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Uncluttering ex-MPs’ entitlements

13 October 2016

A tangle of legislation lay behind the case taken by former parliamentarians to protect their superannuation and travel concessions


What is property? The High Court of Australia building in Canberra. Lucas Coch/AAP Image

What is property? The High Court of Australia building in Canberra. Lucas Coch/AAP Image

When a new way of determining the superannuation entitlements of former federal MPs was introduced in 2011, ex-politicians felt it made them less well-off than they were entitled to expect. Two former backbenchers and two former ministers initiated a challenge to the new procedure in the High Court, and yesterday – after due deliberation by the full bench – that challenge was dismissed. Chief Justice French gave a joint judgement with Justices Kiefel and Bell; the other four judges wrote separately. On the question of superannuation entitlements, though, the result was unanimous.

The two backbenchers, both Labor MPs from Victoria, were Barry Cunningham, formerly the member for McMillan, who left parliament in 1996, and Tony Lamb, a former member for La Trobe and, later, for Streeton, who left parliament in 1990. The Liberal minister was John Moore, who first served as a minister in the Fraser government and later filled a number of roles in the Howard government, most recently as defence minister. He resigned in 2001. The Labor minister was Barry Cohen, a minister in the Hawke government from 1983 to 1987, who retired in 1990.

The legislative history was complex. “Uncluttering the requisite analysis as much as possible” (as Justice Gageler said when embarking on his own attempt), the position was as follows. Before the 2011 amendment to the relevant legislation, the “retirement allowance” for former members was calculated as a fixed percentage of parliamentary salary (the exact percentage depending on the length of parliamentary service). The amendment empowered the Remuneration Tribunal to determine two amounts: the “parliamentary base salary”; and “a portion” of it (covering things like electorate allowances and book allowances) that was to be excluded when calculating superannuation payments. The result was that the superannuation was no longer a percentage of the parliamentary salary, but of a lesser amount. The change was only to the formula used to calculate future fortnightly payments; at no stage did it result in a reduction in payments to existing beneficiaries.

The difficulty of pinning down exactly what the plaintiffs were complaining of was one of the reasons they failed. As yesterday’s joint judgement explained, the changes “do not purport to reduce the plaintiffs’ entitlements to retiring allowances” but only “to alter the method by which the quantum of the retiring allowances is calculated.” Moreover, “Although the plaintiffs contend that the amount payable was less than would have been payable before the 2011–12 amendments, they do not attempt to show how that conclusion is reached.”

In addition to the superannuation issue, the two former ministers also complained about the changed effect of their Life Gold Passes. Previously, the passes could be used for unrestricted travel within Australia. But in 2002, by legislation, their use was restricted to a maximum of twenty-five return trips per year, and in 2012 the twenty-five trips were further reduced to ten. Moore, who had retired in 2001, complained that his permissible travel had been reduced from twenty-five trips to ten. Cohen, who had retired in 1990, also objected to the earlier reduction from unlimited travel to twenty-five trips. On this issue, too, the plaintiffs’ claim failed – though only by a 6–1 majority, with Justice Gageler dissenting.

The plaintiffs had argued that, in both respects, the changes to their entitlements were inconsistent with section 51(xxxi) of the Constitution because they involved an “acquisition of property” without “just terms.” In order to succeed they needed to establish three things: that their entitlements were a form of “property,” that they had been subjected to an “acquisition,” and that the result was unjust.

Neither travel entitlements nor pension entitlements are tangible enough to fit the popular understanding of “property.” But, as an American judge explained in 1872, “property” in law is a technical term:

In a strict legal sense, land is not “property,” but the subject of property. The term “property,” although in common parlance frequently applied to a tract of land or a chattel, in its legal signification “means only the rights of the owner in relation to it.”

Accordingly, when the current case was argued, there was much talk of “property” as referring merely to “a bundle of rights.”

Yet even the word “rights” is not obviously appropriate for the kind of entitlements claimed here. Back in 1924, when a Western Australian teacher complained that she had been deprived of her pension, the High Court dismissed her claim in a 2–1 decision. (The dissenter was Sir Isaac Isaacs.) The majority held that there is no right to a pension; that even when a pension appears to be guaranteed by statute, it remains dependent on “the discretion and bounty of the Crown.” And in 1927 the Privy Council affirmed that decision.

Even if that decision would still be followed today in other contexts, the High Court has often taken a more generous view of “property” when considering the constitutional validity of “acquisitions.” “Property” has been said to cover “every species of valuable right and interest,” including “innominate and anomalous interests.” Yet generosity has its limits, and in this case those limits were stretched.

Justice Keane stressed that what was at issue here was “the notion of an entitlement to be paid superannuation payments calculated on a particular basis, ie, by reference to the remuneration paid from time to time to serving parliamentarians.” He found this “such an abstract conception that it is difficult to accept that it can be said to be ‘property’ in even a broad sense of the term.” He also stressed that any claim by a politician to a monetary allowance, whether during parliamentary service or after it, is in no way analogous to the claim by an employee to wages or salary. “The plaintiffs were duty-bound to serve as parliamentarians as a result of being elected,” and this is a duty that no elected person is “permitted to decline or to evade,” whether he or she is paid for it or not.

Even in less “abstract” cases, entitlements to a pension are “anomalous interests” in at least one obvious sense. Most pensioners are well aware that the amount of a pension may sometimes go up, and sometimes go down. Accordingly, when the case was argued, there was much discussion of “inherent fluidity” or “inherent variability” – of the idea that pension rights are “inherently susceptible of variation or modification.”

It has sometimes been suggested that all statutory rights are inherently vulnerable in this way. The judgements delivered yesterday stopped short of that: as Justice Nettle insisted, the answer must depend in each case on the wording of the particular statute, “the nature and function of the rights thus created and the benefits thus conferred.” He did agree that what he called “gratuitous social security benefits, like the old age pension” are “undoubtedly subject to change from time to time.” But he thought that this might not necessarily be true of a statutory superannuation scheme.

In this case, however, he agreed with the rest of the court “that the continued existence and content of each plaintiff’s right to be paid a retiring allowance was by the statutory terms by which it was created subjected to the will from time to time of the legislature which created it.”

All this talk of “inherent fluidity” has a double thrust. It may mean that such entitlements are too ephemeral to constitute “property”; but it may also mean that interference with them does not involve an “acquisition.”

It was just this double thrust that dictated yesterday’s decision. Because the entitlement to a retirement allowance is “inherently variable,” it did not constitute “property.” For the same reason, the modification of it did not amount to an “acquisition.” The point was summed up by Justice Gordon:

The entitlement is a “right” created by statute that was and remains inherently liable to variation. Not only did the “right” remain inherently liable to variation; its content depended on the will, from time to time, of the legislature that created the “right.” It was, at best, a right to receive whatever level of benefit was provided from time to time. That “right” was not property protected from acquisition by s 51(xxxi) and there was no acquisition of property within the meaning of s 51(xxxi).

No member of the court disagreed with this conclusion, but for some it depended on a closer analysis of the precise kind of “rights” involved.

In particular, for Justice Gageler, it was crucial that the amendments “did not reduce the amount of retirement allowance payable to the plaintiffs”; they had statutory guarantees “preventing the amount they were entitled to from being reduced,” and those guarantees remained. Otherwise all they had was a right to a percentage of parliamentary allowance “as then defined”; and the definition allowed for “the rate of parliamentary allowance being varied up or down at any time.” The amendments “in truth deprived them of nothing.”

It was a contrasting analysis that led him to dissent from the rest of the court as to the second issue. On his view, once Cohen and Moore became entitled to their Gold Passes, they did have enforceable “rights,” and as a matter of statutory interpretation the Remuneration Tribunal had no power to alter those rights. It followed for him that there was nothing “inherently variable about the rights attaching to a Life Gold Pass.”

For the other six judges, however, the travel entitlements, like the superannuation entitlements, were “inherently variable.” It was indeed in relation to the Life Gold Pass (abbreviated now to “the LGP”) that Justice Gordon made the point even more clearly:

The statutory provisions, including the administrative and legislative history of the LGP, demonstrate that the “right” to a LGP suffers from a “congenital infirmity.” The origin of the LGP was inherently unstable and its continued existence, scope and incidents remain unstable. The LGP legislative scheme was and remains inherently liable to variation and the content of the “right” depends on the will, from time to time, of the legislature that created it.

For the superannuation entitlements, and for six judges for the Gold Passes as well, the element of “inherent variability” meant both that the entitlements did not constitute “property” and that there was no “acquisition.” But even if that had not been the case, the constitutional focus on “acquisition” might have presented the plaintiffs with an additional hurdle.

The equivalent provision in the US Fifth Amendment requires simply that without just compensation, property shall not “be taken.” Thus it is sufficient to show that a plaintiff has been deprived of a benefit. But in Australia, in addition, it is necessary to show that a benefit has been acquired by someone else – typically, though not necessarily, the Commonwealth government. In this instance, the regulation of both pension amounts and travel entitlements was clearly saving the government money. The plaintiffs argued that this saving constituted a “benefit” that the government had “acquired”; and it seems that if the members of the court had been satisfied that the plaintiffs had been deprived of a “right,” they might have accepted this argument. It was, indeed, on this basis that Justice Gageler dissented in relation to the Gold Passes: once he concluded that they had given rise to accrued statutory rights, it followed that the diminution of those rights, to the “obvious financial benefit of the Commonwealth,” constituted an acquisition of property.

In earlier cases, the court had held that sometimes, when parliament passes a law, the particular lawmaking power relied on may be such that by its very nature talk of “acquisition” and “just terms” is irrelevant. Taxation is the most obvious example: if the government has the constitutional power to impose taxation, that necessarily means that it has the power to take my money: so the word “acquisition” cannot be read as intended to cover the taking of my money by way of taxation.

In this case, the Commonwealth argued that another example is the power derived from section 48 of the Constitution, which envisages that parliament may make provision for “allowances to members.” The constitutional provision sets an initial allowance for a sitting member of ₤400 a year “until the parliament otherwise provides,” thus presumably implying a similar impermanence for any exercise of parliament’s power. Accordingly, said the solicitor-general, “it is of the very nature of that power that it contemplates exercise in a manner which does not trigger acquisition of property.”

The court found it unnecessary to consider these arguments; but there is also a simpler argument. In a series of cases in 1994 it was held that no “acquisition” is likely to be involved where the dominant purpose of the legislation is not an “acquisition” but rather an adjustment of competing claims in the interests of overall equity. In one of those cases it was said:

The cases… establish that a law which is not directed towards the acquisition of property as such but which is concerned with the adjustment of the competing rights, claims or obligations of persons in a particular relationship or area of activity is unlikely to be susceptible of legitimate characterisation as a law with respect to the acquisition of property.

This is another way of approaching the idea that some entitlements, and particularly statutory entitlements, are “inherently variable.” In another of the 1994 cases, concerned with a change in Medicare benefits, it was said that “statutory entitlements to receive payments from consolidated revenue” are “inherently susceptible of variation,” and that where a change in “the level of benefits” is made “by a law which operates retrospectively to adjust competing claims or to overcome distortion, anomaly or unintended consequences in the working of the particular scheme,” such a law will not be regarded as “a law with respect to the acquisition of property.”

In the present case there was an obvious reason for setting aside “a portion” of parliamentary salary which was not to be taken into account when determining retirement allowances. It was simply to ensure, as the joint judgement explained, “that particular allowances made to serving members, such as electorate and office allowances, which are not referable to the circumstances of retired members, should not be automatically passed on… as a retirement benefit.” As Justice Gordon had observed when the case was argued: “We are not even in the field of acquisition.”

This aspect of what constitutes “acquisition” shades over into the issue of justice. A law designed to achieve greater equity may well satisfy the need for “just terms” – especially since “justice” in this context does not mean merely justice to the dispossessed owner. During the second world war, the Grace Brothers store in central Sydney was taken over by the defence department, initially as a wartime headquarters and then as a permanent Commonwealth office building. In 1946 Sir Owen Dixon held that in determining what was “fair and just” as between the dispossessed owners and “the government of the country,” it was legitimate also to take into account “the interests of the public or of the Commonwealth.”

The legislative changes in this case had adjusted the privileges of former politicians in a way that still leaves them entitled to ten return trips a year at taxpayers’ expense and a pension equivalent to almost three times the average wage. Many in the community may think that this still leaves the scales of justice tilted too heavily in favour of the politicians.

Yet this may not be the point. Justice Gageler, the one judge who did conclude that the right to a Life Gold Pass was constitutionally protected, began his judgement by recalling the emphasis in the Grace Brothers case on the need for “fair and just standards.” But he ended by noting that even though the travel entitlements of retired politicians “must be acknowledged to be a particularly unattractive form of property” typically attracting public “derision,” the constitutional protection has nothing to do with “the popularity of the creation of the property that is protected,” and even less with “the popularity of its taking.” •

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