Research Paper 7 1998-99

Christos Mantziaris
Law and Bills Digest Group
8 November 1998

Contents

Major Issues Summary

Introduction

The problem of informal Minister-board communication

The position of statutory corporations in the framework of responsible government

Interpreting ministerial directions powers

Conclusion

Endnotes

Major Issues Summary

Over the past ten years, the Commonwealth Government has withdrawn from the oversight of the day-to-day operation of many of its business and statutory authorities. The managers have been allowed to manage, while government has concentrated on policy formulation and the overall steering of these entities.

Yet the government's withdrawal from the operational level has not been complete. The government 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, such interventions can be politically controversial.

Parliament has sought to regularise the means by which the executive may intervene in the affairs of statutory corporations by granting the portfolio Minister a formal power to direct the corporation. The breadth of these powers varies. The power might extend to all of the activities 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 of Hughes v Airservices Australia (1997) 146 ALR 1 illustrates, Ministers have ignored the statutory power of direction, and have continued to exercise informal influence over the corporation. These informal communications between Ministers and boards occur in a zone 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 to reconcile the structure of the statutory corporation and the ministerial directions power with the governance arrangements of the private sector company.

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

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

The Hughes case appears to restrict this flexibility by adopting a much stronger and narrower approach to the requirements of 'responsible government'. In particular, the case suggests that the Constitution requires statutory corporations to be accountable to Parliament through the principle of ministerial responsibility notwithstanding any additional means that Parliament may choose (e.g. approval of corporate plans, financial reporting, dividend policy, imposition of directors' duties). This emphasis on ministerial responsibility allowed the court in Hughes to interpret a ministerial directions power as being broad enough (i) to allow a Minister to intervene in any aspect of the board's decision 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, it appears to lack constitutional foundation. Secondly, it runs the danger of placing undue emphasis on a particular form of relationship between Parliament and the executive, that of ministerial responsibility. This emphasis might frustrate Parliament's ability to create other forms of executive accountability, which might better accommodate the changed nature of contemporary social and economic phenomena. Private sector style corporate governance techniques for statutory corporations are one example. The use of companies incorporated under the Corporations Law are another.

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

Introduction

This Research Paper addresses the problem of informal communication between Ministers and the boards of statutory corporations and Parliament's attempt to regulate these communications through the enactment of formal ministerial powers of direction over the corporation. Directions powers are an attempt to reconcile two conflicting needs-the executive's need to delegate decision-making to an agent and the executive's need to preserve its capacity to intervene in the agent's decision-making. Formal directions provisions do not necessarily resolve the problem of informal communication. They are often ignored by Ministers, and their interpretation forces courts to grapple with uncertain areas of constitutional law.

Judges interpreting ministerial direction provisions have generally approached the task by attempting to give effect to Parliament's intention through conventional techniques such as the literal and the purposive construction of the statute. But the increased judicial recognition of the system of responsible government prescribed by the Commonwealth Constitution(1) has raised the possibility of a broader field of interpretation. This paper attempts to assess the merits of rival approaches to the requirement of responsible government in the conduct of the affairs of statutory corporations by reference both to their constitutional underpinnings and to their ability to facilitate historical changes in the form of accountability Parliament might think appropriate.

Part 1 describes the problem of informal Minister-board communication and seeks to contextualise it within the peculiar governance structure of the statutory corporation. The enactment of ministerial directions power is treated as a response to these structural problems. Part 2 reviews the theory of responsible government as it is emerging from the courts and constitutional scholarship in order to ascertain the background to the judicial interpretation of directions powers. Part 3 reviews the rival approaches to responsible government 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 the standard case, the statute which establishes the corporation will allocate formal responsibility for decision-making between the board of the corporation and the executive (usually represented by the Minister) and define formal avenues of communication between the two parties.

But behind this formal façade, there is usually a high level of informal communication between 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 conventions. Often, these informal techniques will be used by the Minister to influence the board's decision-making.

Statutory powers of ministerial direction over a corporation must be understood as a response to this situation. Such powers attempt to satisfy two conflicting needs-the executive's need to delegate decision-making to an agent and the executive's need to preserve 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 succession(2) created by statute. It has the right to sue and be sued and has such other legal capacity as Parliament may validly confer upon it. Beyond the possession of these basic characteristics, the highly malleable nature of the form does not allow the statutory corporation to be conceived as a fixed legal category.

Some statutory corporations are nothing other than a 'corporation sole' in which legal personality is conferred upon an office in order to distinguish it from the natural person who is its temporal occupant.(3) Other statutory corporations provide the governance structure for the conduct of large-scale governmental activities, ranging from the commercial (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 form have differed enormously.(5)

The Commonwealth Executive has also used Corporations Law companies to perform activities. Some of these companies are proprietary companies, some are companies limited by guarantee. Others, like the telecommunications carrier Telstra, are listed public companies in which private investors may hold shares. Government Business Enterprises (GBEs) are simply a collection of legal entities that have been categorised as such because they conduct substantial commercial activities. Some GBEs are statutory corporations. Others have been created as private-sector style companies incorporated under the Corporations Law. Parliament and the Department of Finance have imposed additional oversight mechanisms and controls on GBEs which have been created in response to their commercially-oriented character.(6) Both statutory corporations and Corporations Law companies controlled by the Commonwealth are subject to the Commonwealth Authorities and Corporations Act 1997 (Cth).

For the purposes of this discussion, the Research Paper will focus on the circumstances of larger contemporary Commonwealth statutory corporations such as the Commonwealth Scientific and Industrial Research Organisation (CSIRO), the Australian Broadcasting Authority (ABA), the Special Broadcasting Service (SBS), the Australian Trade Commission (AUSTRADE), or the Grain Research and Development Corporation.(7) These organisations conduct activities on a financial scale and with a labour force of a size that would easily place them within the category of the large proprietary company(8) had they been incorporated under the Corporations Law. They are also the type of organisation that is more likely to experience the problem of informal Minister-board communication.

In the case of these statutory corporations, the parent statute will create a memberless corporation comprising a board of directors, to be appointed by the executive, with defined tenure and conditions for removal. Provision might be made for a 'government director'. In practice, this director is a nominee of the executive and is usually employed as a public servant in the relevant portfolio area. Responsibility for the statutory corporation is granted under the Administrative Arrangements Order to the Minister in charge of the Department of State most closely related to the activities of the corporation.

The corporation is vested with a range of powers necessary for the conduct of statutorily defined functions. But the statute will usually reserve, for the ministerial principal, authority over certain aspects of corporate decision-making. This will usually be through a series of legal techniques which enable periodic flows of formal communication between principal and agent, e.g. the ministerial approval of periodic operational, financial and corporate plans. The preparation of annual reports and the corporation's subjection to audit by the Auditor-General further supplement the informational needs of both the executive and the Parliament.

The parent statute will also regulate formal non-periodic communication between the political principal and the board of the corporation. The statute may require the board to obtain 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 notify the Minister of the occurrence of specific events or the general conduct of corporate operations. Many of these requirements have now been applied generically to statutory corporations through the Commonwealth Authorities and Companies Act 1997 (Cth).(9)

In the background of these controls lie other formal oversight mechanisms. Parliament retains the right to inquire into the affairs of the corporation.(10) Through statute, or the issue of administrative guidelines by the executive, other departments or agencies might be granted authority over specific aspects of corporate operations: for example, the Minister for Finance might be granted oversight of corporate borrowing and 'dividend' policy; the approval of the Department of Foreign Affairs may be required for ventures outside the jurisdiction; or the approval of the Department of Industrial Relations for staff salaries and so on.

Depending on the character of the decision,(11) and the rules of standing,(12) the board's actions might be subject to scrutiny by the courts at the suit of a member of the public. In this circumstance, the review of board decisions will be based on the judicial review of administrative action rather than the general law governing the director's fiduciary duties to the corporation.(13) Depending on the identity of the statutory corporation,(14) corporate information may be examined by the public under freedom of information legislation (albeit in a manner limited by considerations of commercial competition and state confidentiality).

The evidence on informal Minister-board communication

Oversight and coordination is also established through informal communication between the board (and management) and various parts of the executive. These communications range from the ongoing contact between senior management and members of the portfolio department 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 allocated ex ante to the board under the parent statute.

Within the Anglo-Australian legal system, the most systematic inquiries into ministerial intervention of this nature have been occasioned by the large scale nationalised industries of post-war Britain.(15) The British Parliament was so concerned by the visible growth of extra-statutory ministerial control, and 'the lack of clarity about purposes, policies, methods and responsibilities' that ministerial intervention created, that it held a Select Committee Inquiry into the Ministerial Control of the Nationalised Industries (1967-68).(16) Evidence before the Committee by corporate officers and public servants confirmed the extent of de facto ministerial control over the industries. Variations were noted in the pattern of ministerial intervention between industries, in the personal styles of Ministers, in the extent of ministerial control and its historical background.(17)

Empirical data on the frequency of ministerial interventions in Australian statutory corporations is not available; nor is it ever likely to be available due to the inherent methodological difficulties in ascertaining and measuring the exercise of political influence. The recent case of Hughes v Air Services Australia (discussed below) has provided some insight into the manner in which Ministers will attempt to influence boards and also the manner in which the senior management of statutory corporations will cooperate 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 entities such as the Australian Broadcasting Corporation, Telecom, the Overseas Telecommunications Commission and the Civil Aviation Safety Authority.(18) Evidence regarding ministerial intervention in respect of government companies is too limited to support firm conclusions.(19)

These events have often been the subject of political controversy.(20) The relationship between the Minister and the board is so deeply influenced by the location of the statutory corporation within the political system that informal Minister-board communication occurs in a space governed more by political habit and expediency than by legal norms and conventions.

The propriety of informal Minister-board communication

Both British and Australian administrative history reveal an absence of conventions regarding ministerial intervention in the affairs of statutory corporations. Paul Finn's(21) study of the practice of colonial boards in New South Wales, Victoria and Queensland found that although British and colonial practices in relation to the accountability of boards differed, the colonies presented no uniform 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 more Ministers of State, or the Governor-in-Council.

The failure of the British Select Committee on Nationalised Industries to formulate principles for the exercise of ministerial control is instructive.(22) On the one hand, the Committee accepted that, whatever the theoretical arguments in favour of making all exercise of ministerial control precisely formal and authorised by statute, some degree of informality was unavoidable. Indeed the informality of Minister-board relations made it possible to respond flexibly to sudden changes in circumstances. The Committee proposed that the respective responsibilities of board and Minister be discussed informally and then tabled in Parliament. On the other hand, the Committee could not forgo the need for formal statutory regulation. The Committee concluded that Ministers should use statutory powers as their main instruments of strategic control. And in cases of ultimate disagreement between Ministers and boards, the Minister should be required to act formally if his or her directions were to be put into effect. (23) This ambivalence towards the respective roles of boards and Ministers is also reflected in the international public administration literature.(24)

Structural reasons for the problem

Directors in the Corporations Law company owe their fiduciary duties to 'the company as a whole' and not to any particular shareholder, whether that shareholder is in a position to control the company or not.(25) Even the board of a wholly owned subsidiary company is not bound to comply with the directions of the controllers of the company.(26) Where a controlling member of a corporation attempts to dictate informally a course of action to the board, such a communication is legally ineffective. The directors are under no duty to obey such a communication, and indeed would be in breach of their duty if they were to do so.(27)

Company law has a very simple solution to the problem of informal communication between the board and shareholders. Informal communication is tolerated provided that it does not breach the directors' fiduciary duties. Where company directors have habitually observed informal directions, the controller would be considered a 'shadow director' and would be exposed to any liability that might arise as a result of his or her actions.(28)

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

First, the governance structure of the corporation derives from the combined exercise of both the legislative power (controlled by the executive in the Westminster system) and the executive power. Parliament's monopoly over the legislative power allows it enormous latitude in defining the legal incidents of the corporation and the general law environment within which it operates.(29) Significantly, legislation may be used to determine the division of corporate powers between the board and Minister and may qualify the fiduciary duty of the directors to 'the corporation as a whole'.(30) This aspect of the statutory corporation's governance package deprives it of the benefit of the minimum company law norm regulating the flow of informal principal-agent communication, viz, such communication is permissible provided that it does not undermine the fiduciary duties of the directors.

Secondly, the statutory corporation necessarily falls within the ambit of the doctrine of responsible government.(31) As will be seen below,(32) the precise character and content of this relationship of accountability is unclear. But its existence may require a Minister who has been assigned responsibility for a corporation to intervene in its affairs in a manner not permitted to the shareholder of a private company. The demands of responsible government may also generate additional informational needs (and associated costs) not experienced by a shareholder private principal which might cut across fiduciary obligations regarding the confidentiality of corporate information.

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

The inherent insecurity of the executive's term of office(34) may force it to influence the corporation in a direction which conflicts with the statutory corporation's own perception of its objectives. By contrast, the problem of a shareholder attempting to dictate to the board of a company a non-profit or extra-corporate objective, rarely arises in the Corporations Law company. Large proprietary companies are fundamentally driven by the profit motive. The law has responded accordingly, by embodying the understanding that a director's fiduciary duties may be breached if he or she puts a wider notion of corporate social responsibility before the financial interests of the company.(35) This aspect of the directors' fiduciary duty is of little utility to the statutory corporation in circumstances where it is directed to pursue non-profit or extra corporate goals.

Ministerial powers of direction as a solution

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

In Australia, Parliaments have turned to the grant of statutory powers of ministerial direction.(36) Although the device has been used in legislation enabling corporations for quite 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 of such powers.(38) The most important reason for this development is the influence of managerialism in the restructuring of the public sector. While government has withdrawn from the control of operational detail in statutory corporations and departments, entrusting such control to senior public sector management, it still requires devices such as the ministerial 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-board communication. These provisions are an attempt to divert informal principal-to-agent communication 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 the grant of a broad discretionary power of direction over the entire breadth of a corporation's activities to more limited powers circumscribed to particular corporate functions or transactions. In some circumstances, the corporation's compliance with the ministerial direction is mandated, but the corporation is granted indemnity from any legal liability that might arise from the implementation of the direction.(41) Yet another variation is the imposition of an obligation upon the statutory corporation to comply with government policies notified to it by the Minister,(42) a formulation which raises the difficult legal question of how the board is to determine the precise content of the policy and its application to the matters before it.(43)

These provisions no doubt offer guidance in determining which ministerial communications to the corporation fall squarely within or without the channel of communication delineated by Parliament. Yet the experience of statutory corporations-as with other, less autonomous parts of the bureaucracy-comprises many incidents which resist this neat dichotomy. The Minister might attempt to use the statutory power to direct the corporation on matters not covered by the power; or the principal may communicate its desire for a particular outcome, but refrain from an (otherwise valid) exercise of the statutory power in order to achieve it.

A further difficulty with directions provisions, is their interpretation by the courts. As will be seen in the remainder of this paper, when these provisions are litigated, judges will not only have to decide questions such as 'How closely did Parliament intend the statutory corporation to be controlled by the executive?'. They may also have to answer the questions 'In what manner ought the executive be accountable to Parliament for its activities?'. The second question forces the interpretation of directions provisions into the murky constitutional understandings of the requirement of a system of responsible government.

The position of statutory corporations in the framework of responsible government

It is clear that the affairs of the statutory corporation must be conducted within the framework of responsible government. What such a proposition entails in practice is disputed. Traditionally, there was an expectation that the requirements of responsible government could be met through the principle of ministerial responsibility-whether such a requirement be imposed by the Commonwealth Constitution or not. But this may no longer be an adequate way of addressing the question. The manner in which this question is resolved is important for the interpretation of a Minister's powers of direction over a statutory corporation.

The meaning of responsible government

It is now clear that the system of government established by the Commonwealth Constitution is based on the assumption of responsible government. There had always been support for this proposition in constitutional jurisprudence,(44) but the matter was put beyond doubt in Lange v ABC (1997) 145 ALR 96, a case which considered the implied constitutional right to freedom of political speech and its relationship to the law of defamation. In a unanimous judgment, the High Court identified the sections of the Constitution which prescribed a system of representative and responsible government. The sections 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 be exercisable by the Governor-General. The power 'extends to the execution and maintenance of this Constitution, and of the law of the Commonwealth'. Section 64 empowers the Governor-General to appoint Ministers to administer the departments of State of the Commonwealth, 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 there be a session of the Parliament at least once in every year. Section 49 'provides the source of coercive authority for each chamber of the Parliament to summon witnesses, or to require the production of documents, under pain of punishment for contempt'.(46) Finally, these sections must be read in conjunction with those constitutional provisions which establish a system of representative government.(47)

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

2. Ministers have to be members of Parliament.

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

4. The Houses of the Parliament (presumably the popular Houses) can be dissolved before the expiration of their maximum terms.(50)

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

The High Court did not seek to define responsible government exhaustively; thus, the precise identity of all the system's components remains to be determined. Yet Lange establishes an account of responsible government which is potentially broad enough to encompass the totality of Parliament's formal relationship with the executive.(51) If the logic of the court's analysis is followed, the system of responsible government might extend to all formal instruments which Parliament may use to inform itself about, and exercise influence over, the affairs of the executive.

In relation to the affairs of statutory corporations, these instruments will typically include Parliamentary Inquiries(52) and Committees such as the Joint Committee of Public Accounts, the Senate's Legislative Committees and the Senate Standing Committee on Finance and Public Administration.(53) One might speculate as to whether the activities of the Auditor-General might eventually be contained within a judicially recognised theory of responsible government.(54)

The principle of ministerial responsibility

The principles of individual and collective ministerial responsibility to Parliament are components of our system of responsible government. They are based on conventions of political practice which are nevertheless said to be entrenched in the Constitution by sections 62 and 64.(55)

Collective ministerial responsibility refers to the shared responsibility of the ministry as a whole to accept that its tenure as a government is conditional upon the 'confidence' of the House.(56) Individual ministerial responsibility, in its broadest sense, refers to the Minister's accountability to Parliament, under which the Minister is fixed with liability for the conduct of policy within his or her department and the acts or omissions of officials within it.

Although it is common to associate the convention of (individual) Ministerial responsibility with Ministerial resignation, it is clear that this is only the most extreme remedy in an ascending scale of liability and corresponding remedy. Many commentators have noted the gradual erosion of the convention and the increasing rarity of ministerial resignations.(57) Where the Minister has no control or supervisory authority over a body, no accountability is expected.(58) Once such supervision or control is granted, Ministerial responsibility may operate in various modes.(59) The convention may merely mean (a) that the Minister has an obligation to redirect a parliamentary question to the relevant official within the portfolio and to ensure that an answer is produced. But it usually means that the Minister has an obligation (b) to report to Parliament what has happened, or (c) to explain what has happened, or (d) to make amends for what has happened or finally, that the Minister has an obligation (e) to resign over what has happened.

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

The uncertain requirements of responsible government for statutory corporations

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

That which remains uncertain is the character of the institutional arrangements that would satisfy the requirements of responsible government and indeed whether these requirements might displace Parliament's choice of a particular arrangement. The court has not provided a firm answer to the question 'Is ministerial responsibility indispensable for the accountability of statutory corporations'?

This brief passage from Lange would appear to suggest that the assignment of ministerial responsibility to a portfolio is not a necessary implication from the theory of responsible government. Parliament may choose to bypass the Minister by requiring that the statutory authority report directly to it. The passage is also ambiguous as to whether all statutory authorities and public authorities are obliged to report to Parliament or the Minister, or whether such a practice is restricted to those 'statutory authorities and public bodies which are obliged [by legislation or delegated legislation] to report'. If the latter interpretation is adopted, it is conceivable that some bodies might meet Parliament's informational requirements through means other than periodic reporting back to Parliament or the Minister.

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

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

The view of academics

An early and quite authoritative summary of the different views on the role of section 61 in respect of the accountability of statutory corporations (or 'authorities') is that offered to the Senate Standing Committee on Finance and Government Operations by Finn and Lindell in 1982.(61) Reviewing the meagre case law and academic writings, the authors identified three main positions:

2. Parliament may create statutory authorities ('corporations'), but it is contrary to section 61 to vest the executive power of the Commonwealth in such authorities without making them subject to ministerial control. Ministers have reserve non-statutory powers to issue binding directions to authorities.(62) Finn and Lindell described this view as implausible.

3. Parliament may create statutory authorities, but in vesting them with the executive power of the Commonwealth, some 'residual function' inheres in the Governor-General under section 61. This may be discharged by either:

   2. A ministerial responsibility in relation to the 'execution' of the parent statute which arises from a combination of the principle of ministerial responsibility (derived from outside section 61) and the executive's responsibility for the maintenance of the laws of the Commonwealth under section 61. According to this view, a legislative scheme is unconstitutional if it positively precludes a Minister from supervising an authority.(63)

   3. The assignment of a Minister to the administration of an authority's parent statute under the Administrative Arrangement Orders. If the parent legislation does not accord to the Minister's actual responsibilities in the exercise of the authority's function, then there is no such responsibility. The Minister is simply the person to whom Parliament can look when questioning the authority, the person to whom the Governor-General will look for advice concerning the authority and the person who is charged with initiating and enforcing changes to the parent statute. This would appear to suggest that 'redirectory' ministerial responsibility for a statutory corporation might be acceptable.(64)

4. Parliament may create statutory authorities but need not vest responsibility for the authority in the executive government under section 61. This is because Parliament may either override section 61, or alternatively because the vesting of independent functions in the authority involves no exercise of the executive power of the Commonwealth. To the extent that the authority is independent, there is no ministerial responsibility for the authority. It is for Parliament itself to determine the manner and extent of its 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 the constitutional basis for the accountability of statutory authorities. In rejecting view (2)(a), the view which located some 'residual' ministerial responsibility in section 61, the authors suggested that it was 'within the province of Parliament in allocating functions to non-departmental agencies, to override that principle in a particular legislative scheme if that scheme falls within a head of Commonwealth legislative power.'(65) The authors concluded that the principle of ministerial responsibility 'has no necessary part to play' in the creation of independent statutory authorities; Parliament could simply legislate to provide this, if it so pleased. It was for Parliament to 'ordain the nature and limits of the authority's independence from and accountability to Parliament'.(66)

Winterton's study of the executive power(67) lends support to view (3) on an alternative basis, namely that nothing in section 61 indicates that the government is to be the sole executor of Commonwealth legislation. There is therefore no limitation on the Parliament's discretion to specify an autonomous statutory corporation to execute Commonwealth legislation. Winterton rightly distinguishes between the 'good political sense' that might lie behind the use of ministerial responsibility for statutory corporations and the open possibilities contained in section 61. After all, if Parliament requires ministerial responsibility, it can pass a law to enforce it.(68)

The precise position of government-controlled Corporations Law companies within the schema 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 of the requirements of responsible 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 to accord with the expansive view of responsible government in Lange. It is also consistent with the manner in which the High Court disposed of Horta v Commonwealth (1994).(69)

In Horta, the Court upheld, under the foreign affairs power (section 51(xxix) of the Constitution), legislation giving effect to a bi-lateral mining treaty with Indonesia.(70) The legislation conferred upon a vaguely defined Joint Authority the 'exercise of the rights and responsibilities 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] the conferral of any Executive power' upon the Joint Authority.(73)

Similar concerns regarding the constitutionality of Commonwealth-State intergovernmental bodies which, in part, exercise the executive power of the Commonwealth without being subject to control or direction by the Commonwealth, also appear to have been relegated to the margins of constitutional law debate.(74)

However, as will be indicated below,(75) the Federal Court decision in Hughes, seems to have 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 responsible government, how is a theory of responsible government to be employed in the construction of statutory powers of ministerial direction? If a court is to apply an expansive view of responsible government-as it now must-how is it to contextualise a particular instrument of accountability, such as ministerial responsibility, within the whole range of accountability instruments that are available within the system?

Interpreting ministerial directions powers

It appears that courts have taken two approaches to the use of a theory of responsible government when interpreting ministerial powers of direction-a strong and a weak approach. These approaches strike a different balance between parliamentary intention and constitutional requirements in the design of accountability mechanisms for statutory corporations.

Litigation context

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

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

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

4. litigation on another point of law (such as the liability of a statutory corporation for breach of contract) in which the court might consider a ministerial direction, or action performed in conformity with it, as a relevant matter (e.g. as a cause of the contractual breach). The litigation in Hughes Aircraft Systems International v Airservices Australia (1997) 146 ALR 1 falls into this third category.

The interpretative choices

As the statutory corporation is the direct creature of Parliament's will, features of its governance structure such as a directions power fall to be determined by reference to the enabling statute.(76) Whether through 'literal' or 'purposive' constructions of the parent legislation, or some combination of both,(77) the conventional techniques of statutory interpretation aim at eliciting Parliament's intention.

With the increasing judicial recognition of the system of responsible government as a constitutional assumption, two basic approaches have emerged in the interpretation of ministerial directions powers. Each of these reflect different approaches to the manner in which the theory of responsible government may be used by the courts.(78)

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

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

If one uses the principles of responsible government as a background interpretative field that may assist in determining Parliament's intention, there is, in given circumstances, clear scope for recognising that Parliament intended authority over a particular form of decision-making to be vested in a board independent of ministerial control. Conversely, if one seeks to give direct effect to the principles of responsible in a ministerial directions power, any board decision will always be subject to the possibility of ministerial intervention. For according to the strong form approach in Hughes, there can be no other way in which the Minister may satisfy his or her responsibility to Parliament. Some of the difference between these approaches may be traced to different views about the content of the theory of government.

Parliamentary intention and the weak form approach

An examination of the case law on ministerial directions displays judicial allegiance to conventional techniques of statutory interpretation and a reticence to embrace a more general theory regarding responsible government. This represents the weak form approach to responsible government as a tool of statutory interpretation.

These cases arise in two contexts: the judicial review of the Minister's exercise of a statutory power to direct the corporation,(79) and the judicial review of the validity of an administrative act performed in compliance with a ministerial direction.(80) Such reflection as may be found on judicial methodology within the case law points to the adoption of both 'literal' and 'purposive' constructions of Ministerial directions powers. Reference to the system of responsible government is at most a background consideration which might support the process of statutory interpretation.

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 (a statutory corporation) 'shall perform its functions and exercise its powers in accordance with such general directions as are given to it by the Minister in writing'.(81) The court noted the wide variation in the terms of ministerial directions powers enacted by Federal Parliament and indicated that it was impossible to establish a general formula for their interpretation. Some instances of legislative phrasing enabled ministers to make directions with respect to particular cases and problems. Other phrasing restricted these powers to more 'general' directions(82) which operated like binding guidelines. The 'general direction' provision in this case was construed as a guideline which did not permit the Minister to direct the statutory corporation with regard to the outcome of particular decisions.

This literal approach to statutory interpretation allows greater scope for Parliament's choice of the precise manner in which it will make the executive accountable to it. The provision is construed within the four corners of the statute. The system of responsible government 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 was found to reflect the understanding that the Minister would be responsible for the activities of the corporation. But this finding was not strong enough to support the Minister's power to intervene in day-to-day operational matters.

This approach was followed by the Full Federal Court in Aboriginal Legal Service Ltd v Minister for Aboriginal and Torres Strait Islander Affairs (1996) 45 ALD 235. Here, the court again rejected any prior understandings as to the manner in which Parliament chose to define its relationship with statutory corporations. It considered and rejected the suggestion that a ministerial power to give 'general' directions should be read down 'in order to preserve to the [statutory corporation] a pre-determined zone of autonomous decision-making, free from ministerial interference'.(83) The extent of the corporation's decision-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 for Primary Industries and Energy (1990) 21 FCR 332 illustrates that the 'purposive' approach to the construction of ministerial directions powers is equally devoid of any traces of a theory of responsible government. This case concerned the Minister's statutory power to give directions, in 'exceptional circumstances', to the Wool Corporation concerning the performance of its functions and exercise of its powers.

The provision was construed by reference to the Wool Marketing Act 1987 (Cth) which established the corporation and a regulatory regime for the marketing of wool. In this context, the court considered the national interest in giving effect to a decision-making process which would determine the price of Australian wool. The particular regulatory regime 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 previous case, on the ground that the earlier case involved the construction of a statute regulating transport services.(84)

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

Strong form approach

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

Hughes v Airservices Australia

The Hughes case involved a successful challenge by a tenderer against the award of a government contract to its commercial rival. The contract was for the supply of a nationally integrated air traffic control system to replace older systems operating in various Australian centres. The contract was awarded by the Civil Aviation Authority ('the CAA'), a Commonwealth statutory corporation established under the Civil Aviation Act 1988 (Cth).(86) The court found that the tender offer breached the terms of a 'process contract' governing the tender evaluation procedure up to the award of the contract.

The main contribution of Hughes to the law, is the development of a new doctrine of contract law concerning tender processes. But during the course of a long and complicated trial, the court also considered the issue of informal communication between Minister and board. This occurred in two contexts: first, in relation to two letters sent by the portfolio Minister and another Minister to the Chairman of the Board and the Chief Executive Officer which 'intimated' the government's preference for one of the tenderers on the basis of its better performance on a tender evaluation criterion regarding Australian industry involvement: and second, the CEO's unsolicited disclosure to the Minister of details of the rival tenders prior to the board's determination of the tender result.

The court interpreted both the Minister's statutory power of direction and the Minister's right to access confidential corporate information by taking a strong form approach to the requirements 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 its accountability to Parliament. These included the presentation to the Minister of corporate plans, financial plans and annual estimates, the board's duty to notify the Minister of events which might prevent or significantly affect achievement of the CAA's corporate objectives or financial targets and the Minister's power to approve or vary the board's recommendation of the dividend to be paid to the Commonwealth. Other accountability mechanisms included the CAA's subjection to audit by the Auditor-General under the Audit Act 1901 (Cth) and its accountability to various committees of the Parliament.(87)

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

The importance assigned to ministerial responsibility amongst the many alternative ways in which the requirements of responsible government might be met appears to have flowed from Finn J's implicit support of the view that ministerial responsibility over the conduct of a statutory corporation was required by section 61 of the Constitution.(89)

It has been indicated (see pp11-13 above) that this approach to section 61 of the Constitution is not in keeping with academic views of the section and that which can be implied indirectly from the High Court decisions of Lange and Horta. As there are no direct judicial pronouncements on the subject, the statements in Hughes are rather important. Moreover, they issue from a judge whose academic scholarship on the subject of statutory corporations is as extensive as it is highly regarded.(90)

This approach, in turn, led to some rather striking results, in relation to (i) the permissible content of a ministerial direction and (ii) the confidentiality of board matters.

(i) The permissible content of a 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 formal manner required by the statute.(91) The communication was therefore legally ineffective. However, the court described the letter as 'highly imprudent' and 'offensive' to Parliament's intention to protect the corporation from the Minister's control.

The court construed the Minister's power of direction broadly. Thus, provided the Minister used the directions power in the appropriate formal manner, he or she had 'the italics right to communicate with the board on any matter concerning the affairs of the CAA' provided the direction was exercised in the appropriate formal manner. (92) The Minister could therefore direct a particular outcome, such as the award of a tender. This power existed despite the fact that its use might give rise to 'political difficulties' for the government or expose the CAA to liability. The latter possibility was clearly a reference to (at least one version of) the doctrine of executive necessity which allows the Crown to break a contract in order to implement government policy without being subject to the full range of remedies granted to a standard plaintiff for breach of contract.(93)

Although the court might have also arrived at the same construction of the directions power through a weak form approach to responsible government, its emphasis on ministerial responsibility led it to sideline some important statements of Parliamentary intention regarding the extent of ministerial control. One of these was a second reading speech of an amending statute which suggested that Parliament had decided to shift responsibility for operational matters, such as the approval of individual contracts, from the Minister to the board. The speech had stated that:

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

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

(ii) The confidentiality of board matters

In Hughes, the adoption of the strong form approach to responsible government also necessitated a wide interpretation of the Minister's informational rights. Quite apart from any specific statutory provisions that might require the disclosure of corporate information to the Minister, the court found that the Minister was entitled to obtain any corporate information 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 that could or could not be sought and obtained. The Minister was thus entitled to view the details of the tender bids.

From the board's standpoint, board members were under a duty to disclose corporate information if requested by the Minister-even where the information was confidential. If such a disclosure would prejudice the interests of the corporation, it would still have to be made, but subject to some deliberation 'at least to the extent of ensuring that the Minister was fully appraised of the possible implications' for the corporation of compliance with the request.(97) In the absence of a ministerial request, the need to deliberate would be far greater. The directors would have a duty to have proper regard to the interests of the corporation and would need to weigh the reasons for disclosure against the need to maintain confidentiality. Disclosure in these circumstances would be an 'exceptional' event.(98)

Third parties who contracted with government agencies 'must be taken to have done so subject to such lawful rights of access to information in the agency's hands as our laws and system of government confer to others'.(99)

It is worth contrasting these findings with the regulation of confidential corporate information in the private company, i.e. a company incorporated under the Corporations Law rather than one created by statute. In the private company, directors are not free to communicate to members information which might detrimentally affect the company. The ambit of this rule includes 'nominee directors' whose duties towards the company are attenuated by contractual agreements between the company and the appointor.(100) Third parties who impart confidential information to a company under a contractual relationship are not taken to have agreed to the communication of this information to the company's controller. Such a disclosure would place the company in breach of its obligations to the third party(101) and directors who have occasioned such a breach of contract may indeed have breached their fiduciary duty to the company.

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

Responsible government and historical change - the problems of a strong form approach

The utility of a theory of responsible government in constitutional and statutory interpretation lies in its flexibility and its ability to adapt to new circumstances.(102) This characteristic was recognised by the framers of the Constitution in two ways. First, in the openness with which they canvassed rival models of responsible government while attempting to reconcile federalism with the divergence in executive practices which had already emerged between Britain and its colonies.(103) Secondly, in their refusal to entrench their understandings of responsible government in the text of the Constitution.(104)

A strong form approach to the theory of responsible government inhibits the theory's inherent flexibility by threatening to constitutionalise what can only be particular, and historically specific understandings of the 'working' Constitution.(105) Thus to mandate the application of a principle such as ministerial responsibility to the conduct of the affairs of statutory corporations is to frustrate Parliament's ability to establish accountability structures for the conduct of executive government that afford monitoring and oversight capacities more appropriate to contemporary social and economic realities.

The necessity of a flexible understanding of the requirements of responsible government has been borne out by political history. While the minimal formal characteristics of the Commonwealth Executive under the Constitution have remained relatively fixed since Federation, the 'efficient' or 'working' constitution has produced a variety of administrative arrangements for the conduct of government.(106) The withdrawal of the Commonwealth Executive from day-to-day operational control of many of its Government Business Enterprises since the mid-1980s,(107) and the introduction of private sector corporate governance techniques through legislation such as the Commonwealth Authorities and Companies Act 1997 (Cth) and the Financial Management Act 1997 (Cth) are only the most recent examples of this process.

Ministerial directions provisions reflect a variety of concerns 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 may disrupt the prior statutory allocation of decision-making between Ministers and the boards is a matter in which Parliament's intent is to be given its fullest effect before assistance is sought from understandings of responsible government which would apply across the board, regardless of the particular character and locus of executive activity.

Conclusion

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

The paper has identified two approaches-a strong and a weak form-to the use of a theory of responsible government in the interpretation of ministerial directions powers and has assessed their relative merits on the basis of a detailed examination of the remarkable facts of the Hughes case. The strong form approach has been shown to lack constitutional foundation. It is also shown to harbour the danger of an undue emphasis on a particular form of relationship between Parliament and the executive, that of ministerial responsibility. Such an emphasis might frustrate the ability of Parliament to create and enjoy other forms of executive accountability mechanisms which might better accommodate the changed nature of contemporary social and economic phenomena. Parliament's choice of private sector style corporate governance techniques for statutory corporations is but one example. The ability of a theory of responsible government to remain flexible is critical to the evolution of the working Constitution.

Endnotes

2. Lange v Australian Broadcasting Authority (1997) 145 ALR 96, to be discussed in Part 2 of this paper.

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

4. The practice has common law origins of considerable antiquity: S. J. Stoljar, Groups and Entities: An Inquiry into Corporate Theory (1973), Ch. 9; Archbishop of Perth v 'AA' to 'JC' (1995) 18 ACSR 333; E. H. Kantorowicz, The King's Two Bodies: A Study in Medieval Political Theology (1957); F. W. Maitland, 'The Corporation Sole' (1901) 17 LQR 335. For an early example in the Commonwealth sphere, see the incorporated Railway Commissioner created under the Commonwealth Railways Act 1917 (Cth) and considered by the High Court in Watson v Collings (1945) 70 CLR 51.

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

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

7. See: Department of Finance, Governance Arrangements for Commonwealth Government Business Enterprises (June 1997) and R. Humphry, Review of GBE Governance Arrangements (Department of Finance, March 1997).

8. Established respectively under the following enactments: Science And Industry Research Act 1949 (Cth); Broadcasting Services Act 1992 (Cth); Special Broadcasting Service Act 1991 (Cth); Australian Trade Commission Act 1985 (Cth) and the Primary Industries and Energy Research and Development Act 1989 (Cth) in conjunction with the Grains Research and Development Corporation Regulations 1990 (Cth).

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

   A proprietary company is a large proprietary company for a financial year if it satisfies at least two of the following paragraphs:

   2. the consolidated gross operating revenue for the financial year of the company and the entities it controls (if any) is $10 million or more

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

   4. the company and the entities it controls (if any) have 50 or more employees at the end of the financial year.

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

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

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

12. Whether the decision is of an administrative character under an enactment for the purposes of Administrative Decisions (Judicial Review) Act 1976 (Cth), s.3(1) and Australian National University v Burns (1982) 43 ALR 25 (decision under a contract); General Newspapers Pty Ltd v Telstra Corporation ; (1993) 117 ALR 629 (decision to enter a contract). See generally M. Allars, 'Private Law But Public Power: Removing Administrative Law Review From Government Business Enterprises' (1995) 6 PLR 44 and M. Aronson & B. Dyer, Judicial Review of Administrative Action (1996) at 49ff. Note the murkier area of the common law basis of review: Mercury Energy Ltd v Electricity Corporation of New Zealand Ltd [1994] 1 WLR 2; P. Bayne, 'The Common Law Basis of Judicial Review' (1993) 67 ALJ 780 and M. Taggart, 'Corporatisation, contracting and the courts' (1994) Public Law 351.

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

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

15. Freedom of Information Act 1982 (Cth), s.4 (definition of 'prescribed authority') s.7 & Sch 2 (schedule of excluded bodies).

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

17. United Kingdom, Parliament, Select Committee on Nationalised Industries Session 1967-68, Ministerial Control of the Nationalised Industries: First Report (1968), especially Ch III.

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

19. ABC: J. Rydon, 'The Australian Broadcasting Commission 1942-48' Public Administration (Sydney) 11 (1952) 190; G. Bolton, Dick Boyer: An Australian Humanist (1967), Chs 6-9 and most recently E. Simper, 'Alston pressures ABC on bias' The Australian, 4 May 1998, at 1. Telecom: R. L. Wettenhall, 'Quangos, Quagos and the Problems of Non-Ministerial Organization' 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 Sharp admits jobs ploy' The Australian, 13 February 1997.

20. S. Bottomley, 'Corporatisation and Accountability: the Case of Commonwealth Companies' (1997) 7 Aust Jnl of Corporate Law 157 at 170 (intervention is rare) cf documented instances of Departmental or Ministerial intervention in the cases of AIDC Ltd (resignation of government directors requested by their Department to disclose information confidential to AIDC Ltd) and ANL Ltd (Minister pressuring Board for a quick sale of the entity's assets as part of a privatisation process): Parliament, Commonwealth of Australia, Department of the Parliamentary Library, AIDC Sale Bill 1997: Bills Digest 115, 1996-97, at 1 and Australian National Audit Office, Matters Relating to Proposed Sale of ANL Ltd, Audit Report no. 2, 1995-96 and K. Trace, 'You Couldn't Give it Away': Privatising the Australian National Line' (1996) 2 Agenda 433-44

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

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

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

24. Ibid., para 153.

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

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

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

28. H. Ford and R. Austin, Ford and Austin's Principles of Corporations Law (looseleaf) at paras [8.070-8.190] and P. D. Finn, Fiduciary Obligations (1977) at paras 111ff.

29. As either 'shadow directors': Corporations Law s.60; Standard Chartered Bank v Antico (1995) 18 ACSR 1; 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 the appointor for the acts of its nominee while in the course of employment: Dairy Containers Ltd 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 Liable for its Nominee Director's Wrongdoing-An Australian Roadmap' (1997) 15 C&SLJ 81 and Justice E. W. Thomas, 'The Role of Nominee Directors and the Liability of their Appointors' in I. Ramsay (ed), Corporate Governance and the Duties of Company Directors (1997), 148-161.

30. M. J. Trebilcock & J. R. S. Pritchard, 'Crown Corporations: The Calculus of Instrument Choice' in MJ Trebilcock & JRS Prichard, Crown Corporations in Canada: The Calculus of Instrument Choice (1983), Ch. 1 and M. Horn, The Political Economy of Public Administration: Institutional Choice in the Public Sector (1995).

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

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

33. See pages 8-13 of this paper.

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

35. The instability caused by this 'commitment problem' within political transactions has been noted by students of the US Congressional system: Horn, note 29 above at 16-19 and T. Moe, 'Political Institutions: The Neglected Side of the Story' (1990) 6 Jnl Law, Econ & Org 213.

36. Hutton v West Cork Railway Co (1883) 23 Ch D 654; Parke v Daily News Ltd [1962] Ch 927. Within the law of (private non-charitable) trusts, cf. Cowan v Scargill [1985] 1 Ch 270.

37. For example, Science And Industry Research Act 1949 (Cth), s.13; Broadcasting Services Act 1992 (Cth), s.162; Special Broadcasting Service Act 1991 (Cth), s.12; Australian Trade Commission Act 1985 (Cth), s.10; Primary Industries and Energy Research and Development Act 1989 (Cth), s.143.

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

39. For example, the guidelines suggested in Australian National Audit Office, Aspects of Corporate Governance: The Australian Tourist Commission, Audit Report no.10 (1997-98) at 82.

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

41. The most comprehensive survey of these provisions is that of Aronson, note 37 above.

42. Under certain statutes, there is an arrangement for the indemnification of the statutory corporation for any loss incurred by reason of compliance with a ministerial direction: see Aronson'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 the beneficiary 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 the corporation as a result of compliance with a formal notification of government policy is specifically exempted: subs 16(6).

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

44. Ansett Transport Industries (Operations) Pty Ltd v Commonwealth (1977) 139 CLR 54 ('the second 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 Papers, ANU, Report No. 9, 1998), on the problem of administrative tribunals applying government policy.

45. Amalgamated Society of Engineers v Adelaide Steamship Co Ltd (1920) 28 CLR 129 at 147; R v Kirby; Ex parte Boilermaker's Society of Australia (1956) 254 at 275; New South Wales v Commonwealth (Seas and Submerged Lands case) (1975) 135 CLR 337 at 364-5; Attorney-General (Commonwealth); Ex rel McKinlay v Commonwealth (1975) 135 CLR 1 at 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. In respect of the States, see R. D. Lumb, The Constitutions of the Australian States (5th ed, 1991), Ch. 4 and P. D. Finn, Law and Government in Colonial Australia, at 39ff.

46. (1997) 145 ALR 96 at 105.

47. (1997) 145 ALR 96 at 105.

48. Constitution, ss.1, 7, 8, 13, 24, 25, 28 and 30: discussed in (1997) 145 ALR 96 at 104-5.

49. See for example, G. Lindell, 'Responsible Government', in P. D. Finn (ed), Essays on Law and Government: Volume 1-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 and Political Control: The Problem of Accountability in a Westminster System with Special Reference to the Concept of Ministerial Responsibility' in Royal Commission on Australian Government Administration Appendix: Volume 1 (1976), 16-63.

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

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

52. (1997) 145 ALR 96 at 105

53. E. Campbell, note 10 above and G. Lindell, 'Parliamentary Inquiries and Government Witnesses' (1995) 20 MULR 383. Lindell draws an express distinction between the legal obligations and restrictions which frame Parliament's inquisitorial jurisdiction granted under section 49 of the Constitution and a vaguer set of rules which are identified under the label of 'Responsible Government' (at 400-401).

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

55. Western Australia, Royal Commission into Commercial Activities of Government and Other Matters-Report Pt II (1992), para 3.10.1. The relationship between the Auditor-General and Parliament is unclear: J Uhr, Deliberative Democracy in Australia: The Changing Place of Parliament (1998) at 188-90 and Joint Committee of Public Accounts, The Auditor-General: Ally of the People and Parliament, Report 296 (1989), Ch. 5.

56. For example, G. Winterton, Parliament, the Executive and the Governor-General (1983) at 71ff. Incidental to the individual and collective responsibility of Ministers within the Australian setting are a set of conventions regarding the Vice Regal representative (eg. the convention that the Governor or Governor-General acts on the advice of the Minister) and the conventions of Cabinet solidarity and Cabinet secrecy.

57. Uhr, note 54 above at 194.

58. D. Woodhouse, Ministers and Parliaments: Accountability in Theory and Practice (1994), Ch. 2. Cf. Uhr, note 54 above, at 194ff; R. Brazier, Ministers of the Crown (1997), at 262-75; S. E. Finer, 'The Individual Responsibility of Ministers (1956) 54 Public Administration 377 and C. Turpin, 'Ministerial Responsibility: Myth or Reality? In J. Jowell & D. Jaensch (eds), The Changing Constitution (2nd ed, 1989), 53 at 56.

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

60. Woodhouse note 57 above, Ch. 2.

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

62. P. D. Finn and G. J. Lindell, 'The Accountability of Statutory Authorities', in Senate Standing Committee on Finance and Government Operations, Statutory Authorities of the Commonwealth: Fifth Report (1982), Appendix 4.

63. This is the view of J. Goldring, 'Accountability of Commonwealth Stautory Authorities and Responsible Government' (1980) 11 Fed Law Rev 353 supported by reference to (1977) 139 CLR 54 the 'Ansett case' per Barwick C. J. and Murphy J) and R v Anderson; ex parte Ipec-Air Pty Ltd (1965) 113 CLR 117 (the 'IPEC case', per Windeyer J.).

64. 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.

65. Cf text at note 59

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

67. Ibid. at 194 & 185 respectively.

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

69. Ibid. at 104.

70. Horta v Commonwealth (1994) 181 CLR 183, cited in Hughes v Airservices Australia (1997) 146 ALR 1 at 24 in the context of section 61 of the Constitution.

71. The Petroleum (Australia-Indonesia Zone Of Cooperation) Act 1990 (No. 36 of 1990) and the Petroleum (Australia-Indonesia Zone Of Cooperation) (Consequential Provisions) Act 1990 (No. 37 of 1990).

72. Petroleum (Australia-Indonesia Zone Of Cooperation) Act 1990, s.4

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

74. (1994) 181 CLR 183 at 197.

75. Re Duncan; Ex parte Australian Iron and Steel Pty Ltd (1983) 158 CLR 535 at 563 (Mason J.). 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.

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

77. Bank of NSW v Commonwealth (1948) 76 CLR 1 at 274 (in determining whether a statutory corporation is an agent of the Crown)

78. D. C. Pearce & R. D. Geddes, Statutory Interpretation in Australia (4th ed, 1996), paras 2.2ff and F. Bennion, Statutory Interpretation: A Code (2nd ed, 1992), Pt VII and XX.

79. Cf Lindell, note 48 above at 82.

80. 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 Strait Islander 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 And Regional 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.

81. Bosjnak's Bus Service v Commissioner for Motor Transport (1970) 92 WN 1003; Blayney Abbatoirs 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); Kremer v North Sydney Municipal Council (1982) 47 LGRA 209; and Ankers v Attorney-General [1995] 2 NZLR 595.

82. (Emphasis added). The section under consideration was Aboriginal Development Commission Act 1980 (Cth), s.11.

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

84. (1996) 45 ALD 235 at 247 (per Sackville J.). See also at 243 (Tamberlin J.).

85. (1990) 21 FCR 332 at 340 (emphasis added), distinguishing Bosjnak's Bus Service v Commissioner for Motor Transport (1970) 92 WN 1003.

86. 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), per Powell JA.

87. At the time of the tender process, the CAA fulfilled both regulatory and service provision functions. It was later abolished and replaced by the Civil Aviation Safety Authority (a regulator) and Airservices Australia (a service provider) which eventually became the respondent in the action.

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

89. (1997) 146 ALR 1 at 89.

90. 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 Australian jurisprudence. The [first] concerns the constitutional status and standing in our system of government of statutory corporations that by statute are subject to prescribed (hence, presumably, correspondingly limited) powers of Ministerial direction. Do they fall within the Executive? Or are they a fourth arm of government? ... I inquired [of counsel] whether any issue would be taken as to the constitutionality or otherwise of a body such as the CAA because of the provisions of the Constitution, s61... For understandable reasons [counsel] disclaimed any wish to burden his case with constitutional considerations. I would have to say, though, that the absence of authoritative guidance on the place of statutory corporations in our system of government-and, importantly, on their proper relationship both with Parliament and the Executive-is an abiding difficulty in divining the proper resolution of cases of this variety. I have not been able to avoid venturing some conclusions on these issues.' : (1997) 146 ALR 1 at 24-5 (emphasis added).

91. Finn J's 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 on Finance and Government Operations, Statutory Authorities of the Commonwealth: Fifth Report (1982), Appendix 4; Law and Government in Colonial Australia (1987); 'Public Trust and Public Accountability' (1993) Australian Quarterly 65; 'The Abuse of Public Power in Australia: Making Our Governors Our Servants' (1994) 5 PLR 43; 'The Forgotten Trust: 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 Government Vol 1 (1995), Ch. 1.

92. (1997) 146 ALR 1 at 75.

93. (1997) 146 ALR 1 at 74. Finn J. noted, but did not feel bound to consider, the question whether the only member of the ministry who ought communicate directly with the statutory corporation was the portfolio Minister or the corollary issue, whether non-portfolio Ministers need communicate with the corporation about the corporation's affairs through the portfolio Minister (at 75).

94. At (1997) 146 ALR 1 at 75, Finn J. referred to Ansett Transport Industries (Operations) Pty Ltd v Commonwealth (1977) 139 CLR 54 at 76 and L'Huillier v Victoria [1996] 2 VR 465 at 481. On the various versions of the doctrine of executive necessity and its recognition in Australian courts, see N. Seddon, Government Contracts: Federal, State and Local (1995), paras 4.30ff.

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

96. (1997) 146 ALR 1 at 49.

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

98. (1997) 146 ALR 1 at 92-3.

99. (1997) 146 ALR 1 at 91.

100. (1997) 146 ALR 1 at 89.

101. Harkness v Commonwealth Bank of Australia (1993) 12 ACSR 165. Not even the more 'liberal' approach of Jacobs J. in Re Broadcasting Station 2GB Pty Ltd [1964-65] NSWR 1648 and Levin v Clark [1962] NSWR 686 would support such a disclosure. On nominee directors' duties, see generally: P. Redmond, (1987) 'Nominee Directors' (1987) 10 UNSWLJ 194; P. Crutchfield, 'Nominee Directors: the law and commercial reality' (1992) 20 ABLR 109; Justice E. W. Thomas, note 28 above.

102. Bank of Tokyo v Karoon [1986] 3 All ER 468 at 476.

103. G. Lindell note 48 above, 80ff and Lindell note 52 above at 400-1.

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

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

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

107. See sources cited in note 5 above and R. L. Wettenhall, Organizing Government (1986), Chs 2-3, 6; and J. Halligan & P. Power, Political Management in the 1990s (1992), esp. Ch 3.

108. The main policy documents associated with these changes were: The Hon J. Kerin (Minister for Primary Industry), Reform of Commonwealth Primary Industry Marketing Authorities (1986); The Hon P. Walsh (Minister for Finance), Policy Guidelines for Commonwealth Statutory Authorities and Government Business Enterprises (1987); The Hon G. Evans (Minister for Transport and Communications), Reshaping the Transport and Communications 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 Debate (1997).

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