Statutory boards are different from corporate boards. The way they delegate is a key difference.
Some statutory bodies and their boards seem to operate in the same way as corporate boards. (By corporate, I mean non-statutory, though this is an oversimplification.) They might delegate all of their powers as if they were corporate boards. However, this method of operation, even if it has persisted for years, may actually be unlawful for a statutory board. Risk management advisers and those in charge of compliance need to be aware of this issue.
Statutory bodies have a governing person and/or group of people. They have leaders such as a Commissioner, a Registrar, a CEO, a chairman of the board. The board has meetings, discusses things, and makes decisions.
But statutory boards are fundamentally different from corporate boards. The way they obtain and distribute power is quite different. The way they make decisions on these matters must comply with more onerous legal requirements.
These differences arise from the way in which the different entities come to exist. In the case of a statutory board or authority, they come to exist because of Parliament. Parliament wills them to exist through the passing of a statute. The statute, therefore, is key to their existence and methods of operation.
On the other hand, a corporate board exists because some people, or other companies, will them to exist. Parliament has little or nothing to do with it.
As a result of these fundamentally different ‘creation’ methods, the powers of each type of entity can be exercised differently. The ways in which these powers can be ‘delegated’ to others is also fundamentally different.
These significant differences are not always appreciated by those managing statutory boards.
And failing to see these differences is a high-risk strategy which can undermine the whole of operations for that entity.
(For a more detailed look at the range of different entities that are possible at Commonwealth level, try this website: Types of Australian Government Bodies.)
(And for more on delegations, see my post: Why do people forget to delegate powers in a statute?)
Identifying statutory bodies and statutory boards
Those making decisions for statutory entities and their boards must first realise that the entity or board was created by a statute. Sometimes, it is not immediately apparent that a statute created the entity.
For example, if you look at the website of ASIC, you find this explanation: “ASIC is Australia’s integrated corporate, markets, financial services and consumer credit regulator.” The word which gives away the identity of ASIC as a statutory body is the word “regulator”. However, one has to look further, because some industries think that they have self-appointed regulators.
ASIC’s website goes on: “We are set up under and administer the Australian Securities and Investments Commission Act 2001 (ASIC Act)…” There it is. ASIC is “set up under” (or by) an Act of Parliament.
Contrast ASIC with AFCA, the Australian Financial Complaints Authority. It looks very official. But its website discloses: “AFCA is not a government department or agency, and we are not a regulator of the financial services industry. We are a not-for-profit company, limited by guarantee that is governed by a Board of Directors, which includes equal numbers of industry and consumer representatives. AFCA’s Chief Ombudsman is responsible for the management of the organisation.”
What powers might a statutory body have?
A discussion of the meaning and ambit of the powers of a statutory body could become quite complex. As a starting point, one must look for the powers of the statutory body in the statute which creates the body. ASIC summarises its statutory powers on this webpage. The powers are helpfully described as phrases beginning with verbs: “register financial service providers”, “intervene to ban defective products”, and “issue infringement notices”.
Once you identify the powers of the statutory body, you can think about how to exercise them and delegate them, or perhaps authorise others to exercise them too.
How should a statutory board delegate powers?
A corporate board might be able to hold a meeting and decide to delegate something during the discussions held in that meeting. A statutory board might not be able to delegate in this way.
Of course, correct methods of delegation will always depend upon the statute which created the statutory board.
Let’s say the statute requires delegations to be ‘by instrument’ or ‘in writing’. In such a statutory scheme, it is unlikely that a decision to delegate via discussions during a meeting alone, will meet the statutory requirement. Generally speaking, such a delegation, to be effective, must be ‘an instrument’ or ‘in writing’. In other words, there would need to be a ‘stand alone’ document to meet the statutory test for a valid delegation.
Of course, it can be argued that a stand alone document is a good idea anyway. Otherwise, how is the statutory board to prove that they made a delegation of power at all? But boards do not always think this way.
Aren’t the minutes of the meeting ‘a document’?
You might ask whether you can rely on the minutes of a board meeting to show a delegation. A Victorian case, decided by the Court of Appeal of the Supreme Court, clearly stated that such minutes were not so sufficient in the case of the statutory entity in question. Of course, the minutes are not a ‘stand alone’ delegation document. And the board does not ‘issue’ the minutes on the day of the meeting – at best, the board approves the minutes some weeks later, perhaps with corrections.
This case contains some useful explanation of the need for a delegation to comply with the relevant statute, as set out below.
The solicitor case: how statutory boards should delegate
In the case of B a solicitor & G a solicitor v Victorian Lawyers RPA Limited & Legal Profession Tribunal 1 the Victorian Court of Appeal explained why minutes of a board meeting did not contain a delegation for the purposes of the relevant statutory body. Charles and Batt JJA found:
“In the circumstances the legislative purpose of permitting a delegation of the functions and powers to be exercised after completion of an investigation, but requiring such a delegation to be in writing, seems to us to be reasonably apparent. … the requirement of a writing protects the interests of all parties concerned. Furthermore, it seems to us that the wording of s.313 is plain and unambiguous. The question remains then, did the passage of the resolution and the minuting of it, or the signature of the chairman at the next meeting, amount to such a delegation in writing? We think not. The resolution appears under the heading “Recommendation/s”. The relevant recommendation, approved by the resolution, was that the council delegate to Mr Dunn its powers under s.151. In terms, the resolution appears to us to be one which states an intention and an authorisation, rather than one which effects an immediate delegation , and not of itself to constitute the delegation in writing required by s.313. A further step, the implementation of the resolution, remained to be put into effect.2
Ormiston JA found:
“4. What the Court is here concerned with, however, is a formal step taken by a body given certain statutory powers of considerable significance, in the present case, a power which permits the commencement of disciplinary proceedings before the Legal Profession Tribunal, potentially leading to loss of the right to practise. The corporation’s minutes are not a means of delegating in writing a power of such an important kind.[3] They are intended to record the proceedings and decisions of the Council as a board of directors, but even the language here adopted, that of “approving” a “recommendation” does not connote an immediate delegation . Of course, when first prepared the minutes are but a draft of what ultimately has to be approved and as such they are not an authorised act of the RPA. When confirmed, a month and a day later, they were merely the record of what occurred at the previous meeting and the decisions recorded could not have taken on any new legal significance.[4] The signature of confirmation was that of the “chairman”[5], but that for the purpose of minutes means only the chairman of the meeting, although in the case of the RPA that customarily is the chairman of the Council and thereby of the Board of Directors. The authority given by the Council (as the Board) to the chairman on each such occasion of confirmation is merely to record that confirmation as verifying the minutes as a true record. There was no intended power here given to the chairman otherwise to effectuate a delegation in terms of the section. It is well accepted[6] that a chairman has limited powers in acting on behalf of the board of a corporation, so that to act on its behalf for the purpose of effectuating a delegation would require specific authority so to act.
5. In conclusion, it would seem remarkable that a delegate seeking to ascertain or confirm his or her authority pursuant to a delegation would have to sift through several pages of unrelated and often confidential minutes in order to find the terms of the delegation “in writing” and the confirmation of those minutes. In the present case it would have been necessary to look at pages 111 and 112 of the minutes of the RPA for 18 May 2000 for the delegation and then to page 123 for the later confirmation.”3
What if your statutory board has failed to delegate lawfully?
If your statutory board has failed to delegate powers in accordance with its statute, seek legal advice from a specialist. Depending on the type of power and the extent to which it is exercised, it may be that nothing much turns on this. However, it is different if there are significant and extensively-used powers involved. The impact of an unlawful delegation in the latter case will need careful consideration.
If you are not sure whether your statutory board’s decision-making processes are lawful, you could seek advice or training in the area. Many decision-makers under statute can benefit from administrative law training. Statutory board members and their supporters may need to lift their understanding of this important area.