply, while section 6 requires that therebe a session of the Parliament at least once in every year. Section 49 'provides the sourceof coercive authority for each chamber of the Parliament to sununon witnesses, or torequire the production of documents, under pain of punishment for contempt,.46 Finally,

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these sections must be read in conjunction with those constitutional provisions whichestablish a system ofrepresentative government.47

There has never been agreement as to the precise components of a system of responsiblegovernment and it is beyond the purpose of this paper to review the voluminous debate onthis matter.48 Earlier scholarship on the requirements of responsible government generallymoved from the same sections of the Constitution identified in Lange in order to state thatresponsible government in Australia contains at least the following elements:49

1. Ministers have to be members ofParliament.

2. Ministers require a majority in the popular House of the Parliament to hold office.

3. The Houses of the Parliament (presumably the popular Houses) can be dissolvedbefore the expiration of their maximum terms.50

4. Public servants must have different tenures from their Ministers.

The High Court did not seek to define responsible government exhaustively; thus, theprecise identity of all the system's components remains to be determined. Yet Langeestablishes an account of responsible government which is potentially broad enough toencompass the totality of Parliament's formal relationship with the executive.51 If the logicof the court's analysis is followed, the system of responsible government might extend toall formal instruments which Parliament may use to inform itself about, and exerciseinfluence over, the affairs of the executive.

In relation to the affairs of statutory corporations, these instruments will typically includeParliamentary Inqniries52 and Committees such as the Joint Committee of PublicAccounts, the Senate's Legislative Committees and the Senate Standing Committee onFinance and Public Administration.53 One might speculate as to whether the activities ofthe Auditor-General might eventually be contained within a judicially recognised theory ofresponsible government.54

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The principle of ministerial responsibility

The principles of individual and collective ministerial responsibility to Parliament arecomponents of our system of responsible government. They are based on conventions ofpolitical practice which are nevertheless said to be entrenched in the Constitution bysections 62 and 64.55

Collective ministerial responsibility refers to the shared responsibility of the ministry as awhole to accept that its tenure as a government is conditional upon the 'confidence' of theHouse.56 Individual ministeriar responsibility, in its broadest sense, refers to the Minister'saccountability to Parliament, under which the Minister is fixed with liability for theconduct ofpolicy within his or her department and the acts or omissions of officials withinit.

Although it is common to associate the convention of (individual) Ministerialresponsibility with Ministerial resignation, it is clear that this is only the most extremeremedy in an ascending scale ofliability and corresponding remedy. Many commentators"have noted the gradual erosion of the convention and the increasing rarity of ministerialresignations.57 Where the Minister has no control or supervisory authority over a body, noaccountability is expected.58 Once such su~ervision or control is granted, Ministerialresponsibility may operate in various modes. 9 The convention may merely mean (a) thatthe Minister has an obligation to redirect a parliamentary question to the relevant officialwithin the portfolio and to ensure that an answer is produced. But it usually means that theMinister has an obligation (b) to report to Parliament what has happened, or (c) to explainwhat has happened, or (d) to make amends for what has happened or finally, that theMinister has an obligation (e) to resign over what has happened.

Ministerial responsibility is the traditional means by which Parliament secures theaccountability of the statutory corporation to both the executive and the Parliament. But itis not the only means.

The uncertain requirements of responsible government for statutory corporations

Lange has provided assurance that statutory corporations fall within the ambit ofresponsible government. It followed from the court's analysis of the Constitution that therewere implied limitations on the Commonwealth's legislative and executive power toexclude parliamentary oversight of the affairs of statutory corporations ('authorities'):

[I]hose [constitutional] provisions which prescribe the system of responsiblegovernment necessarily imply a limitation on legislative and executive power to deny theelectors and their representatives information concerning the conduct of the executivebranch ofgovernment throughout the life ofa federal parliament. Moreover, the conduct

10


ofthe executive branch is not confined to Ministers and the public service. It includes theaffairs of statutory authorities and public utilities which are obliged to report to thelegislature QI. to a Minister who is responsible to the legislature. ill British Steel vGranada Television [1981] AC 1096 at 1168 Lord Wilberforce said that it was by thesereports that effect was given to .[t]he legitimate interest of the public' in knowing aboutthe affairs of such bodies.60 (emphasis added).

That which remains uncertain is the character of the institutional arrangements that wouldsatisfy the requirements ofresponsible government and indeed whether these requirementsmight displace Parliament's choice ofa particular arrangement. The court has not provideda firm answer to the question 'Is ministerial responsibility indispensable for theaccountability of statutory corporations'?

This brief passage from Lange would appear to suggest that the assigmnent of ministerialresponsibility to a portfolio is not a necessary implication from the theory of responsiblegovernment. Parliament may choose to bypass the Minister by requiring that the statutoryauthority report directly to it. The passage is also ambiguous as to whether all statutoryauthorities and public authorities are obliged to report to Parliament or the Minister, orwhether such a practice is restricted to those 'statutory authorities and public bodies whichare obliged [by legislation or delegated legislation] to report'. If the latter interpretation isadopted, it is conceivable that some bodies ruight meet Parliament's informationalrequirements through means other than periodic reporting back to Parliament or theMinister.

Is ministerial responsibility for astatutory corporation required by the Constitution?

As Lange provides liruited guidance on the requirements of responsible government forthe statutory corporation, it is useful to review earlier academic opinion on the questionand then attempt to structure the emerging views ofthe courts in the light of this work.

The view of academics

An early and quite authoritative sununary of the different views on the role of section 61in respect of the accountability of statutory corporations (or 'authorities') is that offered tothe Senate Standing Committee on Finance and Government Operations by Fiun andLindell in 1982.61 Reviewing the meagre case law and academic writings, the authorsidentified three main positions:

1. Parliament may create statutory authorities ('corporations'), but it is contrary to section61 to vest the executive power of the Commonwealth in such authorities withoutmaking them subject to ministerial control. Miuisters have reserve non-statutory

11


powers to issue binding directions to authorities.62 Finn and Lindell described thisview as implausible.

2. Parliament may create statutory authorities, but in vesting them with the executivepower ofthe COrnnlonwealth, some 'residual function' inheres in the Governor-Generalunder section 61. This may be discharged by either:

(a) A ministerial responsibility in relation to the 'execution' of the parent statute whicharises from a combination of the principle of ministerial responsibilitY (derivedfrom outside section 6l) and the executive's responsibility for the maintenance ofthe laws of the Commonwealth under section 61. According to this view, alegislative scheme is unconstitutional if it positively precludes a Minister fromsupervising an authority.63

(b) The assignment of a Minister to the administration of an authority's parent statuteunder the Administrative Arrangement Orders. If the parent legislation does notaccord to the Minister's actual responsibilities in the exercise of the authority'sfunction, then there is no such responsibility. The Minister is simply the person towhom Parliament can look when questioning the authority, the person to whomthe Governor-General will look for advice concerning the authority and the personwho is charged with initiating and enforcing changes to the parent statute. Thiswould appear to suggest that 'redirectory' ministerial responsibility for a statutorycorporation might be acceptable.64

3. Parliament may create statutory authorities but need not vest responsibility for theauthority in the executive govemment under section 61. This is because Parliamentmay either override section 61, or alternatively because the vesting of independentfunctions in the authority involves no exercise of the executive power of theCommonwealth. To the extent that the authority is independent, there is no ministerialresponsibility for the authority. It is for Parliament itself to determine the manner andextent ofits accountability.

Finn and Lindell rejected the first view outright and suggested that views (2)(b) and (3)would commend themselves to the judiciary as the most plausible approaches to theconstitutional basis for the accountability of statutory authorities. In rejecting view (2)(a),the view which located some 'residual' ministerial responsibility in section 61, the authorssuggested that it was 'within the province of Parliament in allocating functions to nondepartmental agencies, to override that principle in a particular legislative scheme if thatscheme falls within a head of Commonwealth legislative power.'65 The authors concludedthat the principle ofministerial responsibility 'has no necessary part to play' in the creationof independent statutory authorities; Parliament could simply legislate to provide this, if itso pleased. It was for Parliament to 'ordain the nature and limits of the authority'sindependence from and accountability to Parliament,.66

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Winterton's study of the executive power67 lends support to view (3) on an alternativebasis, namely that nothing in section 61 indicates that the government is to be the soleexecutor of Cornmonwealth legislation. There is therefore no limitation on theParliament's discretion to specifY an autonomous statutory corporation to executeCornmonwealth legislation. Winterton rightly distinguishes between the 'good politicalsense' that might lie behind the use of ministerial responsibility for statutory corporationsand the open possibilities contained in section 61. After all, if Parliament requiresministerial responsibility, it can pass a law to enforce it.68

The precise position of government-controlled Corporations Law companies within theschema of responsible government is more difficult to define. The question to be posed is:'Are the provisions of the Commonwealth Authorities and Companies Act 1997 (Cth)exhaustive ofthe requirements ofresponsible government?'.

The emerging view of the courts

The rejection of views (1) and (2)(a) and the endorsement of views (2)(b) or (3) appear toaccord with the expansive view of responsible government in Lange. It is also consistentwith the manner in which the High Court disposed ofHorta v Commonwealth (1994).69

In Horta, the Court upheld, under the foreign affairs power (section 5l(xxix) of theConstitution), legislation giving effect to a bi-Iateral mining treaty with Indonesia.7o Thelegislation conferred upon a vaguely defined Joint Authority the 'exercise of the rights andresponsibilities of Australia' in relation to activities conducted under the treaty. 71

Australia shared control over the Joint Authority with the Indonesian government.72

According to the High Court, there was 'nothing in the Constitution which preclud[ed] theconferral of any Executive power' upon the Joint Authority.73

Similar concerns regarding the constitutionality of Cornmonwealth-Stateintergovernmental bodies which, in part, exercise the executive power of theCommonwealth without being subject to control or direction by the Cornmonwealth, alsoappear to have been relegated to the margins ofconstitutional law debate.74

However, as will be indicated below,75 the Federal Court decision in Hughes, seems tohave adopted a stronger but narrower view, perhaps more in line with views (1) and (2)(a).

Given the fluidity in the contemporary judicial understanding of the system of responsiblegovernment, how is a theory of responsible government to be employed in theconstruction of statutory powers of ministerial direction? If a court is to apply anexpansive view of responsible government-as it now must-how is it to contextualise aparticular instrument of accountability, such as ministerial responsibility, within the wholerange ofaccountability instruments that are available within the system?

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Interpreting ministerial directions powers

It appears that courts have taken two approaches to the use ofa theory of responsiblegovernment when intezpreting ministerial powers of direction-a strong and a weakapproach. These approaches strike a different balance between parliamentary intention andconstitutional requirements in the design of accountability mechanisms for statutorycozporations.

Litigation context

Ministerial directions provisions are rarely litigated, as the problems emerging from theuse or abuse of the statutory power are often resolved through political means. But suchprovisions have been considered in actions brought by third parties. This litigation fallsinto three main categories:

I. the judicial review of the Minister's exercise of the statutory power

2. the judicial review of the validity of an administrative act performed by the statutorycozporation in compliance with a ministerial direction made under the power, and

:\3. litigation on another point of law (such as the liability of a statutory cozporation for

breach of contract) in which the court might consider a ministerial direction, or actionperformed in conformity with it, as a relevant matter (e.g. as a cause of the contractualbreach). The litigation in Hughes Aircraft Systems International v AirservicesAustralia (1997) 146 ALR 1 falls into this third category.

The interpretative choices

As the statutory cozporation is the direct creature of Parliament's will, features of itsgovernance structure such as a directions power fall to be determined by reference to theenabling statute.76 Whether through 'literal' or 'puzposive' constructions of the parentlegislation, or some combination of both,77 the conventional techniques of statutoryintezpretation aim at eliciting Parliament's intention.

With the increasing judicial recognition of the system of responsible government as aconstitutional assumption, two basic approaches have emerged in the intezpretation ofministerial directions powers. Each of these reflect different approaches to the manner inwhich the theory ofresponsible government may be used by the COurtS.78

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The first approach ('the weak fonn approach') is to persist in giving effect to Parliament'sintention by recognising responsible government as an interpretative field against whichParliament's intention might be construed.

The second, 'strong fonn approach', is to turn from the silence of the statute on the precisepoint (e.g. whether the Minister may intervene in a board decision regarding the award ofa tender) to a construction which gives direct effect to the principles of responsiblegovernment. Hughes v Airservices Australia appears to have adopted the strong fonnapproach, by attempting to give a constitutional basis to the principle of ministerialresponsibility which was then directly applied to the construction of the directions power.

If one uses the principles of responsible government as a background interpretative fieldthat may assist in detennining Parliament's intention, there is, in given circumstances,clear scope for recognising that Parliament intended authority over a particular fonn ofdecision-making to be vested.in a board independent of ministerial control. Conversely, ifone seeks to give direct effect to the principles of responsible in a ministerial directionspower, any board decision will always be subject to the possibility of ministerialintervention. For according to the strong fonn approach in Hughes, there can be no otherway in which the Minister may satisfY his or her responsibility to Parliament. Some of thedifference between these approaches may be traced to different views about the content ofthe theory of government.

Parliamentary intention and the weak form approach

An examination of the case law on ministerial directions displays judicial allegiance toconventional techniques of statutory interpretation and a reticence to embrace a moregeneral theory regarding responsible government. This represents the weak fonn approachto responsible government as a tool of statutory interpretation.

These cases arise in two contexts: the judicial review of the Minister's exercise of astatutory power to direct the corporation/9 and the judicial review of the validity of anadministrative act perfonned in compliance with a ministerial direction.8o Such reflectionas may be. found on judicial methodology within the case law points to the adoption ofboth 'literal' and 'purposive' constructions of Ministerial directions powers. Reference tothe system of responsible government is at most a background consideration which mightsupport the process of statutory interpretation.

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Literal construction

The literal approach is illustrated by Aboriginal Development Commission v Hand (1988)15 ALD 410, a case which considered a statutory provision that the Commission (astatutory corporation) 'shall perfonn its functions and exercise its powers in accordancewith such general directions as are given to it by the Minister in writing,.81 The courtnoted the wide variation in the tenns of ministerial directions powers enacted by FederalParliament and indicated that it was impossible to establish a general fonnula for theirinterpretation. Some instances oflegislative phrasing enabled ministers to make directionswith respect to particular cases and problems. Other phrasing restricted these powers tomore 'general' directions82 which operated like binding guidelines. The 'general direction'provision in this case was construed as a guideline which did not permit the Minister todirect the statutory corporation with regard to the outcome ofparticular decisions.

This literal approach to statutory interpretation allows greater scope for Parliament'schoice of the precise marmer in which it will make the executive accountable to it. Theprovision is construed within the four comers of the statute. The system of responsiblegovernment appears only as a faint backdrop which may assist, but not fully determine,the judge's construction of the statute. In this case, the particular directions provision wasfound to reflect the understanding that the Minister would be responsible for the activitiesof the corporation. But this finding was not strong enough to support the Minister's powerto intervene in day-to-day operational matters.

This approach was followed by the Full Federal Court in Aboriginal Legal Service Ltd vMinister for Aboriginal and Torres Strait Islander Affairs (1996) 45 ALD 235. Here, thecourt again rejected any prior understandings as to the marmer in which Parliament choseto define its relationship with statutory corporations. It considered and rejected thesuggestion that a ministerial power to give 'general' directions should be read down 'inorder to preserve to the [statutory corporation] a pre-detennined zone of autonomousdecision-making, free from ministerial interference'.83 The extent of the corporation'sdecision-making autonomy could only be determined by reference to the statute.

Purposive construction

The Full Federal Court decision in New South Wales Farmers' Federation v Minister forPrimary Industries and Energy (1990) 21 FCR 332 illustrates that the 'purposive' approachto the construction of ministerial directions powers is equally devoid of any traces of atheory of responsible goverurnent. This case concerned the Minister's statutory power togive directions, in 'exceptional circumstances', to the Wool Corporation concerning theperfonnance of its functions and exercise ofits powers.

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The provision was construed by reference to the Wool Marketing Act 1987 (Cth) whichestablished the corporation and a regulatory regime for the marketing of wool. In thiscontext, the court considered the national interest in giving effect to a decision-makingprocess which would determine the price of Australian wool. The particular regulatoryregime featured so prominently in the court's construction of the Minister's 'reserve power'of direction that it refused to follow the construction of a directions power in a previouscase, on the ground that the earlier case involved the construction of a statute regulatingtransport services.84

The importance of regulatory purpose in the construction of directions powers has alsomeant that courts are willing to consider the legislative history of the allocation ofauthority over decision-making within a portfolio in circumstances where the meaning ofthe statutory provision is unclear.85 In cases decided according to the purposive method ofstatutory interpretation, there has been even less need to have recourse to a theory ofresponsible government.

Strong form approach

The strong form approach to responsible government in the interpretation of ministerialpowers of direction is illustrated by the decision in Hughes v Airservices Australia. Thedecision merits particular attention, due to the apparent attempt to establish ministerialresponsibility as a constitutional requirement for the statutory corporation. It is argued thatthe strong form approach might lead to judicial inflexibility in regard to accountabilityarrangements for statutory corporations which rely only minimally on ministerialresponsibility.

Hughes v Airservices Australia

The Hughes case involved a successful challenge by a tenderer against the award of agovernment contract to its coriunercial rival. The contract was for the supply of anationally integrated air traffic control system to replace older systems operating invarious Australian centres. The contract was awarded by the Civil Aviation Authority ('theCAN), a Commonwealth statutory corporation established under the Civil Aviation Act1988 (Cth).86 The court found that the tender offer breached the terms of a 'processcontract' governing the tender evaluation procedure up to the award ofthe contract.

The main contribution of Hughes to the law, is the development of a new doctrine ofcontract law concerning tender processes. But during the course ofa long and complicatedtrial, the court also considered the issue of informal cqmmunication between Minister andboard. This occurred in two contexts: first, in relation to two letters sent by the portfolio

17


Minister and another Minister to the Chairman of the Board and the Chief ExecutiveOfficer which 'intimated' the government's preference for one of the tenderers on the basisof its better performance on a tender evaluation criterion regarding Australian industryinvolvement: and second, the CEO's unsolicited disclosure to the Minister of details of therival tenders prior to the board's determination ofthe tender result.

The court interpreted both the Minister's statutory power of direction and the Minister'sright to access confidential corporate information by taking a strong form approach to therequirements of responsible government.

The strong form approach to responsible government in Hughes

Finn J expressly recognised that other aspects of the CAA's parent statute addressed itsaccountability to Parliament. These included the presentation to the Minister of corporateplans, financial plans and annual estimates, the board's duty to notifY the Minister ofevents which might prevent or significantly affect achievement of the CAA's corporateobjectives or financial targets and the Minister's power to approve or vary the board'srecommendation of the dividend to be paid to the Commonwealth. Other accountabilitymechanisms included the CAA's subjection to audit by the Auditor-General under theAudit Act 1901 (Cth) and its accountability to various committees of the Parliament.87

However, these means of accountability were de-emphasised in favour of theaccountability provided by the Minister's overarching responsibility to account toParliament for the affairs of the corporation:

...central to the public accountability of corporations so circwnstanced under theirlegislation as was the CAA, was - and is - their accountability fIrSt to executivegovernment through their respective Minister, and then to parliament via that Minister. Itis the Minister to whom questions in parliament are directed; it is the Minister who,within the government, is given portfolio responsibility for the corporation and itslegislation; it is the Minister who, in the CAA Act itself, is given both specific oversightpowers and a general and specific direction powers. In such a setting - statutory andconstitutional - the Minister should be taken as having a general right to obtaininformation from the eM in virtue both of his relationship to parliament and to theauthority, and ofits accountability to government, the parliament and the public via theMinistelS [emphasis added]

The impor:tance assigned to ministerial responsibility amongst the many alternative waysin which the requirements ofresponsible government might be met appears to have flowedfrom Finn J's implicit support of the view that ministerial responsibility over the conductof a statutory corporation was required by section 61 of the Constitution.89

.

It has been indicated (see ppll-13 above) that this approach to section 61 of theConstitution is not in keeping with academic views of the section and that which can be

18


implied indirectly from the High Court decisions of Lange and Horta. As there are nodirect judicial pronouncements on the subject, the statements in Hughes are ratherimportant. Moreover, they issue from a judge whose academic scholarship on the subjectof statutory corporations is as extensive as it is highly regarded.9o

This approach, in tum, led to some rather striking results, in relation to (i) the pennissiblecontent of a ministerial direction and (ii) the confidentiality ofboard matters.

(i) The permissible content ofa ministerial direction

In Hughes, the parent statute gave the Minister a wide power of direction over the CAA.The court found that the portfolio Minister's letter could not be construed as a direction,for it was not exercised in the fonnal manner required by the statute.91 The communicationwas therefore legally ineffective. However, the court described the letter as 'highlyimprudent' and 'offensive' to Parliament's intention to protect the corporation from theMinister's control.

The court construed the Minister's power of direction broadly. Thus, provided the Ministerused the directions power in the appropriate fonnal manner, he or she had 'the italics rightto cornmunicate with the board on any matter concerning the affairs of the CAA' providedthe direction was exercised in the appropriate fonnal manner. 92 The Minister couldtherefore direct a particular outcome, such as the award of a tender. This power existeddespite the fact that its use might give rise to 'political difficulties' for the government orexpose the CAA to liability. The latter possibility was clearly a reference to (at least oneversion of) the doctrine of executive necessity which allows the Crown to break a contractin order to implement government policy without being subject to the full range ofremedies granted to a standard plaintifffor breach ofcontract.93

Although the court might have also arrived at the same construction of the directionspower through a weak fonn approach to responsible government, its emphasis onministerial responsibility led it to sideline some important statements of Parliamentaryintention regarding the extent of ministerial control. One of these was a second readingspeech of an amending statute which suggested that Parliament had decided to shiftresponsibility for operational matters, such as the approval of individual contracts, fromthe Minister to the board. The speech had stated that:

In line with the philosophy of moving from [government] oversight of day to dayoperations to an emphasis on results and board accountability, the bill removes a range ofday to day controls exercised by government, including controls over the tenns andconditions of individual borrowings, the approval ofindividual contracts, the purchaseof shares and the establishment of subsidiaries and partnerships. These are nowappropriately the responsibility ofthe board. 94 [emphasis added]

Finn J acknowledged that 'the Minister's intention [in the Second Reading Speech] was...realised' in the amending statute and that the Minister 'subsequently was to act on the

19


assumption that the board was 'responsible for... handling day to day management,.95Indeed both the text of the ministerial letters and the occasion for their writing support thisconclusion.96

If a weak form approach to responsible government had been adopted, it appears possiblethat a more complex picture of Parliament's intended allocation of decision-makingbetween Minister and board would have emerged.

(ii) The confidentiality o/board matters

In Hughes, the adoption of the strong form approach to responsible government alsonecessitated a wide interpretation of the Minister's informational rights. Quite apart fromany specific statutory provisions that might require the disclosure ofcorporate informationto the Minister, the court found that the Minister was entitled to obtain any corporateinformation he or she required in order to maintain his or her accountability to Parliament.No distinction could be drawn between particular forms or classes of information thatcould or could not be sought and obtained. The Minister was thus entitled to view thedetails of the tender bids.

From the board's standpoint, board members were under a duty to disclose corporateinformation if requested by the Minister---even where the information was confidential. Ifsuch a disclosure would prejudice the interests of the corporation, it would still have to bemade, but subject to some deliberation 'at least to the extent of ensuring that the Ministerwas full~ appraised ofthe possible implications' for the corporation ofcompliance with therequest. 7 In the absence of a ministerial request, the need to deliberate would be fargreater. The directors would have a duty to have proper regard to the interests of thecorporation and would need to weigh the reasons for disclosure against the need tomaintain confidentiality. Disclosure in these circumstances would be an 'exceptional'event.98

Third parties who contracted with government agencies 'must be taken to have done sosubject to such lawful rights of access to information in the agency's hands as our laws andsystem ofgovernment confer to others'.99

It is worth contrasting these findings with the regulation of confidential corporateinformation in the private company, i.e. a company incorporated under the CorporationsLaw rather than one created by statute. In the private company, directors are not free tocommunicate to members information which might detrimentally affect the company. Theambit of this rule includes 'nominee directors' whose duties towards the com~any areattenuated by contractual agreements between the company and the appointor. 00 Thirdparties who impart confidential information to a company under a contractual relationshipare not taken to have agreed to the communication of this information to the company'scontroller. Such a disclosure would place the company in breach of its obligations to thethird partylOl and directors who have occasioned such a breach of contract may indeedhave breached their fiduciary duty to the company.

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The contrast between the statutory corporation and the Corporations Law companyillustrates how the doctrine of responsible government can cut across the standardunderstandings of the corporate law model. The manner in which it does so, may, in thefuture, be determined more and more by the approach judges take to the requirements ofresponsible government.

Responsible government and historical change - the problems of astrong formapproach

The utility of a theory of responsible government in constitutional and statutoryinterpretation lies in its flexibility and its ability to adapt to new circumstances.102 Thischaracteristic was recognised by the framers of the Constitution in two ways. First, in theopenness with which they canvassed rival models of responsible government whileattempting to reconcile federalism with the divergence in executive practices which hadalready emerged between Britain and its colonies.103 Secondly, in their refusal to entrenchtheir understandings ofresponsible government in the text of the Constitution.104

A strong form approach to the theory of responsible government inhibits the theory'sinherent flexibility by threatening to constitutionalise what can only be particular, andhistorically specific understandings of the 'working' Constitution.lOS Thus to mandate theapplication of a principle such as ministerial responsibility to the conduct of the affairs ofstatutory corporations is to frustrate Parliament's ability to establish accountabilitystructures for the conduct of executive government that afford monitoring and oversightcapacities more appropriate to contemporary social and economic realities.

The necessity of a flexible understanding of the requirements of responsible governmenthas been borne out by political history. While the minimal formal characteristics of theCoriunonwealth Executive under the Constitution have remained relatively fixed sinceFederation, the 'efficient' or 'working' constitution has produced a variety ofadministrativearrangements for the conduct of government.106 The withdrawal of the CornmonwealthExecutive from day-to-day operational control of many of its Government BusinessEnterprises since the mid-l 980s,107 and the introduction of private sector corporategovernance techniques through legislation such as the Commonwealth Authorities andCompanies Act 1997 (Cth) and the Financial Management Act 1997 (Cth) are only themost recent examples ofthis process.

Ministerial directions provisions reflect a variety ofconcerns such as, among other things,the character of the decision-making, the character of the state's involvement in an activity,competition and managerial policy.108 Ultimately, the extent to which these powers maydisrupt the prior statutory allocation ofdecision-making between Ministers and the boardsis a matter in which Parliament's intent is to be given its fullest effect before assistance is

21


sought from understandings of responsible government which would apply across theboard, regardless of the particular character and locus ofexecutive activity.

Conclusion

This Research Paper has identified the source of uncertainty regarding Minister-boardconununications in those features of the governance structure of the statutory corporationwhich are most strongly determined by the location of the Minister within the politicalsystem. Attempts to regulate these communications must satisfy two conflicting needsthe political principal's need to delegate decision-making to an agent and the principal'sneed to preserve its capacity to intervene in the agent's decision-making. The enactment ofministerial directions provisions does not resolve these difficulties, as their interpretationforces this conflict onto a terrain where rival views of responsible government and itsconstitutional underpinnings may hold sway.

The paper has identified two approaches-a strong and a weak fonn-to the use of atheory of responsible government in the interpretation ofministerial directions powers andhas assessed their relative merits on the basis of a detailed examination of the remarkablefacts of the Hughes case. The strong fonn approach has been shown to lack constitutionalfoundation. It is also shown to harbour the danger of an undue emphasis on a particularfonn of relationship between Parliament and the executive, that of ministerialresponsibility. Such an emphasis might frustrate the ability of Parliament to create andenjoy other fonns of executive accountability mechanisms which might betteraccommodate the changed nature of contemporary social and economic phenomena.Parliament's choice of private sector style corporate governance techniques for statutorycorporations is but one example. The ability of a theory of responsible government toremain flexible is critical to the evolution of the working Constitution.

Endnotes

1. Lange vAustralian Broadcasting Authority (1997) 145 ALR 96, to be discussed in Part 2 ofthis paper.

2. The tenn 'perpetual succession' expresses the idea that the artificial legal person created bythe statute cannot die unless through the operation of a 'sunset' clause within the parentstatute, or through the repeal or amendment of the statute which provides for its termination.

3. The practice has common law origins of considerable antiquity: S. J. Stoljar, Groups andEntities: An Inquiry into Corporate Theory (1973), Ch. 9; Archbishop ofPerth v ~'to

'JC' (1995) 18 ACSR 333; E. H. Kantorowicz, The King's Two Bodies: A Study in Medieval

22


Political Theology (1957); F. W. Maitland, 'The Corporation Sole' (1901) 17 LQR 335. Foran early example in the Commonwealth sphere, see the incorporated Railway Commissionercreated under the Commonwealth Railways Act 1917 (Cth) and considered by the HighCourt in Watson v Collings (1945) 70 CLR 51.

4. A (non-exhaustive) list of Commonwealth statutory corporations may be found in SenateFinance and Public Administrations Legislation Committee, List of Commonwealth Bodies(1995).

5. R. Wettenhall; 'Corporations and Corporatisation: An Administrative History Perspective(1995) 6 Public Law Rev 7; 1. Beckett, 'Public Enterprise Boards in Australia' in J. Corkery,C. O'Nuallain & R. Wettenhall (eels), Public Enterprise Boards-What They are and Whatthey do: Reports from an International Study (1994), 172; G. Sawer, 'The PublicCorporation in Australia', in W. Friedmann (ed), The Public Corporation: A ComparativeSymposium (1954), Ch. 1; G. Sawer, 'Ministerial Responsibility and Quangos', in G.R.Curnow & C.A. Saunders, Quangos: The Australian Experience (1983), 73-81. For asample of early literature on Australian statutory corporations see: F. W. Eggleston, StateSocialism in Victoria (1932).

6. See: Department of Finance, Governance Arrangements for Commonwealth GovernmentBusiness Enterprises (June 1997) and R. Humphry, Review of GBE GovernanceArrangements (Department ofFinance, March 1997).

7. Established respectively under the following enactments: Science AndIndustry Research Act1949 (Cth); Broadcasting Services Act 1992 (Cth); Special Broadcasting Service Act 1991(Cth); Australian Trade Commission Act 1985 (Cth) and the Primary Industries and EnergyResearch and Development Act 1989 (Cth) in conjunction with the Grains Research andDevelopment Corporation Regulations 1990 (Cth).

8. Under the Corporations Law, s.45A(3):

A proprietary company is a large proprietary company for a financial year ifit satisfies atleast two ofthe following paragraphs:

(a) the consolidated gross operating revenue for the financial year of the company andthe entities it controls (ifany) is $10 million or more

(b) the value of the consolidated gross assets at the end of the financial year of thecompany and the entities it controls (if any) is $5 million or more

(c) the company and the entities it controls (if any) have 50 or more employees at theend ofthe financial year.

A small proprietary company is a company that falls beneath this threshold: s.45A(2).

9. For example, Commonwealth Authorities and Companies Act 1997 (Cth), Pt 3.

10. Lange v Australian Broadcasting Authority (1997) 145 ALR 96 at 107; G. Lindell,'Parliamentary Inquiries and Government Witnesses' (1995) 20 MULR 383 and E.Campbell, 'Parliament and the Executive' in L. Zines (ed), Commentaries on the Australian

23


Constitution (1977) Ch. 3. at pp 90ff. Wettenhall has examined political control techniquesexercised over statutory corporations, see note 5 above, esp. at 28-9.

11. Whether the decision is of an administrative character under an enactment for the purposesof Administrative Decisions (Judicial Review) Act 1976 (Cth), s.3(1) and AustralianNational University v Burns (1982) 43 ALR 25 (decision under a contract); GeneralNewspapers Pty Ltd v Telstra Corporation; (1993) 117 ALR 629 (decision to enter acontract). See generally M. Allars, 'Private Law But Public Power: RemovingAdministrative Law Review From Government Business Enterprises' (1995) 6 PLR 44 andM. Aronson & B. Dyer, Judicial Review ofAdministrative Action (1996) at 49ff. Note themurkier area of the common law basis of review: Mercury Energy Ltd v ElectricityCorporation ofNew Zealand Ltd [1994] 1 WLR 22; P. Bayne, 'The Common Law Basis ofJudicial Review' (1993) 67 ALJ 780 and M. Taggart, 'Corporatisation, contracting and thecourts' (1994) Public Law 351.

12. See generally M. Aronson and B. Dyer, note 11 above, Ch 12.

-13. For example, State of South Australia & State Bank of South Australia v Marcus Clark(1996) 19 ACSR 606.

14. Freedom ofInformation Act 1982 (Cth), s.4 (definition of 'prescribed authority') s.7 & Sch 2(schedule ofexcluded bodies).

15. A. H. Hanson, Parliament and Public Ownership (1961); W. A. Robson, NationalizedIndustry and Public Ownership (1960), T. Prosser, Nationalised Industries and PublicControl: Legal, Constitutional and Political Issues (1986) and D. Woodhouse, Ministersand Parliament: Accountability in Theory and Practice (1994) at 20-2.

16. United Kingdom, Parliament, Select Committee on Nationalised Industries Session 196768, Ministerial Control of the Nationalised Industries: First Report (1968), especially Chill.

17. Ibid. Cf. J. Corkery & R. WettenhaII, 'Public Enterprise Boards: A Neglected Area ofGovernance' International Institute of Administrative Sciences (1990) at 14-5 and C.Mantziaris, 'When the Minister Leans on the Board: The Forced Resignation of theManaging Director of Australia's Overseas Telecommunications Commission' (1997) 19Asian Jnl Pub Admin 157 at 174-5, 191.

18. ABC: J. Rydon, 'The Australian Broadcasting Commission 1942-48' Public Administration(Sydney) 11 (1952) 190; G. Bolton, Dick Boyer: An Australian Humanist (1967), Chs 6-9and most recently E. Simper, 'Alston pressures ABC on bias' The Australian, 4 May 1998, at1. Telecom: R. L. Wettenhall, 'Quangos, Quagos and the Problems of Non-MinisterialOrganization' in G. R. Curnow & C. A. Saunders, op. Cit., Ch. 5 at 44-5. OTC: C.Mantziaris, note 17 above. CASA: J. Short & M. Gordon, 'Howard under pressure as Sharpadmits jobs ploy' The Australian, 13 February 1997.

19. S. Bottomley, 'Corporatisation and Accountability: the Case of Commonwealth Companies'(1997) 7 Aust Jnl of Corporate Law 157 at 170 (intervention is rare) cf documentedinstances of Departmental or Ministerial intervention in the cases of AIDC Ltd (resignationof government directors requested by their Department to disclose information confidentialto AIDC Ltd) and ANL Ltd (Minister pressuring Board for a quick sale of the entity's assets

24

,-


as part of a privatisation process): Parliament, Commonwealth of Australia, Department ofthe Parliamentary Library, AIDC Sale Bill 1997: Bills Digest 115, 1996-97, at I andAustralian National Audit Office, Matters Relating to Proposed Sale of ANL Ltd, AuditReport no. 2, 1995-96 and K. Trace, 'You Couldn't Give it Away': Privatising theAustralian National Line' (1996) 2 Agenda 433-44

20. In the case of the ABC, the standard allegation over many decades has been that theMinister has attempted to influence programming and editorial decisions of the nationalbroadcaster. In the case of the Civil Aviation Authority, it was alleged that the Minister hadattempted to pressure members of the Board to resign. A similar allegation has been made inthe case of the Overseas Telecommunications Corporation: see sources cited in note 18.

21. P. D. Finn, Law and Government (1987) at 60-1, 97-9, 129-31. Professor Finn has writtenextensively on the subject of statutory corporations (see note 90 below) and was appointedto the bench of the Federal Court in 1995. He decided the Hughes case, which is discussedin this paper as an illustration of the strong form approach to the theory of responsiblegovernment.

22. Select Committee on Nationalised Industries, note 16 above, Ch. IV.

23. Ibid., para 153.

24. M. Dornstein, Boards ofDirectors under Public Ownership (1988), Ch. 6 and Corkery &Wettenhall, note 17 above.

25. Percival v Wright [1902] Ch 2 Ch 421; Bell v Lever Bros Ltd [1932] AC 161. Exceptions tothis rule have been made in particular circumstances: Coleman v Myers [1977] 2 NZLR 225and Glavanics v Brunninghausen (1996) 19 ACSR 204.

26. Gramophone and Typewriter Ltd v Stanley [1908] 2 KB 89. See also Imperial HydorpathicHotel Co Blackpool v Hampson (1882) 23 Ch D 1.

27. H. Ford and R. Austin, Ford and Austin's Principles of Corporations Law (looseleaf) atparas [8.070-8.190] and P. D. Finn, Fiduciary Obligations (1977) at paras Iliff.

28. As either 'shadow directors': Corporations Law s.60; Standard Chartered Bank v Antico(1995) 18 ACSR I; ASC v AS Nominees (1995) 18 ACSR 459; Re Hydrodam (Corby) Ltd[1994] 2 BCLC 180; or, in more limited circumstances, through the vicarious liability of theappointor for the acts of its nominee while in the course of employment: Dairy ContainersLtd v NZI [1995] 2 NZLR 30. See generally, P. Koh, 'Shadow Director, Shadow Director,Who Art Thou?' (1996) 14 C&SLJ 334; J. Pizer, 'Holding an Appointor Vicariously Liablefor its Nominee Director's Wrongdoing-An Australian Roadrnap' (1997) 15 C&SLJ 81 andJustice E. W. Thomas, 'The Role ofNominee Directors and the Liability of their Appointors'in I. Ramsay (ed), Corporate Governance and the Duties of Company Directors (1997),148-161.

29. M. J. Trebilcock & J. R. S. Pritchard, 'Crown Corporations: The Calculus of InstrumentChoice' in MJ Trebilcock & JRS Prichard, Crown Corporations in Canada: The Calculus ofInstrument Choice (1983), Ch. I and M. Horn, The Political Economy of PublicAdministration: Institutional Choice in the Public Sector (1995).

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30. Legislation (in combination with common law understandings) may also subsume orseparate the corporation from 'the Crown'. See generally: P. W. Hogg, Liability of theCrown (2nd ed, 1989) S. Kneebone, Tort Liability ofPublic Authorities (1998), Ch 7 and NSeddon, Government Contracts: Federal, State and Local (1995), Ch. 4.

31. Lange v Australian Broadcasting Authority (1997) 145 ALR 96 at 107; British SteelCorporation v Granada Television [1981] AC 1096 and Hughes v Air Services Australia(1997) 146 ALR 1 at 24-5, 74, 88-9.

32. See pages 8-13 ofthis papc;.t:,

33. In the case of government business enterprises, this problem has led to the demand forcentral policy coordinating agencies: 'Getting Together in Public Enterprise' in R.Wettenhall and C. O'Nullain (eds), Getting Together in Public Enterprise (1987) andMantziaris, note 17 above at 172-3.

34. The instability caused by this 'commitment problem' within political transactions has beennoted by students of the US Congressional system: Hom, note 29 above at 16-19 and T.Moe, 'Political Institutions: The Neglecte!l Side of the Story' (1990) 6 Jnl Law, Econ & Org213.

35. Hutton v West Cork Railway Co (1883) 23 Ch D 654; Parke v Daily News Ltd [1962] Ch927. Within the law of (private non-charitable) trusts, cf. Cowan v Scargill [1985] I Ch 270.

36. For example, Science And Industry Research Act 1949 (Cth), s.13; Broadcasting ServicesAct 1992 (Cth), s.162; Special Broadcasting Service Act 1991 (Cth), s.12; Australian TradeCommission Act 1985 (Cth), s.10; Primary Industries and Energy Research andDevelopment Act 1989 (Cth), s.143.

37. M. Aronson, 'Ministerial Directions: The Battle of the Prerogatives' (1995) 6 PLR 77.

38. For example, the guidelines suggested in Australian National Audit Office, Aspects ofCorporate Governance: The Australian Tourist Commission, Audit Report no.!0 (1997-98)at 82.

39. Aronson, note 37, esp. at 88ff.

40. The most comprehensive survey of these provisions is that ofAronson, note 37 above.

41. Under certain statutes, there is an arrangement for the indemnification of the statutorycorporation for any loss incurred by reason of compliance with a ministerial direction: seeAronson's discussion of these provisions in 'Ministerial Directions', note 37 above at 84-5.The successor of the corporation considered in Hughes, Air Services Australia, is now thebeneficiary of such an indemnification clause under the Air Services Act 1995 (Cth), s.16,but only insofar as directions are concerned. 'Financial detriment' suffered by thecorporation as a result of compliance with a formal notification of government policy isspecifically exempted: subs 16(6).

42. For example, Commonwealth Authorities and Corporations Act 1997 (Cth), s.28.

43. Ansett Transport Industries (Operations) Pty Ltd v Commonwealth (1977) 139 CLR 54 ('thesecond IPEC case') and Hughes v Air Services Australia (1997) 146 ALR 1 at 52. Cf J.McMillan, Review of Government Policy by Administrative Tribunals (Law and Policy

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I';


Papers, ANU, Report No.9, 1998), on the problem of administrative tribunals applyinggovernment policy.

44. Amalgamated Society ofEngineers v Adelaide Steamship Co Ltd (1920) 28 CLR 129 at 147;R v Kirby; Ex parte Boilermaker's Society ofAustralia (1956) 254 at 275; New South Walesv Commonwealth (Seas and Submerged Lands case) (1975) 135 CLR 337 at 364-5;Attorney-General (Commonwealth); Ex rei McKinlay v Commonwealth (1975) 135 CLR 1at 24. See generally, G. Winterton, Parliament, the Executive and the Governor-General(1983) at 71ff; L. Zines, The High Court and the Constitution (4th ed, 1997), at 249-51. Inrespect of the States, see R. D. Lwnb, The Constitutions of the Australian States (5th ed,1991), Ch. 4 and P. D. Finn, Law and Government in Colonial Australia, at 39ff.

45. (1997) 145 ALR 96 at 105.

46. (1997) 145 ALR 96 at 105.

47. Constitution, ss.l, 7, 8, 13, 24,25,28 and 30: discussed in (1997) 145 ALR 96 at 104-5.

48. See for example, G. Lindell, 'Responsible Government', in P. D. Finn (ed), Essays on Lawand Government: Volume I-Principles and Values (1995), 75-113 at 76-9; Winterton,note 44 at 71ff; L. Zines, The High Court and the Constitution (4th ed, 1997), at 249-51; R.S. Parker, 'Responsible Government in Australia' in P. Weller & D. Jaensch (eds),Responsible Government in Australia (1981), 11-22; H. Emy, 'The Public Service andPolitical Control: The Problem of Accountability in a Westminster System with SpecialReference to the Concept of Ministerial Responsibility' in Royal Commission on AustralianGovernment Administration Appendix: Volume 1 (1976), 16-63.

49. G. Lindell, 'Responsible Government', at 76-9 reworking R. S. Parker's defmition in,'Responsible Government', note 48 above at 11-22. Lindell did not place emphasis on theeffect of section 49 cf. note 52 below.

50. Lindell noted that several Australian jurisdictions have either adopted (e.g. NSW) or areproposing to adopt fixed term parliaments.

51. (1997) 145 ALR 96 at 105

52. E. Campbell, note 10 above and G. Lindell, 'Parliamentary Inquiries and GovernmentWitnesses' (1995) 20 MULR 383. Lindell draws an express distinction between the legalobligations and restrictions which frame Parliaments inquisitorial jurisdiction granted undersection 49 of the Constitution and a vaguer set of rules which are identified under the labelof 'Responsible Government' (at 400-401).

53. J. Uhr, Deliberative Democracy in Australia: The Changing Place of Parliament(Mebourne, Cambridge Press, 1998), especially Chapter 8.

54. Western Australia, Royal Commission into Commercial Activities ofGovernment and OtherMatters-Report Pt II (1992), para 3.10.1. The relationship between the Auditor-Generaland Parliament is unclear: J Uhr, Deliberative Democracy in Australia: The Changing Placeof Parliament (1998) at 188-90 and Joint Committee of Public Accounts, The AuditorGeneral: Ally ofthe People and Parliament, Report 296 (1989), Ch. 5.

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55. For example, G. Winterton, Parliament, the Executive and the Governor-General (1983) at71ff. Incidental to the individual and collective responsibility of Ministers within theAustralian setting are a set of conventions regarding the Vice Regal representative (eg. theconvention that the Governor or Governor-General acts on the advice of the Minister) andthe conventions ofCabinet solidarity and Cabinet secrecy.

56. Ubr, note 54 above at 194.

57. D. Woodhouse, Ministers and Parliaments: Accountability in Theory and Practice (1994),Ch. 2. Cf. Ubr, note 54 above, at 194ff; R. Brazier, Ministers ojthe Crown (1997), at 26275; S. E. Finer, 'The Individual Responsibility ofMinisters (1956) 54 Public Administration377 and C. Tutpin, 'Ministerial Responsibility: Myth or Reality? In J. Jowell & D. Jaensch(eds), The Changing Constitution (2nd ed, 1989),53 at 56.

58. Winterton, note 57 above at 110; Woodhouse, note 57 above at 27. Whether the creation ofsuch a body is constitutional, is the subject of disagreement: see discussion under heading 'IsMinisterial responsibility for a statutory corporation required by the Constitution?' (below).

59. Woodhouse note 57 above, Ch. 2.

60. Lange v Australian Broadcasting Corporation (1997) 145 ALR 96 at 107.

61. P. D. Finn and G. J. Lindell, 'The Accountability of Statutory Authorities', in SenateStanding Committee on Finance and Government Operations, Statutory Authorities oj theCommonwealth: Fifth Report (1982), Appendix 4.

62. This is the view of J. Goldring, 'Accountability of Commonwealth Stautory Authorities andResponsible Government' (1980) II Fed Law Rev 353 supported by reference to (1977) 139CLR 54 the 'Ansett case' per Barwick C. J. and Mutphy J) and R v Anderson; ex parte IpecAir Pty Ltd (1965) 113 CLR 117 (the 'IPEC case', per Windeyer J.).

63. This is the view of J. Richardson, 'The Executive Power of the Commonwealth' in L. Zines(ed), Commentaries on the Australian Constitution: A Tribute to Geoffrey Sawer (1977),Ch. 2, esp. at 84-5.

64. Cftext at note 59

65. P. D. Finn and G. J. Lindell, 'The Accountability of Statutory Authorities' at 183.

66. Ibid. at 194 & 185 respectively.

67. G Winterton, Parliament, the Executive and the Governor-General (1983) at 101-110, espat 103, 110.

68. Ibid. at 104.

69. Horta v Commonwealth (1994) 181 CLR 183, cited in Hughes v Airservices Australia(1997) 146 ALR I at 24 in the context of section 61 of the Constitution.

70. The Petroleum (Australia-Indonesia Zone OJ Cooperation) Act 1990 (No. 36 oj 1990) andthe Petroleum (Australia-Indonesia Zone Of Cooperation) (Consequential Provisions) Act1990 (No. 37 oj1990).

71. Petroleum (Australia-Indonesia Zone OjCooperation) Act 1990, s.4

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72. Article 7 of the 'Treaty between Australia and the Republic of Indonesia on the Zone ofCooperation in an Area between the Indonesian Province of East Timor and NorthernAustralia (11 December 1989)'.

73. (1994) 181 CLR 183 at 197.

74. Re Duncan; Ex parte Australian Iron and Steel Pty Ltd (1983) 158 CLR 535 at 563 (MasonJ.). See generally L. Zines, The High Court and the Constitution (4th ed, 1997),270-1; G.Winterton, Parliament, the Executive and the Governor-General (1983) at 101ff. Cf R.Cranston, 'From Cooperative to Coercive Federalism and Back?' (1979) 10 Fed L Rev 121.

75. See discussion under the heading 'Strong form approach'.

76. Bank ofNSW v Commonwealth (1948) 76 CLR 1 at 274 (in determining whether a statutorycorporation is an agent of the Crown)

77. D. C. Pearce & R. D. Geddes, Statutory Interpretation in Australia (4th ed, 1996), paras2.2ffand F. Bennion, Statutory Interpretation: A Code (2nd ed, 1992), Pt VII and XX.

78. CfLindell, note 48 above at 82.

79. New South Wales Farmers' Federation v Minister for Primary Industries and Energy (1990)21 FCR 332; Aboriginal Legal Service Ltd v Minister for Aboriginal and Torres StraitIslander Affairs (1996) 45 ALD 235; Aboriginal Development Commission v Hand (1988)15 ALD 410; Botany Bay City Council & Ors v Minister of State For Transport AndRegional Development & Ors (unreported, Federal Court of Australia (Sydney, Lehane J.,30 May 1966 available through http://www.austlii.edu.au); Ankers v Attorney-General[1995] 2 NZLR 595; and Social Security Commission v Macfarlane [1979] 2 NZLR 34.

80. Bosjnak's Bus Service v Commissioner for Motor Transport (1970) 92 WN 1003; BlayneyAbbatoirs Pty Ltd v State ofNSW & Anor (unreported: NSW CA, Powell JA, Beazley JA,Waddell AJA, 18 July 1996, available through http://www.austlii.edu.au); Kremer v NorthSydney Municipal Council (1982) 47 LGRA 209; and Ankers v Attorney-General [1995] 2NZLR595.

81. (Emphasis added). The section under consideration was· Aboriginal DevelopmentCommission Act 1980 (Cth), s.ll.

82. On Commonwealth drafting practice regarding the distinction between 'general' and'specific' directions, see M. Aronson, 'Ministerial Directions', at 83-4.

83. (1996) 45 ALD 235 at 247 (per Sackville 1). See also at 243 (Tamberlin J.).

84. (1990) 21 FCR 332 at 340 (emphasis added), distinguishing Bosjnak's Bus Service vCommissionerfor Motor Transport (1970) 92 WN 1003.

85. Blayney Abattoirs Pty Ltd v State of NSW & Anor (unreported: NSW CA, Powell JA,Beazley JA, Waddell AJA, 18 July 1996, available through http://www.austlii.edu.au). perPowell JA.

86. At the time of the tender process, the CAA fulfilled both regulatory and service provisionfunctions. It was later abolished and replaced by the Civil Aviation Safety Authority (a

29


regulator) and Airservices Australia (a service provider) which eventually became therespondent in the action.

87. (1997) 146 ALR 1 at 88-9.

88. (1997) 146 ALR 1 at 89.

89. In an early part of the judgment headed 'Issues not Pleaded', Finn J. noted that:

'This case sits unhappily on two rather significant fissures in Australianjurisprudence..The[first] concerns the constitutional status and standing in our system ofgovernment ofstatutory corporations that by statute are subject to prescribed (hence, presumably,correspondingly limited) powers ofMinisterial direction. Do they fall within the Executive?Or are they a fourth arm ofgovernment? ... I inquired [ofcounsel] whether any issue wouldbe taken as to the constitutionality or otherwise ofa body such as the CAA because oftheprovisions of the Constitution, s61... For understandable reasons [counsel] disclaimed anywish to burden his case with constitutional considerations. I would have to say, though, thatthe absence ofauthoritative guidance on the place ofstatutory corporations in our system ofgovernment-and, importantly, on their proper relationship both with Parliament and theExecutive-is an abiding difficulty in divining the proper resolution of cases of this variety.[have not been able to avoid venturing some conclusions on these issues.' : (1997) 146 ALR1 at 24-5 (emphasis added).

90. Finn rs statements on the subject as a legal academic are numerous: P. D. Finn and G. J.Lindell, 'The Accountability of Statutory Authorities', in Senate Standing Committee onFinance and Govemment Operations, Statutory Authorities of the Commonwealth: FifthReport (1982), Appendix 4; Law and Government in Colonial Australia (1987); 'PublicTrust and Public Accountability' (1993) Australian Quarterly 65; 'The Abuse of PublicPower in Australia: Making Our Governors Our Servants' (1994) 5 PLR 43; 'The ForgottenTrust: The People and the State' in M. Cope (ed), Equity: Issues and Trends (1994), Ch 5;and 'A Sovereign People, A Public Trust' in P. D. Finn (ed), Essays in Law and GovernmentVol [ (1995), Ch. 1.

91. (1997) 146 ALR 1 at 75.

92. (1997) 146 ALR I at 74. Firm J. noted, but did not feel bound to consider, the questionwhether the only member ofthe ministry who ought communicate directly with the statutorycorporation was the portfolio Minister or the corollary issue, whether non-portfolioMinisters need communicate with the corporation about the corporation's affairs through theportfolio Minister (at 75).

93. At (1997) 146 ALR 1 at 75, Finn J. referred to Ansett Transport Industries (Operations) PtyLtd v Commonwealth (1977) 139 CLR 54 at 76 and L 'Huillier v Victoria [1996] 2 VR 465 at481. On the various versions of the doctrine of executive necessity and its recognition inAustralian courts, see N. Seddon, Government Contracts: Federal, State and Local (1995),paras 4.30ff.

94. Commonwealth of Australia, House of Representatives, Parliamentary Debates, vol. 171(1990) at 611 cited in (1997) 146 ALR 1 at 48-9.

95. (1997) 146 ALR 1 at 49.

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96. Minister Collins' letter concluded: 'Of course the decision in clearly a matter for the CAAboard using all the evaluation criteria established for the tender process': extracted at (1997)146 ALR 1 at 73.

97. (1997) 146 ALR 1 at 92-3.

98. (1997) 146 ALR 1 at 91.

99. (1997) 146 ALR 1 at 89.

100. Harkness v Commonwealth Bank ofAustralia (1993) 12 ACSR 165. Not even the more'liberal' approach of Jacobs J. in Re Broadcasting Station 2GB Ply Ltd [1964-65] NSWR1648 and Levin V Clark [1962] NSWR 686 would support such a disclosure. On nomineedirectors' duties, see generally: P. Redmond, (1987) 'Nominee Directors' (1987) 10UNSWLJ 194; P. Crutchfield, 'Nominee Directors: the law and commercial reality' (1992)20 ABLR 109; Justice E. W. Thomas, note 28 above.

101. Bank ofTokyo v Karoon [1986] 3 All ER468 at 476.

102. G. Lindell note 48 above, 80ffand Lindell note 52 above at 400-1.

103. Uhr, note 54 above, Ch. 3, esp. at 77-80. See also Finn abovew at note 21.

104. Winterton, note 67 above at 71 ff, esp. 72.

105. The distinction was introduced into English constitutional discourse by W. Bagehot, TheEnglish Constitution (1867): See, R. H. S. Crossman, 'Introduction', in W. Bagehot, TheEnglish Constitution (1963), at 16ff.

106. See sources cited in note 5 above and R. L. Wettenhall, Organizing Government (1986), Chs2-3,6; and J. Halligan & P. Power, Political Management in the 1990s (1992), esp. Ch 3.

107. The main policy documents associated with these changes were: The Hon J. Kerin (Ministerfor Primary Industry), Reform of Commonwealth Primary Industry Marketing Authorities(1986); The Hon P. Walsh (Minister for Finance), Policy Guidelines for CommonwealthStatutory Authorities and Government Business Enterprises (1987); The Hon G. Evans(Minister for Transport and Communications), Reshaping the Transport andCommunications Government Business Enterprises (1988). See generally: J. Halligan & J.Power, Political Management in the 1990s (1992) and M. Considine & M. Painter (eds),Managerialism: The Great I!ebate (1997).

108. Aronson, note 37, at 89-92.

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