Theophanous v Commonwealth of Australia

Theophanous v Commonwealth of Australia - [2006] HCA 18 - HCA 2006 case summary — Zoe

[13]

GLEESON CJ. The plaintiff, who for more than 20 years had been a member of the House of Representatives, ceased to be a member in November 2001. He was entitled to a retirement allowance under the provisions of the Parliamentary Contributory Superannuation Act 1948 (Cth) ("the Superannuation Act"). His wife also had certain contingent rights under the Superannuation Act in the event of his death, provided that the plaintiff was then still entitled to an allowance. Details of the entitlements of the plaintiff and his wife appear from the reasons of Gummow, Kirby, Hayne, Heydon and Crennan JJ ("the joint reasons"), and it is unnecessary to repeat them.
During his term as a member of the House of Representatives, the plaintiff held certain positions concerned with immigration. On 22 May 2002, following a trial in the County Court of Victoria, the plaintiff was convicted of three offences against the Crimes Act 1914 (Cth). One offence was of defrauding the Commonwealth by making false representations in relation to an immigration matter. Another was, in effect, of taking an unlawful inducement. The third was, in effect, of soliciting an unlawful inducement. A conviction for a fourth offence was set aside on appeal. It has been accepted for purposes of argument in this Court that the three offences of which the plaintiff was convicted involved an abuse of his office.
In 1989, the Parliament enacted the Crimes (Superannuation Benefits) Act 1989 (Cth) ("the CSB Act"). In its long title, it is described as an Act relating to certain superannuation benefits paid or payable to or in respect of certain persons convicted of corruption offences. A "corruption offence" is defined to include an offence by a person who was an employee at the time when it was committed, being an offence whose commission involved an abuse by the person of his or her office as such an employee (s 2). "Employee" means, relevantly, a person employed by the Commonwealth. A member of the Parliament is to be taken, for the purposes of the CSB Act, to be employed by the Commonwealth (s 7). Section 16 of the CSB Act provides that, where a person who is or was an employee is convicted of an offence, and the Minister is of the opinion that the offence is a corruption offence, the Minister may authorise the Director of Public Prosecutions to apply to the appropriate court for a superannuation order. In making such an order the court must calculate the value of the employer contributions and benefits related to those contributions (s 19). When a superannuation order is made, all rights to such future benefits cease, and benefits already received are to be repaid to the Commonwealth (ss 19 and 21).
These proceedings challenge the validity of the provisions of the CSB Act relating to superannuation orders. An application for such an order in relation to the plaintiff (which, if successful, will also have consequences for his wife) has been made, but has not yet been heard or determined. There is now only one ground of challenge to the validity of the legislation. It appears from the form of the second question in the Stated Case:

[16]

Section 51(xxxi) of the Constitution empowers the Parliament, subject to the Constitution, to make laws for the peace, order, and good government of the Commonwealth with respect to the acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws. The qualification to the power, contained in the reference to just terms, protects rights of private property. Whatever arguments there may be about the extent of that protection in various circumstances, the existence of the protection has been recognized as an "implied guarantee", with significant consequences for an understanding of the relationship between par (xxxi) and the rest of s 51[1]. If par (xxxi) were intended to be no more than an express conferral of a power of acquisition that would otherwise be implicit in other paragraphs of s 51, then that would not explain the presence of the qualification. It is an important limitation on power.
The Commonwealth contends that the constitutional concept of acquisition of property on just terms for any purpose in respect of which the Parliament has power to make laws has nothing to do with the CSB Act, and that s 51(xxxi) is irrelevant to the validity of that legislation. In order to explain that proposition, which should be accepted, it is necessary to examine the legislative power which supports the Superannuation Act and the CSB Act. For obvious reasons, the plaintiff does not question the validity of the Superannuation Act, but it is necessary to consider the foundation on which it rests in order to put the CSB Act into its appropriate constitutional context.
Section 51(xxxvi) of the Constitution, considered in the light of s 48, empowers the Parliament to legislate for the payment of allowances, including retirement allowances, to members of the House of Representatives. Such allowances, including future allowances, constitute remuneration[2]. Although opinions may differ about the reasonableness of various forms and levels of remuneration, it is now generally accepted that parliamentarians should commit themselves to their duties on a substantially full-time basis, and that the corollary is that they should be remunerated (or, as the Americans would say, compensated) for doing so. If it were otherwise, political activity would be the preserve of the independently wealthy, or parliamentarians would need financial support and assistance of a potentially unhealthy kind. Providing schemes of retirement allowances in the nature of superannuation or pension benefits, whether such schemes are contributory (as in the case of parliamentarians) or non-contributory (as in the case of judges), and whether entitlements may be commuted (as in the case of parliamentarians) or may not be commuted (as in the case of judges), is a well recognized form of remuneration of public office holders. Subject to the Constitution, it is for Parliament to decide the form and incidents of such schemes. Legislation may create rights, the statutory modification or extinguishment of which could effect an acquisition of property[3]. Whether or not s 51(xxxi) has potential application to such modification or extinguishment may depend upon the legislative context in which such modification or extinguishment occurs. If Parliament legislated to modify or take away accrued entitlements simply for the purpose of saving money, or because it was decided as a matter of policy that they were too generous, then the case may fall within s 51(xxxi). It is unnecessary to decide that question. As at present advised, I would not accept that statutory superannuation or pension benefits are inherently defeasible and that, on that account alone, their modification or withdrawal could never constitute an acquisition of property.
The source of the power to enact the CSB Act is the same as the source of the power which sustains the Superannuation Act. Parliament may legislate for the remuneration of members of the House of Representatives, and such remuneration may include retirement allowances in the nature of superannuation benefits. It is ultimately for Parliament to decide the amount, nature and incidents of such remuneration. When Parliament decided, as it did in 1989, that, in the interests of integrity in public life, abuse of office manifested in conviction of a corruption offence should expose a member, or former member, to loss of future retirement allowances, and liability to repay benefits already received, to the extent to which they reflected government contributions, then it was placing a perfectly understandable qualification upon the entitlements created by the Superannuation Act.
In Burton v Honan[4], Dixon CJ responded to an argument that legislation providing for the forfeiture of property under the Customs Act 1901 (Cth), especially when the property belonged to an innocent person, went beyond what was reasonably incidental to the trade and commerce, and the taxation, powers (an argument that might now be expressed by asserting that the legislation was "disproportionate") as follows[5]:

[59]

Secondly, on the day the court made the superannuation order, there would cease to be vested in the plaintiff the benefit or a benefit attributable to employer contributions as identified in s 19(3).
Thirdly, the Commonwealth would not be liable to pay any employer contribution or benefit in respect of the plaintiff on or after the day the superannuation order was made.
Further, the court would be required to specify in its order and in accordance with the formula in s 19(4) the amount of benefits which have been paid which reflected the employer contributions plus interest and the amount so worked out would be payable as a debt due to the Commonwealth (s 21(2)).
Finally, s 21(5) makes provision which would entitle a person such as the plaintiff to payment of an amount respecting employee contributions as determined in accordance with the formula set out in that sub‑section.
The convictions of the plaintiff of the corruption offences in question thus had various adverse consequences for him. First, he was subject to the sentences to which reference has been made. Secondly, Pt 2 of the CSB Act applied to the plaintiff because he had been a member of the Parliament who, whilst a member, committed corruption offences which either or both involved an abuse of his office, and were committed for a purpose that involved corruption, having regard to the powers and duties of his office. Those events rendered him susceptible to the taking of steps under ss 16 and 17 which, if the County Court makes a superannuation order, would have the consequences provided in s 21. These include the cessation of all rights and benefits payable to or in respect of the plaintiff. The prospective or contingent benefits of his wife under the Superannuation Act are dependent upon her status under that Act as a spouse surviving the plaintiff and are thus rights "in respect of" the plaintiff within the meaning of s 21(1) of the CSB Act. These also would cease by virtue of the operation of par (a) of s 21(1).
It is in this setting that the plaintiff asserts the invalidity of the provisions which would empower the County Court to make the superannuation order.
Reference should be made finally to Pt 3 of the CSB Act (ss 24‑39). This is headed "RESTRAINING ORDERS". No issue is raised in the case stated respecting the validity of these provisions. However, the facts disclose that on 7 June 2002, and on the application of the DPP, the County Court made an order restraining the disposition, without the prior written consent of the DPP or further order, of the plaintiff's interest in two parcels of land in Victoria. That order has been extended until 2 December 2006. The power of the DPP to seek such an order in respect of the plaintiff was conditioned upon the plaintiff's conviction of an offence (s 24) and the County Court was required to be satisfied that the offence concerned was a corruption offence (s 25).

[71]

Section 51(xxxi) of the Constitution is not to be given a pedantic or narrow construction[39]. The taking of property under a federal law is not removed from "acquisition" merely because of the statutory description given to the action. It may be complained that the boundary marked to the "just terms" requirement of s 51(xxxi) by reference to its application being "inconsistent" or "incongruous" states a criterion that may require difficult questions of judgment. But to mark the boundary to the application of the "just terms" requirement in this way is grounded in the realisation that to characterise certain exactions of government (such as levying of taxation, imposition of fines, exaction of penalties or forfeitures, or enforcement of a statutory lien) as an acquisition of property would be incompatible with the very nature of the exaction. Such exactions are, and long before the Commonwealth were, regular features of the law in England, the Australian colonies and now of the Commonwealth. It cannot therefore have been the purpose of s 51(xxxi) to apply to such exactions an obligation to provide "just terms". There may, in some cases, be room for difference about the characterisation of the exaction and the application of considerations of inconsistency or incongruity. The present is not such a borderline case.
With these considerations in mind, it is convenient to return first to the reliance by the plaintiff upon s 51(xxxi) of the Constitution. It is unnecessary for the present case to determine any classification for other legal purposes which Pt 2 of the CSB Act might have in its application to the plaintiff. Further, references to penalties and forfeitures in authorities such as Lawler were made, as the passage from the judgment of Deane and Gaudron JJ[40] set out earlier in these reasons indicates, as illustrative of the kind of laws which involve acquisitions which do not permit of just terms.
The operation of Pt 2 of the CSB Act in respect of the benefits and interests of the plaintiff and his wife, vested or contingent, manifests one of the adverse consequences of his conviction for corruption offences. The corruption offences in question were committed whilst the plaintiff was a member of the House of Representatives. They involved abuse of that position and were committed for a corrupt purpose.
The provision of benefits to legislators, whether by salary, allowance or retirement benefit, has long been regarded as made to lessen the risk of and temptation to corruption and abuse of office. Legislation such as Pt 2 of the CSB Act, in its application to the situation of the plaintiff, vindicates the public interest in denying to those who succumbed to that temptation the benefits provided to encourage probity in legislators. To require the provision of "just terms" in such circumstances would indeed, in the sense of the authorities, be incongruous.
For these reasons, s 51(xxxi) has no operation with respect to the application of Pt 2 of the CSB Act to the plaintiff.
The plaintiff's wife can stand in no better position than the plaintiff. The Commonwealth submitted that, notwithstanding the broad meaning of the term "property" in s 51(xxxi), it was debatable whether the plaintiff's wife had any sufficient interest under the Superannuation Act. The Solicitor-General emphasised that under the terms of that legislation she would have no present entitlement unless she survived her husband and the matrimonial relationship endured to his death.
It is unnecessary to determine that issue. It is sufficient to determine the position of the plaintiff's wife by reference to the requirement of the Superannuation Act that not only must she survive him, but he must, at the time of his death, be entitled to a retiring allowance[41]. If the superannuation order presently sought against the plaintiff be made, then the plaintiff's wife can never become entitled to any benefits under the Superannuation Act.
It is also unnecessary to consider statements in the authorities upon which the Commonwealth relied for an alternative submission. This was that, while not all rights created by or under statute were "inherently defeasible" and thus outside the operation of s 51(xxxi), the entitlements under the Superannuation Act were of this character.

[72]

The question then becomes whether, in its application to the plaintiff (and thus to his wife), Pt 2 of the CSB Act is reasonably incidental to the exercise of another head of legislative power. Reference has been made earlier in these reasons to the support for the Superannuation Act provided by s 48 and s 51(xxxvi) of the Constitution. The enjoyment of benefits provided thereunder by reason of membership of the House of Representatives or the Senate may be brought to an end as a further operation of the legislative power which supported their creation[42]. Particularly is this so where the occasion for that determination, convictions for corruption and abuse of power while a member, is expressive of the same public interest in the avoidance of such delinquent exercise of the authority of high public office as sustained the law for the initial provision of those benefits.
There was reference in argument to statements by McHugh J in Lawler[43] which suggest that a "forfeiture" must be both reasonably incidental to the exercise of a head of power other than s 51(xxxi) and be a reasonably proportional consequence of a breach of the law in question. The plaintiff submitted that that reasonable proportionality was absent in the operation of the CSB Act.
Several points are to be made here. First, in Lawler, Toohey J reserved the applicability in this field of a notion of reasonable proportionality[44]; Dawson J disagreed with the whole notion[45]. Secondly, subsequent authority, in particular Leask v The Commonwealth[46], denies the application of a concept of "proportionality" to non‑purposive heads of legislative power. In Leask, McHugh J[47], together with Brennan CJ, Dawson J and Gummow J[48], expressed that conclusion.
Thirdly, in Lawler, McHugh J, in supporting the unanimous decision of the Court, referred to the well‑established use of forfeiture of property, even in the hands of an innocent owner, as a means of obtaining compliance with the law[49]. The operation of Pt 2 of the CSB Act, as already explained, is not, in the constitutional sense, a disproportionate consequence of the convictions of the plaintiff. The Part is therefore within the legislative powers of the Parliament and is constitutionally valid.

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