Interpreting Ministerial Directions to Statutory Corporations: What Does a Theory of Responsible Government Deliver?
| Author | Christos Mantziaris |
| DOI | 10.22145/flr.26.2.4 |
| Published date | 01 June 1998 |
| Date | 01 June 1998 |
| Subject Matter | Article |
INTERPRETING MINISTERIAL DIRECTIONS
TO
STATUTORY CORPORATIONS: WHAT DOES ATHEORY
OF
RESPONSIBLE GOVERNMENT DELIVER?
Christos Mantziaris*
INTRODUCTION
The ability of ministers to exercise
de
facto
control over statutory corporations presents
asignificant governance problem for the Australian public sector. Parliaments
have
attempted to define the degree of autonomy granted to the statutory corporation
by
regulating the flow of communication between ministers
and
boards. Reporting
requirements are one legal technique. Another is the use of legislative provisions which
grant
the minister formal powers of direction over the corporation
and
which impose
upon
its directors obligations to disclose corporate information to the minister.1These
provisions
vary
widely in their language;
and
their meaning is often asource of
concern for corporate office holders
and
third parties dealing
with
the corporation.
Statutory powers of direction raise fundamental questions of institutional design:
how
closely
ought
statutory corporations be controlled by the Executive?
And
in
what
manner
ought
the Executive be accountable to Parliamentfor its activities?
Judges interpreting ministerial direction provisions have generally approached the
task 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 Constitution2has raised the
possibility of abroader basis for interpretation. This
paper
assesses 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
*
1
2
BA (Hons) (Syd),
LLB
(UNSW).
Law
Program, Research School
of
Social Sciences
and
Centre
for Commercial
Law
(Faculty ofLaw), Australian National University.
I
would
like to
thank
Stephen Bottomley, Peta Spender, Jane Stapleton, Leslie Zines
and
the
referee for their comments
on
an
earlier version of this paper. I
have
also benefited
from a
number
of discussions
with
Mark
Aronson, Keven Booker,
Angus
Corbett
and
Paul
Redmond
during
a
stay
at
the
University of
New
South Wales
Law
School
in
January
1998.
Despite asuperficial
appearance
to the contrary, this
paper
and
its
author
are
indebted
to
Justice
Paul
Finn
for his intellectual guidance
and
generosity of spirit. The responsibility
for errors is entirely
my
own. .
See below n76
and
Commonwealth
Authorities
and
Companies- Act1997 (Cth), ss 15-16.
Lange
vAustralian
Broadcasting
Corporation
(1997) 189 CLR 520, to
be
discussed below.
310
Federal
Law
Revielo
Volume
26
their ability to facilitate historical changes
in
the Executive's accountability to
Parliament.
The first
part
of this
paper
places the problem of ministerial intervention
in
statutory
corporations within the
broader
context of governance structures designed
for
the
conduct
of relationships
between
political principals
and
their agents.
Through
a
comparison
between
the regulation of informal principal-agent communication
in
the
Corporations
Law
company
and
the statutory corporation,3 the source of
the
normative
uncertainty
surrounding
minister-board communications is traced to those governance
features necessitated
by
the
minister's location
within
the political system. Attempts to
regulate minister-board 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. MiIlisterial
directions provisions
do
not
resolve these difficulties, as their interpretation forces
courts to
grapple
with
the inherent vagueness of the theory of responsible government.
The second
part
of this
paper
examines the recent Federal
Court
decision of Finn J
in
Hughes Aircraft Systems International vAirseroices Australia.4The decision is
at
trial
level
and
the analysis of the ministerial directions
power
is, strictly speaking,
obiter
dicta
in
what
is otherwise acase
about
government tendering processes. Yet
the
decision is significant for
at
least three reasons. First,
Hughes
marks the
entry
point
into
case
law
of a
robust
theory of responsible government which seeks to identify the
proper
relationship between Parliament, the Executive
and
the
statutory
corporation.
Secondly,
it
is a
statement
of the
law
issuing from the Canberra Registry of the Federal
Court, the pre-eminent
venue
for the litigation of issues
surrounding
the governance of
Commonwealth
statutory
corporations
and
from a
judge
whose academic scholarship
on
the subject of responsible
government
and
the statutory corporation is as extensive
as
it
is highly regarded.5Thirdly, the facts of
Hughes
are
an
excellent illustration of the
pervasive effect of ministerial influence
in
public sector decision-making
and
the
inability of legal forms to contain
such
influence.
The construction of the ministerial directions
power
in
Hughes
illustrates
what
the
third
part
of this
paper
labels as the "strong form approach" to the
use
of
responsible
government
theory
in
statutory interpretation. This represents aconscious
interpretative choice over more conventional alternatives. The final
part
of this
paper
assesses the merits of this choice,
both
in terms of its constitutional foundation,
but
also
in
terms of its ability to deliver aframework for the relationship
between
Parliament,
the Executive,
and
the statutory corporation
that
is capable of facilitating Parliament's
response to change
and
evolution
in
the social
and
economic
phenomena
it
is forced to
3
4
5
These
terms
of
analysis
are
defined
below: see
below
text
at
nn
9-12.
(1997) 146 ALR 1.
Finn
]'s
statements
on
the
subject as alegal academic
are
numerous:
P D Finn,
Lau}
and
Government in
Colonial
Australza (1987); "Public
Trust
and
Public Accountability" (1993)
Australian Quarterly 65; "The
Abuse
of
Public
Power
in
Australia:
Making
Our
Governors
Our
Servants" (1994) 5Public
Law
Rev 43; "The
Forgotten
Trust:
The
People
and
the
State"
in
M
Cope
(ed), Equity: Issues and Trends (1994)
ch
5;
"A
Sovereign
People, APublic Trust"
in
P D
Finn
(ed), Essays
on
Law
and Government
vol
1(1995)
ch
1;
and
P D
Finn
and
GJLindell, "The Accountability
of
Statutory
Authorities"
in
Commonwealth
Parliament
Senate
Standing
Committee
on
Finance
and
Government
Operations,
Statutory Authorities
of
the
Commonwealth: Fifth Report (1982),
appendix
4.
1998 Interpreting Ministerial
Directions
to
Statutory
Corporations
311
address. The
strong
form
approach
is
found
wanting
on
both
accounts, for
it
is
no
less
than
an
attempt
to constitutionalise
an
historically specific
understanding
of
the theory
of
responsible government.
For pragmatic reasons, the
paper
restricts itself to
an
analysis
of
Commonwealth
statutory
corporations. Subject to variations
in
individual
legislative provisions
and
the
differences
between
the constitutional
environment
of
the
Commonwealth
and
that
of
the
States
and
Territories, similar principles
would
inform
an
analysis of
the
power
of
ministerial direction
in
respect ofState
and
Territory statutory corporations.
MINISTER-BOARD COMMUNICATION: STRUCTURAL SOURCES
OF
NORMATIVE
UNCERTAINTY
There
are
certain aspects of the communication between the minister
and
the
board
of a
statutory
corporation which are
common
to
most
situations
in
which aprincipal
delegates the
conduct
of
an
activity to the
board
and
management
of acorporation;
and
there
are
other
features which
are
peculiar to the political character
of
the minister as
principal. This
part
of the
paper
contrasts the regulation of prinCipal-agent
communication
in
the Corporations
Law
company
and
the
statutory
corporation
in
order
to demonstrate
that
the normative uncertainty characterising minister-board
communications
in
the statutory corporation is adirect
product
of
the principal's
embededness
in
political relations. The terms "principal"
and
"agent"
are
not
used
to
denote
the legal relationship of principal
and
agent
as
it
is
known
in
private law,6
nor
do
they serve as the vehicle for
an
"agency cost"7
or
"public choice"8 analysis of public
sector governance structures. The terms are simply
used
to describe
two
functional
roles
which
are
adopted
when
A(principal) delegates
the
conduct
of
an
activity to B
(agent).
It
is
hoped
that
afunctionally-oriented description of these roles
may
assist
in
eliciting
the
reasons
behind
the
differences
in
the
way
two
different corporate
governance structures
deal
with
the problem of the division
of
authority
over
decision-
making.
Comparing
the
statutory
corporation
with
the
incorporated
company
Astatutory corporation is
an
artificial legal
person
with
perpetual
succession 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 variable
nature
of the form does
not
allow the
statutory
corporation to
be
conceived as afixed legal category,
nor
even
an
"ideal type"
in
the
6
7
8
On
the distinction between the legal
and
economic models of agency
and
its relevance to
corporate
law
analysis, see BR Cheffins,
Company
Law:
Theory,
Structure
and
Operation
(1997)
at
45
and
LDallas, "Two Models of Corporate Governance: Beyond Berle
and
Means" (1988) 22 UMich ]
Law
Reform
19
at
34-6.
Cf MPalmer, "Toward
an
Economics of Comparative Political Organization: Examining
Ministerial Responsibility" (1995)
11
]
of
Law,
Econ
and
Org
164.
On
the
problem
of
agency
cost, MJensen
and
WMeckling
..
"Theory of the Firm:
Manag~ria~
Behaviour, Agency Costs
and
Ownership
Structure" (1976) 3 ] of
Fin
Eco
305.
Cf PDunleavy,
Bureaucracy
and
Public
Choice:
Economic
Explanations in
Political
Science
(1991)
and,
within
the tradition of transaction cost economics, MHorn,
The
Political
Economy
of
Public
Administration: Institutional
Choice
in
the
Public
Sector
(1995).
To continue reading
Request your trial