Exam July 2015, questions and answers PDF

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CONSTITUTIONAL LAW – MLL323 – SECOND TRIMESTER 2015 – EXAMINATION PAPER ‘A’

MLL323 – CONSTITUTIONAL LAW 1. Where marks are indicated they are indicative only and are not a strict guide to the marks allocated within each answer. 2. It is not expected that students get all the points detailed in the marking guide in order to score full marks. Consequently, in many cases, the total number of marks allocated by the marking guide for each question add up to more than the total marks allocated for the question. 3. Markers should mark flexibly and leniently, rather than prescriptively, allowing room for creative, but plausible, arguments which make reference to basic constitutional principles. 4. The marking guide is written on the assumption that the markers are all qualified academics or lawyers with detailed knowledge of constitutional law. 5. You will also find inserted some comments from Margaret Brock concerning the marking guide. Margaret taught the Warrnambool and off campus students. Margaret’s comments draw your attention to some differences in the way the unit was taught to those two cohorts and, consistently with point 3 above, should be taken into account in marking the off campus papers (Margaret is marking all the Warrnambool papers herself)

QUESTION 1 (40 marks) In 2015 Commonwealth Government signs a free trade agreement with the United States (‘The FTA’). The FTA requires the US and Australia ‘to take all reasonable steps to reduce the incidence and costs of commercial litigation involving Australian and US companies and to ensure that any such litigation is resolved speedily, efficiently and cost effectively’. The Commonwealth Minister for Trade, John Bonham, then announces the establishment of a new arbitration body, the FTA Institute (‘the FTAI’) ‘as a critical plank in the implementation of the FTA’. The FTAI will be staffed by experts in commercial arbitration, alternative dispute resolution and commercial law. It will be a non-commercial, Page 1 of 19

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independent statutory body which provides alternative dispute resolution services for free in relation to any commercial dispute referred to it by the Minister. Accordingly, the Commonwealth Parliament enacts the FTAI Act 2015 (‘the Cth Act’). The Cth Act relevantly provides: Section 1

Establishment of FTAI

The FTAI is established under this Act as a trading and financial corporation formed within the limits of the Commonwealth. Section 2

Application of Act

This Act applies to any dispute relating to intra-state, inter-state and international trade and commerce, which, in the opinion of the Minister, may adversely affect Australia’s trading relationship with the United States of America. Section 3

Power of Minister to Refer Dispute to FTAI

A dispute to which this Act applies may be referred to the FTAI for compulsory arbitration at the discretion of the Minister. Section 4

FTAI Arbitrations

(1) The FTAI, in arbitrating a dispute referred to it by the Minister under this Act, will arbitrate the dispute speedily, efficiently and cost effectively and is not bound by strict rules of law or any technicalities or legal forms whatever. (2) Any legal proceeding relating to a dispute referred to the FTAI by the Minister under this Act is discontinued.

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(3) Any decision of the FTAI may be registered by the Minister at the Federal Court and, on being registered, will have the legal effect of an order, judgment or sentence of the Federal Court. The Cth Act having been enacted, Minister Bonham proceeds to spend 10 million dollars, appropriated under the Annual Appropriation Act for the Ordinary Annual Services of Government 2015 (Cth), to set up the FTAI in a plush new office tower in the Sydney Central Business District. Robert Plant is the lead plaintiff in a huge class action involving a large United States tobacco company, Led Zeppelin, which is currently being litigated in the Supreme Court of Victoria. The dispute relates to the retail marketing and sale of Led Zeppelin tobacco products by Victorian retailers to smokers in Victoria over a 50 year period. The trial has been conducted under the Tobacco Class Actions (Speedy Resolution) Act 2005 (Vic) (‘the Vic Act’) which relevantly provides: Section 5 Any person who engages in conduct intended to delay or frustrate the resolution of litigation conducted under this Act is guilty of contempt of court. The evidence was heard over six months and it is anticipated that the trial judge, Page J, will order the Led Zeppelin to pay over ten billion dollars in damages to Victorian smokers. While the case is adjourned, pending the handing down of Page J’s judgment, Minister Bonham refers the class action to the FTAI for compulsory arbitration. Page J responds by announcing in open court that he intends to charge Minister Bonham with contempt of court under s 5 of the Vic Act unless the Minister’s referral to the FTAI is withdrawn. Question 1A (14 marks)

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Is the Cth Act a law with respect to one or more heads of Commonwealth head of legislative power? 1) The obvious heads of power are the external affairs power and the inter-state and international trade and commerce head of power. External Affairs (up to 9 marks) 2) The external affairs power empowers the Commonwealth Parliament to make laws implementing Australia’s international obligations. For the law to be valid, the treaty (i) must be bona fide; (ii) must impose a sufficiently specific obligation on Australia; and (iii) the domestic Act must conform to the treaty. Bona fides 3) There is a lack of bona fides when the Commonwealth enters a treaty in order to acquire legislative power over a matter at the expense of the states. There is no suggestion that the FTA is not bona fide. Students should acknowledge that the test is a ‘frail shield’ and that there is a presumption, which is practically close to irrebuttable, that the executive enters into treaty obligations bona fide. Specificity 4) There is a strong argument that the FTA obligation is not specific enough as it does not impose a common course of action (Industrial Relations Act Case): what specifically is involved in taking ‘all reasonable steps to reduce the incidence and costs of commercial litigation etc.’? There are a whole range of means that might be used to achieve that end, some of which are no doubt conflicting. Better answers may acknowledge that the court will not expect that international obligations will be cast in the same precise language as

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obligations, for example, under a contract in civil law, but it is likely that the FTA requirement falls short of a sufficiently specific obligation. Conformity 5) In the alternative, if the FTA obligation is sufficiently specific, then the Cth Act must be ‘reasonably capable of being considered appropriate and adapted to the implementation of the treaty obligation’ (Industrial Relations Act Case). This is a fairly deferential test, so, given the vagueness of the ‘obligation’, it is likely to be met. Conduct of International Relations 6) The other possibility is that the Cth Act relates to the conduct of Australian foreign relations, specifically, Australia’s trading relationship with the US (see s 2). This is certainly arguable, although the argument is more strongly put if it is framed in terms of the inter-state and international trade and commence head of power (see below), which deals specifically with Australia’s international trading relationships. Dual characterisation, however, would not prevent this argument being run in the context of the external affairs power. Corporations Power (up to 4 marks) 7) The Commonwealth has purported to use the corporations power in establishing the FTAI (see s 1). However there are two serious problems with relying on the use of the corporations power. 8) First, although the FTAI is described as a trading and financial corporation under s 1, it appears that it will not engage in any trading or financial activities (‘It will be a non-commercial, independent statutory body which provides alternative dispute resolution services for free’). The Commonwealth cannot deem something to be within a head of power when it is not, and then invoke

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the head of power to regulate it (e.g. the famous example, of deeming a primary school to be a lighthouse, and then regulating it under the lighthouse power). This is fundamentally incompatible with the rule of law and judicial review under the Constitution (Communist Party Case). Unless the FTAI really is a trading or financial corporation based on its actual engagement in substantial and significant trading or financial activities (R v Judges of Federal Court and Adamson; Ex parte Western Australian National Football League and West Perth Football Club) or its intended activities (which may involve reference to its objects [Fencott v Muller]), then the Commonwealth cannot rely on the corporations power in relation to the Act. 9) Secondly, the corporations power does not extend to a power to incorporate trading and financial corporations ( Incorporation Case). 10)However, importantly this is not fatal to the validity of the Act, given dual characterisation. The High Court has made it clear that the various heads of power given the Commonwealth power to participate in activities which fall within the head of power, including the power to incorporate companies to engage in these activities on its behalf (Australian National Airways Pty Ltd v Commonwealth). So as long as the law is sufficiently connected to another head of power, the Commonwealth can incorporate a company (like the FTAI) to engage in activities which fall within the head of power. Express Incidental Head of Power (s 51(xxxix) (up to 3 marks) 11) Some students may seek to argue that this law can be characterised as a law with respect to matter incidental to powers vested in the judiciary under s 51(xxxix). This argument is fraught with difficulty, as under the separation of

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powers model adopted by the High Court, powers of arbitration are nonjudicial powers which are not vested in the judiciary under the Constitution. Nationhood power (up to 4 marks) 12)There is an analogy where with the setting up of the FTAI and the setting up of the Australian Bicentennial Authority ( Davis). Students can argue that the setting up of the FTAI is within the ‘enterprises and activities peculiarly adapted to the government of the nation and which cannot otherwise be carried out for the benefit of the nation’ (AAP Case). Students should then explain the link with the legislative power under s 51(xxxix). The use of the nationhood power when combined with 51(xxxix) is subject to a test of proportionality (Davis): here the legislation has a limited impact on civil liberties, although it is to some extent coercive (‘compulsory arbitration’). It is likely therefore to survive any application of a proportionality test. Interstate and international trade and commerce (up to 7 marks) 13)There is a very strong argument that the Cth Act falls with the international and interstate trade and commence head of power (s 51(i)), given the terms of s 2. However the big problem is the inclusion of intra-state trade and commerce in s 2. The Commonwealth will have to argue that the regulation of intra-state trade falls within the (express or implied) ‘incidental range’ of the head of power (i.e. the Commonwealth’s power to regulate those matters which are reasonably necessary to effectuate the power (Grannall v Marrackville Margarine Pty Ltd) either as a necessary implication of each head of power, or under s 51(xxxix)) on the basis that the regulation of intrastate trade is connected to Australia’s international trade with the US. The

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text of s 2 gives this argument purchase: ‘This Act applies to any dispute relating to intra-state … trade and commerce, which, in the opinion of the Minister, may adversely affect Australia’s trading relationship with the United States of America’. This is certainly arguable (O’Sullivan v Noarlunga Meats; Airlines of New South Wales Pty Ltd v New South Wales (No 2)), although the High Court has generally been reluctant to accept that an economic or political connection between intra-state and inter-state or international trade and commerce is sufficient to move the regulation of intra-trade trade and commerce into the incidental range of the power. The fact that the connection with Australia’s trading relationship with the US is subject to the Minister’s discretion (‘which, in the opinion of the Minister, may adversely affect …’) probably doesn’t matter: the entrenchment of judicial review of administrative action (Constitution s 75(v); Plaintiff S157) would ensure that the Minister’s decision is kept within the boundaries of the head of power. Question 1B (12 marks) Assuming that the Cth Act is a law with respect to one or more Commonwealth heads of legislative power, is the Cth Act constitutionally valid?

Separation of Powers (up to 9 marks) 1) The huge problem within the Cth Act is in relation to the separation of powers. In ordered to survive a challenge on this basis, the Cth Act would have to be read down and parts of it would have to be severed. The best answers should acknowledge this and deal with questions of severance and reading down adroitly. Page 8 of 19

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2) First, the Cth Act gives the Minister the power to refer disputes with are currently before the courts with the consequence that such disputes are thereby discontinued (see s 4(2)). This must be unconstitutional interference with the independence of the federal judicial system at very least, if not a measure which would significantly damage the institutional integrity of the state courts as repositories of federal jurisdiction ( Kable) (although City of Collingwood Nos 1 & 2 suggest that legislatures can legislate to determine proceedings before state courts exercising state jurisdiction without offending the Kable principle; perhaps the better argument in relation to disputes within state jurisdiction litigated in state courts [like the Led Zeppelin dispute here] is framed with reference to the Melbourne Corporation principle?). Consequently, at least re the Minister’s capacity to interfere with federal jurisdiction, the Cth Act would have to be read down consistently with separation of powers principles. 3) The Cth Act would have to be interpreted so that the powers of arbitration conferred on the FTAI are distinguishable from the exercise of judicial power e.g. non enforceability; no final determination matters law etc. Given the history of arbitration bodes in the Australian constitutional context (e.g. under the industrial relations head of power), this could easily be done, subject the severance of s 4(3). 4) Section 4(3) is clear invalid, based on Brandy v Human Rights and Equal Opportunity Commission. This is an example of an executive body attempting to borrow the clothes of judicial power, in seeking to enforce, as an exercise of judicial power, a decision of a non-judicial body. The decision of the FTAI cannot become a decision of the Federal Court ‘automatically’ merely on

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being registered; as put by Joseph and Castan, ‘the enforcement of an administrative decision can only take place after enforcement proceedings have been undertaken in a court. Melbourne Corporation principle (up to 5 marks) 5) The Cth Act, to the extent that it purports to allow the federal minster to interfere with state judicial proceedings is state courts may violate the Melbourne Corporation principle which protects the constitutional autonomy of the States, including their key institutions, such as state Courts ( Austin). The Cth Act may have to be read down in this respect. 1) Students should reference the test as articulated in Clarke and the Clarke list of factors. I cut and paste below the relevant section from the Topic Guide: The High Court in Clarke held, unanimously, that the legislation by imposing a surcharge on State MP’s had offended the Melbourne Corporation doctrine. Importantly, the Court clarified that the doctrine was indeed a single principle as suggested by four members of the majority in Austin. That principle may be described as follows: the Commonwealth cannot, by the exercise of its legislative power, significantly impair, curtail or weaken the capacity or the actual exercise of the States of their constitutional powers and functions whether they be legislative, executive or judicial. 18 In order to apply the Melbourne Corporation doctrine, the following factors are relevant though no factor, ‘considered separately, will necessarily be determinative’:19 i ii iii iv v vi

whether the law in question singles out one or more of the States and imposes a special burden or disability on them which is not imposed on persons generally whether the operation of a law of general application imposes particular burden or disability on the States the effect of the law upon the capacity of the States to exercise their constitutional powers the effect of the law upon the exercise of their functions by the States the nature of the capacity or functions affected the subject matter of the law affecting the State or States and in particular the extent to which the constitutional head of power under which the law is made authorises its discriminatory application.

6) Factors (iii), (iv) and (v) are all relevant here.

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Question 1C (7 marks) Assuming that the Cth Act is constitutionally valid, is Minister Bonham’s expenditure of 10 million dollars on setting up the FTAI legal? 1) The problem here is that although there is an appropriation act, (i) expenditure of this nature is novel and is likely to fall outside the scope of an appropriation for the ‘ordinary annual services of government’ (although this issue is likely to be non-justiciable: AAP Case); and (ii) an appropriation does authorise expenditure (Pape). Either (i) there needs to be legislation authorising the expenditure (and it is unclear whether the Cth Act meets that description); or (ii) the expenditure needs to fall within the ordinary, well-recognised functions of the Commonwealth Executive (‘ordinary government business’) (Williams v Commonwealth (School Chaplaincy Case)). Here it does not; the FTAI is an entirely novel and constitutionally radical institution.

Question 1D (7 marks) Advise Minister Bonham as to the effect of the Cth Act on any Victorian prosecution for contempt of court under s 5 of the Vic Act. 1) On the assumption that the Cth Act is valid, then the question is whether it is inconsistent with the Vic Act under s 109 such that s 5 of the Vic Act is legally inoperative. 2) Strongly arguably there is a direct inconsistency between both Acts. Section 5 of the Vic Act ‘will alter, impair or detract from the operation of the federal law’ (Dickson) in relation to litigation which falls under the Vic Act, as is evident from the fact scenario in the examination question: if a mater which

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