CHAPTER 4

UNDUE DEPENDENCE UPON NON-REVIEWABLE DECISIONS

Application of criterion set out in Standing Order 24(1)(a)(iii)

4.1 Criterion (iii) requires the Committee to report on legislation which makes “rights, liberties or obligations unduly dependent upon non-reviewable decisions”. A bill may exclude review on the merits by an appropriate appeal tribunal, or it may exclude judicial review of the legality of a decision.

Excluding merits review

4.2 Since its establishment, the Committee has consistently drawn attention to clauses which explicitly exclude review by relevant appeal bodies (for example, the Social Security Appeals Tribunal).

Example: Financial Laws Amendment Bill 1996

4.3 In Alert Digest No 13 of 1996, the Committee noted that the amendments to be made by items 32 and 33 of Schedule 12 to this Bill would remove various decisions of the Insurance and Superannuation Commissioner under the Life Insurance Act from review by the Administrative Appeals Tribunal (AAT). The Committee noted the explanation included in the Minister's Second Reading Speech that these amendments were intended to “prevent insolvent or near insolvent companies from using the AAT appeal process to defer the application of regulatory directions designed to protect the interests of existing policy holders, such as orders to freeze assets or cease trading”. Similar exemptions were also contained in prudential legislation covering the superannuation sector.

4.4 For the Committee, it was a matter of striking an appropriate balance between the interests of policy holders and the interests of insurance companies, and the Committee sought further advice from the Treasurer on the appeal system's `potential for delay'.

4.5 Subsequently, the President of the Administrative Review Council wrote to the Committee, drawing members' attention to provisions in Schedule 5 to the bill which would similarly remove AAT review rights under the Insurance Act 1973.

The Council notes the intention of the amendments … is to protect the interests of policy holders. In doing so, the amendments negate the rights of insurance companies and life insurance companies to have decisions that affect them independently reviewed on their merits.

The Council considers that a strong case needs to be made out when existing rights are to be removed. The Council is not aware that the existence of AAT review for the decisions affected by these amendments has obstructed proper administration of the law to date but in any event, the fact that a right is capable of being misused does not negate the value of that right. [1]

4.6 The Council also pointed out that:

• both the Life Insurance Act and the Insurance Act provided for members with special skills in the insurance field to hear applications for review of these decisions; and
• the AAT had power to expedite hearings, and used this power in cases of real emergency.

4.7 The Committee drew these additional comments, which it supported, to the attention of the Treasurer.

4.8 In response, the Assistant Treasurer advised that:

• the decision-making powers at issue involved directions by the Commissioner as to solvency and capital adequacy; to `freeze' assets; and to prohibit a life company from issuing new policies;
• these powers were “significant tools” in the prudential supervision of life insurance companies, and were generally exercisable only where policyholders funds were at risk unless immediate action were taken;
• recent enforcement experience had demonstrated the potential for insurance companies to use AAT processes to frustrate proper supervision by the Commissioner – in this particular case, an insurance company was able to continue trading while its application to stay directions of the Commissioner to either increase capital or cease trading was considered by the AAT;
• merits review in the AAT means that it is relatively simple for an insurer to obtain a stay of the Commissioner's decision in a process that could potentially run for weeks or months;
• existing limitations on the exercise of powers by the Commissioner would be retained: ministerial approval must be obtained, and judicial review of the legality of a decision (but not of its merits) could be sought in the Federal Court; and
• the new arrangements would be subject to a `sunset' clause of five years to ensure that the workability and appropriateness of the arrangements can be reviewed in the light of experience.

4.9 While noting the sunset proposal, the Committee considered that the issue of whether the legislation struck the appropriate balance between competing interests should be left for ultimate resolution by the Senate itself.

4.10 While the issue of appeals was raised by the Greens (WA), the Bill was subsequently read a second time and passed through its remaining stages without amendment or debate. [2]

Example: Financial Sector (Shareholdings) Bill 1998 and other related bills

4.11 In Alert Digest No 4 of 1998, the Committee considered a package of bills which introduced a new regulatory framework for the Australian financial system. A number of these bills raised the issue of the non-availability of merits review in certain circumstances, namely:

• the exercise by the newly established Australian Prudential Regulation Authority (APRA) of the power, currently exercised by the Governor-General, to issue and revoke the authority to carry on banking business in Australia;
• the exercise by the Treasurer of a discretion to determine whether an applicant may hold a stake of more than 15% in a financial sector company;
• a declaration by the Treasurer that a person has practical control of a financial sector company, with the consequential requirement that that person give up that control; and
• the issue by the Reserve Bank of directions to financial institutions, non-compliance with which is a criminal offence.

4.12 In each instance, the Committee sought the advice of the Treasurer on whether the exercise of these discretions should be subject to independent merits review.

4.13 The Parliamentary Secretary to the Treasurer responded that:

• decisions relating to the conduct of banking businesses have direct implications for the commercial interests of the parties concerned, but may also have profound effects on the stability of the financial system – APRA was the most competent authority to assess these implications, and it would be undesirable to have its decisions in this critical area altered by another body likely to have less expertise in the public interest dimension of the financial system;
• in considering whether an applicant would be permitted to hold a stake of more than 15% in a financial sector company, or in requiring a stakeholder to reduce their stake in such a company, the Treasurer was only able to exercise his discretion on `national interest' grounds – this was a broad concept encompassing concerns such as the consequences for depositors, the health of the financial system and the broader economy, and the international financial system, and, as such, it was undesirable to have the Treasurer's decision altered by another body unlikely to be as competent or to have a similar interest and expertise in this public interest dimension; and
• in issuing directions which related to designated payment systems and to authorised holders of the stored value of a purchased payment facility (such as smart cards or electronic cash), it was undesirable that decisions of the Reserve Bank should be capable of being altered by another body that was unlikely to be as competent or to have a similar interest and expertise in the public interest dimension of the payments system. [3]

4.14 In each case, the relevant decisions were subject to judicial review, which was seen as providing appropriate protection.

Excluding judicial review

4.15 During the 38th Parliament, the Committee considered the impact on review rights of a number of bills which proposed amendments to the Migration Act 1958.

Example: Migration Legislation Amendment Bill (Nos 4 and 5) 1997

4.16 In Alert Digest No 10 of 1997, the Committee observed that this bill, among other things, proposed to insert a new Part 8 in the Migration Act. The privative clause included in this new Part would markedly limit the ability of those affected by various decisions under the Act to seek judicial review of those decisions. For example, proposed new subsection 474(1) stated that privative clause decisions were “final and conclusive”; “must not be challenged, appealed against, reviewed, quashed or called in question in any court”; and were “not subject to prohibition, mandamus, injunction, declaration or certiorari in any court on any account”. Such clauses have been interpreted as significantly narrowing the grounds on which administrative decisions can be challenged.

4.17 The Committee first observed that the ousting of judicial review was not a matter to be undertaken lightly by the Parliament. It was the function of the courts to ensure that executive action affecting those subject to Australian law was carried out in accordance with law. In principle, any attempt by one arm of government (the Executive) to seek the approval of the second arm of government (the Parliament) to exclude the third arm of the government (the Judiciary) from its legitimate role gave rise to the need for utmost caution.

4.18 The Minister responded that the provisions of concern to the Committee had now been removed from the (No 4) Amendment Bill and included in the Migration Legislation Amendment Bill (No 5) 1997.

4.19 He observed that the current Part 8 scheme had been introduced by the previous government in 1994. That scheme had been intended to reduce Federal Court litigation. It required merits review rights to be exhausted before Federal Court review was possible. It restricted the grounds of review available before that Court. However, there had been no reduction in the volume of cases before the courts.

4.20 After noting that “in migration cases, litigation can be an end in itself”, and that there was “a high incentive” for refused applicants to delay their removal from Australia, the Minister referred specifically to the present Government's election immigration policy. This stated that the established assessment and two-tiered review mechanism was such that “access to the courts for further review should be restricted in all but exceptional circumstances”. The consensus of the expert legal advice obtained on the best means of implementing this policy was that “because of the constitutional guarantee of access to the High Court, the only practical option open … was the imposition of a privative clause”, which was the approach taken in the bill.

At present, the restrictions on the judicial review grounds in Part 8 of the Migration Act apply only to the Federal Court and the High Court's original jurisdiction under section 75 of the Commonwealth Constitution is unaffected. Under the new judicial review scheme, the same grounds of review would apply before both the Federal and High Courts.

The effect of a privative clause as interpreted by the High Court, is not to remove access to the courts, including the High Court, but is to limit the grounds of judicial review. The High Court has made it clear that privative clauses are not unconstitutional (and it the Commonwealth Constitution which deals with the separation of powers between the Executive and the Judiciary).

The Government remains committed to preserving an open and credible migration program and a balance between the `rights' of the individual and the interests of the wider Australian community. [4]

4.21 Noting the Minister's statement about preserving a balance between the rights of the individual and the interests of the wider community, the Committee concluded that whether the proposed use of the privative clause struck the right balance was a matter which should be left for ultimate resolution by debate in the Senate. In the event, the bill was not passed during the 38th Parliament.

Footnotes

[1] Scrutiny of Bills Committee, Alert Digest No 1 of 1997, p 30.

[2] Senate, Hansard, 26 June 1997, pp 5305-5306.

[3] Scrutiny of Bills Committee, First to Eleventh Reports of 1998, pp 130-138.

[4] Scrutiny of Bills Committee, First to Nineteenth Reports of 1997, pp 296-7.