Inside Story

Dr Gillespie and the licensed post office

The challenge to the National Party MP should help clarify the outer limits of a conflict of interest

Tony Blackshield 11 July 2017 2416 words

Capable of being chosen? David Gillespie being sworn in as assistant health minister by governor-general Peter Cosgrove in January this year. Mick Tsikas/AAP Image

After a long career as a gastroenterologist, mostly in Port Macquarie, David Gillespie stood for parliament as a candidate for the National Party. At the election in September 2013, he replaced Rob Oakeshott as the member for Lyne. At the election in July 2016, he won again.

His family company, Goldenboot Pty Ltd, established in 1999, owns a shopping centre at Lighthouse Beach, to the south of Port Macquarie. One of the shops leased out by Goldenboot is also a licensed post office. Does this mean that Dr Gillespie has a “direct or indirect pecuniary interest” in an agreement with the Commonwealth Public Service – specifically, in the licensing agreement between his tenant and Australia Post? If so, then section 44(v) of the Constitution would render him “incapable… of sitting as a Senator or member of the House of Representatives.” And if the same arrangements were in place at either or both of the 2013 and 2016 elections, then section 44(v) would have rendered him “incapable of being chosen.”

News reports suggest that Dr Gillespie is taking steps to terminate the relevant arrangements. If that were done, he would no longer be incapable of sitting. But if he was disqualified at the time of either or both of the elections, nothing that might be done now could alter the fact that he was disqualified then.

As Rod Culleton and Bob Day have recently found, a member or senator found to have been sitting while disqualified (or to have been elected while “incapable of being chosen”) would logically be required to make a repayment of parliamentary salary, though there seems to be some room for discretion in enforcing this requirement. Otherwise, the consequences for an individual disqualified by section 44 are less serious than they once were. Originally, section 46 of the Constitution provided that once an individual was found in such circumstances, “any person” who chose to do so could claim from that individual a penalty of £100 (which of course would now be $200) “for every day on which he so sits.” Moreover, since the penalty could be claimed by “any person” who chose to sue in any competent court, there was no limit on the number of people entitled to claim it. One person could claim it, then another, then another and another and another…

But this provision was expressed to operate only “[u]ntil the Parliament otherwise provides.” No one took any notice of it until 1975, when amid that year’s political turmoil it was suggested that Senator James Webster might be disqualified under section 44(v) because his family company had contracts for the supply of timber to Commonwealth departments. The penalties available under section 46 were immediately changed. Moreover, the changes were rushed through in April, though the Webster case was not decided until June.

The penalty can now be claimed only once. It consists of an original penalty of $200 for the day on which the court process is served on the offender (or for the most recent day of sitting) and an additional $200 per day for every day on which the offender continues to sit thereafter. No claim can be made in respect of a sitting more than twelve months earlier. Claims can be made only in the High Court; and the court must refuse to make any order which would cause the offender “to be penalized more than once in respect of any period or day of sitting.”

For the political party involved, the consequences may be much more serious. If section 44(v) is found to apply to Dr Gillespie, then his present disqualification would cease the moment the leasing or licensing arrangements at Lighthouse Beach were changed; and if that happened before the issue was decided, he might never have to stop sitting at all. But even a very brief period of disqualification might be sufficient to trigger a crisis for the Turnbull government, since the loss of one National Party vote in the House of Representatives would deprive it of a clear majority. And if it turned out that, at either or both of the 2013 and 2016 elections, Dr Gillespie was “incapable of being chosen,” the chaos would be even worse.

Fortunately for the government, such an outcome seems unlikely.

On the basis of what was said in the Webster case – once it was finally decided back in 1975 – such an outcome would have been wholly unthinkable. In that case, the chief justice, Sir Garfield Barwick, chose to give the decision alone without referring it to a full court. He subjected the timber contracts involved to a highly technical and artificial analysis; and he justified that approach by confining the intended operation of section 44(v) to a limited and largely obsolete purpose. The result of his decision was that section 44(v) again became a dead letter, and remained so for another four decades.

But in April this year the Full High Court decided that Senator Bob Day was in breach of section 44(v). In doing so it rejected Barwick’s approach in the Webster case and embarked on a reconsideration of section 44(v) in the light of a much wider purpose. The necessary reconsideration is still in its early stages, and the Gillespie case will be the next step.

Barwick interpreted section 44(v) as intended only to shield members of parliament against undue influence by “the Crown” – that is, by the executive government. All judges in the Day case understood the provision as having not only that purpose, but also an additional and much wider purpose: the prevention of any conflict of interest that might lead a member of parliament to give priority to his or her own financial interest rather than to impartial judgement of policy. This wider purpose was not just acknowledged, but emphasised. Chief Justice Kiefel, for example – in a joint judgement with Justices Bell and Edelman – insisted that the provision should be accorded a “special status” as “protective of matters which are fundamental to the Constitution, namely representative and responsible government in a democracy.”

On this basis, the operation of section 44(v) will now extend more widely than was previously understood. The question is whether it will be wide enough to catch the arrangements at Lighthouse Beach.

Throughout its entire history, section 44(v) has given rise to anxieties that, if it were extended too widely, it might seem to apply to situations that are in fact totally innocent. One frequently invoked example, even when the Constitution was being drafted in 1897, was that too broad an application of such a provision would mean that any member of parliament who continued to practise as a barrister could no longer accept briefs from the Crown. More recently, in the Day case, counsel protested that a member might be disqualified simply because a spouse had taken a job in the Commonwealth Public Service. Other examples given in the judgements include the issue of a postal note or a Treasury bond, or a Commonwealth payment of compensation for compulsory acquisition of land.

Throughout the judgements in the Day case there was general consensus that the agreements referred to in section 44(v) should not include agreements of a kind which the Commonwealth routinely enters into with all persons in the relevant class, but should be limited to agreements giving rise to some particular interest in an individual case. For example, the joint judgement delivered by Chief Justice Kiefel denied that the provision could extend to “every day-to-day dealing which a citizen has with government,” or agreements of a kind “ordinarily made between government and a citizen,” or examples of “how the government ordinarily deals with citizens.” The other judgements made similar concessions.

On this basis, it seems intuitively clear that whatever interest Dr Gillespie might be thought to have in the arrangements at Lighthouse Beach should fall on the acceptable side of the line. Indeed, the exact nature of the alleged interest remains unclear. Presumably it is that the rent paid by the tenant of the shop at Lighthouse Beach will eventually reach Dr Gillespie and his wife through their family company; that the funds from which the rent is drawn depend partly on the proceeds of operating a licensed post office; and that those proceeds depend on a licensing agreement with Australia Post. None of this seems likely to undermine Dr Gillespie’s capacity for impartial judgements of policy; and the licensing agreement itself seems clearly to be an example of the kind of agreement “ordinarily made” between government and citizens.

The trouble is that when the judges in the Day case tried to draw a precise dividing line between harmless agreements “ordinarily made” and those potentially giving rise to unacceptable conflicts, they were unable to do so convincingly.

Justices Keane and Gageler suggested that a solution could be found in the fact that the provision refers to agreements “with the Public Service of the Commonwealth”: ordinary agreements with “the Commonwealth” could therefore be excluded. Yet Justices Nettle and Gordon pointed out that any agreement “made in the course of Commonwealth government business” will ordinarily be made by dealing with a member of the Commonwealth Public Service. Accordingly, they said, the distinction “is without practical or legal content.”

That issue seems likely to be revisited in the Gillespie case. An agreement with Australia Post – or more strictly with “the Australian Postal Corporation” – might conceivably be regarded as an agreement with “the Commonwealth” but not with “the Public Service.” Indeed, the result of its corporatisation in 1989 may be that Australia Post can no longer be regarded as “the Commonwealth,” and its employees can no longer be regarded as “the Public Service.” We may well be destined for arguments about the precise effect of the Australian Postal Corporation Act 1989 – including the “community service obligations” and “general governmental obligations” imposed on the Corporation by sections 27–28 of the Act; the fact that under section 50, except as specifically provided elsewhere, the Corporation is “not subject to direction by or on behalf of the Commonwealth Government”; the fact that under section 90A (added in 1994) “Australia Post is not entitled to any immunity or privilege of the Commonwealth”; and the fact that under section 89(2), the terms and conditions of post office employment “shall be determined by Australia Post.”

Also relevant here might be the suggestion sometimes advanced that the capital letters in section 44(v) are meant to distinguish “the Public Service” from “the public service.” On that basis, even if Australia Post and its staff were seen as part of “the public service,” they might not fall within section 44(v) unless it were also possible to regard them as part of “the Public Service.” Yet precisely how this majuscular distinction might be applied to Australia Post (with or without considering the effects of corporatisation), and precisely what the criteria might be for making and applying such a distinction, remain unclear.

All judgements in the Day case sought to limit the operation of section 44(v) by an emphasis on the word “in”: the disqualification applies only to someone who has a direct or indirect pecuniary interest “in” an agreement. According to the joint judgement delivered by Chief Justice Kiefel, “the requirement that the interest be ‘in’ an agreement implies some personal connection to it, albeit indirect.”

Other judgements quoted what was said in the case of Ford v Andrews in 1916: whether a person is “directly” interested in a contract (as a party to it) or merely “indirectly” interested (through “expectation of a benefit dependent on the performance of the contract”), the interest must be “in the contract.” According to Ford v Andrews this means that the relation of the interest to the contract “must be immediate and not merely connected by a mediate chain of possibilities.” But the application of this language to the facts of a particular case may not be very clear, either; yet it does seem unlikely that Dr Gillespie’s interest in his tenant’s agreement with Australia Post would be sufficiently “immediate” to constitute an interest “in” the contract.

On the other hand, all the judgements in the Day case made it clear that a mere possibility of benefit may be enough. The wording of section 44(v) expressly excludes any application to benefits arising from membership of companies of more than twenty-five persons; and according to the judgements in the Day case, the fact that this specific exemption was thought to be necessary makes it clear that, in the absence of such an exemption, expectations of merely contingent benefit, dependent on the exercise of someone else’s discretion, would normally be sufficient to trigger section 44(v).

Moreover, the whole court rejected Day’s argument that the “interest” referred to must be a legal interest – insisting that the interest “does not have to be legal or equitable or legally enforceable” (Justices Nettle and Gordon), and that regard may be had “to practical as well as legal effect” (Justice Keane). And although the court refused to hold that section 44(v) could be triggered merely by the public perception of a conflict of interest, most judges accepted that it would be enough if the person in question “could conceivably be influenced.” The assumption appeared to be that relying merely on public “perception” would be a subjective test, whereas the question whether an arrangement could “conceivably” give rise to conflict was one that could be answered objectively. For Justice Gageler, the proposed test of “perception” was “vague and evaluative”; for Justice Keane J, it reflected “an impressionistic approach”; for Justices Nettle and Gordon it was both “evaluative” and “impressionistic.”

Yet the various epithets used to commend the approach preferred by the High Court seemed little better. There must be a “practical commercial likelihood” of a conflict of interest (Justice Gageler); the potential benefit must be “not insubstantial” (Justices Nettle and Gordon). For Justice Gageler, the possibility of a conflict of interest must be “more than trivial”; it must be “immediate or real as distinct from mediate or remote.” As I pointed out at the time in AUSPUBLAW, one is irresistibly reminded of what Sir Garfield Barwick once said about the ripples caused by a stone thrown into a pond: all of the ripples are sufficiently direct until they are too remote.

In short, although it is clear that arrangements potentially giving rise to a conflict of interest will attract section 44(v), while “ordinary” contacts between the Commonwealth and its citizens will not, the line between these two kinds of arrangements is currently not at all clear. Once the Gillespie case is decided, the line is likely to be clearer. •