Endings and Fairness: The Clean Energy Act 2011 (Cth) and Queensland Nickel: Queensland Nickel Pty Ltd v Commonwealth

By Brad Jessup

Queensland Nickel Case Page

Australia’s first national laws to put a price on carbon were effective to their end; reportedly leading to reductions in Australia’s combined greenhouse gas emissions. In their absence it has been reported that increases in emissions have resumed. While our new Prime Minister grapples with how to rein in these emissions, the High Court last year confirmed that the carbon price laws were lawful, and through the prism of the Constitution fair, to their end. The history books will show, however, that politicians failed to make the case for a carbon price law, but they devised and crafted a successful, if complex though geographically unfair, legal policy. Over the past few days the protagonist in the High Court case, Queensland Nickel, with the business faltering, has brought claims of fairness into the political discourse around this business’ carbon intensive operations.

The Constitution and no interstate discrimination

In Queensland Nickel Pty Ltd v Commonwealth [2015] HCA 12, notable also as Nettle J’s first judgment, the High Court dismissed a claim by Queensland Nickel that regulations supporting the principal Act, the Clean Energy Act 2011 (Cth), were unconstitutional based on their geographic effect. Arguments relying on s 99 of the Constitution, the non-discrimination provision, that the regulations inadvertently and indirectly discriminated against the Queensland-based refinery business wholly owned by Clive Palmer MP, the federal parliamentary member for Fairfax, were rejected.

The High Court concluded that the additional financial liability imposed on Queensland Nickel relative to other refineries in Western Australia that triggered the case was not a cause of a difference or discrimination on the grounds of physical or jurisdictional geography but a result of past decisions made by Queensland Nickel on purely financial grounds. The effect of the laws as experienced by Queensland Nickel relative to its Western Australian competitors may have had an increased financial burden on Mr Palmer’s company, which has not been attributed to the company’s financial woes, but that burden was not attributable to the law; rather business decisions made by the company in its infancy.

In the High Court case, Nettle J adopted the plurality view in the Fortescue Metals case, and found that the particular parts of the carbon price regulation that set out liabilities for nickel refineries ‘did not discriminate between States. In terms, it applied equally to eligible persons carrying on the production of nickel regardless of the State of production’ (at [56]). Although Nettle J acknowledged a difference in practical effect of the laws for Queensland Nickel, he considered that ‘in this case it does not appear that any of the differences between the plaintiff’s and the Western Australian nickel producers’ inputs, production processes or outputs were due to differences between Queensland and Western Australia in natural, business or other circumstances’ (at [58]).

Instead, Nettle J focussed on past decisions about mining processes as giving rise to the different effect of the laws. The mining process adopted by Queensland Nickel was found to have been the reason for the greater financial burden under the laws. Although Nettle J conceded that the mining process decision ‘was informed by geographic considerations’ (at [61]), the decisions were ultimately based on delivering to each firm the greatest possible financial windfall at the time the decisions were made in the historical technological settings.

This conclusion, which eschews considerations of the geography of place, effect, and time in preference for considerations of financial autonomy offers an appropriate and consistent ending for the Clean Energy Act 2011, because financial interests trumped geographic interests and fairness throughout its invention, implementation and repeal.

Continue reading

Secret Votes in the High Court: Smith v The Queen

 To His Honour, The jury is still not in total agreeance.

– First formal vote was [redacted] for [redacted] against (Guilty)
– Second formal vote was [redacted] for [redacted] against

Thank you.

It was 4:30pm on a summer Monday afternoon in early 2014. Leslie Smith’s jury had been deliberating since 11am the previous Friday, with a generous break over the weekend. Asked if an 11:1 verdict would solve the impasse, the jury foreman said ‘[y]ou could probably give us about half an hour and we can [indistinct].’ It took them just eighteen minutes to return a majority verdict, so they were on their way home by 5pm.

In Smith v R [2015] HCA 27, the High Court considered whether the trial judge should have publicly divulged the full contents of the jury’s note before he allowed them to reach the verdict that started Smith’s five year sentence and ended a twenty-five year journey by the woman who said he had raped her.

A secret struggle

She said that she was calling from a public phone box and sounded distressed. She told [her boyfriend] that she had had to get out of [Leslie Smith]’s apartment. He could hear the sound of a motorbike in the background. Ms B told him that she would meet him in town.

It was 11:30pm on an autumn night in 1989 when his sixteen year old girlfriend called. He didn’t see her until the next morning. Afterwards, at Townsville’s casino, where he and Smith worked, Smith wanted to ‘explain’, but he said that there was no need. His girlfriend had told him not to be angry at Smith or to blame him. She was ‘fine’. Six months passed before she told him that Smith had dragged her onto his motorbike that night and raped her at his flat. He didn’t believe her. Nor did anyone else she told that year. It was another 18 years before she went to the police, aged 34.

Until recently, a case like this would never have come to trial.  Continue reading

McCloy Symposium: Anne Carter on Proportionality and Its Discontents

By Anne Carter

McCloy Case Page

In McCloy v New South Wales [2015] HCA 34 four members of the High Court endorsed, for the first time, a ‘uniform analytical framework’ of proportionality to determine whether the implied constitutional freedom of political communication had been infringed. Although there was broad consensus amongst the Court as to the result of the case (with Nettle J dissenting only in respect of the prohibition on donations from property developers), the Court divided in respect of the role of proportionality analysis. In this post I consider how the joint judgment’s approach refines — or perhaps rewrites — the traditional two-part Lange test, and I compare this with the approach of Gageler J. In addition, I make some observations about the possible implications of the decision.

The Lange Test: A ‘cumbersome and inexact phrase’?

Since the Court’s unanimous decision in Lange v Australian Broadcasting Corporation [1997] HCA 25 in 1997, the High Court has consistently confirmed, with only slight modifications, a two-stage test for assessing limitations on the implied freedom of political communication. This by-now familiar test contains two limbs. First, it asks whether the law effectively burdens freedom of communication about government or political matters either in its terms, operation or effect. Secondly, if the law effectively burdens that freedom, it asks whether the law is reasonably appropriate and adapted to serve a legitimate end in a manner which is compatible with the maintenance of the constitutionally prescribed system of representative and responsible government.

The prevailing view, in Lange and the cases which followed it, was that ‘proportionality’ was simply an alternative formulation of the ‘reasonably appropriate and adapted’ test. In Lange itself the Court noted that the relevant test had been expressed in different ways and that it was not necessary to distinguish between the two concepts (at 562). In a footnote the Court observed that there was ‘little difference’ between the two tests (at 572). This view, that the two expressions are simply alternative ways of expressing the same test, has continued to be influential. Chief Justice Gleeson in Mulholland v Australian Electoral Commission [2004] HCA 41, for instance, noted that ‘whichever expression is used, what is important is the substance of the idea it is intended to convey’ (at [34]).

Although the Court has continued to prefer the expression ‘reasonably appropriate and adapted’, this formulation has not been without its critics. In Mulholland Kirby J, building upon his reasons in Levy v Victoria [1997] HCA 31 and Coleman v Power [2004] HCA 39 critiqued the phrase ‘appropriate and adapted’ as being ‘inappropriate and ill-adapted to perform the constitutional function repeatedly assigned to it by members of this Court’ (at [247]). He considered that the expression ‘proportionality’ better captured the ‘actual process of constitutional reasoning’ (at [250]). Continue reading

Tax and Power in the High Court: The Capital Cost of an Electricity Monopoly: Ausnet Transmission Group Pty Ltd v Federal Commissioner of Taxation

By Professor Miranda Stewart

Ausnet Case Page

State governments are keen to raise funds by privatising electricity networks, as has just been legislated in New South Wales, but a privatisation agenda can also cause an election loss, as shown in this year’s Queensland election. Electricity privatisation is controversial and the costs and benefits are hard to understand.

One of the less visible aspects of electricity privatisation is the tax treatment of the asset purchase for the private buyer. This year, one of the few High Court cases on income tax is about the privatisation of Victoria’s electricity transmission networks in the late 1990s. This is the case of AusNet Transmission Group Pty Ltd v Federal Commissioner of Taxation [2015] HCA 25.

AusNet is a listed electricity transmission company that, in its own words, is Victoria’s ‘largest energy delivery service’. According to its website, AusNet owns and operates $11 billion of electricity and gas distribution assets that connect to more than 1.3 million Victorian users in a network of ‘49 terminal stations, 13,000 towers and 6,500 kilometres of high-voltage powerlines’. It’s not surprising that when AusNet has a tax issue, it is similarly large.

AusNet loses case on tax deductibility

AusNet (at that time called SPI Powernet) paid more than $2.5 billion for electricity transmission assets that it purchased in 1997 from a Victorian State-owned company. The asset purchase was just one element in the massive exercise of electricity privatisation (for more, see the first instance decision). The purchase price included the physical assets and the electricity transmission licence which would permit AusNet to operate the network. The contract also required AusNet to pay charges under the Electricity Supply Act 1993 (Vic) of $177.5 million in the 1999, 2000 and 2001 tax years, as the new owner of the transmission licence.

AusNet sought to deduct these charges as current expenses under the general income tax deduction rule (s 8-1 of Income Tax Assessment Act 1997 (Cth)). The Commissioner denied the deduction, arguing that the charges were instead capital in nature. It took more than a decade for this argument, arising out of a complex tax audit, to make its way to the High Court, where AusNet lost.

Applying Australia’s 30 per cent company tax rate, the deduction of $177.5 million was worth about $53 million to AusNet. With interest expense on unpaid tax, AusNet owed a total of $91 million to the Tax Office, of which it had previously paid $30 million. AusNet lost the case in the High Court and announced its ‘disappointment’ to the market in an ASX release. Continue reading

A Comment on Professor Finnis’s Praise of Australia’s High Court

In a recent lecture Judicial Power: Past, Present and Future, leading legal philosopher Professor John Finnis launched a strong critique of the Supreme Court of the United Kingdom, especially the famous decision of its predecessor, the House of Lords, in the Belmarsh case, that a provision permitting the detention of suspected terrorists was incompatible with Europe’s human rights convention. By contrast he was strongly supportive of the High Court, writing:

Australia, which has as a federal nation done entirely without constitutionally stated rights for 115 years, made the choice not to entrust this inappropriate kind of power to judges, but to trust themselves and the legislatures they elect. (Victoria and one small federal territory are the only exceptions and very novel ones.) Australia I would say has done easily as well as countries under judicially enforceable or even judicially declarable human rights, and has kept its legislative and judicial discourse authentic, largely uncluttered with this sort of make-believe and confusion of roles, responsibilities and competences.

Professor Finnis relied upon the High Court’s decision in Al-Kateb v Godwin [2004] HCA 37 (where Court upheld indefinite immigration detention in some circumstances) and reserved particular praise for Justice Heydon’s judgment in Momcilovic v The Queen [2011] HCA 34 (where he would have declared Victoria’s human rights law constitutionally invalid.)

Policy Exchange, which has published the lecture as part of its judicial power project, invited three leading constitutional scholars to comment. Adrienne Stone’s commentary — questioning his reliance on Al-Kateb and Momcilovic — is here: Continue reading

McCloy Symposium: Scott Stephenson on the Complications and Consequences of Constitutional Comparison

By Dr Scott Stephenson

McCloy Case Page

In McCloy v New South Wales [2015] HCA 34 for the first time a majority of the High Court (French CJ, Kiefel, Bell and Keane JJ) endorsed proportionality analysis as the appropriate framework for determining whether a law violates the freedom of political communication, an implication derived from the Australian Constitution. In doing so, the majority turned to comparative materials, especially comparative constitutional scholarship, to explain and justify its decision. In this post, I consider the complications and consequences of the Court’s comparative engagement, examining the difficulties associated with drawing on the scholarship in this field before considering some implications of the Court’s move. I suggest that it gives greater prominence to two dimensions of constitutional adjudication that are typically not accorded priority, namely the value in providing legislatures with clarity about the limits of their powers and making value judgments explicit.

Complications: The necessary yet difficult task of comparatively engaging with proportionality

The decision to endorse proportionality analysis requires careful consideration of comparative case law and scholarship to ascertain what, precisely, proportionality analysis entails. While it may be, as the majority suggest, a ‘uniform analytical framework’ (at [74]), that framework does not have a uniform formulation or application. Some jurisdictions adopt a three-stage test, while others adopt a four-stage test (see [79] fn 100). In some jurisdictions, the majority of laws that fail proportionality analysis do so at the ‘necessity’ (least restrictive means) stage, while in others it is at the ‘adequate in its balance’ (proportionality in the strict sense) stage (Grimm, 2007). Continue reading

McCloy Symposium: Joo-Cheong Tham Sounds a Cautionary Note on Political Equality as a Constitutional Principle

By Dr Joo-Cheong Tham

McCloy Case Page

In its 1974 decision, Buckley v Valeo, 424 US 1 (1975), the United States Supreme Court infamously ruled that:

the concept that government may restrict the speech of some elements of our society in order to enhance the relative voice of others is wholly foreign to the First Amendment.

Decades later, Buckley remains powerfully influential with the Supreme Court in McCutcheon v Federal Election Commission stating last year that:

No matter how desirable it may seem, it is not an acceptable governmental objective to ‘level the playing field’, or to ‘level electoral opportunities’, or to ‘equalize the financial resources of candidates’.

In McCloy v New South Wales [2015] HCA 34, the High Court emphatically rejected the approach of US Supreme Court as to the illegitimacy of political equality or fairness as a legislative objective. On the contrary, under the Commonwealth Constitution, ‘(l)egislative regulation of the electoral process directed to the protection of the integrity of the process is … prima facie legitimate’.

Central to the conclusion that political equality and fairness are legitimate legislative objectives was the High Court’s insistence that political equality was a constitutional principle. Yet, the latter was hardly necessary for the former conclusion. If elections are to be ‘free and fair’, it would seem absurd to deny Parliament the ability to regulate with the view to advancing electoral fairness, regardless of what the Constitution said about political equality. As McLachlin CJ and Major J observed in the Canadian Supreme Court decision in Harper v Canada [2004] SCC 33 — a decision favourably cited by the joint judgment and Gageler J:

Common sense dictates that promoting electoral fairness is a pressing and substantial objective in our liberal democracy.

Not only does logic fail to bind these two aspects of the High Court’s judgment in McCloy, they also carry quite different implications in terms of legislative ability to regulate elections. The High Court’s ruling that political equality and fairness are legitimate legislative objectives permits Parliaments to regulate elections for these purposes; political equality as a constitutional principle, on the other hand, will constrain the ability of Parliaments to regulate elections, even in situations when the purported justification is one of equality and fairness.

This post sounds a cautionary note on the elevation of political equality as a constitutional principle in McCloy. It does so by posing three questions, questions that alert us to the fact that political equality as a constitutional principle does not necessarily result in the realisation of political equality and, in fact, poses risks to the democratic project. Continue reading

McCloy Symposium: Lael Weis on Why Political Communication Isn’t an Individual Right in Australia

By Dr Lael Weis

McCloy Case Page

Much of the commentary about McCloy, the High Court’s recent decision upholding NSW’s ban on donations by property developers, will concern the disagreement among members of the Court about the appropriate method for analysing burdens on the freedom of political communication, and I will look forward to what my colleagues have to say. My own contribution to the blog symposium on this case focuses on a long-standing consensus point: namely, the idea that the freedom is not an ‘individual right’.

Although I imagine members of the public might feel somewhat scandalized if told the right of individuals to communicate political matters is a fake idea in Australia, this is something the Court seems firmly committed to. Each of the four judgments in McCloy affirms this proposition: at [29]–[30] (French CJ, Kiefel, Bell, and Keane JJ); at [119]–[120] (Gageler J); at [219] (Nettle J); at [316]–[319] (Gordon J).

This was also a consensus theme in Unions NSW [2013] HCA 58, the antecedent to McCloy that struck down a wider NSW ban on political contributions by people who are not on the electoral role, such as corporations and unions. In a joint judgment Continue reading