Public Law Essentials 07: What happens when things go wrong?

Lawyers assisting decision-makers should be attuned to the concept of legal risk management, including what are the risks of challenge, and how can a decision be buttressed against those risks? So, what are the legal risks that can arise from government decision-making? And when these risks materialise, what are the practical implications for government decision-makers? This edition of our Public Law Essentials series explains.

Merits review proceedings

The role of merits review

In the framework of government decision-making, merits review is important for accountability and plays a vital role in enabling persons who are affected by a government decision to seek review of that decision. While decisions made by administrative review tribunals are not binding as legal precedent, they can provide useful guidance for future government decision-makers making decisions under the same legislative scheme.

Merits review provides a pathway for individuals seeking to change the outcome of a decision to one that is more favourable to them. By contrast, challenging the legality of a decision in court by way of judicial review will not necessarily (and often does not) lead to a favourable outcome. The Kerr Committee report (which led to the establishment of the Administrative Appeals Tribunal) observed that:

“A person aggrieved by a decision of a Commonwealth official or tribunal will generally feel the decision was wrong on the facts or merits of the matter…The courts are, in most cases, not open to him for this purpose and he is driven, if he wishes to upset a decision, to find some way of attacking it in the courts upon legal grounds… If, being driven to seek in the courts an invalidating judgment, he succeeds in having a decision set aside, he is, in effect, in many cases back where he started with the administrative process to be faced again before the same administrative officer or body. An attempt is often made to have a decision upset, not so much because of the legal flaws involved but because a person aggrieved by it thinks that it is wrong on the merits and success in the courts in many cases involves the risk of the same decision on the merits being reached, after the previous judicial decision has been given, by the same administrative body and by processes which can no longer be attacked in the courts.”

What is the question for determination in merits review?

The decision-maker on merits review is looking to determine the correct and preferable decision in the circumstances of the case.

When is merits review available?

Merits review may be conducted both internally and externally. Internal merits review, commonly referred to as “internal review”, is conducted by a different officer than the officer who made the original decision. External review is conducted by an administrative tribunal, such as the Administrative Appeals Tribunal (AAT) or the New South Wales Civil and Administrative Tribunal (NCAT). The specific tribunal that will conduct the external review of a decision will depend on the relevant legislation.

Merits review is not available as of right. Internal review will not be available where the legislation does not prescribe a process for internal review. Similarly, administrative tribunals will not have jurisdiction to review a decision that has not been prescribed by Parliament as reviewable. In addition, applicants for external review will have to demonstrate that they have standing to apply for review of the decision, by satisfying the tribunal that they are a person whose interests are affected by the relevant decision (see, for example, section 27 of the Administrative Appeals Tribunal Act 1975 (Cth)). The decisions that may be subject to merits review will generally be prescribed by the same enactment that confers the relevant decision-making power.

How is merits review conducted?

Internal merits review

The procedures for internal merits review will depend on the relevant framework established by the agency undertaking the internal review. However, the following points serve as a general guide to internal review.

• The internal review decision-maker will be a different officer within the same agency from the original decision-maker. Internal review decision-makers are usually more senior than the original decision-makers, although this is not always a requirement.
• Internal review will usually be conducted based on documentary material alone. Because the decision is being reconsidered afresh, persons seeking internal review will have the opportunity to submit additional material in support of their position.
• An internal review decision-maker may affirm, vary, or set aside the decision under review. Once made, the internal review decision replaces the original decision.
• Where a person is still not satisfied with the internal review decision, they may be able to seek external review of the internal review decision. A person whose interests are affected by the internal review decision may also be able to request a written statement of reasons from the internal review decision-maker.

External merits review: tribunal proceedings

External merits review is typically undertaken by tribunals established by legislation, such as the AAT and the NCAT.

To manage their caseload of applications, tribunals have in place procedures to progress external review applications from lodgement (the beginning of an application) to a decision (the conclusion of an application). These procedures are similar to court procedures, but are designed to be more accessible to self-represented applicants and to encourage the efficient resolution of applications.

The aim of merits review tribunals is to be “fair, just economical, informal and quick”. This is reflected in legislation establishing the tribunals, such as section 2A of the AAT Act. Merits review proceedings will usually involve the following key features.

• In the early stages of the proceedings, the respondent decision-maker will have to provide a statement of reasons for the decision under review. For example, the AAT Act describes this as “a statement setting out the findings on material questions of fact, referring to the evidence or other material on which those findings were based and giving the reasons for the decision” (see: section 37(1)(a) of the AAT Act).
• Respondent decision-makers are also required to provide documents in their possession or under their control that they consider to be relevant to the review (see, for example, section 37(1)(b) of the AAT Act). This requirement is subject to any other directions that the tribunal may make about disclosure of documents in the proceedings, including directions in relation to confidentiality.
• The tribunal will schedule case conferences and directions hearings to case manage applications. These will be used to agree on timetables for providing further documents, arrange attendance at mediation or conciliation, and schedule hearing dates.
• Both the applicant seeking review and the respondent government decision-maker will have the opportunity to provide additional evidence and written submissions to the tribunal. The rules of evidence do not apply in tribunals.
• Tribunal proceedings usually involve a contested hearing where the parties can attend and give evidence, ask questions of the other party’s witnesses, and make oral submissions to the tribunal. However, a contested hearing is not a mandatory requirement, and parties can agree for an application to be determined without a hearing, based on documentary material submitted by the parties.
• In determining an application for merits review, tribunals can make orders to affirm, vary or set aside the decision under review.
• Tribunals will usually make their decisions publicly available as well as providing them to the parties in the proceedings.
• Merits review tribunals are a “no costs” jurisdiction. This means that the general rules in relation to legal costs – where the unsuccessful party pays the successful party’s costs – do not apply in merits review tribunals unless there are exceptional circumstances. However, even without the potential for costs orders, running administrative review proceedings can be costly and resource intensive for applicants and decision-makers alike.

A summary of the key steps in merits review proceedings is set out at the end of this Guide.

Outcomes in merits review

Like any litigated matter, it is also possible to resolve administrative review proceedings before a contested hearing where the parties reach an agreement. External tribunals can assist with this process by facilitating alternative dispute resolution processes, such as conciliation and mediation.

Judicial review proceedings

The role of judicial review

Judicial review is concerned with the lawfulness of the decision under review. As Justice Brennan held in Attorney-General (NSW) v Quin (1990) 170 CRL 1, the role of the judiciary is to declare what the law is:

”the proper role of the federal courts is to determine if the relevant … executive act or decision was in breach of or unauthorised by the law or was beyond the scope of power given to the decision maker by the law… [the merits of the decision] are beside the point.”

When considering the distinction between judicial review and merits review, courts have consistently emphasised that their role is not to revisit the merits of the decision under review, and that this is instead the role of merits review tribunals (such as the AAT). Also in Quin, Justice Brennan stated that:

“Some advocates of judicial intervention would encourage the courts to expand the scope and purpose of judicial review, especially to provide some check on the Executive Government which nowadays exercises enormous powers beyond the capacity of the Parliament to supervise effectively. Such advocacy is misplaced. If the courts were to assume a jurisdiction to review administrative acts or decisions which are ‘unfair’ in the opinion of the court — not the product of procedural unfairness, but unfair on the merits — the courts would be assuming a jurisdiction to do the very thing which is to be done by the repository of an administrative power, namely, choosing among the courses of action upon which reasonable minds might differ… the absence of adequate machinery, such as an Administrative Appeals Tribunal, to review the merits of administrative acts and decisions may be lamented in the jurisdictions where the legislature has failed to provide it, but the default cannot be made good by expanding the function of the courts.”

How is judicial review conducted?

A decision made by a government decision-maker can be challenged by way of judicial review proceedings as follows:

• Under the ADJR Act for the particular jurisdiction (Federal, State and Territory). Judicial review is only available if the relevant decision is a "decision under an enactment", for the purposes of section 3(1) of the ADJR Act. There are also particular decisions that are prescribed by statute to be decisions to which the ADJR Act does not apply.
• Where ADJR Act review isn't available, and the relevant decision is made by a Commonwealth officer, judicial review may be sought through the issue of prerogative writs via section 75(v) of the Constitution. This process has been simplified through legislation, and jurisdiction to hear such applications is conferred on the Federal Court pursuant to section 39B the Judiciary Act 1903 (Cth). This means that proceedings of this kind are usually commenced in the Federal Court of Australia.

This Guide focuses on judicial review proceedings conducted at the Federal level. Where the State or Territory equivalent of the ADJR Act is not available, judicial review proceedings seeking review of a State or Territory government decision can still be commenced in State or Territory Supreme Courts. State Supreme Courts can hear and determine judicial review applications in accordance with their inherent common law jurisdiction, also reflected in the relevant Supreme Court Acts for each State. Territory Supreme Courts have an implied or incidental jurisdiction to hear and determine judicial review applications.

Judicial review under the ADJR Act

The ADJR Act and its State and Territory counterparts intend to codify the complex common law processes for seeking judicial review.

The ADJR Acts do this by conferring on courts the power to make orders in respect of:

• applications seeking review of decisions (section 5 of the ADJR Act);
• applications seeking review of conduct related to making of decisions (section 6 of the ADJR Act); and
• applications in respect of failures to make decisions (section 7 of the ADJR Act).

A court may make an order of review in relation to an application made pursuant to sections 5 and/or 6 of the ADJR Act where the court is satisfied that one or more of the grounds described in sections 5(1), and/or 6(1) are made out. The grounds described in sections 5(1) and 6(1) codify common law grounds of review, and include that:

1. a breach of the rules of natural justice occurred with the making of the decisions;
2. procedures required by law to be observed in connection with the making of the decision were not observed;
3. the person who purported to make the decision did not have jurisdiction to make the decision;
4. the decision was not authorised by the enactment in pursuant of which it was purported to be made;
5. the making of the decision was an improper exercise of the power conferred by the enactment in pursuance of which it was purported to be made;
6. the decision involved an error of law, whether or not the error appears on the record of the decision;
7. the decision was induced or affected by fraud;
8. there was no evidence or other material to justify the making of the decision;
9. the decision was otherwise contrary to law.

A court can also make an order of review pursuant to section 7 of the ADJR Act where a person has a duty to make a decision to which the ADJR Act applies; and

• there has been unreasonable delay in making the decision; or
• the person has failed to make the decision before the expiration of a period prescribed by law.

Judicial review pursuant to section 75(v) of the Constitution and section 39B of the Judiciary Act

For judicial review proceedings commenced via section 75(v) of the Constitution and section 39B of the Judiciary Act:

• there must be a “matter” in relation to which the court’s judicial power can be exercised;
• the applicant for judicial review must establish that a writ of mandamus, prohibition or an injunction should issue as relief; and
• the writ of mandamus, prohibition or injunction must be sought against an officer or officers of the Commonwealth.

This means that judicial review proceedings instituted under these provisions can include review of decisions of a legislative character and exercises of prerogative power. This is broader than the coverage of the ADJR Act, which relates only to decisions of an administrative character made under an enactment.

To be successful, an applicant must demonstrate that the relevant decision was affected by jurisdictional error: a legal error that caused the decision-maker to exceed the limits of the functions and powers conferred on them, such that the decision was not lawfully made. The categories of common law jurisdictional error have now been codified in the ADJR Act, but include:

• a breach of the rules of natural justice (including the hearing rule and/or the rule against bias);
• legal unreasonableness;
• error of law;
• reasoning grounds, including failing to consider a relevant consideration or considering an irrelevant consideration; and
• failure to comply with a statutory pre-condition to the exercise of the power (also referred to as jurisdictional fact).

Judicial review: court proceedings

Because judicial review is undertaken by the courts, all the normal court rules and processes apply. This includes:

• Cost: The general rule is that the unsuccessful party will pay the successful party’s costs.
• Speed: Court proceedings are generally slower than merit review processes.
• Formality: Legal representation (with both barristers and solicitors) is the norm in judicial proceedings. The rules of evidence apply. Courts have etiquette rules.
• Disclosure: Unlike under the AAT Act, there is no automatic right to documents or reasons. However, a person may still apply under the ADJR Act for a statement of reasons.

Civil claims, including misfeasance in public office

The role and significance of civil litigation in public law

Historically, civil proceedings commenced against government agencies are very rare. While this is likely to continue, the number of civil proceedings commenced against government respondents appears to be increasing. In 2021, the government sector faced the most new proceedings for class action claims, exceeding those filed against the banking and financial services sector.

Recent proceedings involving civil claims commenced against government agencies include the landmark settlement approached in the Robodebt class action by the Federal Court in 2021. Civil litigation also looks to be a future battleground for the expansion in climate change litigation, including the proceedings in Minister for Environment v Sharma [2022] FCAFC 35 (where Ms Sharma argued that the Commonwealth Minister for the Environment owed a novel duty of care to exercise certain statutory powers under the Environment Protection and Biodiversity Conservation Act 1999 (Cth) with reasonable care so as not to cause harm), and the ongoing proceedings in relation to the impacts of climate change in the Torres Strait (Pabai Pabai v Commonwealth of Australia, commenced in the Federal Court).

Civil claims against government and government officers can be complex and resource intensive to run. It is unlikely that claims in tort, including the tort of misfeasance in public office, will overtake judicial review as the primary manner of challenging government decisions and promoting government accountability. However, if recent developments are anything to go by, the risk for government decision-makers in tort may increase in the years to come.

The consequences for governments of a successful tort claim are more significant than a successful judicial review application. Where a claim in tort is successful, the defendant is liable to pay compensation in the amount ordered by the court. This is distinct from judicial review proceedings, where it is open to a government decision-maker to (try to) remake the decision in a way that is lawful following a successful judicial review challenge.

Element 1: "Invalid or unauthorised act"

For misfeasance in public office to be proven, the purported exercise of power must be invalid, that is:

• the purported exercise of power was invalid because there was no power to be exercised; or
• the exercise of the power miscarried due to some matter, which warrants a setting aside of the administrative action by a court.

In Mengel, Justice Brennan explained the rationale for this requirement:

“There can be no tortious liability for an act or omission which is done or made in valid exercise of a power. A valid exercise of power by a public officer may inflict on another an unintended but foreseeable loss – or even an intended loss – but, if the exercise of the power is valid, the other's loss is authorized by the law creating the power.”

Misfeasance in public office is concerned with the misuse of public power. Accordingly, courts have recognised that invalid or unauthorised acts include:

• administrative decisions that may be set aside on judicial review (Mengel; Sanders v Snell (1998) 196 CLR 329);
• unreasonable imposition of delegated legislation (Brett Cattle Company Ltd v Minister for Agriculture (2020) 274 FCR 337);
• use of public power for an improper purpose (Nyoni v Shire of Kellerberin (2017) 248 FCR 311); and
• acting directly contrary to the express terms of the power (Obeid v Lockley (2018) 98 NSWLR 258)

Element 2: "done maliciously"

Misfeasance in public office is an intentional tort and will only be established if the public official's conduct was "done maliciously" or in "bad faith". This is the key element of this tort, which is concerned not with negligence, but with a dishonest exercise of power involving bad faith on the part of the decision-maker.

The element that the act was “done maliciously” will be proven if either:

• the public official engaged in the conduct maliciously with the intention of causing injury or damage, or for an improper or ulterior purpose (also known as "targeted malice"); or
• the public official engaged in conduct with either "knowledge" of, or "reckless indifference" about:
  • whether their conduct was within power; and
  • the likelihood that their conduct would cause harm.

The threshold for establishing targeted malice is high and will exist if the act was done with actual intention to cause such injury (Mengel). It is unusual for courts to be satisfied that a public officer acted with actual intention to cause injury (Nyoni v Shire of Kellerberrin (2017) 248 FCR 311).

For reckless indifference to exist, it must be established that the decision-maker was determined to proceed whether or not their actions lacked lawful authority. For example, a public official who does not seek advice about whether their proposed conduct is lawful would be recklessly indifferent (Brett Cattle Company Pty Ltd v Minister for Agriculture, Fisheries and Forestry (2020) 274 FCR 337).

Establishing this element requires a court to draw conclusions about the decision-maker’s state of mind. In circumstances where conflicting inferences are open and one of these inferences are favourable to the decision-maker, the court may not be satisfied that the case of misfeasance in public office would have been proved to the necessary standard (Commonwealth of Australia v Fernando [2012] FCAFC 18).

Element 3: "By a public officer"

Misfeasance in public office will only be found against a "public officer". Courts have grappled over time with who will be considered a “public officer” for the purposes of the tort of misfeasance, and whether the relevant exercise of power needs to be attached to the public office.

In Cannon v Tahche (2002) 5 VR 317, the court stated that “since the tort is essentially concerned with misuse of a relevant power which is an incident of a public office, it follows as a matter of practicality that an office cannot be characterised as a public office for the purposes of the tort if no relevant power is attached to it”.

However, Chief Justice Bathurst took a broader view in Obeid v Lockley (2018) 98 NSWLR 258, noting that “the cases provide no clear statement of what constitutes “the holding of a public office”, or whether the power has to be “attached” to the public office, or whether it is sufficient that the public officer by virtue of their position is entitled or empowered to perform the public acts in question”.

In Noori v Leerdam [2008] NSWSC 515, Chief Justice Spigelman stated that:

“The concept of ‘public office’ or ‘public officer’ appears in various legal contexts, both statutory and at common law. There is no authoritative statement of a test for determining what constitutes a public officer for the purposes of the tort of misfeasance. Nor is one needed. In almost all cases the answer will be obvious.”

Examples of public officers from the case law include policy officers, prison officers, and local authorities (such as a city council). Examples of who is not a public officer include a solicitor acting on behalf of the Commonwealth, counsel assisting an independent commission, and members of staff of an independent commissioner who were granted power by a warrant to search a property.

Element 4: "In the purported discharge of his or her public duties"

This element will be made out where a public officer purports to exercise statutory powers or prerogative powers of the executive that have been conferred on them. However, it is less clear whether this element will be made out where a public officer has misused their public office, or where the relevant conduct is private conduct.

In Nyoni v Shire of Kellerberrin (2017) 248 FCR 311, the Full Court of the Federal Court (Justices North and Rares) held that a misuse of public office had led to the tort of misfeasance in public office. The majority held that:

“The misuse can be one that would be within the power… or in the excess of the power. Nonetheless, it is necessary to establish that the alleged misfeasance is connected to a power or function that the officer has by virtue, or as an incident, of his or her public office.” [emphasis added]

In reaching this conclusion, the majority in Nyoni distinguished the facts of that case from the decision in Calvely v Chief Constable of the Merseyside Police, where a police officer made a false report to a superior officer in the course of an internal investigation. In Calvely, the court held that the tort of misfeasance in public office could not be made out because the false report was not a relevant exercise of power by the police officer.

This issue about the connection between the conduct and the person’s public office was considered recently in (on an appeal from a summary dismissal application) in Ea v Diaconu [2020] NSWCA 127. In Ea, the New South Wales Court of Appeal overturned the summary dismissal of a misfeasance in public office action on the grounds that it is arguable that a known member of the Australian Federal Police had misused her office, within the meaning of Nyoni, by making eye contact with jurors, smiling and laughing during a criminal prosecution.

Element 5: "Which causes loss or harm to the plaintiff"

Misfeasance in public office can only be brought by a person that has suffered harm. Accordingly, a member of the general public cannot bring a claim for misfeasance in public office for any improper government conduct.

Investigations, inquiries, complaints and other claims

The last “thing that can go wrong” for government decision­-makers is the commencement of an investigation or inquiry, and/or the submission of a complaint in relation to a decision.

The ways in which this risk can manifest are wide-ranging. Investigations can include internal or external investigations. Inquiries can include parliamentary inquiries, inquiries commenced by statutory bodies conferred with investigative powers, or inquiries such as Royal Commissions. Complaints can include complaints to the Commonwealth, State or Territory Ombudsman (who have specific powers to investigate complaints lodged in relation to government decisions), or Ministerial complaints. Other claims can include claims made under schemes such as the Commonwealth Scheme for Compensation for Detriment caused by Defective Administration (CDDA Scheme).

Each type of investigation, inquiry, complaint and/or other claim has its own purpose and role to play in the broader framework of good government decision-making. Investigations and inquiries on the scale of Royal Commissions can lead to systemic legislative and policy reform in response to findings and recommendations arising out of the relevant investigation or inquiry. On the other hand, complaints lodged by individuals may not have as broad of an effect, but nevertheless play a critical role in maintaining government accountability and transparency in decision-making. Schemes such as the CDDA Scheme also play an important role for individuals affected by government decision-making, as they are designed to provide compensation for those who would not otherwise be eligible for relief by way of a civil compensation claim, but who are able to establish that they have suffered loss or damage as a result of defective government administration.

Complaints and administrative investigations

An administrative investigation considers whether there has been defective administration in government, inquiring into issues such as whether decisions are being made too slowly and whether decisions are being explained properly. These investigations usually, but not always, arise as a result of complaints made to the investigatory body by those affected by their dealings with government.

Administrative investigations are concerned with the entire administrative process (not only decisions) of nearly all Commonwealth agencies. They are conducted by an inquisitorial method, often with little active involvement of the complainant.

If successful, these investigations result in a recommendation or advisory report by the investigator. There is no fee to make a complaint, and complaints can be made informally by any interested person or organisation. There is no time limit for complaints, but they can be dismissed if they are too remote.