Hundreds of unsuccessful applicants to the Government's $100 million pre-election sports grants scheme may be entitled to a payout, according to a respected lawyer.

Key points: A former senior government legal advisor claims the controversial sport grant scheme is "illegal"

A former senior government legal advisor claims the controversial sport grant scheme is "illegal" He argues the Sports Commission Act does not allow the minister to be delegated the power to approve grants

He argues the Sports Commission Act does not allow the minister to be delegated the power to approve grants The $100 million scheme is currently being investigated by the National Audit Office

Ian Cunliffe, who worked for more than a decade in government and now advises a constitutional law centre at the University of Melbourne, argues the Community Sport Infrastructure scheme "pretty clearly was illegal" because the relevant legislation does not allow the minister to be given Sport Australia's power to choose grants.

Kate Palmer, chief executive of Sport Australia, told Senate estimates last month that "as the delegate, the minister approves the grants and was able to make the final decisions about the grants".

Upon hearing this, Mr Cunliffe — with decades of providing advice establishing schemes and applying for grants — thought such an arrangement was unusual.

"I did what I always do, which is to dive into the legislation and see what it actually said."

Section 54 of the Sports Commission Act sets out to whom Sport Australia can delegate its powers, such as choosing grants. The Sports Minister is not listed.

"What it actually said was no, legally speaking, it can't happen that way," Mr Cunliffe stated.

According to his interpretation, clubs behind the 618 applications recommended by Sport Australia but rejected by the minister — worth up to $500,000 each — have a sound case to appeal to the Federal Court.

"If it was half a million dollars and I was on the board of one of the sports bodies involved I would be pushing very strongly that it be done," Mr Cunliffe said.

Mr Cunliffe's legal argument was backed by another senior legal academic contacted by ABC.

Former sport minister Bridget McKenzie and current Sport Minister Richard Colbeck declined to comment.

Sport Australia also declined to comment, noting the scheme was currently being investigated by the National Audit Office.

Ian Cunliffe is on the advisory board for the Centre for Comparative Constitutional Studies at Melbourne University. ( ABC News )

Importance of rule of law

The $100 million scheme has been beset by controversy, including Liberal candidates announcing grants instead of sitting MPs and a bias towards funding for marginal seats.

It's still not clear exactly which grants were recommended by Sport Australia but rejected by the minister, and how many grants were approved by Senator McKenzie that had not been recommended.

Labor sport spokesperson Don Farrell said the Government had questions to answer over the scheme.

"Hundreds of recommendations about the best projects that should have been supported and the minister rejected those recommendations.

"We want to know why she did it and we want to know what clubs she did it to."

In the 1980s, Ian Cunliffe (centre) worked with the Constitutional Commission, which included Gough Whitlam. ( Supplied )

Mr Cunliffe, who was a legal advisor in the Fraser government and advised Gough Whitlam in the Constitutional Commission, said the rule of law was a very important principle in Australia.

"It's part of our culture, part of our history, that we all should abide by the law.

"That applies with a special force to governments."

The National Audit Office is scheduled to release its investigation into the scheme later in November.