oscar-roos BY OSCAR ROOS

Today the High Court will sit as the Court of Disputed Returns and hold a directions hearing in relation to the former South Australian senator, Bob Day. The directions hearing will be held because on 7 November 2016 the Senate resolved to refer a series of questions to the Court under s 376 of the Commonwealth Electoral Act about the former senator and s 44(v) of the Constitution. It appears that the former senator may have had a financial interest in an agreement between the Commonwealth and a company for the lease of his electoral office, and s 44(v) disqualifies a person who has ‘any direct or indirect pecuniary interest in any agreement with the public service of the Commonwealth’.  The referral provides the Court with a rare opportunity to consider how s 44(v) of the Constitution should be interpreted.

In this post I explain the drafting history of s 44(v) and discuss why the framers inserted it into the Constitution.  To date, public discussion of the Day reference has ignored this material, but it will influence how the High Court interprets s 44(v) ― with significant political consequences.  If the former senator is found to have been disqualified by s 44(v), it is likely to shift the numbers in the Senate away from the current Coalition Government, and make it even harder for it to negotiate the passage of its legislation through the Parliament.

The Court’s current position: In Re Webster

Section 44(v) provides:

Any person who 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 of sitting as a senator or a member of the House of Representatives.

Section 44(v) has only been considered once before by the High Court, in 1975 in In Re Webster.  In that case the Court, constituted by Barwick CJ sitting alone, interpreted s 44(v) restrictively, so that it only applied to ‘executory contracts which had a currency for a substantial period of time’ where ‘the Crown could conceivably influence the contractor in relation to parliamentary affairs’.  Although Webster, as a decision of a single judge, is not a binding precedent, it is a persuasive authority and it was invoked by the House of Representatives in 1999 in relation to the alleged disqualification of Warren Entsch, a Coalition member of the House of Representatives.

The Court in Webster justified its narrow interpretation of s 44(v) by claiming that the provision only had a narrow purpose.  Given that the Court’s ‘self-imposed embargo’ on the use of the Convention Debates had not yet been lifted, that purpose was identified not by reference to those Debates but by reference to the asserted historical antecedents of s 44(v), in particular a 1782 Act of the British Parliament commonly known as the House of Commons (Disqualification) Act 1782.  That Act was enacted when Parliament was establishing its independence from the Crown and it was expressly stated in the Act’s preamble that it was ‘for further securing the freedom and independence of Parliament’.  Barwick CJ drew a clear distinction between that purpose and the broader purpose of ‘disqualification provisions under local government and comparable legislation’ where ‘the object of the disqualification is to prevent a possible conflict of interest and duty … to preserve purity in local government administration’.  Section 44(v) was consequently narrowly interpreted in light of its narrow object of securing the independence of the Parliament from the Crown, rather than broadly interpreted in light of a broader, anti-corruption object.

The result was that Senator Webster was found not to be disqualified, notwithstanding his position as a shareholder, managing director, secretary and manager of a small family company (of fewer than 25 persons) which had supplied timber and hardware under a series of contracts to the Commonwealth Department of Housing and Construction after his election to the Senate.

Problems with the Court’s reasoning in Webster

It is accepted that s 44(v) cannot be read literally, and must be read down in the light of its object and purpose, so as ensure that trivial or everyday transactions with the Commonwealth do not trigger disqualification.  However, there are a number of problems with the Court’s conclusion in Webster that s 44(v) had the same purpose as the 1782 Act of the British ParliamentPerhaps the most striking is the jarring anachronism.  Securing the independence of Parliament from the Crown was a huge constitutional issue in the 17th and 18th centuries but the conventions of responsible government, which effectively allow Parliament to control the political activities of the Crown, were well established on the cusp of the 20th century when our ‘modern’ Constitution was being framed.  Also, the text of the 1782 Act differs markedly from that of s 44(v).  The 1782 Act disqualifies persons who ‘undertake, execute, hold or enjoy’ agreements with the Crown, whereas s 44(v) disqualifies anyone who ‘has any direct or indirect pecuniary interest in any agreement with the Public Service’.  These, of course, are not fatal criticisms, if it can be established (as was asserted in Webster) that s 44(v) was framed with the same narrow object as the 1782 Act.

Section 44(v) and the Framers

In 1988 the High Court lifted its embargo on the use of the Convention Debates, so that we can now look at those Debates to identify ‘the contemporary meaning of language used, the subject to which that language was directed and the nature and objectives of the movement towards federation from which the compact of the Constitution finally emerged’. When those Debates are examined, it will be difficult for the Court to adhere to the narrow Webster interpretation of s 44(v).

The unnumbered clause in the first official draft of the Constitution Bill drafted at the First Convention in Sydney in 1891 closely followed the text of the 1782 Act and Sir Samuel Griffith, the principal author of the first official draft of the Constitution Bill, affirmed at the Convention that the clause was included in the Bill to limit the influence of the Crown over Parliament.  However, by the time of the Second Convention in 1897-8, the comments of the delegates suggest that they now had a new preoccupation and a broader objective for the clause ― the prevention of fraud ― which extended beyond merely securing the independence of Parliament from the Crown.

This probably reflects the scandalous problems with political corruption which had emerged in the colonial parliaments and in local government in the wakes of the boom and bust cycle of the 1880s and early 1890s.  For example, Edmund Barton, the Leader of the Second Convention, talked about the need to prevent parliamentarians ‘carrying out a fraud upon the public’; John Gordon, a South Australian delegate stated ‘If we are going to prevent fraud let us make the perpetration of it as difficult as possible’; and Isaac Isaacs was characteristically emphatic about the need to protect the public from the broadest range of conflicts of interest:

We should be careful to do all that is possible to separate the personal interests of a public man from the exercise of his public duty.  We should bear in mind that it is not only important to secure that so far as we can in actual fact, but, in every way possible, we should prevent any appearance of the contrary being exercised. … The public are interested in seeing and ensuring, so far as it is possible to ensure it, that no member of Parliament shall for his own personal profit allow his judgment to be warped in the slightest when he is called upon to decide on questions of public moment.

The delegates’ concerns about the risk of financial corruption, in terms of the drafting of s 44(v), are consistent with their concerns about the financial probity of Commonwealth parliamentarians generally.  These concerns are also manifest in s 44(v)’s companion, s 44(iii), which disqualifies an ‘undischarged bankrupt or insolvent’ (which, coincidentally, triggered another Senate referral to the High Court on 7 November 2016, in relation to Western Australian One Nation Senator Culleton)).   While the delegates were prepared to allow ‘the greatest criminal under heaven’ to be ‘eligible, at the end of his sentence, to be a member of the Federal Legislature’, they baulked at the idea that electors should be allowed to elect an undischarged bankrupt or insolvent because it was ‘a matter of public protection’.

The critical changes to the wording of s 44(v), from a clause which was obviously derived from the 1782 Act, to its current text, were made by the Drafting Committee consisting of Barton, Sir John Downer and Richard O’Connor by 1 March 1898 at the Melbourne Session of the Second Convention.  As there was no further debate about the clause on the floor of the Convention, the precise reasoning behind the changes made by the Committee will never be known.  What we do know is that on or prior to 3 March 1898, Barton distributed a ‘long notice’ to the delegates containing the amendments to the Constitution Bill made by the Drafting Committee and that, in response to a query from the South Australian delegate Vaiben Solomon (‘Are all the amendments to be proposed by you merely drafting amendments?’), Barton replied: ‘Not all. They cannot be left to the drafting stage, but they are endeavours to carry out what has been gathered as the sense of the Convention’.

The Day Reference

The facts surrounding former Senator Day’s financial relationship with the Commonwealth are not completely clear at this stage and will no doubt be clarified during the course of the litigation before the High Court.  Much will turn on what is meant by ‘indirect pecuniary interest in any agreement with the Commonwealth’, given that the relevant agreement was allegedly between the Commonwealth and a company ― which owed Day money ― for the lease of the Senator’s electoral office (albeit that it appears that no rent was actually ever paid by the Commonwealth).

If the Court adopts the same restrictive approach to s 44(v) that it did in Webster then it is likely that the Court will determine that s 44(v) did not operate to disqualify Day from being elected to the Senate at the 2 July 2016 Federal Election. This would then leave his party, Family First, free to nominate his replacement under the casual Senate vacancy provisions of s 15 of the Constitution.  In Webster, the Court observed that, where there is an agreement between a company and the Commonwealth, the impugned member or senator must have a pecuniary interest in the specific agreement between the company and the Commonwealth to trigger s 44(v), and intimated that that interest must be a legal or equitable interest.

By contrast, if the High Court pays heed to the drafting history of s 44(v) and the Convention Debates, it will probably conclude that the framers were concerned that people should not avoid disqualification by conducting their dealings with the Crown from behind the corporate veil.   An interpretation of the words ‘indirect pecuniary interest’ which advances the real objects of the framers, is, therefore, likely to result in the disqualification of Mr Day from some point from the date he first assumed his seat in the Senate on 1 July 2014.  It is alleged that the building housing the electoral office was owned by Day’s company and then transferred during 2014 to a ‘one person’ company, Fullerton Investments Pty Ltd, controlled by a long-term business partner, and that Mr Day loaned Fullerton Investments money and continued to maintain a mortgage with a bank that was secured over the property.  A finding that Mr Day was disqualified will then almost certainly necessitate a complicated recount of the South Australian Senate vote at the 2016 Federal Election to elect South Australia’s 12th senator, with the possible election of a Green or Labor Senator to replace Mr Day.

Oscar Roos is Senior Lecturer in Law at Deakin University.  He teaches and researches in both domestic and international public law and is particularly interested in originalism and the relationship between legal history and the contemporary interpretation of legal instruments.

Suggested citation:  Oscar Roos  ‘Another Day in Court: The purpose and interpretation of section 44(v)‘ on AUSPUBLAW (21 November 2016) <https://auspublaw/2016/11/another-day-in-court/>