[1969-1982] NLR (A) 83

IN THE SUPREME COURT OF NAURU

Constitutional Reference No. 3 of 1977

Four questions referred under Article 55 of the Constitution

27th September, 1977.

Supply legislation - Article 61 of the Constitution - procedural requirements for enactment of supply legislation under Article 61(4).

Supply legislation - Articles 59(4) and 61 of the Constitution - whether supply legislation can be enacted otherwise than under Article 61.

Article 59 of the Constitution reads -

"59. (1) No moneys shall be withdrawn from the Treasury Fund except to meet expenditure that is charged upon the Treasury Fund by this Constitution or in accordance with law.

(2) No moneys shall be withdrawn from any fund referred to in Article 58 other than the Treasury Fund except in accordance with law.

(3) A proposed law for the withdrawal of moneys from the Treasury Fund or any other fund referred to in Article 58 shall not receive the certificate of the Speaker under Article 47 unless the purpose of the withdrawal has been recommended to Parliament by the Cabinet.

(4) The Cabinet shall cause to be prepared and laid before Parliament before the date of commencement of each financial year (or if, in respect of a particular financial year, Parliament, by resolution, determines a later date, before that later date), estimates of the revenues and expenditure of Nauru for that year."

Article 61 reads -

"61 (1) If the appropriation law in respect of a financial year has not received the certificate of the Speaker under Article 47 on or before the twenty-first day before the commencement of that financial year, the Cabinet may, in accordance with clause (2) of this Article, recommend to Parliament a proposed law authorising the withdrawal of moneys from the Treasury Fund for the purpose of meeting expenditure necessary to carry on the services of the Republic of Nauru after the commencement of that financial year until the expiration of three months or the coming into operation of the appropriation law, whichever is the earlier.

(2) A recommendation by the Cabinet referred to in clause (1) of this Article shall be in writing delivered to the Speaker not later than the fourteenth day before the commencement of the financial year and the Speaker shall, on receiving the recommendation, lay it before Parliament as soon as practicable.

(3) For the purposes of clause (2) of this Article and notwithstanding Article 40, the Speaker shall, if necessary, appoint a time for the beginning of a session, or for a sitting, of Parliament.

(4) Where the Cabinet has recommended a proposed law under clause (1) of this Article and neither the appropriation law nor that proposed law has come into operation on or before the commencement of that financial year, the Cabinet may authorise the withdrawal of moneys in accordance with that proposed law but the amount of moneys so withdrawn shall not exceed one-quarter of the amount withdrawn under the authority of the appropriation law or laws in respect of the preceding financial year."

On 9th June, 1977, a Bill for a Supply Act was presented to Parliament; it was read three times and passed by Parliament on that date. A written recommendation of the Bill by the Cabinet was delivered to the Speaker but not laid before Parliament by him. The Act provided for supply from 1st July, 1977, until 1st October, 1977, or until the appropriation law for the 1977-1978 financial year came into operation, whichever date might be the, earlier. The Minister for Finance, introducing the Bill, said that it was "necessary to introduce the Bill as required by Article 61 of the Constitution". Estimates of revenue and expenditure for 1977-1978 had been laid before Parliament and a Bill for the Appropriation Act 1977-1978 had been presented before the Bill for the Supply Act was presented.

The validity of the Supply Act was called into question and the Cabinet referred four questions to the Supreme Court for its opinion under Article 55 of the Constitution. 

Those questions were:

(1) On the facts, have the provisions of Article 61 of the Constitution been complied with in relation to the Supply Act 1977?

(2) If the answer to Question 1 is in the negative, was the Cabinet nevertheless entitled to authorise withdrawal of moneys from the Treasury Fund in accordance with Article 61(4) of the Constitution?

(3) Was the Act entitled the Supply Act 1977 validly enacted?

(4) Is the Supply Act 1977 law?

Held: (1) Article 61 of the Constitution sets the procedure which must be complied with before the Cabinet can authorise the withdrawal of moneys from the Treasury Fund under clause (4) of that Article.

(2) Although the provision in Article 61 for the presentation to Parliament of a Bill for supply for the first three months of a financial year is the only provision in the Constitution relating expressly to supply, it is a part of the procedure provided as a prerequisite to withdrawal of moneys from the Treasury Fund being authorised under Article 61(4); it is not intended to exclude the presentation of Bills for supply otherwise than in accordance with that Procedure, if their presentation is otherwise expressly or implicitly authorised by the Constitution.

(3) Although Article 59(4) implicitly requires that the principal of annuality be observed in the Republic's finances and accounting, it does not preclude the enactment of supply legislation.

(4) Bills for supply legislation may be presented to Parliament and enacted by Parliament, provided that their effect is not to destroy or seriously impair the principle of annuality in the Republic's finances and accounting.

S.E.K. Hulme for the Cabinet
C.G. Powles for Hammer DeRoburt, M.P. and other M.P.s
Hon. V. Eoaeo, M.P. in person

Thompson, CJ.:

The following questions have been referred under Article 55 of the Constitution for the opinion of this Court –

(1) On the facts, have the provisions of Article 61 of the Constitution been complied with in relation to the Supply Act 1977?

(2) If the answer to Question 1 is in the negative, was the Cabinet nevertheless entitled to authorise withdrawal of moneys from the Treasury Fund in accordance with Article 61(4) of the Constitution?

(3) Was the Act entitled the Supply Act 1977 validly enacted?

(4) Is the Supply Act 1977 law?

These questions have been referred in the context of certain facts. Those facts may be summarised as follows:-

(1) A Bill for an Act citable as the Supply Act 1977 was presented to Parliament by the Minister for Finance on 9th June, 1977, and was read three times and passed by Parliament on that date. It was then certified by the Speaker as having been passed by Parliament.

(2) A written recommendation of the Bill by the Cabinet dated 9th June, 1977, was delivered to the Speaker but not laid before Parliament by him. The Bill was orally recommended to Parliament by the Minister for Finance on behalf of the Cabinet.

(3) The Bill contained provision for the withdrawal of moneys from the Treasury Fund for the purpose of meeting expenditure necessary to carry on the services of the Republic from 1st July, 1977; it provided for the Supply Act 1977 to cease to have effect on 1st October, 1977 or upon the coming into operation of the appropriation law for the 1977-1978 financial year, whichever date was the earlier.

(4) In the Objects and Reasons accompanying the Bill it was implied that he Bill was being presented pursuant to Article 61 of the Constitution. The Minister for Finance, in presenting the Bill, made a statement that it was "necessary to introduce the Bill as required by Article 61 of the Constitution".

(5) Before the Bill was presented to Parliament the Cabinet had laid before Parliament estimates of revenue and expenditure for the financial year 1977-1978 and had presented to Parliament the Bill for the Appropriation Act 1977-1978. Those estimates have not yet been approved and that Bill has not yet been passed.

Written submissions were received by this Court from Mr. C.G. Powles, as counsel representing eight Members of Parliament, Mr. S.E.K. Hulme, as counsel representing the Cabinet, and the Honourable V. Eoaeo, M.P. All three of them subsequently addressed the Court orally and an oral submission was received also from the Honourable JA. Bop, M.P.

QUESTION NO. 1

Article 61 of the Constitution is as follows-

"61. (1) If the appropriation law in respect of a financial year has not received the certificate of the Speaker under Article 47 on or before the twenty-first day before the commencement of that financial year, the Cabinet may, in accordance with clause (2) of this Article, recommend to Parliament a proposed law authorising the withdrawal of moneys from the Treasury Fund for the purpose of meeting expenditure necessary to carry on the services of the Republic of Nauru after the commencement of that financial year until the expiration of three months or the coming into operation of the appropriation law, whichever is the earlier.

(2) A recommendation by the Cabinet referred to in clause (1) of this Article shall be in writing delivered to the Speaker of later than the fourteenth day before the commencement of the financial year and the Speaker shall, on receiving the recommendation, lay it before Parliament as soon as practicable.

(3) For the purpose of clause (2) of this Article and notwithstanding Article 40, the Speaker shall, if necessary, appoint a time for the beginning of a session, or for a sitting, of Parliament.

(4) Where the Cabinet has recommended a proposed law, under clause (1) of this Article and neither the appropriation law nor that proposed law has come into operation on or before the commencement of that financial year, the Cabinet may authorise the withdrawal of moneys in accordance with that proposed law but the amount of moneys so withdrawn shall not exceed one-quarter of the amount withdrawn under the authority of the appropriation law or laws in respect of the preceding financial year."

The marginal note to the Article reads "Withdrawal of moneys in advance of appropriation law".

For the presentation of a proposed law to Parliament to comply with Article 61, the recommendation of it by the Cabinet must -

(a) be made after 10th June;

(b) be made in writing;

(c) be delivered to he Speaker by not later than 17th June; and

(d) be laid before Parliament by the Speaker.

Quite clearly the recommendation must be made, and laid before Parliament, before or contemporaneously with the presentation of the proposed law to Parliament.

A Bill for an Act is proposed legislation. The presentation of the Supply Bi11 1977 clearly did not comply with Article 61 in two respects. First, it was presented to Parliament (and indeed passed) two days before it could properly be recommended. Second, the recommendation, although made by the Cabinet in writing to the Speaker, was not laid before Parliament by the Speaker.

Mr. Powles submitted that the Bill did not comply with the provisions of Article 6l for a third reason, namely that moneys were sought for one day in excess of the three months referred to in Article 61(1). Whether that submission is correct or not depends upon the effect of the words "shall cease to have effect on" in clause 2 of the Bill. It is not necessary in the circumstances of this case for this Court to express any opinion on the point.

Mr. Eoaeo submitted that the Bill did not comply with Article 61 because no proposed appropriation law for the 1977-1978 financial year had been properly recommended to Parliament. In doing so he relied on facts not included in the reference. The questions referred can be answered only on the basis of the facts stated in the reference. It is therefore, not possible to consider that submission.

Because of the two respects referred to above in which the Bill did not comply with the requirements of Article 61, this Court will have to answer "No" to Question No. 1. Before it does so, however, it should be made clear that the Cabinet does not seek to rely on such compliance as the basis of the validity of the Supply Act 1977. Further, it should be noted that failure to comply with a procedure prescribed by statute as preliminary to any transaction does not necessarily invalidate the transaction. In some cases the transaction may be valid if there has been substantial compliance with statutory requirements, even though there has not been strict compliance with them. In others the statutory provision may be regarded as directory rather than mandatory. In each case it is necessary to consider the nature of the statutory provision and the extent and effect of the non-compliance before it can be ascertained whether the transaction is valid of invalid. This is well illustrated by the different judgments, and the reasoning adopted in each of them, in the case of Victoria v. The Commonwealth of Australia (1976) 50 A.L.J.R. 7, a case in the High Court of Australia.

Question No. 1 is answered as follows -

It is the opinion of his Court that the procedure followed preliminary to the presentation of the Bill for the Supply Act 1977 to Parliament did not comply with the provisions of Article 61 of the Constitution.

QUESTION NO. 2

The Court will deal with this question after it has considered Question No. 3.

QUESTION No. 3

The Speaker has certified that the Supply Act 1977 was enacted by Parliament. The Bill was presented to Parliament in the proper form for a proposed law, was recommended to Parliament by the Cabinet, was read three times and was passed through all stages by a majority vote of Parliament. Prima facie, therefore, it was validly enacted. However, its validity is called in question on three grounds. The first is that supply legislation cannot be validly enacted except in accordance with Article 61 of the constitution. The second is that, even if supply legislation can be enacted otherwise than in pursuance of, and in accordance with, Article 61, the Bill for the Supply Act 1977 could not be so enacted because Parliament was informed that it was being presented under Article 61. The third ground is that the Bill could not be validly enacted by Parliament passing all three stages of the Bill on the same day.

In his written submission Mr. Powles has stated:

"Once Cabinet elected to recommend the proposed law in accordance with Article 61 and purported to introduce it to Parliament pursuant to that Article, the recommendation and proposed law were required to comply with the provisions of that Article".

That statement may possibly reflect the Cabinet's political obligation but I am unable to accept it as a correct statement of the 1aw. This Court has no jurisdiction to inquire into the workings of Parliament to see whether members have been misled over any matter. The Constitution gives it no such jurisdiction; nor can jurisdiction be inferred from the principles underlying the Constitution or the system of interrelating checks and balances between the three arms of the State, the legislature, the executive and the judiciary, implicit in the Constitution. It may be politically reprehensible to mislead Parliament as to the circumstances in which legislation is presented (whether or not it is reprehensible in any particular case and if so, how reprehensible no doubt depends on whether Parliament is misled deliberately or accidentally) but that is a matter for Parliament, and ultimately the electors, not for this Court. This Court can express an opinion only upon the legal validity or invalidity of the Supply Act 1977.

Mr. Powles has not, I think, expressly submitted that the Act is invalid because the Bill passed through all three readings on the same day but he has called the restriction on debate "improper"; such a submission can have relevance to these proceedings only so far as such "impropriety" leads to legal invalidity. The normal practice in the House of Commons in the United Kingdom is for the three readings of money bills to be taken on different days, apparently in order to ensure that there is ample opportunity for members to consider the contents of the bills and to debate them. But that practice has been departed from on a number of occasions, once as recently as 1974. Parliamentary practice in respect of money bills is essentially a matter for Parliament; Parliament is free to regulate its procedures. The public may well be concerned if Parliament habitually adopts procedures which enable money bills to be "bulldozed" through without adequate time for consideration of their contents or for debate. But that is a political matter, for members of Parliament, and ultimately the electors. It does not affect the legal validity of the legislation.

Apart from his arguments with which I have just dealt, Mr. Powles' submissions are based on one fundamental premise, that supply legislation, that is to say a Bill to provide for the withdrawal of moneys from the Treasury Fund to meet expenditure in any financial year until the appropriation law for that financial year has become law, can be presented to parliament only in accordance with Article 61.

If, as Mr. Hulme has contended, the Cabinet has an option whether or not to use the Article 61 procedure for supply legislation, Mr. Powles submissions must fail.

Broadly, Mr. Powles has based on two alternative or complementary grounds his argument that a bill for a supply Act can be presented to Parliament only in accordance with Article 61. First, he has submitted that, although there is no express prohibition of supply legislation which does not comply with Article 61, that Article and Article 59 when read together impose a system of annuality on the management of the Republic's finances, that in respect of each financial year they permit only an appropriation Act, or several appropriation Acts, and one, but only one, Supply Act, and that that Supply Act must be for a period of three months and comply as to content and presentation with the requirements of Article 61. Second, he has submitted that, if Articles 59 and 61 do not prohibit Supply Acts which do not comply with Article 61, a constitutional convention that they must comply with it has been established by practice over the nine years since independence.

In support of his arguments to establish the first of those grounds Mr. Powles tendered a copy of the report of two days (in January 1968) of the proceedings of the Constitutional Convention, the elected body of Nauruans which enacted the Constitution. The report was admitted as evidence provisionally; that is to say, the Court reserved its final decision whether to admit it. Having read all the relevant passages in the report, I find that it affords an excellent illustration of the reason why generally the Courts will not admit as evidence reports of parliamentary debates on proposed legislation. The contents and the purpose of Article 61 were discussed by so many members of the Convention, and so many different views were expressed, that no clear picture emerges of what purpose the Convention as a whole intended it to serve. Even the advisers were not wholly consistent in the explanations which they gave from time. The record of the Convention will, therefore, not be taken into account by this Court for the purpose of these proceeding.

Article 59 of the Constitution contains provisions relating to the withdrawal of moneys from the Treasury Fund. It is as follows:

"59. (1) No moneys shall be withdrawn form the Treasury Fund except to meet expenditure that is charged upon the Treasury Fund by this Constitution or in accordance with law.

(2) No moneys shall be withdrawn from any fund referred to in Article 58 other than Treasury Fund except in accordance with law.

(3) A proposed law for the withdrawal of moneys from the Treasury Fund or any other fund referred to in Article 58 shall not receive the certificate of the Speaker under Article 47 unless the purpose of the withdrawal has been recommended to Parliament by the Cabinet.

(4) The Cabinet shall cause to be prepared and laid before Parliament before the date of commencement of each financial year (or if, in respect of a particular financial year, Parliament, by resolution, determines a later date, before that later date), estimates of the revenues and expenditure of Nauru for that year."

There is no express provision that there must be an "appropriation law" for any financial year; but it is to be implied from Article 59(4) and is assumed in Article 61 that there will be an appropriation law in respect of each financial year. The expression "appropriation law" is not defined in the Constitution. It is apparent from the context, however, that it means an Act of Parliament appropriating moneys in the Treasury Fund for specific purposes for which those moneys have been voted to the executive by Parliament.

In the United Kingdom, and in many other countries which have derived their political systems from the United Kingdom, the executive cannot spend public moneys unless authorised to do so by Parliament. In order to satisfy Parliament that moneys which the executive seeks parliamentary authority to spend are properly required, the executive prepares and lays before Parliament estimates of expenditure; these comprise a statement of the purposes for which the moneys are required and the amount required for each purpose.

Parliament then considers the requirements (other than any for which expenditure is already authorised by any law), vote-head by vote-head, and, having by resolution voted the required moneys to the executive, enacts legislation appropriating the various amounts to the various vote-heads. In this way Parliament exercises control over the purposes for which money is spent by the executive. Parliamentary control is further exercised in many countries by the adoption of a system of annual budgeting, accounting and accountability. Estimates of expenditure are prepared and moneys appropriated on an annual basis, although usually the estimates are revised, or supplementary estimates laid before Parliament, and further public moneys are voted and appropriated by law for particular purposes during the financial year. In the United Kingdom and many other countries, because the voting of moneys sought in the annual estimates takes several months and the appropriation law in respect of that authorised expenditure is not passed until well into the financial year, some moneys have to be voted and appropriated before the start of the financial year so that the executive can keep the services of the state running until the moneys for the full year are voted and appropriated. In the United Kingdom the procedure followed is for special estimates of moneys needed to carry on the services of the state for about five months to be laid before Parliament; the amounts sought by the executive are then voted by resolution (called "votes on account") and Consolidated Fund Act is enacted appropriating the moneys voted.

Article 59 of the Constitution of Nauru, read in conjunction with Part IV, clearly provides for Parliamentary control of the provision of public moneys to the executive for expenditure on the services of the Republic. Moneys cannot be withdrawn from the Treasury Fund (other than for expenditure charged on the Treasury Fund by the Constitution) unless authorised by Act of Parliament. Furthermore, in order that Parliament may be aware of the purposes for which the Cabinet requires to be authorised to spend moneys in each financial year, estimates of such expenditure have to be laid before Parliament. Normally this has to be done before the start of the financial year but Parliament may agree to a later date. Implicit in this provision is a system of annual financial accounting and accountability. Thus the system of annuality, which in the United Kingdom is based on a constitutional convention, is a part of the constitutional framework of Nauru. [It is necessary that Parliament should exercise its powers within that framework]

What is the effect of this on the apparently unlimited power of Parliament under Part IV of the Constitution to authorise the cabinet to withdraw moneys from the Treasury Fund at any time and for any period, if a proposed law for the purpose is recommended to it by the Cabinet? In my view, Parliament must accept that its power is circumscribed. Legislation intended to frustrate, or having the effect of frustrating, the system of annual accounting should not be enacted. The appropriation law for a financial year should be related to the annual estimates of expenditure for that financial year, i.e. the estimates laid before Parliament under Article 59 (4), as eventually approved by Parliament and authority given by Parliament during the course of the financial year to incur additional expenditure should be reflected in an approved revision of those estimates or in approved supplementary estimates for that financial year. Otherwise, the basis of accounting – and, more important, of the cabinet's accountability – for expenditure would be removed. Whether and if so, to what extent, those obligations of Parliament are enforceable by this Court, e.g. by declaration that legislation enacted in breach of them is invalid, or only by the electorate by its votes is a question which is not necessary to decide in these proceedings.

In these present proceedings this Court is concerned only with the question whether the enactment of the Supply Act 1977 was a breach of Parliament's obligation to keep within the constitutional framework of annuality. The maximum period for which the Act provides moneys is only three months. In the United Kingdom such Acts are without time limit and the moneys provided are usually sufficient for a period of four or five months. The do not frustrate the "annuality" system in the United Kingdom. No reason is apparent why an Act such as the Supply Act 1977 should be regarded as likely to do so in Nauru. The fact that it is for a fixed period is irrelevant in this regard, because it is overtaken by the appropriation Act and the expenditure which it authorises is included in that Act.

The protection of the "annuality" system does not require that proposed supply legislation should be presented only in accordance with Article 61. Article 61 does not itself expressly or by necessary implication require it. Its strict requirements as to time and manner of presentation are appropriate to a procedure leading to the cabinet having a power to withdraw moneys from the Treasury Fund for a period of up to three months without express parliamentary approval; they appear unnecessarily restrictive in respect of procedure resulting simply in Parliament having the opportunity to enact supply legislation. In the opinion of this Court Articles 59 and 61 do not require that supply legislation be limited to one Act providing moneys for a maximum period of three months only and presented in pursuance of, and in accordance with, Article 61.

With regard to the second ground on which Mr. Powles based his argument that a bill for a supply Act can be presented to Parliament only in accordance with Article 61, that is to say that a constitutional convention has been established by a practice followed over the nine years since Independence, it is to be noted that the practice was not followed in 1972. Further, it is a practice which is as consonant with a decision of the Cabinet to adopt the Article 61 procedure so as to be able, if necessary, to take advantage of the provisions of Article 61 (4), as it is with a decision to limit supply legislation to periods of three months. Mr. Bop, the former Minister for Finance, has informed this Court that he believed at all times over the period of nine years that the Supply Act had to be for a period of three months. A misunderstanding of what the Constitution requires is hardly a sound basis for the establishment of a Constitutional convention. In the opinion of this Court, therefore, no constitutional convention has been established that there must be only one Supply Act in respect of each financial year or that it must be for a period of three months.

Before answering Question No. 3, I think it desirable draw attention to a practice followed in the United Kingdom in relation to the content of supply legislation. If not essential to the system of annuality, it is closely related to it. The practice is that no provision may be included for expenditure on services not already sanctioned by Parliament in the appropriation law for the previous financial year or in legislation specifically authorising expenditure on those services. That practice appears to have been followed in Nauru up to date and it is possible that the phrase "expenditure necessary to carry on the services of the Republic of Nauru", which appears in Article 61, should be construed as requiring that it be followed. I express no concluded opinion on that point, as it is not in issue in these proceedings.

Question No. 3 is answered as follows:

In the opinion of this Court the Act entitled the Supply Act 1977 was validly enacted.

QUESTION NO. 4

In view of the answer given to Question No. 3, Question No. 4 is answered as follows -

In the opinion of this Court the supply Act 1977 is law.

QUESTION NO. 2

Question No. 2 is now answered as follows -

As the Supply Act 1977 is law, the Cabinet has no need to, and is not entitled to, authorise withdrawal of moneys from the Treasury Fund in accordance with Article 61(4) of the Constitution.