John Gorton Building, King Edward Terrace, Parkes ACT 2600 Telephone 02 6215 2555 Facsimile

John Gorton Building, King Edward Terrace, Parkes ACT 2600  Telephone 02 6215 2555  Facsimile 02 6215 3774

Internet

7/20/2011 10:39:00 AM

Submission by the Department of Finance and Deregulation to the Administrative Review Council’s inquiry into judicial review in Australia – July 2011.

Our Ref: SEC0004927

Mr Colin Neave AM

President
Administrative Review Council

Access to Justice Division

Attorney-General’s Department

3-5 National Circuit

BARTON ACT 2600

Dear Mr Neave

Administrative Review Council’s Inquiry into Judicial Review in Australia

Thank you for your letter of 20 April 2011 to Mr David Tune PSM, Secretary of the Department of Finance and Deregulation. I am replying on his behalf.

The Department of Finance and Deregulation (Finance) welcomes the opportunity to provide comments on the consultation paper as part of the inquiry into judicial review across the Commonwealth administrative law system. Finance considers that the current regime of judicial review has had, and will continue to have a normative impact on government administration through improved decision making.

Our comments (see Attachment 1) relate to Finance’s role in improving government administration and operations. Judicial review, and in particular the Administrative Decisions Judicial Review Act 1977, have had a positive effect by encouraging the legitimate exercise of authority and enabling challenges to the exercise of authority where it is flawed.

Finance would be pleased to meet with you or members of the Council to discuss any issues raised in the comments. Please contact Dr Guy Verney on (02) 6215 2555.

Yours sincerely

Ms Jan Mason

Deputy Secretary

Asset Management and Parliamentary Services
July 2011

Attachment 1

Introduction

Good government depends on decision making which is based on the ideals of openness, fairness, participation, accountability, consistency, rationality and access to review.

Judicial review stimulates sound public administration through improved administrative decision making. The current system of judicial review strikes an appropriate balance between fairness, administrative efficiency and cost.

Finance considers the current regime encourages better administrative decision making.

Department of Finance and Deregulation (Finance)

Finance’s role is to provide:

• Informed decisions on Government finances and continuous improvement in regulation making through: budgetary management and advice; transparent financial reporting; a robust financial framework; and best practice regulatory processes.

• Improved Government administration and operations through systems, policy and advice on: procurement; Commonwealth property management and construction; government enterprises; risk management; and application of information and communication technology.

• Support for Parliamentarians, others with entitlements and organisations as approved by Government through the delivery of entitlements and targeted assistance.

Normative Effect of Review and Complaint Mechanisms in Legislation

Better decision making is encouraged by the normative effect of existing judicial review and complaint mechanisms.

At the Commonwealth level, there are three options for judicial review which include the Administrative Decisions (Judicial Review) Act 1977 (ADJR Act), judicial review under section 39(b) of the Judiciary Act 1903,the constitutionally protected right to judicial review (a construction of the Constitution and the common law right to judicial review) andspecific statutory schemes for judicial review, for example, under Part 8 of the Migration Act 1958.

Finance’s decisionmaking

Of these three mechanisms, Finance has been involved with the ADJR Act, noting that it provides a clearly articulated process for judicial review. This has occurred with respect to discretionary compensation decisions.

The ADJR Act allows a person who has standing to challenge a decision by Finance and/or the Minister for Finance and Deregulation (Finance Minister) in relation to decisions made pursuant to sections 33 and 34 of the Financial Management and Accountability Act 1997(FMA Act). These sections of the FMA Act vest in the Minister the power to make act of grace payments and waive debts. This is further explained in Finance Circular 2009/09 –

Discretionary Compensation and Waiver of Debt Mechanisms(Attachment A) and Finance’s Submission to the Senate Legal and Constitutional Affairs References Committee’s Review of Government Compensation Payments (Attachment B).

An aggrieved person can obtain a statement of reasons in respect of the decision under section 13 of the ADJR Act and, under section 5, may request the Federal Court of Australia or the Federal Magistrates Court consider the legality of the decision.

In Finance’s experience, the prospect of a review of a decision or decisions under the ADJR Act has led to a focus on the grounds for judicial review as elements of sound decision making. Specific examples of this are as follows – have the party or parties been accorded procedural fairness (natural justice), that is, have the party or parties been given a hearing and was the hearing fair; has there been bias and was the decision maker impartial; has any statutory requirement been breached; have irrelevant considerations been taken into account; was there a failure to take relevant considerations into account; is the decision unreasonable; did the decision maker fulfil the duty to inquire into all relevant material; was there evidence for the decision; has government policy restricted/fettered the decision maker from exercising their discretion and making a decision in favour of the person were it not for the policy; and a Minister cannot dictate the decision to be reached.

In addition to scrutiny under the ADJR Act, Finance’s decisions on discretionary compensation under the FMA Act are also subject to review by the Ombudsman pursuant to the Ombudsman Act 1976. Under section 5 of that Act, the Ombudsman is empowered to investigate claims, both at the request of a claimant and under its own motion. Both of these channels of potential scrutiny – the Courts and the Ombudsman – encourage rigour in ensuring processes are followed in accordance with relevant legislation. In the interests of procedural fairness, Finance provides each claimant with information about their review options when a decision is made not to make an act of grace payment and/or waive a debt.

In relation to proceedings under the ADJR Act related to discretionary compensation, they have been rare: there have been 13 instances of litigation under the ADJR Act since 2001. This represents 0.24% of claims. During that period, Finance has received 5,401 claims for act of grace payments and/or waivers of debt, 99 requests for statements of reasons (1.83% of total claims), and 46 investigations by the Ombudsman (0.85% of total claims).

Of the 13 litigated claims,three are ongoing, one resulted in a decision being set aside and the remainder were either dismissed or discontinued –in no case has a claimant been successful in a subsequent claim for compensation following litigation.

The current arrangements for judicial review and scrutiny by the Ombudsman continue to have a normative effect in improving administrative decision making without imposing onerous costs in the management and operation of the discretionary powers of the FMA Act.

Executive Schemes

The authority for the establishment and management of executive schemes relies on section61 of the Constitution which provides that the executive power of the Commonwealth “extends to the execution and maintenance of the Constitution, and of the laws of the Commonwealth”. The section does not define the power.

In general, executive schemes are targeted at large groups of stakeholders, such as members of a particular industry or region. They are subject to judicial review under the Constitution and section 39(b) of the Judiciary Act 1903. The schemes offer speed and flexibility in order to meet the requirements of the Executive, butas the Ombudsman has noted, there can be an increased risk to accountability.[1]

There are a considerable number of executive schemes dealing with a diverse array of areas in public life[2], for example, the F-111 deseal/reseal program administered by the Department of Veterans’ Affairs (DVA) and the liquid petroleum gas vehicle scheme administered by the Department of Innovation, Industry, Science and Research (DIISR)[3].

Finance has policy responsibility for an executive scheme, the Scheme for Compensation for Detriment caused by Defective Administration (the CDDA Scheme)[4]. The CDDA Scheme enables Government portfolio Ministers and authorised officials in FMA Act departments/agencies to compensate individuals or other bodies who have experienced losses caused by a department’s/an agency’s defective administration. The Finance Minister is responsible for the scheme, although individual Ministers are the relevant decision-makers within their portfolios.

Current arrangements working

Under the CDDA Scheme, decisions are made at the discretion of the decision maker and payments are approved on the basis that there is a moral, rather than a legal, obligation to the person or body concerned. Each case is determined on its own merits. The principles of procedural fairness are applied to CDDA matters and applicants must be treated equitably.

Finance conducts reviews of the operation of the scheme as well as providing policy advice. Finance first reviewed the CDDA scheme in 2004, and found that generally the scheme was operating effectively, although there was room for further guidance by Finance in the day-to-day processing of claims. Finance responded by updating its guidance material in Finance Circular 2006/05.

Finance has just completed a further survey of agencies’ views on the operation of the scheme, including in relation to the Ombudsman’s suggestion of the creation of an advisory or review panel dealing with sensitive or disputed claims. In response, departments and agencies generally suggested that the Ombudsman’s current role and exercise of its powers is addressing the needs of stakeholders.

The Ombudsman has noted “the survival of the CDDA scheme probably depends upon it remaining an administrative scheme under which decisions are not routinely subject to court or tribunal review.”[5] The Ombudsman has developed advice and information on decision making, particularly in relation to the operation of executive schemes.[6]

The extension of the purview of the ADJR Act to CDDA would change the nature of the ADJR Act, since it deals with decisions made ‘under an enactment’. It also has the potential to set a precedent for the application of the ADJR Act to decisions outside an enactment. Under the separation of powers in the Constitutionbetween the legislature and the judicature,the focus by the courts is on the legality and enforcement of a decision and not its merits.[7]

Finance supports the continuation of the current arrangements for the review of decisions in executive schemes. Executive schemes provide the executive with flexibility in dealing with administrative challenges arising from the diversity of its activities. As noted in the discussion paper, the ADJR Act does not enable judicial review of decisions unless they are made under an enactment.[8] The role of the Ombudsman is well suited to the review of decisions made under executive schemes, noting that the option of judicial review can be exercised through s 39 (b) Judiciary Act 1903 and the Constitution.

Extension of the ADJR Act to Procurement Decisions

Under current arrangements, officials comply with a legislative framework that ensures procurement decisions and processes are transparent, accountable, in-line with government policy and achieving value for money. As part of this framework, a range of mechanisms are available for reviewing the procurement process itself and the administrative decisions relating to a particular procurement. These include discussions between an agency and the tenderer or supplier through to possible review by the Australian Government Procurement Coordinator, Commonwealth Ombudsman or ultimately the civil legal system. An additional external avenue is the ability to make Ministerial representations through a local member of the Commonwealth Parliament. This scaled approach provides a balance between scrutiny of administrative decisions and enabling agencies to achieve the Government’s policy, programme and service delivery outcomes in a timely and efficient manner.

To date, there has been no indication provided to Finance, either from agencies, suppliers or interested third parties, that the current process requires review or that the ADJR Act should cover procurement decisions. The current arrangements ensure that procurement processes are efficient and decisions are made and justified in a manner commensurate with the needs of the procurement. Any expansion of the ADJR Act to include procurement decisions is likely to increase compliance costs for both agencies and suppliers, reduce the flexibility of the existing framework and cause delays to procurement outcomes while potentially unmeritorious claims are considered through the ADJR Act process.

Exclusions from the ADJR Act

Exemptions to the operation of a statute have the potential to reduce its coverage and overall impact. An issue is whether the classes of decisions excluded from the operation of the ADJR Act reduces its normative effect in promoting better administrative decision making.

Some areas of Finance’s responsibilities are excluded from the ADJR Act by its schedules. They are:

• Schedule 1(zb):relating to Snowy Hydro Limited (SHL). This is appropriate as SHL operates in a commercial environment and the Commonwealth has a minority interest;
• Schedule 2(h): relating to section 27 of the FMA Act, relating to drawing rights; and
• Schedule 2(y): relating to the employment and termination of Members of Parliament (Staff) Act 1984 (MOP(S) Act) employees and consultants. This remains appropriate as such employment decisions are not based on a merit selection process and the Fair Work Act 2009 provides grounds for review of termination and relations with consultants can be addressed through a contract of service.

Finance does not consider that there exists a policy rationale for change to these exemptions.

The reference in paragraph (q) of Schedule 1 to the ADJR Act is to a non-existent Part IIIA of the Commonwealth Electoral Act 1918 (the CE Act). Prior to 1983, Part IIIA of the CEAct dealt with redistributions. Those provisions are now contained in Part IV of the CE Act. Accordingly, the reference to Part IIIA in paragraph (q) of Schedule 1 to the ADJR Act appears to be superfluous.

Dispute Management Capabilities in the Commonwealth, including Alternative Dispute Resolution

Any consideration of potential changes to the current system of judicial review needs to take into account the range of dispute management capabilities available at the Commonwealth level,[9] which may mitigate against the need for judicial review. The onus is on a department/agency to manage a dispute using the available capabilities, including alternative dispute resolution and seek to resolve a dispute efficiently. The available capabilities may lead to the early resolution of a dispute and avoid the costs of litigation.

The extension of judicial review may have an unintended consequence. It may detract from the exercise of available dispute management capabilities in the Commonwealth and militate against the development of broader administrative capability in the development of better administrative decision making.

Extension of the CDDA Scheme to CAC Act bodies and third parties

In its report Review of Government Compensation Arrangements, the Senate Legal and Constitutional Affairs Reference Committee recommended that Finance consider the extension of the CDDA Scheme to bodies covered by the Commonwealth Authorities and Companies Act 1997 (CAC Act) and to third parties performing functions or providing services on behalf of the Australian Government.[10] Finance is currently investigating this recommendation.

Ex gratia payments

The basis for ex gratia payments emanates from s 61 of the Constitution. The ex gratia mechanism provides flexibility to the Government in responding urgently to events, for example, financial relief to persons affected by the floods in Katharine, Northern Territory, in 1998 and to families who needed to visit an injured member after the bombings in Bali in 2002. Ex gratia payments are reported in the relevant portfolio Annual Report and in Portfolio Budget Statements. The Council’s comments on the appropriateness of the current accountability framework of ex gratia payments would be useful and welcome.

ARC’s non-legislative option

As the discussion paper notes, the codification of principles of good decision making in the ADJR Act has simplified judicial review and provided improved access for the public in the review of administrative decisions.[11] The proposal for the development of policy principles by the Council to guide judicial review of government decisions would be a continuation of this process in line with the advice and information promulgated by the Ombudsman’s Office in relation to decision making, and the guidance provided by Finance on the operation of the discretionary compensation mechanisms. As noted above, the principles enshrined in the ADJR Act underpin good decision making, and their formulation in a policy document could be a useful addition, in the interests of sound public policy.

There may be merit in the production and dissemination by the Council of such a guidance document for all officials involved in administrative decision making, whether under legislation or under an executive scheme. It could build upon section 5 of the ADJR Act and elicit the principles which underpin the ADJR Act.

Conclusion

In summary, Finance considers that the existing regime of judicial review strikes an appropriate balance between administrative efficiency on the one hand, and on the otherfairness for the citizen and the positive normative impact on administrative decision making that judicial review brings.

Bibliography

Legislation

Administrative Decisions (Judicial Review) Act 1977

Commonwealth Of Australia Constitution Act

Financial Management and Accountability Act 1997

Judiciary Act 1903

Policy

Finance Circular 2009/09 -Discretionary Compensation and Waiver of Debt Mechanisms (Attachment A).

Reports and submissions

Administrative Review Council,2011, Judicial Review in Australia,Canberra.

Commonwealth Ombudsman, 2009,Executive schemes, Canberra.

Commonwealth Ombudsman, 2009, Putting things right: compensating for defective administration,Canberra.

Department of Finance and Deregulation, 2010, Department of Finance and Deregulation Submission to the Legal and Constitutional Affairs References Committee into Government Compensation Payments, Canberra. (Attachment B)