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K-Generation Pty Ltd & Anor v Liquor Licensing Court & Anor [2007] SASC 319

30 August 2007 Supreme Court of South Australia - Full Court

This version of the judgment has been prepared by: Dr Robert N Moles and Bibi Sangha
Underlining where it occurs is for editorial emphasis]

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Gray J - dissenting judgment (part three) State Legislation and State Courts

The present case involves a State District Court judge (sitting as the Licensing Court), and the Full Court of the Supreme Court (which is required by the legislation to uphold the denial of natural justice), and so additional considerations arise. Section 77(iii) of the Constitution enables the Commonwealth Parliament to confer federal jurisdiction upon State courts. The District Court and Supreme Court of South Australia are two such courts that have been invested with federal jurisdiction. Together they form part of the integrated Australian judicial system for which the Constitution provides.

In Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51, the High Court held, by majority, that Chapter III invalidated state legislation that empowered the Supreme Court of NSW to make an order for the detention of Kable in prison for a specified period if it was satisfied on reasonable grounds that he was more likely than not to commit a serious act of violence and that it was appropriate, for the protection of a particular person or the community generally, that he be held in custody. Gaudron, McHugh and Gummow JJ held that the exercise of jurisdiction under the Act was incompatible with the integrity, independence and impartiality of the Supreme Court as a court in which federal jurisdiction also had been invested under Chapter III. Gaurdon J observed:“Neither the recognition in Ch III that State courts are the creatures of the States nor its consequence that, in the respects indicated, the Commonwealth must take State courts as it finds them detracts from what is, to my mind, one of the clearest features of our Constitution, namely, that it provides for an integrated Australian judicial system for the exercise of the judicial power of the Commonwealth. Moreover, neither that recognition nor that consequence directs the conclusion that State Parliaments may enact whatever laws they choose with respect to State courts.”

Gaudron J noted: “Once the notion that the Constitution permits of different grades or qualities of justice is rejected, the consideration that State courts have a role and existence transcending their status as State courts directs the conclusion that Ch III requires that the Parliaments of the States not legislate to confer powers on State courts which are repugnant to or incompatible with their exercise of the judicial power of the Commonwealth.”

McHugh J observed: “One of the basic principles which underlie Ch III and to which it gives effect is that the judges of the federal courts must be, and must be perceived to be, independent of the legislature and the executive government. Given the central role and the status that Ch III gives to State courts invested with federal jurisdiction, it necessarily follows that those courts must also be, and be perceived to be, independent of the legislature and executive government in the exercise of federal jurisdiction. Public confidence in the impartial exercise of federal judicial power would soon be lost if federal or State courts exercising federal jurisdiction were not, or were not perceived to be, independent of the legislature or the executive government. … While nothing in Ch III prevents a State from conferring non-judicial functions on a State Supreme Court in respect of non-federal matters, those non-judicial functions cannot be of a nature that might lead an ordinary reasonable member of the public to conclude that the Court was not independent of the executive government of the State. … Furthermore, although nothing in Ch III prevents a State from conferring executive government functions on a State court judge as persona designata, if the appointment of a judge as persona designata gave the appearance that the court as an institution was not independent of the executive government of the State, it would be invalid.”

In Fardon v Attorney-General (Qld) (2004) 223 CLR 575 the High Court held that an impugned statute was constitutionally valid. This has been interpreted by some as a decision that narrowed the ambit of the Kable principle. An important point of distinction in Fardon, though, is that the impugned legislation did not prevent the court from affording procedural fairness to parties before it. McHugh J observed: “Hearings are conducted in public, and in accordance with the ordinary judicial process. There is nothing to suggest that the Supreme Court is to act as a mere instrument of government policy. The outcome of each case is to be determined on its merits.”

Similarly, Gummow J reasoned, as part of his justification as to why the Act in question was constitutionally valid, that “there is nothing in the Act to exclude rules of natural justice from the process of the Supreme Court”.  Callinan and Heydon JJ noted that “the Act requires that the prisoner will be provided with full disclosure and details of the allegations and all other relevant material filed by the Attorney-General against him”.  As earlier observed, the Liquor Licensing Act expressly denies the Licensing Court the power to provide certain adverse information to parties affected by its decisions. Callinan and Heydon JJ further noted in Fardon that “another judicial hallmark of the process for which the Act provides is the requirement that the Court give reasons for its decision” – a hallmark which the Licensing Court is not required to comply with. The Liquor Licensing Act requires the Licensing Court to exercise judicial power in a way where some of the essential hallmarks of the judicial process are absent.

The judgments in Fardon make clear that the repugnancy doctrine in Kable does not imply into the Constitutions of the States the same separation of judicial power mandated for the Commonwealth by Chapter III of the Constitution. However, the States’ power to legislate with respect to courts is not unfettered, and so somewhere between these two positions will be found the point where State legislation is invalid because of the way in which it requires a State court to exercise judicial power. A fundamental denial of natural justice, as is mandated by the Liquor Licensing Act, is one such characteristic that a State cannot validly impose on a State court invested with federal jurisdiction. Nothing in Fardon opposes this conclusion, and many of the observations made in Kable and Fardon, cited above, support it.

Two cases from the Court of Appeal of Queensland and the Supreme Court of Western Australia provide examples of the application of the Kable principle. In Re Criminal Proceeds Confiscation Act 2002 [2003] QCA 249 the Court of Appeal of Queensland held that section 30 of the Criminal Proceeds Confiscation Act 2002 (Qld) was constitutionally invalid. That section provided that where the State applied for a restraining order without giving notice to any person to whom it related, the Supreme Court of Queensland was required to hear the application in the absence of the person whose property was the subject of the application, and without the relevant person having been informed of the application. Williams JA, with whom White and Wilson JJ agreed, observed that to ask a judge to make a decision in those circumstances “makes a mockery of the exercise of the judicial power in question”.  His Honour held: “The direction or command to the judge hearing the application to proceed in the absence of any party affected by the order to be made is such an interference with the exercise of the judicial process as to be repugnant to or incompatible with the exercise of the judicial power of the Commonwealth. Then, because the Supreme Court of Queensland is part of an integrated Australian judicial system for the exercise of the judicial power of the Commonwealth, such a provision is constitutionally invalid.”

Section 28A of the Liquor Licensing Act analogously requires the Licensing Court and the Supreme Court to deny natural justice to a plaintiff. Whilst the Liquor Licensing Act differs from the Criminal Proceeds Confiscation Act in that it allows a person affected to appear before the Licensing Court and make submissions, the right to appear before a court and make submissions is empty when the person does not know anything about the allegations made against them. Section 28A of the Liquor Licensing Act confers no material advantage on a person affected by a decision when compared to section 30 of the Criminal Proceeds Confiscation Act, and equally makes a mockery of the exercise of judicial power.

In Gypsy Jokers Motorcycle Club Inc v Commissioner of Police [2007] WASCA 49 – (special leave to appeal to the High Court was granted on 15 June 2007) the Court of Appeal of Western Australia considered whether section 76 of the Corruption and Crime Commission Act 2003 (WA) was constitutionally invalid. Section 76 of that Act relevantly provided:
(2) The Commissioner of Police may identify any information provided to the court for the purposes of the review as confidential if its disclosure might prejudice the operations of the Commissioner of Police, and information so identified is for the court’s use only and is not to be disclosed to any other person, whether or not a party to the proceedings, or publicly disclosed in any way.
(5) The court may decide whether or not the Commissioner of Police could have reasonably had the belief required by section 72(2) when issuing the notice.
(6) If the court decides that the Commissioner of Police could not have reasonably had the belief required by section 72(2) when issuing the notice, the notice ceases to have effect.

Immediately it can be seen that section 76 of the Corruption and Crime Commission Act provided the court with a power that section 28A of the Liquor Licensing Act does not provide to the Licensing Court – the power, under section 76(5) and 76(6), to review the Commissioner of Police’s decision. The Court held, by majority that section 76 was constitutionally valid. Wheeler JA, in dissent, held that the section was antithetical to the judicial process and so was constitutionally invalid. With respect to the right of review, Her Honour observed: “Whatever the precise scope of the review, and the precise scope of the materials which might be relevant to such a review, it is clear that the ability of the Commissioner of Police unilaterally to determine that certain materials not be disclosed, has the effect that the judicial function, which would normally involve the affording of natural justice to the applicant for review, and of hearing from the applicant informed submissions relevant to the court’s function, cannot be independently performed, but will be constrained to the extent that the Commissioner of Police identifies information as confidential, and thereby “instructs” that the information not be disclosed.”

With respect to the effect of section 76, Wheeler JA observed: “The Commissioner of Police, who is an officer of the Executive Government, decides conclusively what information the court may publish or disclose, both to a party to litigation and (in any reasons which may be published) to the public at large. That Executive decision, once made, has the potential significantly to disadvantage the individual litigant opposed to the Executive. The respondent to an application in the Supreme Court (the Commissioner of Police) is empowered conclusively to determine whether and to what extent information which that party makes available to the court can be disclosed to the opposing party. The court is required to make a determination affecting the property rights of a party in circumstances in which that party may have had no opportunity whatever to consider (even in a summarised or truncated way) the material put against it. Finally, the court’s ability to provide intelligible reasons for its decision, or otherwise to perform its functions in that public way which is generally the hallmark of justice is impaired or destroyed, because of the court’s inability to disclose material which may be critical to its determination. It may be that no one of these factors individually would be sufficient. However, it seems to me that collectively they represent such a departure from the requirement of independence of the Executive and such a departure from that impartiality which is the hallmark of the judicial process, as to render the legislation invalid.

The parallels to section 28A of the Liquor Licensing Act are evident. The power that the Commissioner of Police has under the Liquor Licensing Act to direct the Licensing Court is even greater than the Western Australian counterpart. There is no equivalent in the Liquor Licensing Act to section 76(5) and 76(6) of the Corruption and Crime Commission Act – the Licensing Court is not given power to review the Commissioner of Police’s decision to classify information as criminal intelligence. Once the Commissioner of Police, an officer of the executive government, classifies information as criminal intelligence, the Licensing Court must abide by this determination. The Commissioner of Police is given power by section 28A of the Liquor Licensing Act to conclusively determine what information the Licensing Court gives to people whose rights and interests are affected by its decisions. Under these circumstances, the line demarcating the independent operation of the executive and the judiciary has been unacceptably blurred, and the appearance of judicial impartiality dissolved.

The legislation in the present case makes a District Court judge and the Full Court of the Supreme Court of South Australia instruments of the executive government. It expressly removes the ordinary protections inherent in the judicial process.

The Licensing Court’s Status as a State Court Invested with Federal Jurisdiction

It is clear that the Supreme Court of South Australia is a State court invested with federal jurisdiction. Section 28A of the Liquor Licensing Act, by requiring the Full Court of the Supreme Court to uphold a denial of natural justice by the Licensing Court, is invalid under the principles expounded in Kable. But the other ground for invalidity – that the legislation imposes a function on the Licensing Court itself that is inconsistent with the exercise of federal judicial power – requires a further step in the chain of reasoning. The Licensing Court is not invested with federal jurisdiction, it is a court established by the Liquor Licensing Act to hear applications and other proceedings under that Act. Chapter III of the Constitution is invoked, however, because the Licensing Court is comprised of a District Court judge. The District Court is a court invested with federal jurisdiction, and section 28A of the Liquor Licensing Act is invalid because it requires a judge of the District Court to act, when sitting as the Licensing Court, in a way that is inconsistent with that judge’s role as a member of a court invested with federal jurisdiction.

In Wilson v Minister for Aboriginal and Torres Strait Islander Affairs (1996) 189 CLR 1 the High Court held that a Judge of the Federal Court could not be nominated to provide a report to the Minister for Aboriginal and Torres Strait Islander Affairs. The Judge nominated was not nominated as a Judge of the Federal Court, but in a personal capacity. Brennan CJ, Dawson, Toohey, McHugh and Gummow JJ, referring to the constitutional doctrine of incompatibility, observed: “Its purpose is to protect effectively the independence of Ch III judges from the political branches of government as a guarantee of liberty and as a buttress to public confidence in the administration of justice by Ch III courts. The effect of the application of the constitutional doctrine, which might differ from the effect of application of the common law doctrine, is not to vacate the office to which the Ch III judge has been appointed but to sterilise the power to interfere with the protection which the Constitution gives to the independence of Ch III judges. … The capacity of Ch III judges to perform their judicial duties throughout the terms of their appointment independently of the political branches of government cannot be prejudiced by their appointment to non-judicial office or to perform non-judicial functions. If an appointment to non-judicial office or performance of non-judicial functions prejudices that capacity it is incompatible with the office and function of a Ch III judge.”

Their Honours continued by giving examples of permissible appointments that a judge may accept, such as to a Royal Commission or the Administrative Appeals Tribunal. Their Honours made it clear that the terms of a Royal Commission would be significant in determining whether a judge can accept an appointment to it. As for the Administrative Appeals Tribunal, an appointment there was compatible with the role of a judge, as a member of the Administrative Appeals Tribunal must still decide applications independently of any instruction, advice or wish of the executive government. This may be contrasted with the present case, where the Licensing Court has no input into the classification of criminal intelligence, and once told that something has been certified by the Commissioner of Police to be criminal intelligence, has no discretion to inform the applicant of the allegations made within it.

Similarly, Gaudron J in Wilsonstated: “The function purportedly conferred on Justice Mathews pursuant to s 10 of the Act is not one that has, historically, been performed by judges. Moreover, it is not a function that must be carried out in public. Perhaps the interests of justice require that the matter upon which she was asked to report be considered in confidence. Whether or not that is so, the function of reporting under s 10 of the Act is not one which, in my view, can be conferred on a judge in his or her individual capacity. As the report need not be made public, it cannot be judged according to its own terms. … The function of reporting under s 10 of the Act is one which, if performed by a judge in his or her individual capacity, gives the appearance that the judge is acting, not in any independent way, but as the servant or agent of the Minister. Thus, it is not a function that Parliament may confer on a judge of a court exercising the judicial power of the Commonwealth.”

In the present case the Licensing Court has been reduced to a servant of the executive. The fact that it is a District Court judge who holds the position as the Licensing Court, and that the Full Court of the Supreme Court has no option under the legislation but to uphold the Licensing Court’s breach of natural justice, results in section 28A being constitutionally invalid.

Conclusion

The Liquor Licensing Act compelled the Licensing Court to breach what would ordinarily be a fundamental aspect of the natural justice hearing rule. The plaintiffs had no right to receive the criminal intelligence, by virtue of section 28A, and so were denied the opportunity to know the case against them. That does not give rise to a remedy in itself, however, because the plaintiffs, by virtue of section 28A, did not have any right to know the case against them when the allegations were criminal intelligence. I have reached the conclusion that section 28A is constitutionally invalid by the operation of Chapter III of the Constitution.

It must be emphasised that the question that has been considered in this case is not whether the legislature can specify that applications for liquor licences be refused, and liquor licences varied or removed, on the basis of secret material. Parliament clearly has the power to legislate for this. These acts, though, should be carried out by the executive. What is impermissible is the involvement of the independent judiciary in the process of denying natural justice. By involving the judiciary in such determinations, the legislature obtains the advantage of giving the determinations the appearance of legitimacy and impartiality. But if the court is required to act in a way that denies procedural fairness to one party, then the appearance of legitimacy and impartiality is lost. It brings the court itself into disrepute. The court is forced to act as an arm of the executive. If the legislature wishes these decisions to be made by the judiciary, it must accept that members of the judiciary cannot exercise power in a manner that offends Chapter III of the Constitution. It must accept that the judiciary’s appearance of legitimacy and impartiality arises in part from the natural justice obligations that it owes to parties who come before it. If the legislature does not want natural justice to be afforded to applicants for, and holders of, liquor licences, then the decisions to refuse applications, and vary or remove licences, should be carried out by the executive.

The constitutional validity of section 28A of the Liquor Licensing Act cannot depend on how the judges of the Licensing Court or the Full Court of the Supreme Court discharge the duty that the Act imposes upon them. The provision was either valid or invalid when given the Royal Assent. Nothing that a judge of the Licensing Court did after its enactment could change its status as a valid or invalid piece of legislation. At the time of its enactment, ordinary reasonable members of the public might have seen the Liquor Licensing Act as making the Licensing Court and the Full Court of the Supreme Court parties to and responsible for implementing political decisions of the executive government, acting through the Commissioner of Police, without giving persons who are affected by these decisions the benefit of the ordinary processes of law. As McHugh J observed in Kable: “Any person who reached that conclusion could justifiably draw the inference that the Supreme Court was an instrument of executive government policy.”

That being so, public confidence in the impartial administration of the judicial functions of the District Court and the Supreme Court must inevitably be impaired. The courts no longer exhibit all of the “defining characteristics which mark a court apart from other decision making bodies”. Forge & Ors v Australian Securities and Investments Commission & Ors [2006] HCA 44. Section 28A of the Liquor Licensing Act infringes Chapter III of the Constitution, is invalid, and should be severed from the Liquor Licensing Act. Section 28A of the Liquor Licensing Act creates a situation that is an affront to justice. The plaintiffs in the present case do not know why they have been refused a licence, they do not know the evidence that was put against them, and they do not even know if the evidence concerns themselves or merely someone whom they “associate” with. They will never know this information.

The section represents the executive arm of government dictating that the judicial arm conduct itself in a way that is procedurally unfair. It gives rise to a denial of procedural fairness that cuts deep into judicial integrity and independence. It is an impermissible intrusion into judicial integrity. This application for judicial review should be granted. Declarations to give effect to these reasons should be made in terms to be approved. The application for review should be remitted to the Licensing Court for determination in accordance with these reasons.

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