FAI Insurances Ltd v Winneke

FAI Insurances Ltd v Winneke - [1982] HCA 26 - HCA 1981 case summary — Zoe

[59]

In passing I should observe that ministerial responsibility means (1) the individual responsibility of Ministers to Parliament for the administration of their departments, and (2) the collective responsibility of Cabinet to Parliament (and the public) for the whole conduct of administration (Emy, "The Public Service and Political Control" in the appendix to the report of the Royal Commission on Australian Government Administration (1976) vol. 1, p. 16; Mackintosh, The Government and Politics of Britain, 4th ed. (1977), p. 17). The principle that in general the Governor defers to, or acts upon, the advice of his Ministers, though it forms a vital element in the concept of responsible government, is not in itself an instance of the doctrine of ministerial responsibility. It is a convention, compliance with which enables the doctrine of ministerial responsibility to come into play so that a Minister or Ministers become responsible to Parliament for the decision made by the Governor in Council, thereby contributing to the concept of responsible government. "The principal convention of the British constitution", says de Smith in his Constitutional and Administrative Law, 3rd ed. (1977), p. 99, "is that the Queen shall exercise her formal legal powers only upon and in accordance with the advice of her Ministers, save in a few exceptional situations". Comformably with this principle there is a convention that in general the Governor-General or the Governor of a State acts in accordance with the advice tendered to him by his Ministers and not otherwise (Sawer, Federation under Strain (1977), p. 142; see also Keith, Responsible Government in the Dominions, 2nd ed. (1928), pp. 107-108). He does this by acting in comformity with the advice given by the Executive Council on consideration of the recommendation by the responsible Minister which may in some cases reflect Government policy as settled by Cabinet or determined by the Minister. The Royal Instructions to the Governor of Victoria expressly allow him to disregard advice (cl. VI). This does not affect the convention that he will act on advice. But it is not to be thought that the Queen, the Governor-General or a Governor is bound to accept without question the advice proffered. History and practice provide many instances in which the Queen or her Australian representatives have called in question the advice which has been tendered, have suggested modifications to it and have asked the Ministry to reconsider it even though in the last resort the advice tendered must be accepted (see, for example, de Smith, Constitutional and Administrative Law, 3rd ed. (1977), p. 99).

[95]

The material facts and the relevant legislation are discussed and set out in the reasons for judgment of my brother Mason which I have had the advantage of reading. It is however necessary for me to mention the sequence of events. The appellant in the first appeal had had an approval of the Governor in Council to carry on workers' compensation insurance business in Victoria for many years and its then current approval was due to expire on 30 June 1979. The company applied for its renewal for a further year but approval was granted only until 31 December 1980. A letter from the Minister of Labour and Industry ("the Minister") informed the appellant of his approval and set out certain criteria which he said workers' compensation insurers would be required to satisfy before 1 July 1981. On 2 December 1980 the appellant applied for a renewal of its approval for twelve months from 31 December 1980 and made certain submissions as to the criteria which had been prescribed by the Minister and as to the regulations. On 23 March 1981 the Minister informed the appellant that its application for renewal was still under consideration and that the Governor in Council had given interim approval effective until 1 June 1981. On 18 May the Minister informed the appellant in writing that he had decided to recommend to the Governor in Council that the application be not approved. In that letter he set out what he called "a summary of the case against the applicant" in which he mentioned a number of aspects of the company's activities and those of a group of companies of which it was one. On 21 May 1981 the appellant's solicitors wrote to the Minister and to the Clerk to the Executive Council seeking particulars of the matters raised by the Minister and asking for an opportunity to answer those matters. On 26 May 1981 an Order in Council was made by the Governor in Council refusing to grant approval to the appellant, the order being expressed to operate on and from 2 June 1981. No opportunity was given to the appellant to place material before, or to make representations to, the Minister or to the Executive Council in response to the matters raised by the Minister.

[106]

The view expressed by the Full Court of the Supreme Court of Victoria in this case was that the Governor in Council had an "unfettered discretion". That may well be a correct description of many of the administrative and "legislative" activities which the Governor in Council is required or authorized by the Crown or by statute to carry out. Thus the nature of the act or decision authorized or required may not by itself determine whether the relevant power is examinable or not. Some statutory powers may from their nature be capable of valid exercise without prior inquiry into particular facts for the nature of the subject matter may make particular facts irrelevant. On the other hand a power given to a Minister to revoke a licence to carry on a particular business from its nature will generally speaking require the Minister to investigate the facts and to invite and consider representations and explanations by the person immediately concerned, but without there being a duty to hold any kind of formal hearing. In this context it is difficult if not impossible to lay down general rules capable of automatic application, for each case will involve a different statute. The grant of a very wide discretion may in some cases be a clear indication of a parliamentary intention to displace the rules of natural justice, but generally something more than a discretion without express restrictions will be necessary to exclude the duty to observe the principles of natural justice. The circumstances in which this kind of problem may arise are, from their very nature, diverse and unpredictable and moreover the problem is still likely to arise in circumstances in which the draftsman has not had occasion specifically to direct his mind to the question of whether the "rules of natural justice" are to be applicable to the exercise of the particular power in question. The provisions of the Administrative Law Act represent a recent attempt to formulate general rules governing the extent to which and the manner in which administrative decisions may be challenged but it is not unfair to say that the context of the legislation makes it clear that the position of the Governor in Council was not expressly in the mind of the draftsman or of those, one must assume, who directed the preparation of the Bill which ultimately became that Act.

[113]

It is in my opinion destructive of the notion of natural justice to proceed upon the basis that, where a hearing or an examination of old and new material relevant to a decision made by a Minister is concerned, such hearing or re-examination should be carried out by some person who was not the deciding mind in relation to the original decision. If a recommendation is made to the Governor in Council by a Minister who has arrived at his recommendation without giving a required opportunity to the person affected by the decision to bring to his attention all the material regarded as relevant to the Minister's decision, including answers to complaints by or questions asked by the Minister, then it is the recommendation to which the requirement of natural justice attaches. It is contrary to the scheme of organized government in the States to suppose that the Governor in Council constituted in the same manner as it was on the day on which the original decision was made, or constituted in some other way, should itself conduct some kind of a hearing or some kind of an investigation or to examine the new material, as well as the old material which was not before it, and then conclude what recommendation the Minister ought to have made on the new material. A true analysis is that, if by reason of the failure of the Minister to give the opportunity for the submission of answers to questions raised by or material relied upon by the Minister, there has been a failure to provide natural justice, then the result must be that the proceedings before the Governor in Council have miscarried so that no effective Order in Council has been made, there having been no effective recommendation. The Minister has mistakenly exceeded his powers in advising the Governor, either directly if he is present or indirectly through such Ministers as were present when the particular recommendation was made to the Governor in Council. In those circumstances it seems to me that the Order in Council recording the decision not to renew must be void. There is nothing that the Governor in Council has effectively done and nothing that the Governor in Council as such can do unless and until the relevant Minister makes a recommendation either personally or through another Minister or member after he, as the deciding authority, has in fact taken into account all the material that he should have taken into account. In the present case that means the examination and consideration by the Minister of the answers which would have been made by the appellant to the factors which the Minister had set out in his communication as "the case against" the appellant.

[178]

The cases show clearly that the principles of natural justice do not comprise rigid rules, but the requirements of compliance with those principles will depend upon the particular circumstances. "Fairness" may require, or be satisfied by, different procedures even by the same statutory authority in different circumstances. His Honour then cited a passage from the judgment of Kitto J. in Mobil Oil Australia Pty. Ltd. v. Federal Commissioner of Taxation [12] . In Salemi [No. 2] several members of the Court made the same point with particular reference to the distinction between the grant, and the renewal of an annual licence. Barwick C.J. [13] said: Where a licence or permit is given for a fixed term in relation to a subject matter and in circumstances which carry the implication that if the licensee or permittee has fulfilled the obligation of the licence he may expect a renewal of the licence or permit, the grant will be construed as importing a term that at least the interests of the existing licensee will be considered before a renewal is refused. Such a person thus has a legal basis for asking for that consideration: and, if so, ought to be heard. Stephen J., after reviewing a number of authorities, summed up the principle in these terms [14] : When the discretionary grant of a licence, permit or the like carries with it a reasonable expectation of, although no legal right to, renewal or non-revocation, summarily to disappoint that expectation is seen as unfair; hence the requirement that the expectant person should first be heard and this no doubt as much to aid those who exercise discretions in pursuing the goal of a just result as to safeguard the interests of the expectant party. Cf., also, Jacobs J. [15] . To a like effect are the observations of Megarry V.C. in McInnes v. Onslow-Fane [16] . 1. (1977) 137 C.L.R., at pp. 513-514. 2. (1963) 113 C.L.R. 475, at pp. 503-504. 3. (1977) 137 C.L.R., at p. 405. 4. (1977) 137 C.L.R., at p. 439. 5. (1977) 137 C.L.R., at pp. 451-452. 6. [1978] 1 W.L.R., at p. 1529; [1978] 3 All E.R., at p. 218.

[187]

This is a field in which it is unwise to generalize, but the fact that the power is conferred quite unconditionally is a circumstance that suggests - not necessarily conclusively - that the principles of natural justice are not intended to apply. This may be a case where the discretionary content of a power reposed in the Governor is not of itself sufficient to exclude a right to be heard. Much depends upon the nature of the decision that is made in a particular case. In many cases where decisions are committed to the Governor in Council there could be no question of that decision-making process being attended with a duty to be fair and so to allow individual representations from persons affected by the decision to be incorporated into the process. The problem does not arise where decisions are of a legislative character or of a kind which affect the community as a whole or large sections of it. Again, if it were the fact that a decision affecting an individual is dictated by the application of a principle of government policy, with the result that considerations personal to the individual do not and could not influence the outcome, then there is no applicable principle of fairness which requires more than that the individual in question be informed of that overriding policy consideration. In such a case it would be positively unfair to encourage the person concerned to think that anything could be gained by his making representations. Of course, in a democracy there are ways and means of challenging government policy but the processes of judicial review cannot be harnessed to that end. On the other hand, there will be cases where there is no relevant policy or the policy is not so clear-cut in its application to a particular case as to pre-determine the result. So long as there are considerations personal to the individual which may influence the outcome, then the objective of fairness may require that he be given to understand the general nature of those considerations and provided with an opportunity to submit written material by way of answer or explanation in relation to them together with any other matters which may support a favourable decision. In such a case fairness would no doubt require that such material be honestly considered. But that having been done, there can be no fetter on the freedom of the Governor and his advisers to determine the result, whether because of countervailing considerations or because, ultimately, of the effect given to government policy. 1. (1977) 137 C.L.R., at p. 420.

[191]

The Solicitor-General referred to practical problems which he said were necessarily attendant upon a finding that the Governor in Council was under a duty to be fair. Undoubtedly, there would be grave difficulty if the Executive Council itself was obliged to discharge the duty. But if the proper construction of the Act favours a right to be heard, then in my opinion that construction contemplates that the discharge of the duty may be delegated to the appropriate Minister. The practical difficulties are then not nearly so great, and yet with no denial of the principle of fairness. I would expect the matter to be handled consistently with the normal procedures of the public service. Ordinarily, the decision of the Governor in Council is based on a recommendation of a Minister of the Crown. That recommendation normally will have the backing of a Cabinet decision or represent an implementation of a policy approved by the Cabinet. In the course of preparing a recommendation for submission by the appropriate Minister, his officers will have gathered the material relevant to the matter. If it concerns an application by an insurer for renewal of approval pursuant to s. 72 of the Act, and it appears that the recommendation could be adverse because of considerations that are personal to the applicant, then the applicant will be informed and given the opportunity of contributing to the relevant material. The Minister then decides on his recommendation in the light of the total material, including any relevant policy. His submission to the Governor in Council will show on its face that the dictates of natural justice have been observed. Neither the Governor nor the members of the Executive Council who constitute the quorum on the particular day are required to go behind that assurance. No discussion of the merits of a particular case will ordinarily proceed in the Executive Council. It would be pure coincidence that the relevant Minister happened to be present, and in any event the Governor is obliged to act on the advice of his Ministers. It is they and the Government who are responsible for that advice to the Parliament and ultimately to the electorate.

[192]

That is not to say that the Governor may not ask questions of his Ministers, directed perhaps among other things to the observance in a proper case of the principles of natural justice. Hence the desirability of an assurance to that effect appearing on the face of the submission. It would be absurd to suppose that the principle of responsible government requires the Governor to act purely as an automaton. He may be described as a rubber stamp, in the sense that his executive acts are based, and necessarily based, on the advice that he is given. But his responsibility is to administer the executive government, and to do so with integrity, discretion and a complete absence of political partiality. Bagehot's famous observation, that "the sovereign has, under a constitutional monarchy such as ours, three rights - the right to be consulted, the right to encourage, the right to warn." (Bagehot, The English Constitution, Crossman ed. (1964), p. 111), is still good law and good constitutional practice. Sir Ivor Jennings cites the advice of Lord Esher to King George V. at the time of the Home Rule crisis in 1913 to the effect that the King "may endeavour to influence their actions. He may delay decisions in order to give more time for reflection." His was "a prerogative of criticism and delay, of personal influence and remonstrance" but not "the final right of private judgment" (Cabinet Government, 3rd ed. (1959), p. 337). Ministerial responsibility is the safeguard of the monarchy. See, also, S. A. de Smith, Constitutional and Administrative Law, 3rd ed. (1977), p. 99. I see no reason why in a case where it appears to the Governor that some further consideration by the Minister or the Cabinet would be desirable he could not request that further consideration be given before he acts on the advice that is tendered to him. Let it be said that such action may well be most infrequent, but the possibility of it serves to illustrate the true function of the Governor in Council and the practicality of a legislative step which commits to him a decision which imports the requirements of natural justice.

[223]

The second matter for consideration is the interests which are likely to be affected by the exercise of the power. It is of the nature of a workers' compensation insurance business that the insurer maintains a fund into which premiums, investment returns and other income are paid, and out of which claims, expenses and other outgoings are paid. An insurance company may be affected by a cessation of the flow of money into the fund, for that would necessitate the realization of assets to meet current liabilities. It is a consequence of reg. 201 that a cessation of receipt of premium income follows forthwith upon the expiry of an approval, and it is foreseeable that such a cessation would in many cases force a realization of some of the assets in which the insurer's fund is invested in order to meet current liabilities. Refusal to renew an approval may thus be productive of loss in the realization of assets to the detriment of a solvent company, and, if the company should be insolvent or be forced into insolvency, to the detriment of creditors also. On the other hand, the statutory licensing system is clearly intended to ensure protection against the risks involved in the erosion or elimination of an insurer's margin of solvency: see reg. 202(2). If detection of an insurer's impending insolvency is left too late, financial loss to employers, to their employees who are injured and to other creditors of the insurer may result. Renewal of an approval to carry on a business for any period when the continued solvency of an insurer is uncertain may fail to prevent widespread losses. The exercise of the power to renew approval may thus affect the interests of persons other than the insurer, and the legislature must be taken to have intended the power to be exercised in a way which is appropriate to take account of the interests of policy holders and creditors as well as the interests of the insurer. However, a procedure which does not afford an insurer some opportunity to be heard would be unlikely to take account of the insurer's interests. Such an opportunity is not incompatible with the interests of policy holders and other creditors, for it might aid in acquiring the information needed in taking account of those interests.

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