In brief
The case of The Environment Centre NT Inc v Minister for Resources and Water (No 2) [2021] FCA 1635 concerned judicial review proceedings in the Federal Court of Australia (Court) in respect of two decisions of the Minister for Resources and Water (Minister) and one decision of the Commonwealth. The decisions related to gas exploration activities in the Beetaloo sub-basin located in the Northern Territory.
The Applicant, a community-sector environmental organisation in the Northern Territory, raised five grounds of judicial review in relation to the decisions of the Minister and the Commonwealth. The grounds raised issues of compliance with section 71 of the Public Governance, Performance and Accountability Act 2013 (Cth) (PGPA Act), legal unreasonableness, and whether the decision-makers had acted on incorrect advice in making the decisions.
The Court held that the Minister's failure to consider climate change matters did not make the Minister's decisions legally unreasonable and did not constitute a breach of the PGPA Act. However, the Court held that the Commonwealth's decision was legally unreasonable given the timing of the decision in relation to ongoing litigation and communications between the parties.
The fifth ground of review, being that the timing of the Commonwealth's decision was "legally unreasonable, illogical and/or irrational", was made out and the Court declared the Commonwealth's decision invalid. The remaining grounds of review were unsuccessful.
Relevant decisions
The relevant decisions made by the Minister and the Commonwealth are as follows:
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The Minister's decision to prescribe the Beetaloo Cooperative Drilling Program (Program) by a statutory instrument (Instrument). The Instrument was made by the Minister under section 33(1) of the Industry Research and Development Act 1986 (Cth) (IRD Act), which allows the Minister to prescribe programs in relation to industry, innovation, science, or research.
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The Minister's decision to approve $21 million in funding for new exploration wells under the Program (Approval Decision). The Program provides a monetary incentive for exploration and appraisal activities.
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The Commonwealth's decision to enter into three contracts with Imperial Oil and Gas Pty Ltd (Imperial) which gave effect to the Approval Decision (Contracts Decision).
No failure to comply with section 71 of the PGPA Act or the Commonwealth Grants Rules and Guidelines 2017
The Applicant argued that, when making both the Instrument and the Approval Decision, the Minister failed to comply with section 71 of the PGPA Act by failing to consider climate change. Section 71 requires the Minister to make "reasonable inquiries" into whether a proposed expenditure is a "proper use" of relevant money. The Court did not accept the Applicant's argument.
Requirement to make "reasonable inquiries" not a jurisdictional pre-condition
In relation to the nature of the duties under section 71 of the PGPA Act, the Court held that the requirement to make "reasonable inquiries" is not an objective, jurisdictional pre-condition to the exercise of the Minister's powers, but rather one which requires the Minister's opinion or judgement (at [80]). The assessment required under this section will involve the weighing of competing considerations, and the nature and extent of such inquires is within the discretion of the Minister (see [63] to [66]).
Section 71 of the PGPA Act does not apply to the Instrument
The Court held that the making of the Instrument itself did not constitute an approval of a proposed expenditure by the Minister and therefore section 71 of the PGPA Act did not apply to the making of the Instrument. This was because of the statutory context of the IRD Act, which is primarily concerned with prescribing programs rather than financial management (at [83]).
No contravention of section 71 of the PGPA Act or the Guidelines when making the Approval Decision
Both section 71 of the PGPA Act and the Commonwealth Grants Rules and Guidelines 2017 (Guidelines) applied to the Approval Decision meaning that the Minister was required to be satisfied that the funding for new exploration wells under the Program was a "proper use" of relevant money. However, the Minister did not breach the PGPA Act or the Guidelines when making the Approval Decision.
The Court held that there was no requirement under section 71 of the PGPA Act or the Guidelines for the Minister to make reasonable inquiries into climate change matters or economic risks in the following circumstances (see [89] to [93]):
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The funding related to exploration and appraisal activities, as opposed to extraction activities and the subsequent use of gas. There was no evidence before the Court that those activities contribute to climate change.
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Climate change risk matters would, where relevant, be considered by downstream decision-makers when managing risks in respect of the substantive recovery, extraction, and use of gas.
Thus, the Applicant's claim under this ground failed.
Decision to make the Instrument and the Approval Decision not legally unreasonable
The Applicant argued that when making both the Instrument and the Approval Decision, the Minister acted in a way that was legally unreasonable, illogical, or irrational by failing to have adequate regard to climate change risks and economic risks, and failing to act in a way that had an "evident and intelligible justification".
The Court held that the Approval Decision was amenable to judicial review due to the heavily regulated statutory regime for Ministerial expenditure decisions (at [110]). However, the Court held that the Approval Decision was not unreasonable in this case (at [112]).
The Court noted that the Applicant had misstated the standard of review for unreasonableness. Being a form of delegated legislation, the Instrument is subject to a higher standard of unreasonableness. The Court quoted the following passage from the judgment in Athavle v State of New South Wales [2021] FCA 1075 at [96] confirming the relevant test for unreasonableness:
"…the proper test is not one of expediency but whether there is a power to make the subordinate instrument. Where there are difficult choices to be made, it is essential that the Court does not usurp the role of the maker of the impugned subordinate instrument..."
The Court referred to the following discussion in the case of Minister for Immigration and Border Protection v SZVFW [2018] HCA 30 at [11] which confirmed that:
"…the test for unreasonableness is necessarily stringent…courts will not lightly interfere with the exercise of a statutory power involving an area of discretion".
In this situation, the Court was not convinced that the Instrument nor the Approval Decision were unreasonable. Thus, the Applicant's claim under this ground also failed.
Minister did not act upon erroneous advice
The Applicant argued that when making the Approval Decision, the Minister relied on incorrect or unfounded advice from an assessment committee regarding the financial viability of the Program. It was argued that such considerations were central to the mandatory relevant considerations under section 71 of the PGPA Act.
The Court rejected this argument and held that the information was unlikely to have had a misleading effect on the Approval Decision given that the purpose of the Program was to accelerate investment and not to generate new investment (at [119]). The assessment committee had also assessed the proposed spending as per the requirements of the Program assessment criteria (at [121]).
The Court held that the Minister had not acted on erroneous advice. Thus, the Applicant's claim under this ground also failed.
Contracts Decision was legally unreasonable
The final ground of review related to the Contracts Decision made by the Commonwealth. The Applicant argued that the timing of the making of the Contracts Decision was legally unreasonable, illogical, or irrational. It argued that the Commonwealth had breached its common law obligations to act as a model litigant, being the Commonwealth's duty to act in a way which promotes the proper use and management of public resources, and had acted in a way that was legally unreasonable (at [159]).
By way of background, following the commencement of proceedings against the Minister's Approval Decision, the Applicant wrote to the Minister stating that any agreements entered into in reliance on the Approval Decision and the Instrument would be invalid, and would be "contrary to the interests of justice" given that the Minister's powers were before the Court. The Commonwealth nonetheless entered into three contracts with Imperial.
The Court confirmed that a decision will be unreasonable in the legal sense when it lacks "an evident and intelligible justification" or where it is a decision that "no reasonable person could have arrived at" (see [181] to [186]).
Emphasising the need for "judicial self-restraint", the Court referred to the decision in the case of Minister for Immigration and Border Protection v Stretton [2016] FCAFC 11, which noted that there is "an area of decisional freedom of the decision maker" and that the concept of legal unreasonableness does not "…provide a vehicle for the Court to remake the decision according to its view as to reasonableness…" (see [183] to [184]).
The Court held that the Contracts Decision was legally unreasonable. The Court's reasoning included that the Applicant had put the Commonwealth on notice of its concerns, the Applicant had sought an undertaking from the Minister, there was no evident and intelligible justification for the Contracts Decision, the timing of the Contracts Decision deprived the Applicant of the opportunity to seek urgent injunctive relief, and the Commonwealth had failed to comply with the common law conduct standards for a model litigant.
The Court held that the Contracts Decision was legally unreasonable and thus the contracts themselves were void. Thus, the Applicant's claim under this ground was successful.
Conclusion
The Applicant was successful on one of the five grounds, and the Court therefore granted a declaration that the Contracts Decision is invalid and dismissed the remaining grounds.