BY NICHOLAS ARONEY AND DANIEL WHITMORE

In May 2019 the High Court of Australia held by majority (Kiefel CJ, Bell, Gageler and Keane JJ) that a provision of the Commonwealth electoral law was invalid, on the basis that it was beyond the legislative power of the Commonwealth to make laws with respect to federal elections. The provision in question was s 302CA of the Commonwealth Electoral Act 1918 (as inserted by the Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Act 2018 (Cth)), which purported to permit the making, reception and retention of gifts to political parties registered under federal law, despite any State or Territory electoral law, if at least part of the gift was required to be used – or could possibly be used – to incur expenditure for the dominant purpose of influencing voting in federal elections.

That provision was introduced into the Commonwealth electoral law in response, it seems, to the enactment in May 2018 of amendments to Queensland electoral law by the State of Queensland which made it unlawful for property developers to make donations to political parties that endorse and promote candidates in Queensland State and local elections. This ban on property developer donations was introduced as part of a series of reform measures passed by the Queensland Parliament that had been recommended by the report on the (Queensland) Crime and Corruption Commission’s Operation Belcarra (see the Explanatory Note to the Queensland Amendment Act). In Operation Belcarra, the Crime and Corruption Commission had inquired into whether candidates for the March 2016 Queensland local government elections had committed offences under the Local Government Electoral Act 2011 (Qld) that could constitute corrupt conduct. In the course of its inquiry it sought to identify “strategies or reforms to help prevent or decrease corruption risks and increase public confidence”. One of the recommendations of the report was to ban donations from property developers due to the corruption risk associated with property developers making political donations, especially at the local government level.

There were some who appeared to question this explanation of the rationale for the Queensland amendments. The chair of the federal Joint Standing Committee on Electoral Matters (also a Liberal Party Senator for Queensland), James McGrath, reportedly described the Queensland amendments as a ‘devious’ law designed by the Queensland Labor government to harm the Queensland Liberal National Party. It has been suggested that the Queensland amendments disproportionately impacted on the Queensland Liberal National Party because that party “received a materially greater amount of donations than the other major party, the Labor Party (Queensland), from entities that are involved in the development of property”. The Commonwealth amendments, which were introduced through a Bill to ban foreign political donations, were said to be aimed at clarifying “the interaction between similar State and Territory and Commonwealth electoral funding schemes”. But they obviously, also, had clear political ramifications.

Gary Spence, the former President of the Liberal National Party in Queensland, commenced proceedings in the original jurisdiction of the High Court seeking declarations that the Queensland amendments were invalid on various grounds, including – most relevantly to the ultimate outcome of the proceedings – that they were inoperative by virtue of s 109 of the Constitution because they were inconsistent with federal electoral law. Other grounds included that the Queensland amendments contravened the implied freedom of political communication; that they contravened the doctrine of intergovernmental immunities; and that they dealt with subject matter that was within the exclusive legislative power of the Commonwealth. Queensland denied the arguments advanced by Spence, and also argued that s 302CA of the Commonwealth Act (which was introduced subsequent to Spence commencing proceedings in the High Court) was itself invalid on the grounds that it contravened the doctrine of intergovernmental immunities, and that it dealt with subject matter that was within the exclusive power of the States. Other State interveners, led by Victoria, advanced the argument that proved ultimately successful however, namely that it was beyond the legislative power of the Commonwealth to make laws with respect to federal elections.

There was, and is, no question that the Commonwealth has power to make laws regulating federal elections, and that the States have power to legislate with respect to State elections. However, the issue in Spence stemmed from the fact that the major political parties in Australia nominate and endorse candidates in both Commonwealth and State elections. The question therefore arose about which of the two jurisdictions has power to regulate gifts to political parties that are not specifically identified as being for use in relation to either Commonwealth or State elections, but may be used for either. It was this apparently unallocated middle-ground between Commonwealth and State legislative competence that was the central issue in Spence (see [277] of the judgment), because s 302CA of the Commonwealth law purported to authorise the giving, receipt and retention of gifts that could, but therefore also might not, be applied for the purposes of Commonwealth elections, and in so doing, to override any State laws to the contrary. This was ultimately what Kiefel CJ, Bell, Gageler and Keane JJ, in their majority joint judgment, held to be the fatal constitutional flaw in s 302CA (at [5], [29], [36], [56], [75], [77]-[79], [83]). It purported to confer a right to give, receive and retain gifts that, in practice, might never be used for the purpose of influencing voting at a federal election, and therefore could not fairly be characterised as a law with respect to federal elections. As a result of the finding that s 302CA was invalid, it raised no problem of inconsistency for the State amendments. The joint judgment also found (Gordon J and Edelman J agreeing) that the Queensland amendments were validly enacted: they did not contravene the implied freedom of political communication (at [97] (Kiefel CJ, Bell, Gageler and Keane JJ); [264], [266] (Gordon J); [326] (Edelman J); they did not breach the intergovernmental immunity doctrine (at [109] (Kiefel CJ, Bell, Gageler and Keane JJ); [265], [266] (Gordon J); [320] (Edelman J); and they did not intrude on a topic exclusively within the legislative power of the Commonwealth (at [46] (Kiefel CJ, Bell, Gageler and Keane JJ); [265], [267] (Gordon J); [305] (Edelman J).

Both the ultimate outcome and the reasoning were surprising. While it had not been conclusively determined, there was a long line of uncontradicted High Court opinion to the effect that Commonwealth power over federal elections is exclusive (see for example Smith v Oldham (1912) 15 CLR 355; R v Brisbane Licensing Court; Ex parte Daniell (1920) 28 CLR 23; Judd v McKeon (1926) 38 CLR 380; Langer v Commonwealth (1996) 186 CLR 302; Abbotto v Australian Electoral Commission (1997) 71 ALJR 675; Rowe v Electoral Commissioner (2010) 243 CLR 1; and Murphy v Electoral Commissioner (2016) 261 CLR 28). Perhaps even more significantly, the decisive argument – that s 302CA was beyond the legislative power of the Commonwealth because it could not properly be characterised as a law with respect to federal elections – seemed to run counter to the approach to the interpretation of Commonwealth legislative power that the Court had adopted since the Engineers’ Case. This was particularly so given the reference in the majority judgment to the fact that s 302CA extended to activities ‘the regulation of which is within the heartland of State legislative power’ (at [80]).

Since the Engineers’ Case, the High Court’s approach to the interpretation and application of the Constitution has allowed the Commonwealth’s practical powers of operation to increase substantially (see e.g. discussion by Windeyer J in the Payroll Tax Case (1971) 122 CLR 353 at 395-396). As identified by Allan and Aroney, there have been two main drivers for this. The first is the proposition, set out at [16] and [108] of Grain Pool of Western Australia v Commonwealth (2000) 202 CLR 479,  that Commonwealth legislative powers are to be interpreted as widely as the words can reasonably admit, without taking into consideration the powers that are left to the States. The second is that when characterising a Commonwealth law, the only question is whether it can fairly be described as a law with respect to one or more of the Commonwealth’s heads of power; it does not matter whether it can also be characterised as a law with respect to matters left to the States (see Actors and Announcers Equity Association v Fontana Films Pty Ltd (1982) 150 CLR 169 at 192). After the Engineers’ Case, it became illegitimate to seek to maintain some kind of appropriate ‘balance’ between the powers of the Commonwealth and the States (see the Work Choices Case (2006) 229 CLR 1 at [54], [141], [145], [183], [189], and [195]-[196]).

However, the use of the expression ‘heartland of State legislative power’ in the majority judgment in Spence follows other statements quoted by the majority from earlier decisions of the Court that seem to run counter to the orthodox approach to assessing whether a Commonwealth law was validly enacted, which involves considering only whether there is a sufficient connection to a federal head of power, and not the effect it has on State power. Those included the statement by Sir Owen Dixon that it is relevant to consider whether a Commonwealth law dealt with a topic that ‘falls within the province of the States’ or which reaches ‘into the exercise of the constitutional powers of the States’ (quoted in Spence at [65] and [67], respectively, citing the Communist Party Case (1951) 83 CLR 1 at 175; and the Second Uniform Tax Case (1957) 99 CLR 575 at 614), and the statement by Gibbs CJ that ‘in considering whether a law is incidental to the subject matter of a Commonwealth power it is not always irrelevant that the effect of the law is to invade State power’ (quoted in Spence at [69] citing Gazzo v Comptroller of Stamps (Vict) (1981) 149 CLR 227 at 240). It might be said that these statements indicate an element of reserved-powers type thinking in the majority judgment (see Fisher v Fisher (1986) 161 CLR 438 at 453; Gazzo v Comptroller of Stamps (Vict) at 248 and 255). To what extent does the reasoning of the majority in Spence apply the kind of balancing or reserved powers-type thinking that these comments suggest?

The majority judgment observed that Commonwealth laws which operate in areas that might be considered incidental, penumbral or peripheral to the subject matter of the head of power under which they are made, as was the case in Spence, can be helpfully assessed by identifying their object or purpose and then determining whether there is a sufficient connection between that purpose and the subject matter of the relevant head of power, and that this will involve an assessment of whether the law is reasonably appropriate and adapted to achieving that goal (at [59]-[70]). The problem with s 302CA was that it regulated the making and retention of political gifts that might never be used for federal electoral purposes (the modality is described in the joint judgment in various ways: the gifts ‘might, or might not’ and they ‘might, but need not’ be used for federal elections: at [78] – [79]).

It is in this context that the reference to the ‘heartland of State legislative power’ arises, and where the divergence from the orthodox approach may be seen to be less than first thought. It is arguable that the majority did in fact consider only whether there was a sufficient connection to a federal head of power, and not the effect that the Commonwealth amendments had on State power. The line in the majority judgment that immediately follows the ‘heartland’ reference is instructive (at [80]):

The contrast between the slightness of the impact of s 302CA on the subject matter of the federal electoral process and its much greater impact on matters outside that subject matter points strongly to a purpose that cannot be said to be incidental to that subject matter.

The point of the majority judgment was that the extent of the intrusion into the ‘heartland of State legislative power’ demonstrated how tenuous, and in the end insufficient, the connection was to the federal electoral process (at [80], [81], [83]). Put simply, it was not that the Commonwealth could not, or should not be allowed to, legislate in a way that would affect State electoral processes – it was that the Commonwealth could not legislate in a way that would apply to gifts that might only ever be used in relation to State electoral processes, and not federal elections.

Perhaps instead of one absolute or the other – a return to the reserved powers doctrine, or a completely orthodox assessment of the validity of Commonwealth laws – the approach of the majority in Spence is a middle-ground between the two. It could still be considered consistent with the orthodox approach to the interpretation of the Commonwealth’s legislative powers to the extent that it arguably involved considering only whether the law can fairly be described as a law with respect to a Commonwealth head of power, and not whether it was also a law with respect to matters left to the States. However, it may be considered inconsistent with the other key element of the orthodox approach – that Commonwealth legislative powers are to be interpreted as widely as possible, without taking into consideration the powers that are left to the States. The majority did, in effect, interpret the power to legislate with respect to federal elections more narrowly than they might have by finding that the power was not wide enough to include matters that only might relate to federal elections (at [75], [79], [81]). The key reason for not interpreting the power more broadly was the extent to which it purported to apply to, and would impact on, State electoral processes (at [81]). It is questionable, even unlikely, that the wording of the power could ever be interpreted broadly enough to include the power to make laws with respect to State elections, regardless of the power of the States to legislate for State elections; but the reasoning of the majority judgment certainly took into account the impact of the Commonwealth law on the powers of the States. In that way, the majority’s reasoning did involve an element of ‘balancing’ the powers of the Commonwealth and the States (see discussion of ‘federal balance’ in the Work Choices Case at [54], [141], [145], [183], [189], [195]-[196]), or of protecting or preserving the legislative power of the States.

It is also important to emphasise that the majority’s reasoning relied on principles of interpretation relating specifically to the assessment of the validity of Commonwealth laws passed pursuant to the incidental or peripheral aspects of a Commonwealth legislative power. The majority’s reasoning suggests that a different assessment, using different principles, must continue to be applied when legislation is exercised within the ‘core’ of a Commonwealth power.

Whatever the potential broader application of the Spence decision, it is significant because it gives some recognition to the historical significance and ongoing role of the States within the Australian Constitution and federal system, in that it treats the Commonwealth and the States more symmetrically than has been the case in the past. The Commonwealth has been prevented from overriding a piece of State legislation governing matters squarely within the State’s legislative competence with a provision that purported to apply to circumstances that may not relate, in any way, to an area of Commonwealth legislative competence. In doing so, the majority in Spence has affirmed that when determining whether a Commonwealth law falls within power, at least in the case of laws that purport to operate in areas incidental or peripheral to Commonwealth powers, it is relevant to ask whether it intrudes into ‘the heartland of State legislative power’. The decision in Spence does not overrule, or directly or explicitly challenge, the decision in the Engineers’ Case (as Allan and Aroney suggested in 2006 it might be time to do) – but perhaps, just maybe, it lights a path to doing so in the future.

This post draws on the more detailed analysis in Nicholas Aroney ‘Spence v Queensland and the federal balance: How many swallows make a summer?’, which is forthcoming in a 2020 Public Law Review special edition on the centenary of the Engineers’ Case. AUSPUBLAW thanks the editors of that journal for their permission to publish this post.

Nicholas Aroney is a Professor of Constitutional Law at the University of Queensland.

Daniel Whitmore is a barrister and federal prosecutor, and an LLM candidate at the University of Queensland.

Suggested Citation: Nicholas Aroney and Daniel Whitmore, ‘Spence v Queensland: A Turning Point in the High Court’s Approach to Federalism?’ on AUSPUBLAW (16 October 2019) <https://auspublaw.org/2019/10/spence-v-queensland-a-turning-point-in-the-high-courts-approach-to-federalism/(opens in a new tab)>