This chapter outlines some of the issues raised by submitters and witnesses related to the constitutional validity of the bill, and details the position taken by relevant Government departments on these matters.
As emphasised in the evidence presented below, some of the concerns raised below have been flagged as suggestive or indicative of potential issues with the bill’s constitutionality rather than conclusive. Due to these uncertainties, the committee has chosen to present the following evidence as it was received, rather than trying to order it around specific themes or concrete issues.
Views on the constitutionality of the bill
The Law Council of Australia drew the committee’s attention to ‘significant constitutionality concerns’ raised in evidence to the Parliamentary Joint Committee on Corporations and Financial Services (PJCCFS), and cautioned the bill was likely to lead to ‘a significant level of litigation’ to determine the constitutional issues. Mr John Emmerig from the Law Council described such litigation as ‘inevitable’, telling this committee, ‘I would be very surprised if there was not a constitutional challenge to the legislation’.
In its submission to the PJCCFS, the Law Council raised three key constitutional concerns with the bill. The first relates to whether the corporations power of the Constitution (section 51(xx)) can support the provisions of the bill.
The second issue relates to whether the bill impairs, curtails, or weakens the capacity of states and state courts to exercise their constitutional powers. The Law Council elaborated on this point in its submission to this committee:
Pursuant to section 109 of the Constitution, the provisions of the Bill would prevail over a number of provisions of the class actions legislation enacted in several Australian states (including Victoria, New South Wales and Queensland).
The third concern raised by the Law Council of Australia in its submission to the PJCCFS relates to apparent inconsistencies between the bill and the Federal Court of Australia Act 1976, regarding which the Law Council suggested the proposed amendments may imply an effective repeal of parts of that Act.
In its submission to this committee, the Law Council of Australia argued:
The wider implications of the Bill should be the subject of careful consideration including inter-governmental consultation, in particular given that the Commonwealth’s legislative power, if any, may depend on a referral of powers by states.
The joint opinion of former Solicitor-General Mr Justin Gleeson SC, Mr Sebastian Hartford-Davis, and Mr Myles Pulsford, submitted by the Association of Litigation Funding of Australia (ALFA) and International Litigation Partners, noted that the provisions of the bill may ‘transgress the doctrine of inter-governmental immunities’ that prevent the Commonwealth from curtailing the exercise of state power and courts. The joint opinion further suggested certain provisions within the bill may be beyond the Commonwealth’s legislative power to impose. The joint opinion noted with respect to the application of the corporations powers to litigation funding:
While a law need not have a single character, the connection between the measure and the company, which s 601FA requires operate a registered managed investment scheme, may be too “insubstantial, tenuous or distant” to permit the bill to be characterised as a law “with respect to” either matter.
Mr Emmerig elaborated on this concern:
Even if we’re dealing with managed investment schemes there is still a characterisation issue about whether or not the goal here is to regulate corporations or to improve outcomes for class action litigation funding schemes. So you’ve got to get across that insubstantial, tenuously distant connection test.
Similarly, Mr Lachlan Armstrong QC suggested not all litigation funders need be corporations and may not come under the Corporations Act 2001. He questioned whether the extension of the provisions to non-commercial activities may be beyond power.
Mr Armstrong QC and Dr Peter Cashman questioned the extent to which the proposed amendments were permitted under the constitution:
The provisions purport to apply to state courts not exercising federal jurisdiction. However, federal legislative power does not permit legislation that significantly impairs, curtails or weakens the capacity of states or state courts to exercise their constitutional powers or functions.
Mr Armstrong QC and Dr Cashman expressed concern that the provisions of the bill may amount to an implied repeal of the Federal Court of Australia Act 1976 and an overriding of the powers of state courts pursuant to section 109 of the Constitution relating to the inconsistency of laws.
Investor Claim Partner Pty Ltd (ICP) pointed to one effect of the bill being that funded class actions could no longer be run in a state court not exercising federal jurisdiction and submitted these provisions would ‘constitute an extraordinary intervention by the Commonwealth in the operation and conduct of litigation in State Courts’. ICP questioned whether ‘such an exercise of federal legislative power would be constitutionally valid’.
Mr John Walker, Chairman of ALFA and Director of ICP, summarised his concerns with the proposed bill as follows:
The federal parliament is looking at passing a bill that seeks, in a broad sense, to have overall coverage of all class actions, irrespective of state legislation, irrespective of federal legislation that's already in place and may be affected by this bill, and, in my view, without due regard to assessing whether or not in fact it has the power to pass this bill.
Mr Daniel Meyerowitz-Katz observed that the bill purports ‘to regulate the procedure applying to litigation in state courts in a manner that is directly in conflict with state legislation’—for example, the appointment of contradictors. He argued the proposed legislation ‘gives rise to significant constitutional difficulties’, concluding that ‘to the extent it purports to apply to matters not in federal jurisdiction, it has no clear basis in the Constitution’.
Consideration of the bill’s constitutionality
During a public hearing on 12 November 2021, members of the PJCCFS put the question of the bill’s constitutionality to witnesses from the Attorney-General’s Department. Dr Albin Smrdel, Assistant Secretary at the Attorney-General’s Department, told the PJCCFS that the Department had received ‘a number of different pieces of legal advice’ throughout the legislative development process and was ‘confident, on that advice, that the legislation is constitutional’.
Dr Smrdel also expressed confidence in the terms of the legal advice received by the Department and told the PJCCFS the current Solicitor-General had signed off on the constitutionality of the bill.
However, Dr Smrdel declined to provide details with respect to the basis of the bill being constitutional, citing legal professional privilege and foreshadowing that a claim of public interest immunity over the legal advices related to the bill may be made by the Attorney-General (as it indeed was).
On 19 November 2021, the PJCCFS directed the Attorney-General’s Department to produce, on a confidential basis, all legal advices relating to the constitutionality of the bill.
On 24 November 2021, the Attorney-General, Senator the Hon Michaelia Cash, claimed public interest immunity over the content of the legal advices obtained by the Department in relation to the bill. The Attorney-General articulated legal professional privilege as the grounds on which the claim was based and specified harm to the administration of justice if the advices were to be disclosed. Dr Smrdel subsequently described the basis of the Attorney-General’s claim for this committee:
The Attorney-General noted the specific harm that would result from the disclosure of confidential interactions between lawyer and client would be to the administration of justice by discouraging full and frank disclosure between clients and their legal advisors.
On 25 November 2021, witnesses from the Attorney-General’s Department appeared before the PJCCFS for an in-camera hearing on the bill. According to Dr Smrdel, the Department was ‘unable’ to assist the committee during that confidential hearing.
On 29 November 2021, the PJCCFS wrote to the Attorney-General and Attorney-General’s Department advising it had advice from the Clerk of the Senate and, consistent with that advice, did not accept the public interest immunity claim made by the Attorney-General over the legal advices obtained by the Department in relation to the bill.
On 9 December 2021, this committee placed on notice a question to the Attorney-General’s Department relating to the head or heads of power in the Constitution on which the bill relies. The Department provided the following response:
The Government, in accordance with standard practice, has sought legal advice on the constitutionality of this Bill. The Government is confident in the constitutionality of this Bill.
In accordance with the longstanding practice of successive Australian governments, it is against the public interest to disclose confidential legal advice. This is so that the Government can engage fully and frankly with its legal advisers and access such advice confidentially, which as a practical matter is critical to the development of sound Commonwealth policy and robust law-making. Consistent with this approach, the Attorney-General claimed public interest immunity over legal advices in relation to this Bill, in response to an earlier order for production of documents by the Parliamentary Joint Committee on Corporations and Financial Services.
The department is therefore not in a position to disclose the head or heads of power this Bill relies on.
The committee notes that prior to issuing this response to the question on notice, the Attorney-General’s Department had already been notified that the PJCCFS did not accept the public interest immunity claim made by the Attorney-General over the content of the legal advices obtained by the Department in relation to the bill. The committee also notes the following from Odgers’ Australian Senate Practice:
It has never been accepted in the Senate, nor in any comparable representative assembly, that legal professional privilege provides for a refusal of information in a parliamentary forum.
Odgers’ further notes:
The Senate has rejected government claims that there is a long-standing practice of not disclosing privileged legal advice to conserve the Commonwealth’s legal and constitutional interests.
In relation to the head or heads of power on which the bill relies, Mr Emmerig told the committee:
The Law Council considers it important that the Parliament is aware of the Constitutional head of power relevant to the legislation sought to be enacted. It is relatively common for the head of power underpinning legislation to be disclosed and it is the Law Council’s view that such information can be provided without breaking any client legal privilege or public interest immunity.
Mr Emmerig also distinguished between the Department taking legal advice and the Department answering the committee’s questions about the head or heads of power on which the bill relies. Mr Emmerig provided his view that providing the committee with the head or heads of power on which the bill relies does not require revealing the legal advice. At the same time, the committee recognises that the Attorney-General’s Department has particular expertise in considering such matters in the context of parliamentary processes considering bills.
Committee view on the constitutionality of the bill
Three related but distinct issues arise with respect to the constitutionality of the bill.
First, the committee welcomes the fact that the Attorney-General’s Department placed on the public record the chronology and circumstances of its interactions with the PJCCFS with respect to the advices received by the Department (including the PJCCFS order to provide the advices to that committee and the refusal of the Attorney-General’s Department to provide the advices following a claim for public interest immunity raised by the Attorney-General on the grounds of legal professional privilege). This committee notes that legal professional privilege has never been accepted by the Senate as grounds for a refusal to provide information in a parliamentary forum. This committee notes that the PJCCFS did not accept the claim for public interest immunity raised by the Attorney-General. In these circumstances, the PJCCFS decided not to press its claim. Hence the issue is still live.
The committee also notes that questions concerning the possible waiver of legal professional privilege were canvassed during the public hearing for this inquiry. In particular, the Attorney-General’s Department expressed concern that providing a parliamentary committee with any details around the head of power or other aspects of constitutionality might be deemed a waiver of legal professional privilege. The Department suggested it was unable to provide further details to the PJCCFS even on a confidential basis. This raises a number of issues. First, the committee considers that the public disclosure of the head of power or legal advice to a parliamentary committee is protected by parliamentary privilege. Second, a parliamentary committee can receive material on an in-camera or confidential basis precisely to avoid any harm that might arise from public disclosure.
Moreover, in the context of consideration of a bill—the constitutionality of which is contested by credible witnesses and stakeholders—this committee is left in a situation where the relevant department is unable to identify the relevant constitutional head or heads of power upon which the bill relies. On the one hand, the committee has been provided with advice detailing concerns regarding the constitutionality of the bill on a number of grounds. On the other hand, the committee has the benefit of a general assurance (no doubt sincerely held by the relevant officers of the Attorney-General’s Department) that the Department’s view is that the bill is constitutional. Whilst the evidence is clear that the Attorney-General’s Department has obtained advice from senior counsel in relation to the constitutionality of the bill, the committee (and the PJCCFS) has not received any detail of that advice (even the minimal detail of the relevant heads of power founding the constitutionality of the bill). How can the committee weigh the arguments of those who have raised issues regarding the constitutionality of the bill, if it not given the benefit of the arguments which provide a contrary view or address those issues? With due respect to all those involved, this is an unsatisfactory state of affairs.
The committee suggests that the Attorney-General’s Department and the Attorney-General reflect on this matter and situation prior to the bill being debated in the Senate given the constitutionality of the bill will no doubt be raised. The committee respectfully suggests the Attorney-General’s Department and the Attorney-General reflect on the circumstances leading to this situation to inform how future issues of a similar nature are managed.
The committee acknowledges the concerns raised around the constitutionality of the bill—particularly those raised in the joint opinion by the former Solicitor-General, Mr Justin Gleeson SC, and Mr Sebastian Hartford-Davis and Mr Myles Pulsford, and the submissions and evidence provided by the Law Council of Australia to both this inquiry and that of the PJCCFS.
That said, as referred to above, it is clear to the committee that the Attorney-General’s Department has undertaken extensive work on this matter. Indeed, the Attorney-General’s Department noted in its evidence that it had commissioned seven separate pieces of legal advice on the constitutionality of the bill. Clearly, the bill has not been brought forward without considerable attention to these matters. At the same time, the committee acknowledges that this level of consideration indicates that the constitutionality of the bill is contested. Nevertheless, the committee acknowledges the conclusion of the Attorney-General’s Department—and the current Solicitor-General—that the bill is constitutionally valid. Further, the committee notes that the bill will be subject to scrutiny in the Senate at which point the committee expects issues about its constitutionality to be debated.
The committee therefore recommends the bill be passed, subject to the amendment (discussed in the committee view in Chapter 2) detailed below.
The committee recommends the bill be passed subject to amending subsection 601LG(3) to remove the word ‘only’ and adding a new paragraph (g) to include ‘any other factors considered relevant by the court’.
Senator Paul Scarr
Liberal Senator for Queensland