High Court of Australia upholds Queensland ban on political donations by property developers

Spence v Queensland [2019] HCA 15

Summary

The High Court (the Court) upheld the validity of Queensland anti-corruption measures which prohibit the making of political donations by property developers. The decision supports legislative efforts to improve transparency and accountability in electoral funding. However, it may also be seen as giving permission to parliaments to ban political donations from certain classes of donors even where strong evidence of corruption is lacking.

Background

Following the 2016 Queensland local government elections, the Crime and Corruption Commission conducted an investigation into concerns about actual and perceived corruption. The inquiry (dubbed "Operation Belcarra") found widespread non-compliance with state electoral regulations during the campaign.  In response, the Queensland government enacted changes to the Electoral Act 1992 (Qld) and to the Local Government Electoral Act 2011 (Qld) (Queensland amendments) prohibiting property developers from making donations to political parties at the State and local government level.

Shortly after the Queensland amendments were passed, the Commonwealth Parliament enacted reforms to the Commonwealth Electoral Act 1918 (Cth).  These amendments permitted the making of gifts to registered political parties unless prohibited by Division 3A (for example, the making and receipt of gifts from “foreign donors” to “political entities”), nd allowed the recipient to retain that gift, despite any State or Territory law.  The effect of the Commonwealth amendments, if they were valid, would be to invalidate the Queensland amendments via section 109 of the Constitution to the extent of the inconsistency.

Facts

Gary Spence, former President of the Queensland Liberal National Party, brought the challenge to the validity of the Queensland amendments in the Court's original jurisdiction. He principally argued the Queensland amendments were invalid as they infringed the implied freedom of political communication under the Commonwealth Constitution (implied freedom), amongst other arguments.

Decision

The majority (Kiefel CJ, Bell, Gageler and Keane JJ, with Gordon and Edelman JJ agreeing, but dissenting on other grounds) found that the Queensland amendments did not impermissibly burden the implied freedom, while Nettle J (in dissent) argued that the discriminatory operation of the law was unjustified.

The majority applied the test as set out in Lange v Australian Broadcasting Corporation (1997) 189 CLR 520, and modified in subsequent cases including McCloy v NSW (2015) 257 CLR 178 (McCloy), which looks at whether:

(a)  the law effectively burdens the implied freedom, in either its operation or effect;

(b) if yes to (a), whether the purpose of the law is legitimate, in the sense that it is compatible with the maintenance of the constitutionally prescribed system of representative government; and

(c) if yes to (b), whether the law is appropriate and adapted to advance the legitimate purpose.  This third inquiry is known as 'structured proportionality' testing, involving analysis of whether the impugned law is suitable, necessary and adequate in its balance.

In applying this test, the key hurdle for the plaintiff was overcoming the Court's decision in McCloy.  In McCloy, the Court found substantially similar NSW electoral laws prohibiting property developers from making political donations were appropriate and adapted to preventing corruption, and therefore did not impinge the implied freedom.

Rather than seeking to overturn McCloy, the plaintiff argued McCloy was distinguishable.  The plaintiff contended that because there have been fewer concerns about corruption at the State government level in Queensland, the Queensland amendments imposed an unjustified burden on the implied freedom.  The majority did not accept this argument.  The majority found that irrespective of whether the factual circumstances underpinning the law in Queensland and NSW differ, States and Territories frequently justify legislative action on the basis of experiences in other jurisdictions.  Therefore, the plaintiff's submission that McCloy should be distinguished failed, and the validity of the Queensland amendments was upheld.

In separate judgments, Gordon and Edelman JJ both found the Queensland amendments did not infringe the implied freedom for similar reasons in light of McCloy.

Nettle J, in dissent, argued the Queensland amendments were invalid.  He reached this conclusion on the grounds that the burden was not justified, as the prohibition was discriminatory, and lacked a rational connection to the prevention of bribery and corruption.  His Honour stated that there was no clear evidence that property developers exerted any greater influence in elections through making donations as compared to any ordinary elector, and in any case, it was not clear how a ban would curb the risk of corruption (which is already criminalised under the Criminal Code Act 1899 (Qld)).

Mr Spence's contention raised a number of other complex constitutional questions, including challenges brought on the basis of the doctrine of intergovernmental immunities, section 109 inconsistency issues, and complex questions surrounding the scope of the Commonwealth's power to legislate in respect of State elections.

Commentary

The Spence decision is significant as it firmly entrenches the McCloy precedent, enabling governments to prohibit political donations made by particular classes of persons.

The decision is welcome in some respects, as the Queensland amendments clearly had the purpose of promoting transparency and accountability in electoral processes.  On the other hand, the decision sets a precedent for permitting governments to ban political donations (and by analogy possibly other forms of political participation) by particular classes of persons where there is no proven record of corruption or undue influence.

This concern underlies Nettle J's reasoning in Spence (and earlier in McCloy).  His Honour's view is that these particular bans were unjustified as they were discriminatory in their operation.  Essentially, this is because the effect is to permit the government to subjectively determine who may engage in the political process.  Conceptually, such a law, which restricts the right of some to participate in political discourse, while leaving others free to do so, "mandates an inequality of political power which strikes at the heart of the system" (McCloy, at [271] per Nettle J). 

Despite Nettle J's concerns, it should be noted that any future legislation burdening the implied freedom which expands on these prohibitions must still be justified.  For example, in Unions NSW v NSW (2013) 252 CLR 530 (Unions NSW), the Court found that bans on political donations made by persons not on the electoral roll (eg corporations, trade unions or foreigners) were invalid, as NSW had not introduced any clear evidence demonstrating that these entities generally had a corrupting influence on elections to justify the burden on the freedom.

It appears though that the onus of establishing a factual justification for the burden after Spence is not especially onerous.  In Unions NSW, the burden was unjustified only because NSW did not introduce any clear evidence in support of the justification.  In Spence (and to an extent McCloy), while the Court was made aware of the context to the Queensland amendments, the majority gave wide deference to the government's submissions about the extent to which the ban is appropriate and adapted to preventing corruption and bribery.  However, the nexus between an outright ban and the prevention of bribery is open to question, for the reasons noted by Nettle J (see above), and because there are arguably less restrictive, and non-discriminatory, means of achieving that purpose (eg caps on donations, or publishing donations on a public register).

Ultimately, we will need to wait and see whether Spence will be interpreted broadly so as to permit a wide range of donors being banned from making political donations, or whether the experience of property developers is an outlier.

Read the full decision here.

Matthew Staraj is a Graduate Lawyer at Ashurst