McCloy v New South Wales

The High Court has decided a special case on whether various provisions of the Election Funding, Expenditure and Disclosure Act 1981 (NSW) contravene the implied freedom of political communication, raised in relation to a hearing before the Independent Commission against Corruption in New South Wales. The second defendant (ICAC) subjected McCloy to a compulsory examination about whether donations made in the March 2011 NSW state elections contravened the challenged provisions. Those provisions are pt 6 div 2A, which makes it unlawful for a person to accept a donation that exceeds the applicable cap, pt 6 div 4A, which makes it unlawful for ‘prohibited donors’ to make political donations (the special case focuses on ‘property developers’, who are prohibited by s 96GAA), and s 96E, which makes it unlawful for a person to make a range of enumerated ‘indirect campaign contributions’. The plaintiffs contend that each of these provisions are not directed at or rationally connected to a legitimate end, and, in the alternative, are not proportionate to any possible legitimate end, and thus contravene the implied freedom of political communication.

A majority of the Court (French CJ, Kiefel, Bell and Keane JJ in a joint judgment, Gageler J and Gordon J) rejected the plaintiffs’ contentions and held that none of the challenged provisions were invalid. Nettle J held that div 4A was invalid insofar as it applied to property developers, but otherwise found that the other provisions were not invalid.

The joint judgment held that while each of the provisions did burden the implied freedom, they had been enacted for legitimate purposes, advance those purposes by rational means that ‘not only do not impede the system of representative government … but enhance it’, are adequate in their balance, and that there are no obvious and compelling alternative and reasonably practicable means for achieving that purpose (at [5]). These conclusions reflected a proportionality approach that looks to whether a measure is suitable, necessary and adequate in its balance: at [2]. Noting again that the implied freedom is not a personal right but a limit on legislative power relevant to its effect on the freedom (at [30), the joint judges phrased the test of compatibility of the legitimate purpose and means with the Constitution as follows (at [31]):

Accepting that Div 2A and Div 4A burden the freedom, in the way explained in Unions NSW, the process of justification for which Lange provides commences with the identification of the statutory purpose or purposes. The other questions posed by Lange are not reached unless the purpose of the provisions in question is legitimate. A legitimate purpose is one which is compatible with the system of representative government provided for by the Constitution; which is to say that the purpose does not impede the functioning of that system and all that it entails. So too must the means chosen to achieve the statutory object be compatible with that system.

The joint judges held that div 2A and s 96E were not invalid because their capping provisions were aimed at the legitimate end of preventing corruption and undue influence, and reduced the risk of corruption and undue influence by preventing the payments of large sums of money through political donations (at [33]ff). The joint judges noted that ‘[t]he risk to equal participation posed by the uncontrolled use of wealth may warrant legislative action to ensure, or even enhance, the practical enjoyment of popular sovereignty’, and that those risks had been long recognised both in Australia since Federation and in other countries with representative systems (at [45]–[47]). Turning to div 4A’s ban on property developer donations, the joint judges accepted the State’s submissions that property developers warrant specific regulation ‘in light of the nature of their business activities and the nature of the public powers which they might seek to influence in their self-interest, as history in New South Wales shows’ (at [49]): div 4A aims at reducing a risk that may be higher than in other areas of official decision making (see [53]). The joint judges rejected the plaintiffs’ submissions that the provisions had no rational connection to targeting corruption (at [54]ff) and that there were equally practicable alternatives (at [57]ff), in particular noting that schemes that only require disclosures or attach to bribery would not be as effective or a reasonable alternative to capping, and that, in any case, the justification goes to the ‘objective tendency’ of large sums to corrupt the political process (at [62]). The joint judgment then moved to an extended discussion of the nature of proportionality analysis in the context of the implied freedom, drawing in particular on academic writings and decisions of courts in Europe and the UK (see [66]–[93]). The joint judges noted at the outset that these materials were ‘a source of analytical tools’ that may be applied in the Australian context, but expressly noted that their utility in resolving proportionality questions in the context of the implied freedom of political communication does not involve a ‘general acceptance’ of their value for Australian constitutional law, or accepting that these approaches are ‘methodologically correct’ (at [3]–[4]).

Gageler J agreed with the joint judgement’s answers to the special case, but held that this was not due to proportionality (on which see at [142]ff) but rather because the provisions were no more restrictive than was reasonably necessary to be imposed in the pursuit of a compelling statutory objective, namely preventing corruption and undue influence in the government of a State ([98]). In Gageler J’s view, the requirement here for the validity of the provisions was (at [155]):

that such restriction as each imposes on political communication is imposed in pursuit of an end which is appropriately characterised within our system of representative and responsible government as compelling; and that the imposition of the restriction in pursuit of that compelling end can be seen on close scrutiny to be a reasonable necessity.

Holding that the challenged provisions restrict political communication by restricting funds available to candidates ([158]ff), Gageler J explored the meanings of corruption and undue influence (at [167]ff) and emphasised their meanings as going to unequal access to government based on money ([181]–[184]). Gageler J concluded that div 2A clearly achieved that purpose ([185]ff), and that div 4A’s elimination  of access for corporate property developers could be justified on the nature of the business, the profits of which depended on public officials’ exercising statutory discretions in their favour, which ‘gives corporate property developers a particular incentive to exploit [the] avenues of influence as are available to them’: at [193].

Gordon J likewise agreed with the answers proposed by the joint judgment, but applied a straightforward two-step Lange analysis (see at [306]), noting that ‘the method or structure of reasoning to which the plurality refers does not yield in this case an answer any different from that reached by the accepted modes of reasoning’ (at [311]). Dealing with each provision separately, Gordon J concluded that each burdened the implied freedom but that each served a legitimate object and were reasonably appropriate and adapted to serving that end (see [311]ff).

Nettle J agreed that the donation caps in div 2A were appropriate and adapted to the legitimate aim of reducing the risk of patronage and undue influence (at [224]–[227]), but held that restrictions against certain classes of political raised ‘different considerations’ and were here invalid (at [230]ff): those provisions ‘discriminated against a particular sector of the community, and thus against the expression of their particular political views’ and thus fail the second limb of the Lange test (at [257], see also at [242]–[248] and [266]–[269]).

High Court Judgment [2015] HCA 34 7 October 2015
Result Div 4A is not invalid in relation to donations by property developers; div 2A is not invalid; s 96E is not invalid.
High Court Documents McCloy v NSW
Full Court Hearing [2015] HCATrans 141[2015] HCATrans 142 10 June 201511 June 2015
Directions Hearings [2015] HCATrans 1  19 January 2015
[2014] HCATrans 265 17 November 2014

[2014] HCATrans 225  13 October 2014

[2014] HCATrans 212 17 September 2014


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About Martin Clark

Martin Clark is a PhD Candidate and Judge Dame Rosalyn Higgins Scholar at the London School of Economics and Political Science and Research Fellow at Melbourne Law School. He holds honours degrees in law, history and philosophy from the University of Melbourne, and an MPhil in Law from MLS. While at MLS, he worked as a researcher for several senior faculty members, was a 2012 Editor of the Melbourne Journal of International Law, tutor at MLS and various colleges, a Jessie Legatt Scholar, and attended the Center for Transnational Legal Studies Program.