Cunningham v Commonwealth

The High Court has decided a constitutional matter on the annual allowance payable to retired members of parliament. The plaintiffs, four retired ALP and LNP MPs, challenged the validity of various provisions of statutes relating to retirement allowances and travel benefits (‘Life Gold Passes’) for former parliamentarians and the powers of the Remuneration Tribunal. The plaintiffs contended that those allowances amounted to property rights within the meaning of s 51(xxxi) of the Constitution, and that changes to those provisions and the connected tribunal determinations constituted or authorised the acquisition of their property otherwise than on just terms, contrary to s 51(xxxi).

The High Court held that neither the sections under challenge nor the determinations contravened the requirements of s 51(xxxi) (Gageler J dissenting on the question of the Life Gold Pass and determinations).

French CJ, Kiefel and Bell JJ rejected the plaintiffs’ claim that the retirement allowances were ‘property’ in the sense of being fixed and certain amounts, which the legislative amendments had diminished. Rather than reducing particular entitlements, the amendments changed the method of calculating those allowances (at [36]). More generally, the plaintiffs could not identify ‘when and how’ those rights became fixed and certain, and simply asserted this was the case without grounding that characterisation in the provisions of the Superannuation Act (at [37]). Further, the Act provides that benefits will be paid ‘subject to this Act’, which reflects that the benefits and the methods of calculating them may change over time, contrary to the plaintiffs’ assertion that it created rights free from any conditions that the value of those benefits might be reduced in the future (see [38]). The joint judges also rejected the plaintiffs’ underlying argument that the amendments were laws ‘with respect to’ the acquisition of property (see [40]ff). Rights based solely in statutes are more liable to variations than common law rights, and certain categories can be seen as inherently variable, among them entitlements to retirement allowances (see [43]). Contrary the plaintiffs’ arguments against descriptions like ‘inherently’ susceptible, the joint judges noted that this objection overlooked the fact that these descriptions identify within a statutory right some feature that is ‘critical’ to their nature as property for the purposes of s 51(xxxi): ‘If a right or entitlement was always, of its nature, liable to variation, apart from the fact that it was created by statute, a variation later effected cannot properly be described as an acquisition of property. The Commonwealth does not as a result of an amendment effecting a variation receive a release from an existing liability and therefore acquire property, as the plaintiffs contend. The Commonwealth’s liability corresponds with the variation made.’: at [46]. As to the Life Gold travel passes, the joint judges noted that while the same reasons relating to the retirement allowances should apply (namely that they could be amended at any time), the plaintiffs’ arguments here focused on the passes as allowances, meaning that the Remuneration Tribunal could make determinations with respect to them (at [51]). The joint judges rejected the plaintiffs’ characterisation of the passes as allowances, holding that the Tribunal dealt with them as an existing entitlement, though they are better described as a gratuity or privilege  that could be modified or extinguished at any time (see [53]–[55]).

Gageler J rejected the plaintiffs’ arguments on the retiring allowance, but did accept the arguments of the two plaintiffs challenging the alterations to the Life Gold Passes. In rejecting the arguments on the retiring allowance, Gageler J focused on s 22T of the Superannuation Act, which ‘set a floor’ on the amount of retiring allowance payable after the calculation laid out in s 18 (see [85]–[87]). While the 2011 amendments did change that method of calculation to use the base salary of current parliamentarians (see [90]ff), it did not effectively reduce the amount the plaintiffs received, and they remained covered by the protection of s 22T (see [100]–[103]): ‘The fundamental problem with the plaintiffs’ argument is that it is founded on too large and imprecise a conception of just what their statutory rights to a retiring allowance had been before the enactment of the 2011 Act.’ (at [102]). As they were not deprived of any property, the amendments did not meet the threshold requirement of  s 51(xxxi) of a law with respect to an acquisition of property (at [103], [105]). Turning to the Life Gold Passes, Gageler J accepted that the passes were statutory rights accruing to the members as retirement allowances that could not be altered later: the Tribunal’s power under s 7(1) was limited to determining the allowances to be paid to current parliamentarians by reason of their membership of parliament and did not extend to retired members (at [109]–[110]). Consequently, the Life Gold Pass rights were not ‘inherently variable’, and the pass conferred accrued rights which were altered by the determination reducing the number of trips from 25 to 10 (see [111]–[113]). That reduction was an acquisition otherwise than on just terms and should be without effect (see [117]).

Keane J held that the retiring allowances right was a statutory right to the payment of money from the Commonwealth, and of the same character as the right of serving parliamentarians to remuneration (at [155]) and, notably, does not use the language of ‘vesting’ (see [166]): instead, the right to payments is created by s 18, the terms of which may be changed from time to time (at [167]). Keane J also rejected the plaintiffs’ contentions that the minimum limit in s 22T supported their construction of s 18 as not allowing a reduction in value: that provision limits reductions on the absolute amount of payments, and does not ‘maintain the relativity’ that the plaintiffs suggest it does (at [169]). Finally, Keane J also rejected the plaintiffs’ contention that the entitlement was vested in them as a right earned by virtue of their service, because parliamentarians and ministers are not Commonwealth employees (see [170]ff). As to the Life Gold Passes, Keane J held that the 2012 statutory framework for the passes both regularised and determined the content of the entitlement, which the Tribunal under s 7(1) may vary from time to time, consistent with the provisions of the Act (at [189]–[191]). Keane J emphasised that the entitlement was an allowance within the meaning of s 7(1), and if that were not so, the Tribunal would not have the power to create any entitlements (at [192]).

Nettle J agreed that both challenges failed, holding that the central flaw in the plaintiffs’ case was that the right to paid a retiring allowance was, under the terms of statute by which it was created, subject to the will of the legislature that created it, and subject to changes in the will of that legislature (at [222], [234]). After commenting on a number of aspects of the Commonwealth’s submissions (see [223]–[233]), Nettle J noted that where a right is inherently defeasible, extinguishing or diminishing it will not constitute an acquisition of property (at [235]). While the ‘subject to this Act’ preface suggests a statutory intention that the rights may be varied from time to time, it cannot be assumed that those words are sufficient to show the rights are inherently defeasible: ‘where an Act creates a right in terms which are otherwise indicative of immutability, a preface of “subject to this Act” may not be sufficient to render it subject to amendment from time to time. It will depend on the nature of the provision and the right thereby created, the context and ultimately the apparent purpose of the legislation’: at [237]. As applied to the benefit in s 18, however, the text and legislative history made it clear that the legislature intended the amounts paid may be amended from time to time (at [238]ff). Turning briefly to the Life Gold Pass, Nettle J characterised the pass as an executive entitlement that was necessarily subject to change or cancellation from time to time (at [243]). Nettle J, agreeing with the joint judges, rejected the plaintiffs’ argument that it became a statutory entitlement following the amendments, and emphasising that the Remuneration Tribunal’s power under s 7(1) was a power to determine allowances: consequently the pass is an entitlement determined by the Tribunal and was, from the beginning, inherently subject to change from time to time, and thus was not proprietary in nature and hence could not be the subject of an acquisition contrary to s 51(xxxi) (at [244]).

Gordon J also held that neither the provisions or the determinations contravened s 51(xxxi). Gordon J held that at the time when the plaintiffs became eligible to receive a retiring allowance, they received only a right governed by the Superannuation Act as amended from time to time: the content of that right depended on the will of the legislature that created it, and the inherent variability of the right is reflected in the statutory scheme, particularly clear from the entitlements being ‘subject to this Act’ (at [328]). Likewise the methods for calculating the allowance was not fixed (see [329]ff). As to the Gold Passes, Gordon J held that the statutory provisions and their administrative and legislative history, shows that the claimed ‘right’ in the passes is inherently unstable (at [352]). This instability is reflected in the Tribunal’s power to determine allowances to be paid to serving members (at [353]). While the two plaintiffs are retired, their claimed right still depends on the statutory scheme, and remains ‘as fragile and inherently variable as the right of a serving parliamentarian. The content of the “right”, at least from 1976, depended on the will, from time to time, of the legislature that created the “right”. Not only its origin, but its continued existence, was and remains unstable’: at [355]. The amendments in 2002 and 2012 varied the right and made it clear that the Tribunal’s powers to make determinations had to be consistent with the 2002 Act: consequently describing the Pass as creating accrued statutory rights is inconsistent with the Tribunal’s powers and the express terms of the 2002 and 2012 Acts: at [357]. The ‘rights’ in the passes were variable and could be amended, and thus they were not property within the meaning of s 51 (xxxi).

High Court Judgment [2016] HCA 39 12 October 2016
Result Allowances and benefit reductions did not contravene s 51(xxxi)
High Court Documents Cunningham
Full Court Hearing [2016] HCATrans 140 16 June 2016
Directions Hearings [2015] HCATrans 346 18 December 2015
[2015] HCATrans 243 23 September 2015

ORDER

The questions stated by the parties in the special case dated 4 February 2016 and referred for consideration by the Full Court be answered as follows:

Question One

Do any, and if so which, of the following laws and Determinations of the Remuneration Tribunal constitute or authorise an acquisition of any, and if so what, property of the plaintiffs, or any of them, otherwise than on just terms, within the meaning of s 51(xxxi) of the Constitution:

  1. Remuneration Tribunal Act 1973 (Cth), ss 7(1A), 7(1B), 7(1C) and 7(2A);
  2. Remuneration and Other Legislation Amendment Act 2011 (Cth), s 3 (insofar as it made the amendments or repeals provided for in Sched 2, items 1, 16A, 17A, 19, 20, 21(2));
  3. Members of Parliament (Life Gold Pass) and Other Legislation Amendment Act 2012 (Cth), s 3 (insofar as it made the amendments or repeals provided for in Sched 2, items 1, 2, 3, 5, 6, 7, 8 and 9);
  4. Members of Parliament (Life Gold Pass) Act 2002 (Cth), s 11(2) (as originally enacted);
  5. Members of Parliament (Life Gold Pass) and Other Legislation Amendment Act 2012 (Cth), s 3 (insofar as it made the amendments or repeals provided for in Sched 1, item 6);
  6. Determination 2012/02, Pt 2 (cl 2.2);
  7. Determination 2012/03, Pt 2 (cl 2.3), Pt 3 (cl 3.1);
  8. Determination 2012/15, Pt 1 (cl 1.3 and cl 1.4 (insofar as it relates to cl 1.3));
  9. Determination 2013/13, Pt 2 (cl 2.2), Pt 3 (cl 3.3), Pt 4 (cl 4.1);
  10. Determination 2014/10, Pt 2 (cl 2.2), Pt 3 (cl 3.3), Pt 4 (cl 4.1);
  11. Determination 2015/06, Pt 2 (cl 2.2), Pt 3 (cl 3.3), Pt 4 (cl 4.1)?

Answer

No.

Question Two

If the answer to Question One is yes, to what, if any relief are the plaintiffs, or any of them, entitled in the proceedings?

Answer

Unnecessary to answer.

Question Three

Who should pay the costs of the proceedings?

Answer

The plaintiffs.

This entry was posted in Case Pages, Decided Cases, Opinions by Martin Clark. Bookmark the permalink.

About Martin Clark

Martin Clark is an 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 in legal theory, a Jessie Legatt Scholar, and attended the Center for Transnational Legal Studies Program.

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