‘Parliamentary Perks’ as Constitutionally Protected Property?: Cunningham v Commonwealth

By Dr Lael Weis

Cunningham Case Page

How could the same constitutional provision that Darryl Kerrigan famously invoked to protect his ‘castle’ be relied upon by former Members of Parliament to protect ‘gratuitous’ — in the sense that they go above and beyond entitlements based on superannuation contributions — retirement benefits against any possible future reductions? As news coverage of the High Court’s recent decision in Cunningham v Commonwealth [2016] HCA suggests, the very contention is offensive to public sensibilities.

The constitutional provision in question, s 51(xxxi), protects individuals from the arbitrary acquisition of property by requiring that the acquisition of property by the Commonwealth be ‘on just terms’. Yet it seems highly counterintuitive to think of gratuitous retirement benefits — funded by taxpayer money, no less — as ‘property’ that the Constitution affords protection to. As one opinion piece scoffed, ‘you could hardly be blamed for imagining a snort of derision from the Bench at the implication that the [former parliamentarians] believed it was their own money they were fighting for.’ Surely they’re dreamin’ … or are they?

In this blog post I will briefly comment on the seemingly odd character of the constitutional challenge, explaining why Cunningham is not in fact that odd as far as s 51(xxxi) cases go. I will then offer a few remarks on what the commonplace character of challenges of this kind tells us about the broader challenges that confront the High Court’s jurisprudence in this area, and why the Court didn’t exactly tell the plaintiffs to ‘dream on’.

‘Property’ protected by the constitutional guarantee

In reality, cases like Darryl Kerrigan’s — which involve straightforward real property interests — are atypical for Australian constitutional property law. Australian constitutional property law much more frequently concerns unfamiliar or unusual interests, many of which do not even qualify as ‘property’ in the technical legal sense.  Examples include statutory licences, the right to receive a payment of money, and the right to bring a cause of action.

This character of the ‘property’ in play in s 51(xxxi) cases is not only surprising from a non-legal perspective, but also from a comparative legal perspective. In other jurisdictions that afford constitutional protection to property rights, disputes involving challenges by land-owners to the state’s regulation of land and the incidents of land-ownership are far more common.

There are two reasons why s 51(xxxi) jurisprudence is different on this score. The first reason is that the guarantee binds the Commonwealth, but not the States. (Many people find this surprising. On this score it bears noting that a proposal to amend the Constitution to extend the same protection to State legislation was rejected in the 1988 Referendum.)

Because land law is by-and-large State law, property interests associated with land-ownership come up infrequently.

The second reason is that the High Court has given an extremely broad interpretation to ‘property’ for the purposes of that provision because it is one of our Constitution’s few express guarantees.  Accordingly, to recite a much-quoted line from Dixon J’s judgment in the Bank Nationalisation Case ‘s 51(xxxi) is not … confined pedantically to the taking of title by the Commonwealth to some specific estate or interest in land … but … extends to innominate and anomalous interests’. This was not inevitable, however. As Rosalind Dixon has forcefully argued, there are good reasons for thinking that s 51(xxxi) is a supplemental source of legislative power rather than a freestanding constitutional guarantee. Without getting into the details of that debate (or Dixon’s argument), the High Court still seems firmly committed to the constitutional guarantee view. That said, it is perhaps noteworthy in this regard that in Cunningham only Gageler J emphasised the status of s 51(xxxi) as a constitutional guarantee, whereas this was underplayed (or at least not front and centre) in the other judgments (compare Gageler J at [57], [116] with the joint reasons at [35]). In light of the facts of the case, this is unsurprising.

Another consequence of the constitutional guarantee understanding of s 51(xxxi) is that the High Court has simultaneously adopted a broad construction of what constitutes an ‘acquisition’ of property for the purpose of triggering the constitutional requirement to provide ‘just terms’. Broadly speaking, the Commonwealth need not directly acquire the property in question (for example, through physical seizure or compelled sale), but could acquire an interest in the property indirectly (for example, by changing the way that an entitlement is defined, such that the Commonwealth’s corresponding obligation to provide it is diminished). The latter, of course, is precisely the nature of the complaint at issue in Cunningham.

Narrowing the scope of ‘acquisitions’

Once this background is in place, we can see that Cunningham is not such an unusual case. But we can also see that the High Court has given itself an extremely difficult job. Given the broad definition of ‘property’ and the possibility of ‘indirect acquisitions’, it would seem that Commonwealth acquisitions of property are ubiquitous. In light of the circumstances of the modern social welfare state and the inherently reciprocal character of legal rights, many or even most regulatory laws appear to result in prima facie acquisitions of property. The High Court thus requires a strategy to narrow the class of prima facie acquisitions of property — or, as my colleague Simon Evans once put it, to explain ‘when an acquisition of property is not an acquisition of property’.

The High Court’s predominant strategy in this regard has been to develop categories that are ‘exempt’ from the operation of the constitutional guarantee. One such category is the category deployed in Cunningham: property interests that are ‘inherently susceptible to variation’.

In recent years, the High Court has expressed some reservations about relying on the ‘inherently variable’ category to dispose of constitutional property issues. For example, although the category could have very plausibly been applied in the tobacco plain packaging case, JT International SA v Commonwealth [2012] HCA 43, most members of the 6:1 majority did not dismiss the challenge on that basis. Reservations about the category are primarily due to difficulties in managing its boundaries. Many property interests are creatures of statute and a key challenge has been to fend off the temptation to simply say that all statutory interests are ‘inherently variable’ (a proposition which, as Nettle J observes in Cunningham, has never had any real traction: at [229]).  It is unclear why some statutory property interests are regarded as ‘inherently variable’, and others are not.

Here it would be helpful for the Court to explain what, exactly, it is about property interests that are ‘inherently variable’ such that they are exempt from constitutional protection afforded to other property interests. In applying the category, however, the Court has tended to rely purely on the process of statutory interpretation to determine the character of the interest (qua ‘inherently susceptible to variation’), as opposed to the evaluative considerations that one typically expects in constitutional property rights analysis, and that might shed light on the rationale for disqualification — considerations such as: the reasonableness of the interest-holder’s expectations, the relative burden on the interest-holder in relation to the benefits achieved by the regulatory scheme, and the like. One often suspects that unarticulated considerations of this kind are lurking in the background, suppressed by the seemingly formalistic ‘inherently variable’ analysis.  My own view is that this is dissatisfying.

Although Cunningham doesn’t appear to add too much to our understanding of the underlying rationale for the category, or indeed how and when it applies, it is interesting in and of itself that all but one of the judgments rely on it to dispose of the case (albeit to varying degrees). (Gageler J is the exception: [104]. His approach is to use susceptibility to variation less as a determinative ‘category’ than as one consideration among others: see eg [66]–[67]. Of the other judgements, Nettle J and Gordon J appear to rely on the category most strongly: Gordon J [252]–[253], [289], [328], [352]–[353], [355].) Accordingly, one wonders why it was applied here but not applied five years ago, in JT International.

One possibility is that the Court was concerned in that case with giving the impression that all intellectual property rights are ‘inherently susceptible to variation’ (as opposed to, more narrowly, the use of those rights in relation to the sale of tobacco products). However, Cunningham arguably presents exactly the same kind of ‘containment’ problem with respect to gratuitous benefits provided by the state.  Notably, the Court did not go so far as to hold that all such benefits are exempt from the protection of s 51(xxxi) (Nettle J even went out of his to clarify this point: 67 [231]).  Indeed, although several judgments cast doubt on the ‘proprietary’ character of gratuitous retirement benefits (see especially Keane J [149], [153]; Gordon J [328]–[329], [340], [352], [358]), the Court did not even hold that all such benefits are exempt from constitutional protection (French CJ, Kiefel and Bell JJ [7], [48]; Gageler J [69]–[70]; Nettle J [223]–[224], [226]; Gordon J [271], [334]).  (Although the joint judgment comes close, suggesting that there is a strong presumption that statutory entitlements of this kind are ‘inherently variable’: [43]).

Statutory entitlements in the modern welfare state — The constitutional dilemma

This begs the question: why not simply hold that gratuitous social welfare benefits provided by statute are not constitutionally protected ‘property’, and that their modification or extinguishment by the Commonwealth does not attract the constitutional requirement of ‘just terms’? This would make the Court’s job in this area much easier.

The dilemma that the Court faces in grappling with this set of issues — I want to suggest — stems from limitations in the resources available within our Constitution to protect individuals against the arbitrary deprivation of state-provided entitlements. Perhaps we are not so troubled about protecting the ‘rights’ of retired parliamentarians to their cushy, taxpayer-funded retirement benefits. But what if the Commonwealth decided to substantially reduce, or even suspend, the provision of an essential service (such as health care) that Australians have come to rely on as a state-provided public good, and that a substantial number of Australians could not afford to purchase on the private market? It is not implausible to think that there ought to be some limitations on the power of the state to deprive an individual of at least some kinds of social welfare benefits, and that under at least some circumstances that deprivation would be arbitrary and unjust. My own view is that the High Court appreciates the power of this suggestion, and it is for this reason that the Court has so far resisted adopting the position that the modification or extinguishment of gratuitous social welfare benefits categorically falls outside the scope of s 51(xxxi).

Query, however, whether this asks s 51(xxxi) to do too much. Arguably, concerns about the arbitrary deprivation of social welfare benefits would be better conceptualised through the lens of constitutional guarantees of ‘due process’ or ‘procedural justice’, rather than through the lens of constitutional guarantees of ‘property rights’. One consequence of having a Constitution without a bill of rights, however, is that constitutional provisions may be called upon to perform rights-like functions that they are perhaps not well-suited to perform. Thus in recent years Chapter III and the separation of judicial power jurisprudence has sometimes functioned as a stand in for due process-type considerations. Although it currently seems unlikely, it is worth thinking about whether a similar development could take foothold in the context of s 51(xxxi) jurisprudence.

Dr Lael Weis is a Lecturer at Melbourne Law School

AGLC3 Citation: Lael Weis, ‘”Parliamentary Perks” as Constitutionally Protected Property?: Cunningham v Commonwealth’ on Opinions on High (21 October 2016) <http://blogs.unimelb.edu.au/opinionsonhigh/2016/10/21/weis-cunningham/>.

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About Lael Weis

Dr Weis joined Melbourne Law School in July 2010 as a McKenzie Post-Doctoral Fellow. She holds a PhD and JD from Stanford University from the Department of Philosophy and Law School. She completed her dissertation, 'Public Purpose, Common Good: Constitutional Property in the Democratic State', while a fellow at the Stanford Humanities Center during the 2009-10 academic year. Her research interests lie at the intersection of constitutional legal theory, democratic political theory, and comparative constitutional law. She organises the MLS Legal Theory Workshop, a discussion group for works in progress in legal theory that draws guests from around Australia and overseas.

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