12 Apr 2010

Judicial review of refusals to make act of grace payments: When is it possible?

by Michael Palfrey, James Stellios

While the making of act of grace payments is within the absolute discretion of the Minister for Finance, refusals to make payments may be the subject of judicial review proceedings and, in some cases, the decision may be successfully challenged.

There have been few cases considering the operation of the act of grace provision in section 33 of the Financial Management and Accountability Act 1997 (Cth). That provision authorises the Minister for Finance to make an act of grace payment where it is appropriate to do so because of special circumstances. This article will consider two recent cases dealing with the judicial review of decisions to refuse requests for such payments. These cases demonstrate that decisions to refuse act of grace payments can be judicially reviewed and, at least in some circumstances, these proceedings may be successful.

Clement v Minister for Finance and Deregulation [2009] FMCA 43

In Clement v Minister for Finance and Deregulation [2009] FMCA 43, proceedings, described as vexatious by Neville FM, were instituted under section 5 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) to review a rejected claim for an act of grace payment. The applicant was self-represented before the Federal Magistrates Court and the arguments for relief under the ADJR Act were not entirely clear. The Minister conceded that the decision to refuse an act of grace payment was reviewable under the ADJR Act, but argued against the establishment of any grounds of review. All claims for relief were rejected by Federal Magistrate Neville, who, in the course of dismissing the proceeding, reiterated some useful observations about the nature of the power under section 33 of the FMA Act.

Federal Magistrate Neville said that the fundamental premises of section 33 are threefold:

  • first, that "there are no other remedies available";
  • secondly, that "essentially as a matter of moral responsibility or obligation, the Minister chooses to act so as to remedy an injustice that otherwise remains incapable of repair or solution through the ordinary or usual processes of the law"; and
  • thirdly, "that such a payment is ultimately a matter that rests or reposes, as a matter of discretion, in the Minister" (in other words, "there is never any formal duty or compulsion on the part of the Minister to authorise a payment under section 33 of the Act even if, as section 33 requires, there exist 'special circumstances'").

The moral responsibility imposed on the Minister "must be based, as a matter of principle, in the virtue of justice rather than the virtues of charity (or benevolence)". Of course, the discretion cannot be "exercised capriciously or on any whim", but its exercise is guided by consideration of justice, not charitable considerations.

As to what constitutes "special circumstances" for the purposes of section 33, he agreed with Justice Weinberg in Toomer v Slipper [2001] FCA 981, who considered that it is impossible to predict the circumstances where "payments would not otherwise be authorised by law or required to meet a legal liability". A number of circumstances might give rise to such a payment. In Clement, Federal Magistrate Neville took this statement to say that "it is impossible to state, in advance, what might constitute 'special circumstances'".

In Toomer, Justice Weinberg had also referred to the Minister's assertions that act of grace payments could only be made where "the application of Commonwealth legislation had produced unintended, anomalous, or inequitable results, or where because of its direct role in a particular situation the Commonwealth considered that it had a moral responsibility to redress the circumstances of the individual concerned". Federal Magistrate Neville did not see that explanation of "special circumstances" as "being too narrow, or otherwise erroneous in law".

As to the basis for the claims for judicial review, he canvassed, but rejected, a range of claims, one of which was that the Minister had taken into account irrelevant considerations. He emphasised that "the wider the discretionary power conferred, such as here under section 33 of the Act, the more difficult it will be for a Court to proscribe the range of permissible considerations". He agreed with the comments of Justice Mason in Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1985) 162 CLR 24 that the ground of failure to take account of relevant considerations can only, but not inevitably, be made out when a decision-maker is bound to take it into account. Furthermore, Federal Magistrate Neville said:

"that the exercise of a broad discretion, conferred by the Parliament, by a Minister who has been elected by certain members of the populace according to due processes and who is, thereby politically accountable, may be less the subject of judicial review on the grounds of not taking account of relevant, or taking account of irrelevant, considerations than might otherwise be the case."

On the facts in the case, he formed the firm view that the applicant was asking the Court to revisit the merits of the claim to an act of grace payment. The merits, however, are not open for review under judicial review proceedings.

G & M Nicholas Pty Ltd v Minister for Finance and Deregulation [2009] FCA 121

In case one took the view that judicial review proceedings could never be made out in relation to an act of grace payment, G & M Nicholas Pty Ltd v Minister for Finance and Deregulation [2009] FCA 121 demonstrates that this is not the case. G & M Nicholas involved a request for an act of grace payment arising out of the revocation of the applicant's approval as an accredited pathology laboratory for the purposes of the Health Insurance Act 1973 (Cth). The revocation followed reports identifying defects in procedures at the laboratory. The withdrawal of approval was mentioned in the Senate by the federal Minister for Health. The Minister also notified the NSW Minister for Health of the concerns, and the Commonwealth Department of Heath and Ageing contacted all medical practitioners who had referred patients to the applicant over the previous three years. A warning about the applicant was also posted on the NSW Department of Health's website.

In claiming payment under section 33 of the FMA Act, the applicants claimed that these circumstances constituted "special circumstances". The Minister refused the request for an act of grace payment, and the applicant sought review under section 5 of the ADJR Act and section 39B of the Judiciary Act 1903 (Cth) on the ground that they were denied natural justice because some of the material before the Minister when making the decision had not been provided to the applicant for comment.

Justice Cowdroy agreed. He started with the accepted propositions that whether a duty to afford natural justice exists, and the content of any such duty, depends upon the statutory provisions in question. Although section 33 of the FMA Act confers a broad discretion on the Minister to make a decision, that, in itself, does not mean that the rules of procedural fairness are inapplicable. Applying established principles stated in Annetts v McCann (1990) 170 CLR 596 and Jarratt v Commissioner of Police for New South Wales (2005) 224 CLR 44, Justice Cowdroy concluded that the Minister's act of grace decisions affect the rights of applicants and, thus, a duty to afford natural justice is required unless excluded by statute. As to the content of that duty, he said that

"the authorities establish that, in general, natural justice will demand that the party to be affected by a decision must be given an opportunity to deal with matters which are adverse to their interests and are credible, relevant and significant to the decision."

On the facts in the case, in making the act of grace decision, the Minister had relied upon certain information that had not been disclosed to the applicants. In his view, the failure to provide that information resulted in a breach of natural justice requirements. This was especially the case, although it does not appear to have been decisive, because the applicant had repeatedly asked whether they had been provided with all relevant information before the Minister.

Is there an inconsistency between these cases?

There seems to be some inconsistency between these two cases. In Nicholas, Justice Cowdroy said that a section 33 decision can affect rights. In support of that conclusion, he said that the act of grace decision "determines whether an act of grace payment may be made in respect of a claim which may otherwise be compensable or not compensable at law". However, as Federal Magistrate Neville said in Clement, the discretion to make an act of grace payment is exercised when there are no other remedies available and where the Minister chooses to act so as to remedy an injustice that otherwise remains incapable of repair through the ordinary processes of the law. Indeed, as Neville FM also emphasised, there is never any formal duty or compulsion on the part of the Minister to authorise a payment under section 33.

Despite these inconsistencies, the two decisions demonstrate that decisions to refuse act of grace payments can be subjected to judicial review proceedings, and the decision in Nicholas demonstrates that it is possible that such decisions can be successfully challenged, at least on the basis of a breach of natural justice.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.