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November 2017

This post was contributed by Georgia Allen, a CRU Intern:

S 44 – Disqualification

Any person who:

(v) has any direct or indirect pecuniary interest in any agreement with the Public Service of the Commonwealth otherwise than as a member and in common with the other members of an incorporated company consisting of more than twenty-five persons;

shall be incapable of being chosen or sitting as a senator or a member of the House of Representatives.

In April 2017, the Full Bench of the High Court, sitting as the Court of Disputed Returns, held in Re Day that Senator Bob Day was “incapable of” (i.e. disqualified from) sitting as a Senator by virtue of section 44(v) of the Constitution. Day had sought to avail himself of the rental income from his Commonwealth-funded office accommodation entitlement whilst avoiding the operation of section 44(v), by interposing an elaborate web of companies and trusts between himself and a property he beneficially owned, which was subsequently leased by the Commonwealth to house his electorate office. This attempt failed.

The Full Bench held that Day had an indirect pecuniary interest in the lease between the Department of Finance and the registered proprietor of the building (a company called Fullarton Investments, which was the trustee of the Fullarton Road Trust, of which the Day Family Trust was a beneficiary), as the recipient company name and bank account nominated by Fullarton Investments to receive payments from the Commonwealth under the lease were owned by Day. As such, Day became disqualified from sitting in the Senate by at least February 26, 2016, the date that the direction for the payment of rent into Day’s bank account was first given.

In doing so, the High Court unanimously overruled the only prior decision on the operation of section 44(v). In Re Webster, a 1975 case, Chief Justice Barwick sitting alone as the Court of Disputed Returns adopted a restricted (and arguably obsolete) purposive construction of section 44(v) that confined the section to pecuniary interests in agreements with the Commonwealth Public Service which could result in influence by the Executive over the parliamentarian in relation to parliamentary affairs, by the very existence of the agreement or by something done or refrained from being done in relation to the agreement or its subject matter.

In Re Day, the High Court emphasised that the Founders’ intention for the section was actually two-fold, with section 44(v) introduced for the dual purposes of: (1) protecting against conflicts of interest that might lead a parliamentarian to give priority to his or her own pecuniary interests over the public interest; and (2) the avoidance of Executive influence over the Parliament. Furthermore, the inclusion of indirect pecuniary interests and the 25-shareholder company exception to section 44(v) both demonstrate that parliamentarians cannot interpose companies or other entities to cloak their pecuniary interests.

Whilst it is now clear that section 44(v) prohibits a broader range of interests than previously thought, significant uncertainty remains about the outer limits of the section. Issues such as are State-owned corporations part of the “Public Service of the Commonwealth” and how far removed must an indirect pecuniary interest in an agreement be before it falls beyond the scope of the section are currently unresolved. The Alley v Gillespie case, presently before the High Court, should elucidate these issues further.

ALLEY V GILLESPIE

Dr David Gillespie, Nationals MP and the current Assistant Minister for Health, replaced Rob Oakeshott MP as the member for Lyne in the House of Representatives in the September 2013 election, and was subsequently re-elected in July 2016. Goldenboot Pty Ltd, Gillespie’s family company, owns a shopping centre complex in Port Macquarie and one of its tenants has a licensing agreement with Australia Post to operate as an Australia Post outlet.

Peter Alley, the unsuccessful Labor candidate for the seat of Lyne in the 2013 and 2016 elections, has brought an action under the Common Informers (Parliamentary Disqualifications) Act 1975 challenging Gillespie’s eligibility for office. Alley argues that Gillespie has an indirect pecuniary interest in an agreement with the Commonwealth Public Service (namely, the licensing agreement with Australia Post) contrary to section 44(v), rendering him incapable of sitting as a member of the House of Representatives. Furthermore, if this licensing agreement was executed prior to the 2013 and/or 2016 elections, it is argued that Gillespie was “incapable of being chosen” under section 44(v) (i.e. standing for election in the first place).

In a Directions Hearing on 29 September 2017, Bell J referred two preliminary questions to the Full Bench of the High Court under section 18 of the Judiciary Act 1903. In short: (1) can and should the High Court decide whether Gillespie is a person declared by the Constitution to be incapable of sitting as a member of the House of Representatives under the Common Informers Act, and (2) if yes, whether the policy of the law regarding common informers directs the High Court to refuse to issue subpoenas by which to establish the relevant facts of the case. The Court will consider these preliminary issues at a hearing on 12 December 2017. Whether Gillespie’s eligibility under section 44(v) will be considered by the High Court will depend upon the outcome of that hearing.

THE AUSTRALIA POST OUTLET AND SECTION 44(V)

Agreement with the “Public Service of the Commonwealth”

Alley’s case may well fall at the first hurdle if it cannot be demonstrated that Australia Post, a government business enterprise, is a part of the “Public Service of the Commonwealth”.

Keane and Gageler JJ mounted convincing arguments in separate judgments in Re Day, that the reference to “the Public Service of the Commonwealth” imposes a textual limitation on the scope of the section. The “Public Service of the Commonwealth” refers to those officers of the Executive Government of the Commonwealth within the departments of State, as described in section 64 of the Constitution, and not to “the Commonwealth” as a whole. The accompanying sections in Part IV of the Constitution support this distinction – the “Public Service of the Commonwealth” can be contrasted with the broader references to “the Crown” in section 44(iv) and “the Commonwealth” in section 45(iii).

On the other hand, Nettle and Gordon JJ argued that this distinction “is without practical or legal content”, as all agreements made in the course of Commonwealth government business will ordinarily be negotiated by members of the Public Service of the Commonwealth. This interpretation is less persuasive. The fact that a public servant has negotiated an agreement does not necessarily mean that the agreement can be characterised as one with the Public Service of the Commonwealth, unless one of the departments or its officers is a party to it.

As the joint judgment of Kiefel CJ, Bell and Edelman JJ did not address this issue, however, it is unclear how the Full Bench will characterise “the Public Service of the Commonwealth” in Alley v Gillespie.

Tony Blackshield has suggested that the parties’ arguments will surround the precise effect of the Australian Postal Corporation Act 1989 on the status of Australia Post and may make reference to sections such as: the community service obligations and general governmental obligations imposed on Australia Post under sections 27-28, the fact that Australia Post is not subject to direction by or on behalf of the Commonwealth Government under section 50, and the fact that Australia Post does not have an entitlement to any immunity or privilege of the Commonwealth under section 90A.

As a result of its corporatisation in 1989, it could be held that Australia Post is no longer a part of “the Commonwealth” at all, but is merely a company owned by the Commonwealth with separate corporate personality. If this is incorrect, however, it may be the case that an agreement with Australia Post is an agreement with “the Commonwealth” but not with the “Public Service of the Commonwealth”, as Australia Post is not a section 64 department.

Direct or indirect pecuniary interest in an agreement

It is clear from Re Day that a “pecuniary interest” is an interest sounding in money or money’s worth, and may consist of a gain or loss. It is also apparent that a pecuniary interest does not have to be a legal, equitable or legally enforceable interest, with regard had to the practical consequences of the performance or non-performance of the agreement.

Furthermore, all judgments recognised that agreements ordinarily entered into by the Commonwealth with its citizens (such as the payment of a passport fee to the Department of Foreign Affairs, for example) are not within the ambit of section 44(v). As stated by Keane J, “[g]iven the purpose that informs section 44(v), there is no reason to expand its disqualifying effect to any person who might obtain a pecuniary benefit [or loss] conferred by the Commonwealth which is available generally to the community.” Instead, the textual limitations restrict the section to agreements giving rise to a particular interest in an individual case which may result in a conflict of duty and interest.

The distinction between a contract ordinarily entered into and a contract giving rise to a particular interest in an individual case, however, is difficult to determine. Whether a licensing agreement is a type of contract ordinarily entered into by the Commonwealth and its citizens, for example, is open to debate – Australia Post’s franchise model means that such an agreement is available to ordinary members of the public, however, the fact that the licensing agreement is not a day-to-day transaction may give it a special character.

Finally, all judgments accepted that the mere possibility of a pecuniary benefit conditional upon the exercise of another’s discretion is enough to trigger the section, such as distributions under a discretionary trust or the payment of dividends to a shareholder at the discretion of the board. Beyond this, however, no bright line emerges from the four judgments in Re Day regarding when an indirect or direct pecuniary interest will be “in” an agreement.

The Court rejected the Commonwealth Attorney-General’s submission that section 44(v) should apply when, objectively, there is a real risk that a person could be influenced, or be perceived to be influenced, in relation to parliamentary affairs, by a direct or indirect pecuniary interest, as a reliance on perception is vague, impressionistic and/or evaluative. Gageler J instead suggested that there must be a “practical commercial likelihood” of a conflict of interest, whereas Nettle and Gordon JJ held that it would be sufficient if the parliamentarian “could conceivably be influenced”. What is required to satisfy these thresholds however, remains unclear.

Similarly, what constitutes an “indirect pecuniary interest” is also uncertain. Although a majority of the court approved the definition of an indirect interest given by Gavan Duffy J in Ford v Andrews (Gageler, Keane, Nettle and Gordon JJ), the definition itself is open to interpretation.

A man is directly interested in a contract if he is a party to it, he is indirectly interested if he has the expectation of a benefit dependent on the performance of the contract; but in either case the interest must be in the contract, that is to say, the relation between the interest and the contract must be immediate and not merely connected by a mediate chain of possibilities.

For example, Gillespie’s alleged indirect pecuniary interest could be viewed by the Court as connected to the licensing agreement by a mediate chain of possibilities rather than being “in” the licensing agreement itself. Arguably, Gillespie’s indirect pecuniary interest is actually in the payment of rent under the lease, which may or may not depend on the tenant being licensed to operate as an Australia Post outlet.

On the other hand, in having regard to the practical consequences of the performance or non-performance of the licensing agreement, it could be argued that as a shareholder in the landlord company, Gillespie has an indirect financial interest in the agreement between Australia Post and the tenant staying on foot, as a termination of the agreement may result in the loss of rent. This “could conceivably” result in a conflict of interest should Australia Post be the subject of parliamentary business. How this potential conflict of interest could affect Gillespie’s capacity to operate impartially, however, is questionable, unless the Parliament sought to legislate to close all Australia Post outlets, for example.

The meaning of a “mediate chain of possibilities” cannot be ascertained from the reasoning in the three judgments that adopt it either. Gageler, Nettle and Gordon JJ all held that Day had three potential indirect disqualifying pecuniary interests in the lease, including that the rental monies would eventually be used to help repay a bank loan of which Day was guarantor, even though the rent would have to change hands three times before it reached the bank, if it did at all. As such, Day’s interest in the payment of rent in his capacity as guarantor does not appear immediate, but rather connected to the lease by a mediate chain of possibilities.

In short, how far removed an indirect pecuniary interest must be from the underlying agreement for it to fall outside of section 44(v), and thus whether Gillespie’s shareholding in Goldenboot can give rise to a pecuniary interest in the licensing agreement, remains unclear.

PROPOSALS FOR REFORM

Whilst the other subsections of section 44 have been the topic of regular analysis and debate since the 1980s, very few have considered reform of section 44(v) in depth.

In 1981, the Commonwealth Parliament’s Standing Committee on Constitutional and Legal Affairs recommended in its report The Constitutional Qualifications of Members of Parliament that consideration should be given to the need for amendment to section 44(v), despite the section being beyond its terms of reference. The Committee was concerned that candidates and members may be unwittingly disqualified as a consequence of its operation. The Government Response stated that the Attorney-General would give further consideration to this issue with a view to developing a specific proposal for reform, however, no such proposal was developed.

The 1988 Constitutional Commission recommended that the Constitution be reformed to explicitly provide that Parliament have the power to disqualify a member of Parliament who holds interests which might constitute a risk of a conflict of interest. Such a change does not appear necessary after the decision in Re Day.

The Australian Democrats have on four separate occasions proposed bills to address the perceived limitations of section 44, but none were fully debated nor passed into law. For example, the Constitution Alteration (Qualifications and Disqualifications of Members of the Parliament) Bill 1992 proposed to give the Parliament the power to make laws with respect to “the interests, direct and indirect, pecuniary or otherwise, the holding of which by a person shall render him incapable of being chosen or of sitting as a senator or a member of the House of Representatives” in a new section 45A.

Unless the High Court sheds more light on the limits of section 44(v) in Alley v Gillespie, reform to the section may be desirable to ensure the greatest certainty of operation for parliamentarians. As the joint judgment of Kiefel CJ, Bell and Edelman JJ forcefully opined, section 44(v) has a “special status” as it is “protective of matters which are fundamental to the Constitution, namely representative and responsible government in a democracy.” It cannot fulfil this important function, however, if Senators and members of the House of Representatives do not know where they stand.

Whether the Parliament would be brave enough to propose a reform to section 44(v) and whether the Australian public would be willing to vote for it in a referendum, however, seems unlikely in the current political climate. Such a proposal would arguably be viewed as self-serving and unnecessary – designed to cloak the perceived incompetence of the politicians and political parties impugned in the Citizenship Seven saga rather than to serve a purpose that is in the national interest.

SUGGESTED CITATION: Georgia Allen, 'Alley v Gillespie and the Uncertain Scope of Section 44(v)', Constitutional Critique, 8 November 2017, (Constitutional Reform Unit Blog, University of Sydney, http://blogs.usyd.edu.au/cru/).

This post was prepared by Christie Chang Ching Wilson, an intern of the Constitutional Reform Unit.

In 2017, almost two decades after the unsuccessful republic referendum of 1999, Australia remains a constitutional monarchy. Despite the great support behind the nation’s republican movement in the 1990s from many politicians and members of the public, some perceive Australia as being no closer to changing its constitutional arrangements. This blog-post seeks to evaluate the likelihood of another republic referendum being proposed in the next decade and the issues that must be faced.

Australia’s current constitutional arrangements

Contrary to common misconceptions, Australia has already achieved complete autonomy from the United Kingdom. Although it is not entirely clear when this constitutional independence was attained, the High Court of Australia in Sue v Hill held that it was no later than the passage of the Australia Acts 1986.

Despite our nation’s colonial ties having already been severed, Her Majesty Queen Elizabeth II remains Australia’s Head of State, with the Governor-General acting as her representative. The Head of State is the highest-ranking constitutional office in Australia. The Queen appoints the Governor-General on the advice of the Prime Minister. For this reason, the office of Governor-General can be described as being entirely Australian in character; the Governor-General, an Australian, is chosen by the Australian Head of Government and appointed by the Head of State of Australia.

Under s 61 of the Constitution, the Commonwealth’s executive power is vested in the Queen and made exercisable by the Governor-General. In relation to Australian national affairs, the Queen and her vice-regal representative, the Governor-General, act upon the advice of the Prime Minister. However, the Governor-General also possesses certain reserve powers. These powers are not codified and are underpinned by constitutional conventions. Reserve powers include the ability to appoint and dismiss the Prime Minister.

As Australia has already achieved complete autonomy from the United Kingdom, the Queen’s role as Australian Head of State is largely reflective of a bygone era. When Australia does become a republic, it will not necessarily affect its membership in the Commonwealth of Nations. It is no longer the case that Commonwealth Realms have to apply for readmission to the Commonwealth when they become a republic.

The 1999 referendum

As the twentieth century came to a close, the republic issue was propelled to the fore, influenced by factors such as a burgeoning national pride and a growing recognition of Australia’s place in the Asian region. As Australia has a rigid Constitution, a referendum is required to make any constitutional amendments. For a proposed law to be successful at referendum, it needs to be approved by a majority of electors in the majority of States, in conjunction with a majority of the electors overall.

On 6 November 1999, Australian electors were asked in a referendum whether they approved of:

A proposed law: To alter the Constitution to establish the Commonwealth of Australia as a republic with the Queen and Governor-General being replaced by a President appointed by a two-thirds majority of the members of the Commonwealth Parliament.

Under the proposed law, the President, who was to become the nation’s Head of State, was largely to assume the same powers that the Queen and Governor-General had enjoyed.

This proposed law was rejected in all Australian States. A total of 55% of electors nationally responded with a “no” vote. Only in the Australian Capital Territory did the proposal succeed with 63% of electors voting “yes”. This outcome was in direct contrast to the findings of public polls conducted between 1998 and 1999, where a large portion of the participants had indicated that Australia should become a republic. A number of factors can be identified as leading to the rejection of the proposed law; however, for the present purposes, the focus will be on the issue of a directly elected President.

Directly elected President

Under the proposed law, the President was to be elected by a two-thirds majority of the members of Parliament. Interestingly, in studies conducted after the 1999 referendum, a significant percentage of electors who had voted against Australia becoming a republic indicated that they would have voted “yes” had the appointment of the President been decided by a direct election. These findings suggest that electors who voted “no” may still have supported Australia becoming a republic, but just desired a more democratic form of choosing the President. A directly elected President had been suggested in the debates leading up to the referendum. However, it was ultimately rejected at the 1998 Constitutional Convention in favour of the parliamentary election model.

As such, it can be suggested that if a republic referendum is proposed once more, it would be more likely to succeed if it provided for a directly elected President. However, a more democratic model brings several problematic issues. For example, where the President is directly elected by the nation, it may lead to both the public and the President believing that the President holds a direct popular mandate, unlike the Prime Minister. This may lead to the President overstepping the traditional boundaries of the role. To safeguard against this, the President’s powers, including the reserve powers, could be more clearly defined and limited in the Constitution. Nevertheless, there are significant risks in codifying the President’s reserve powers. It is important to leave a level of flexibility to allow the President to respond to varying circumstances.

A direct election of the Head of State would involve a national vote; this would require a nationwide election campaign. As such, to be a successful Presidential candidate, an individual would need the financial means to launch this widespread campaign. This may restrict the Presidential candidates to individuals of sizeable wealth, such as celebrities, or those who have the backing of a political party.

Some academics have raised the concern that politicians may be incapable of maintaining the impartiality needed of a President. While this has not proved the case when politicians have fulfilled the vice-regal role of representing the Queen, it may be different if they are directly elected and are not someone else’s representative. These are all issues that will need to be given consideration when proposing a structure for an Australian republic.

Likelihood of a republic referendum in the near future

Academics have noted that over the course of the last eighteen years, advocacy for an Australian republic has diminished. However, in recent months, Opposition Leader Bill Shorten has promised that as Prime Minister he will hold a republic vote during his first term. This plebiscite will ask: “Do you support an Australian Republic with an Australian Head of State?” If it receives a majority ‘yes’ vote, a referendum will then follow.

Shorten’s proposal has been met with criticism, especially from monarchist politicians, such as Tony Abbott. The Australian public itself may also not be entirely receptive to the government carrying out another plebiscite, so close to the same-sex marriage postal survey, which cost the public approximately $122 million. The holding of a referendum – necessary to alter Australia’s constitutional arrangements – would also involve an additional cost (the 1999 republic referendum cost $66 million). As such, it is possible that even if Shorten is elected as Prime Minister, the lack of public support for a republic plebiscite may discourage the Labor Party from fulfilling this promise.

Turning away from Shorten’s proposal, whether or not another republic referendum will be put to the public in the near future rests on several factors. Given the current lack of public interest in Australia’s constitutional arrangements, the occurrence of a major event may be necessary to revive discussions on whether or not Australia should have an Australian Head of State. An example of such an event would be the death of Her Majesty Queen Elizabeth II. It is possible that the Queen’s death may prompt nostalgic sentiments for the British monarchy amongst the Australian populace, diminishing support for a republic. However, the prospect of the still fairly unpopular Prince Charles – who surveys say that only 34% of the British populace would like to succeed the Queen – becoming King of Australia may be sufficient to dampen such sentiments and provide the needed impetus for a republic referendum.

Before such an event occurs, other matters are likely to continue to dominate public discussion about constitutional reform. For example, the issue of amending the Constitution to give Aboriginal and Torres Strait Islander peoples a more direct voice in Parliament has stimulated greater public attention than the republic in recent times.

Finally, the 1999 referendum’s lack of success may discourage politicians from pursuing another republic referendum if there is not a sufficiently strong public movement for such change. The failure of a referendum is neither conducive to the republican cause nor helpful for the political standing of a government.

Conclusion

While Prime Ministers Kevin Rudd, Julia Gillard and Malcolm Turnbull all supported a republic, none was prepared to spend the necessary political capital on pursuing a referendum. While Bill Shorten may buck the trend by keeping his commitment to hold a republic referendum if he becomes Prime Minister, the greater likelihood is that a republic referendum will be spurred by a major event, such as the death of Queen Elizabeth II. When another referendum is proposed, it will be important to analyse the reasons behind the 1999 referendum’s failure in order to help ensure its success.

SUGGESTED CITATION: Christie Chang Ching Wilson, 'God save the President: The Likelihood of an Australian Republic in the Twenty-First Century', Constitutional Critique, 7 November 2017, (Constitutional Reform Unit Blog, University of Sydney, http://blogs.usyd.edu.au/cru/).