The issue confronting the Commonwealth Government and its
agencies following the High Court's decision in Williams
(No. 2) is the need to determine which of the scores of its
grants and funding programs are valid.
As noted by James Stellios, the High Court's decision in
Williams v Commonwealth  HCA 23 was limited to the
validity of funding agreement with the Scripture Union Queensland
with the Commonwealth and the operation of s 32B of Financial
Management and Accountability Act 1997 in relation to that
However, the ramification of Williams (No. 2) is that a
grant or funding program is most likely invalid unless it is
authorised by the "nationhood" dimension of the executive
power in s 61 of the Constitution or one of the heads of
legislative power in s 51 of the Constitution.
Williams (No. 2) also made it clear that funding
agreements are not made valid just because that spending is
authorised by budget appropriations Acts pursuant to s 81 of the
Constitution or that one of the parties to a funding agreement is a
corporation (attracting the operation of s 51(xx)).
The challenge for Government and agencies is to work through
every grants and funding program to ascertain which ones cross the
line drawn by the High Court.
For local government, there is also now be a need to identify
what funding received directly from the Commonwealth is validly
At least more than 400 grants and funding programs have already
been identified in schedule to the regulations made after the
Financial Framework Legislation Amendment Act (No 3) 2012
(FFLAA), which inserted s 32B, was passed in response to
Williams (No. 1).
The Wiliams (No. 2) decision highlights a focus of the
High Court under Chief Justice Robert French on the limitations of
the scope of the executive power under s 61 in decisions like
Pape v Commissioner of Taxation (2009) 238 CLR 1 and
Williams v Commonwealth (2012) 248 CLR 156. However, the
plurality judgment in Williams (No. 2) provides greater
clarity on the scope of the executive power given that there were
five separate judgments in Williams (No. 1). The High
Court rejected the proposition that executive power of the
Commonwealth is the same as British executive power. Unlike the
position in Britain, the Commonwealth is not "a polity
organised and operating under a unitary system or under a flexible
constitution where the Parliament is supreme". It is one where
the Constitution effects a distribution of powers and functions
between the Commonwealth and the States.
During the Parliamentary debates over the FFLAA and a
constitutional amendment to enable the Commonwealth to make direct
payments to local government there were pointed references by
then-Opposition members to the federation and the importance of the
States in providing funding of the kind that the fix-up legislation
sought to authorise.
"I say to the Australian people that if you think Canberra
can resolve all of your problems then you are not asking the right
question, because more limited government is in our national
interest. More trust in local authorities and communities to
determine their own direction and self-direction and more
responsibility and accountability from state governments will
result in the better governance of your state," said Liberal
senator Cory Bernardi.
The High Court's decision was also foreshadowed by the
then-shadow Attorney-General George Brandis 2012 who cast doubt on
the FFLAA's validity during the debates about it.
"The whole point of the Williams case was to decide that
the executive cannot spend public money without legislative
authority and parliamentary scrutiny," Senator Brandis said
during the Senate debate.
"It seems to me that it is hardly sufficient to meet the
tests which the majority set out in their reasons for judgment as
necessary to constitute a valid expenditure merely to specify a
schedule of grants payments and simply declare them to be valid...
In short, this government's response to the Williams decision
to invalidate a particular program because it was established by
executive action rather than legislation is to say that all
programs are validated so long as they are identified in a
regulation, and that regulation does not even have to be made by
Williams (No. 2) provides the Commonwealth Government
with an opportunity to put into action its commitment to
"re-align the federation". As the Court pointedly
highlighted, s 96 enables the Commonwealth to fund programs through
As a result, the focus will now be on the the release of a
Federation White Paper promised by the Government in the next
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