Judicial review of private bodies

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This article is a topic within the subject Administrative Law.

Contents

Required Reading

R Creyke & J McMillan, Control of Government Action: Text, Cases and Commentary, 3rd ed, 2012, [1.4.1]-[1.4.8]; [2.5.1]-[2.5.13]; [2.4.48]-[2.4.50].

The following pieces are available on Moodle:

Justice Emilios Kyrou, ‘Judicial Review of Decisions of Non-Governmental Bodies Exercising Governmental Powers: Is Datafin Part of Australian Law?’ (2012) 86(1) Australian Law Journal 20.

Matthew Groves, ‘Outsourcing and s 75(v) of the Constitution’ (2011) 22(1) Public Law Review 3.

Accountability across the public/private divide

[1]There is a trend in Western countries for governments to devolve functions to private sector bodies whenever it is felt that the function can be thereby delivered more efficiently or effectively. This trend takes three main forms:

  1. Privatisation - transfer of functions performed by publicly owned organisation to private sector bodies e.g. Commonwealth Bank, Qantas and Telstra.
  2. Commercialisation – government imposes a private sector business structure, including commercial methods and goals, on an agency that is owned and controlled by government. The term ‘government business enterprise’ is commonly used here. E.g. Australia Post, the Health Insurance Commission and the Defence Housing Commission.
  3. Contracting out – a government service will be delivered to the public by a private sector body, pursuant to a contract entered into with a government agency e.g. job network providers and the management of immigration detention centres.

The dichotomy between public and private has traditionally defined administrative law, however, it can be difficult to identify exercises of public power in the post-modern state and to justify interference of administrative law the private sector.

Contracting out

“While responsibility to do certain things can be transferred, accountability for the results cannot. Whatever the method of service delivery, a government agency must remain accountable...”[2]

  • Some argue that contracting out can enhance accountability by requiring the contracting agency to specify clearly the service to be delivered and to allocate precisely responsibilities between the agency and the contractor for delivery of service.
  • The Administrative Review Council believes that administrative law should apply to all government-controlled bodies, although commercial activities undertaken in a competitive market should not be subject to administrative law.
  • Contracting out can lead to a loss of ministerial responsibility by allowing the minister to “pass the buck”.
  • Some public law accountability mechanisms do not easily apply to the decisions of government in administering contracts, particularly judicial review by the courts.
  • “Contracting out breaks the already stretched links between administrative agencies and parliament in the Westminster model.”[3]
  • Most performance indicators are not quantitative in nature and therefore don’t provide a mechanism for holding contractors accountable for service quality. In practice, the government’s only sanction is the right to refuse to renew the contract with an unsatisfactory contractor – a very indirect form of accountability.

Judicial review across the public/private divide

The purpose of judicial review, in a broad sense, is to control government decision-making in satisfaction of rule of law and separation of powers. The blurring of the divide between the public and the private sectors create a jurisdictional problem for the courts which has not yet been resolved.

Ultimately there is an unanswered question of accountability, however there are many different ways of ensuring accountability and administrative law mechanisms are only part of the total picture.

The ‘clubs cases’

[4]In the private arena there are many clubs, tribunals and other societies and organisations that make decisions, or exercise power, akin to those of government. The issue arises of whether decisions made by those bodies should be subject to judicial scrutiny at the suit of an aggrieved person, and if so, on what basis and according to what criteria.

Courts have statutory jurisdiction to review some decisions in accordance with anti-discrimination legislation and industrial relations legislation. Beyond this, judicial scrutiny of ‘club’ and ‘domestic’ decisions is well established at common law, especially concerning decisions of a disciplinary nature such as the expulsion of a member. The usual focus of the court’s scrutiny is whether the society observed its own rules in commencing disciplinary proceedings, and whether natural justice was observed in the process.

In a few decisions, the courts have sought to resolve these jurisdictional issues by likening the disciplinary or regulatory power of a private organisation to the public power exercised by a government agency, and thus to proceed as though a public law action was being heard in the supervisory (or administrative law) jurisdiction of the court.

Forbes v New South Wales Trotting Club[5]

Facts: The NSW Trotting Club Ltd was a non-governmental body which devised and administered the Rules of Trotting, which provided that the managing committee of the club could issue a ‘warning off’ notice to a person, thereby excluding that person from admission to any trotting course in NSW. A warning off notice was issued to Forbes, a professional punter. The club conceded that it was obliged to observe natural justice in exercising the power but it also argued that in its capacity as landowner, it could refuse permission to any person to enter its courses.
Held: The rules of trotting limit the exercise by the respondent of its right as landowner to exclude from its courses any person whom it does not choose to admit.
  • An owner who uses his land to conduct public race meetings owes a moral duty to the public from whose attendance benefits, he should not defeat the reasonable expectation of an individual who wishes to accept the invitation by excluding him quite arbitrarily and capriously.
  • When rights are so aggregated that their exercise affects members of the public to a significant degree, they may often be described as public rights and their exercise as that of public power.

Datafin and its reception in Australia

The UK decision in Datafin determined justiciability through the governmental nature of power exercised, rather than the source of the power (i.e. statutory authority).

R v Panel on Take-overs and Mergers; Ex parte Datafin plc[6]

Facts: The Panel on Take-overs and Mergers was an unincorporated association, whose members were appointed by various non-government organisations that participated in the financial and securities industry. The City Code devised by the panel provided that a material breach, as found by the panel, could result in a private remand or public censure. Datafin complained that other companies had acted in breach of the code. The panel investigated but rejected the complaint, whereupon Datafin made an application for leave to apply for judicial review of the panel’s decision.
Held: The Court of Appeal held that the courts had jurisdiction to undertake judicial review, but dismissed the proceedings on the ground that no legal error had been committed by the panel.
  • The panel lacks legal authority but exercises immense power de facto by applying the City Code on Taker-overs and Mergers and the sanctions they apply are no less effective because they are applied indirectly and lack a legally enforceable base.
  • The source of power should not be the sole test of whether a body is subject to judicial review. The nature of the power is also significant. If the body in question is exercising public law functions, or if the exercise of its functions have public law consequences, then this may be sufficient to bring the body within the reach of judicial review.
  • The panel operates wholly in the public domain and performs an important public duty and therefore should be subject to administrative law and judicial review.

The decision in NEAT is the closest the High Court has come to addressing the issues illustrated in Datafin.

NEAT Domestic Trading Pty Ltd v AWB Ltd[7]

Issue: Whether a decision by a private company that had statutory effect was a decision that was reviewable under the ADJR Act.
Held: The Court found that the jurisdiction under s 39B was not available because the company was not “an officer of the Commonwealth” however some members of the Court alluded to the broader issues, by discussing both the availability of public law remedies against a private company and the application of the grounds for judicial review to an exercise of private power.
  • “When a statute confers a discretionary power which is capable of affecting rights or interests, the identity and nature of the repository of the power may be a factor to be taken into account when deciding what are intended to be matters that must necessarily, or might properly, be considered decision-making or whether it is intended that the power is at large.”
  • Whilst the company is not a statutory authority, to describe it as representing purely private interests is inaccurate because it holds a virtual statutory monopoly on the export of wheat, which is also in the national interests.
  • Their Honours found that the company was under no duty imposed by the Act to consider “public” considerations when making decisions to grant or refuse export approval. Kirby J dissented, finding that the company’s refusal to grant consent was a decision of administrative character and therefore was made pursuant to governmental or statutory authority.
  • This decision can be contrasted with the Court’s decision in Plaintiff M61,[8] where it held that the assessments of a private contractor under executive direction were linked to the Migration Act and could be set aside for error of law and breach of natural justice.

End

This is the end of this topic. Click here to go back to the main subject page for Administrative Law.

References

Textbook refers to R Creyke & J McMillan, Control of Government Action: Text, Cases and Commentary, 3rd ed, 2012.

  1. Textbook, pp 30-5.
  2. Industry Commission, Competitive Tendering and Contracting by Public Sector Agencies, Report No 48 (1996).
  3. G Airo-Farulla, ‘Administrative Agencies and Accountability’ P Boreham, G Stokes & R Hall (eds) The Politics of Australian Society, 2nd ed, Longman, Sydney, 2004.
  4. Textbook, pp 109.
  5. (1979) 143 CLR 242.
  6. (1987) 1 QB 815 Court of Appeal (UK).
  7. (2003) 216 CLR 277.
  8. Plaintiff M61/2010E v Commonwealth (2010) 243 CLR 319.
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