Harris v Victorian Electoral Commission

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

GENERAL LIST

S ECI 2020 01026

MATTHEW HARRIS, State Director of the NATIONAL PARTY OF AUSTRALIA – VICTORIA	First Plaintiff
and
SAM McQUESTIN, State Director of the LIBERAL PARTY OF AUSTRALIA (VICTORIAN DIVISION)	Second Plaintiff
v
VICTORIAN ELECTORAL COMMISSION	Defendant

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JUDGE:	Richards J
WHERE HELD:	Melbourne
DATE OF HEARING:	14 September 2020
DATE OF JUDGMENT:	14 October 2020
CASE MAY BE CITED AS:	Harris v Victorian Electoral Commission
MEDIUM NEUTRAL CITATION:	[2020] VSC 676

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ELECTIONS – Proposed payment by Liberal Party of Australia (Victorian Division) to National Party of Australia – Victoria – Whether proposed payment a ‘gift’ and a ‘political donation’ within Pt 12, Electoral Act 2002 (Vic) – Whether proposed payment would be made for ‘consideration in money or money’s worth’ – Whether proposed payment would be for inadequate consideration – Where parties ran joint tickets in three Legislative Council regions – Where public funding entitlement in respect of joint tickets paid to Liberal Party – Where Liberal Party proposed to pay one-third share of that entitlement to National Party – Effect of Coalition Agreement between Liberal Party and National Party – Electoral Act 2002 (Vic), ss 69A, 151, 206, 207F, 211, 212.

STATUTORY INTERPRETATION – Definitions of ‘gift’ and ‘political donation’ in s 206(1), Electoral Act 2002 (Vic) – Construction of ‘gift’ – Meaning of ‘consideration in money or money’s worth’ and ‘inadequate consideration’ – Scaffidi v Chief Executive Officer, Department of Local Government and Communities (2017) 52 WAR 368 – Wheatley v State of New South Wales [2018] NSWCA 315.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr P Hanks QC with Ms S Zeleznikow	TJ Mulvany & Co
For the Defendant	Mr C Horan QC with Mr M Hosking	Clayton Utz

HER HONOUR:

On 2 April 2008, the National Party of Australia – Victoria and the Liberal Party of Australia (Victorian Division) agreed to work in coalition ‘with the aim of establishing closer working relations and achieving Government in the State of Victoria’. The leaders of the two parties signed a written Victorian Coalition Agreement, setting out the terms on which they had agreed to work together.

Among other things, they agreed that, for the 2010 and 2014 Victorian general elections, they would stand a group ticket in each of the Western Victoria, Northern Victoria, and Eastern Victoria regions in the Legislative Council, and that a Liberal Party candidate would occupy the first place on each group ticket. Separately, they reached an understanding that the public funding payable under the Electoral Act 2002 (Vic) for the three group tickets would be shared between them in the proportions of one-third to the National Party and two-thirds to the Liberal Party. After the 2010 election and the 2014 election, the Victorian Electoral Commission (VEC) made payments to each party in those proportions.

The Coalition Agreement was renewed in October 2018, and a further written agreement was signed by the leaders of both parties. Again, they agreed to run a joint ticket in the Western Victoria, Northern Victoria, and Eastern Victoria regions in the Legislative Council at the 2018 and 2022 Victorian general elections. Again, they agreed that a Liberal Party candidate would occupy the first place on each ticket. There was no change to the understanding that public funding payable for those three group tickets would be apportioned between the National Party and the Liberal Party on a one-third, two-thirds basis.

After the 2018 election, the State Directors of both parties wrote to the VEC asking that public funding for the three Legislative Council regions be distributed in the agreed proportions. However, as a result of amendments to the Electoral Act made by the Electoral Legislation Amendment Act 2018 (Vic), the VEC considered that it was unable to apportion the public funding entitlement as requested. Rather, it made payments based on the number of first preference votes received by candidates endorsed by each party in the three regions, which amounted to a payment of $757,321.25 to the Liberal Party and only $1,410.50 to the National Party. In addition, the VEC conveyed its view that a payment by the Liberal Party to the National Party of one-third of the entitlement would amount to a political donation in excess of the general cap prescribed by the Electoral Act. Part 12 of the Electoral Act now prohibits political donations that exceed the general cap, which is currently $4,160.

While the National Party initially disputed the VEC’s position that it could not apportion public funding in accordance with the joint request, it did not seek judicial review of that decision. Instead, the State Directors of both the National Party and the Liberal Party commenced this proceeding, in which they seek declaratory relief against the VEC. The VEC contested the proceeding in the role of contradictor.

The primary relief sought in this proceeding is a declaration to the effect that the proposed payment by the Liberal Party to the National Party of one-third of the public funding entitlement for the three Legislative Council regions would not constitute a ‘political donation’ for the purposes of Pt 12 of the Electoral Act. Alternatively, the plaintiffs seek a declaration to the effect that they may pay the entitlement into a separate ‘Group State Campaign Account’, from which the entitlement can be distributed to the National Party and the Liberal Party in the agreed proportions.

The issues for resolution, and a summary of my conclusions in relation to each issue, are as follows:

(a) Would the proposed payment be a ‘political donation’ for the purposes of Pt 12 of the Electoral Act?

No. The proposed payment would be made by the Liberal Party to the National Party for adequate consideration in money’s worth, and so would not be a ‘gift’ or a ‘political donation’ within Pt 12 of the Electoral Act.

(b) Can the National Party and the Liberal Party pay the entitlement into a separate ‘Group State Campaign Account’, from which payments can be made to each party in the agreed proportions?

No. There is no longer any ‘group’ in respect of which a State campaign account can be kept. Further, payment by the Liberal Party of its share of the entitlement into a Group State Campaign Account, and the proposed payments out of that account to the National Party or the Liberal Party, would be political donations within Pt 12 of the Electoral Act, in excess of the general cap.

(c) Should the Court make the declarations sought?

The Court will make a declaration to the effect that the proposed payment by the Liberal Party to the National Party would be made for adequate consideration in money’s worth, and would not be a political donation within Pt 12 of the Electoral Act. The declaration will determine a real controversy arising from a concrete situation. No declaration will be made concerning the alternative proposal to make the payment through a Group State Campaign Account.

My reasons for those conclusions follow.

Victorian Coalition Agreement

Both the National Party and the Liberal Party are unincorporated associations that are registered political parties under the Electoral Act. Matthew Harris has, since October 2017, been the State Director of the National Party and is the registered officer of the National Party for the purposes of the Electoral Act. Sam McQuestin is the State Director and registered officer of the Liberal Party.

On 2 April 2008, the National Party, the Liberal Party, and their respective State parliamentary parties entered into the Coalition Agreement.[1] Part 2 of the 2008 Coalition Agreement dealt with elections, relevantly:
[1]Affidavit of Peter Ryan dated 25 February 2020, [3] and Exhibit ‘PR-1’.

2.1For the purposes of the 2010 and 2014 Victorian General Elections and any by-election held before those General Elections, a Party shall not contest a Seat held by the other Party as at the date of this Agreement unless the Parties otherwise agree in writing.
…
2.3For the purpose of the 2010 and 2014 Victorian General Elections, the Parliamentary Parties will run a joint ticket comprising as follows for the electoral regions of:
(a) Western Victoria Region:
No. 1 – Liberal Party;
No. 2 – Liberal Party;
No. 3 – The Nationals;
No. 4 – Liberal Party;
No. 5 – The Nationals.

(b) Northern Victoria Region:
No. 1 – Liberal Party;
No. 2 – The Nationals;
No. 3 – Liberal Party;
No. 4 – The Nationals;
No. 5 – Liberal Party.

(c) Eastern Victoria Region:
No. 1 – Liberal Party;
No. 2 – The Nationals;
No. 3 – Liberal Party;
No. 4 – Liberal Party;
No. 5 – The Nationals.

2.4Other than as provided in Part 2.3, The Nationals will not contest any other electoral region unless the Liberal Party agrees otherwise in writing.

The 2008 Coalition Agreement also set out how the parties had agreed to act in coalition when in government and in opposition, with the National Party entitled to five members of the Cabinet or Shadow Cabinet, and various offices allocated between the parties. It provided for the formulation of joint policies for Victorian elections, and for joint party meetings of all members of the parliamentary parties. The parties agreed to review the operation of the agreement following the 2014 Victorian general election.

The 2008 Coalition Agreement said nothing about the public funding entitlement for the joint tickets they had agreed to run in the Western Victoria, Northern Victoria, and Eastern Victoria regions. Peter Walsh, who represents the district of Murray Plains in the Legislative Assembly and is currently the leader of the National Party in the Victorian Parliament, explained how the matter was dealt with during the negotiation of the 2008 Coalition Agreement:[2]

In and around 2007 and 2008 I held the position as Deputy Leader of the [National Party]. At about that time, the National Party was negotiating with the [Liberal Party] to enter into coalition for the purposes of the upcoming 2010 State Election. I and my counterpart at the Liberal Party, Louise Asher, were assigned the responsibility of negotiating the terms of the Coalition Agreement.
Louise Asher and I specifically discussed the question of allocation between the parties of public funding provided via the Victorian Electoral Commission for Legislative Council districts, where the National Party and the Liberal Party stood on a joint ticket. We were guided by the fact that, at the time, the Northern District Electorate was represented by two Liberal members and one National member. The Eastern District Electorate was represented by two Liberal members and one National member and the Western District electorate was represented by two Liberal members and, at the forthcoming 2010 election, it was expected that one National member would be elected.
Accordingly, Louise Asher and myself agreed to recommend to the leaders of each of our parties that the public funding for Legislative Council districts, where the National Party and the Liberal Party stood on a joint ticket, should be split in the proportions of two-thirds to the Liberal Party and one-third to the National Party. That recommendation was accepted by the leaders of each of our parties.
Following the acceptance of the recommendation as to the division of public funding, the Coalition Agreement was executed by the Parliamentary Leaders, Mr Ted Baillieu for the Liberal Party and Mr Peter Ryan for the National Party on 2 April 2008.

[2]Affidavit of Peter Walsh dated 20 February 2020, [2]-[5].

One of the signatories to the 2008 Coalition Agreement was Peter Ryan, who was then the parliamentary leader of the National Party. He was also present at the meeting of the National Party’s State Council on 14 March 2008, which endorsed the agreement. Mr Ryan confirmed in his affidavit that he was aware of the agreement reached between Mr Walsh and Ms Asher that ‘public funding payable for Legislative Council regions where the two parties stood on a joint ticket should be split in the proportions of 2/3 to the Liberal Party and 1/3 to the National Party’.[3]
[3]Affidavit of Peter Ryan dated 25 February 2020, [4].

At the 2010 Victorian general election, the National Party and the Liberal Party stood candidates on a joint ticket for each of the Western Victoria, Northern Victoria, and Eastern Victoria regions in the Legislative Council. The National Party and the Liberal Party made a joint request to the VEC that the public funding payable for those three regions be apportioned on the basis of one-third to the National Party and two-thirds to the Liberal Party. The VEC apportioned those payments as requested. A total of $291,586 in public funding was paid to the National Party in respect of the three regions.

The same occurred at the 2014 Victorian general election. The two parties ran joint tickets in the three Legislative Council regions of Western Victoria, Northern Victoria, and Eastern Victoria. In accordance with the 2008 Coalition Agreement, a Liberal Party occupied the first place on each ticket. The State Directors of the two parties jointly requested the VEC to apportion the public funding for the three regions one-third to the National Party and two-thirds to the Liberal Party. Once again, the VEC paid one-third of the public funding entitlement for the three joint tickets to the National Party, a total of $283,895.50.

In 2018, the National Party and the Liberal Party renewed their agreement to work in coalition. Between July and October 2018, Mr Walsh negotiated the new agreement with the then parliamentary leader of the Liberal Party, Matthew Guy. The 2018 Coalition Agreement was signed by the leaders of both parties on 28 October 2018.[4] It provides, in relation to elections:
[4]Affidavit of Matthew Harris dated 13 May 2020, Exhibit MH-12.

2.1A Party may contest a Seat of the other Party that becomes Vacant.[5]
[5]In clause 1.1, ‘Seat’ is defined to mean ‘the right of sitting and voting as a member of the Council or Assembly’, and ‘Vacant’ is defined to mean ‘the sitting member of a Seat retires, dies or is otherwise ineligible to remain a member’.
2.2For the purpose of the 2018 and 2022 Victorian General Elections, the Parliamentary Parties will run a joint ticket comprising as follows for the electoral regions of:
(a) Western Victoria Region:
No. 1 – Liberal Party;
No. 2 – Liberal Party;
No. 3 – The Nationals;
No.4 – Liberal Party;
No. 5 – The Nationals.

(b) Northern Victoria Region:
No. 1 – Liberal Party;
No. 2 – The Nationals;
No. 3 – Liberal Party;
No.4 – The Nationals;
No. 5 – Liberal Party.

(c) Eastern Victoria Region:
No. 1 – Liberal Party;
No. 2 – The Nationals;
No. 3 – Liberal Party;
No.4 – Liberal Party;
No. 5 – The Nationals.

2.3Other than as provided in Part 2.2, The Nationals will not contest any other electoral region unless the Liberal Party agrees otherwise in writing.
…

There is no mention in the 2018 Coalition Agreement of public funding for the three Legislative Council regions in which the parties agreed to run joint tickets. It does not appear to have been the subject of any discussion between Mr Walsh and Mr Guy in 2018. Mr Walsh deposed:[6]

It was my understanding, during those negotiations that the agreed basis for apportioning public funding available for the three Legislative Council Regions where the two parties ran on a joint ticket would not be changed: that is, that it would continue on the basis of 1/3 to the National Party and 2/3 to the Liberal Party.

[6]Affidavit of Peter Walsh dated 20 February 2020, [6](b).

At the 2018 Victorian general election, the National Party and the Liberal Party stood joint tickets in each of the Western Victoria, Northern Victoria, and Eastern Victoria regions of the Legislative Council. In each region, a candidate endorsed by the Liberal Party occupied first place on the Coalition ticket. The other places on each ticket were distributed between candidates endorsed by the National Party and candidates endorsed by the Liberal Party.

Following the 2018 election, Mr Harris and Nick Demiris, the then State Director of the Liberal Party, wrote a joint letter to the VEC about the distribution of public funding for the three Legislative Council regions. Consistent with the understanding between the two parties, they asked the VEC to apportion the public funding in the proportions of one-third to the National Party and two-thirds to the Liberal Party.

On this occasion, the VEC considered that it was unable to apportion the payment in the manner requested, because of the recent amendments to the Electoral Act.[7] As already noted, the VEC paid the public funding entitlement in accordance with first preference votes received by candidates, with the lion’s share going to the Liberal Party.[8] It is not necessary to recount any of the correspondence between the National Party and the VEC about the correctness of the VEC’s position, because that is not now in contention. This proceeding turns on whether payment by the Liberal Party to the National Party of one-third of the public funding entitlement for the Coalition tickets in the three regions would be a ‘political donation’ for the purposes of the Electoral Act.

Electoral Act

[7]The relevant amendments are described at [33]-[43] below.

[8]See [4] above.

Registered political parties

The term ‘registered political party’ is defined in the Electoral Act to mean a political party that is registered under Part 4 of the Act.[9] Part 4 provides for the registration of political parties, with s 43 requiring the VEC to establish and maintain a Register of Political Parties.
[9]Electoral Act 2002 (Vic), s 3 – definition of ‘registered political party’.

To be eligible for registration, a political party must be established on the basis of a written constitution, and must have at least 500 members.[10] There is no requirement that a political party be incorporated, and registration does not confer corporate status. It is the case that a number of registered political parties – including the National Party and the Liberal Party – are unincorporated associations.
[10]Electoral Act, s 45.

Each registered political party must nominate a person as its registered officer, whose name and address is included in the Register of Political Parties.[11] Key obligations under the Electoral Act are imposed on the registered officer of a registered political party, who is the person through whom the political party acts. That is why the plaintiffs in this proceeding are Mr Harris and Mr McQuestin, who bring the proceeding on behalf of the National Party and the Liberal Party respectively.
[11]Electoral Act, ss 44, 45(2)(c), 51(1)(b)-(c).

Group tickets for the Legislative Council

The Legislative Council is the upper house of the Parliament of Victoria. It consists of 40 members, comprising five members elected from each of Victoria’s eight electoral regions.[12] The Electoral Act makes provision for the conduct of elections in the multi-member electorates of the Legislative Council.
[12]Constitution Act 1975 (Vic), ss 26, 27.

Section 69A of the Electoral Act provides for the grouping of candidates for Council elections. Relevantly here, s 69A(3) provides:

If 2 or more candidates for a Council election are endorsed by different registered political parties, the registered officers of each registered political party may make a joint request to the Commission that—
(a) the candidates’ names be grouped on the ballot-papers; or

(b) the candidates’ names be grouped on the ballot-papers in a specified order.

A request under s 69A(3) must be in writing and be signed by the registered officers of each registered political party.[13] It may include a further request that a composite name formed from the registered political parties that endorsed the group be printed on the ballot paper.[14]

[13]Electoral Act, s 69A(4).

[14]Electoral Act, s 69A(5).

Group voting tickets are dealt with in s 69B. In the case of a group of candidates endorsed by different registered political parties, the registered officers of each party must lodge with the VEC a statement of the order in which it is wished that voters indicate their preferences in relation to all candidates in the Council election, starting with the endorsed group of candidates.[15]
[15]Electoral Act, s 69B(3). A group can lodge up to three group voting tickets.

Section 93A provides for the marking of votes in an election for the Legislative Council. Section 93A(2) provides for what is commonly known as ‘above the line’ and ‘below the line’ voting, in the following terms:

An elector must mark the elector's vote on the ballot-paper by placing—
(a) the number 1 in the square in relation to the group for which the elector votes as first preference; or
(b) the number 1 opposite the name of the candidate for whom the elector votes as first preference and at least the numbers 2, 3, 4 and 5 opposite the names of the remaining candidates so as to indicate by unbroken numerical sequence the order of preference of contingent votes.

Where an elector votes ‘above the line’ for a group, the ballot paper is taken to have been marked in accordance with the group voting ticket or tickets lodged for that group.[16]
[16]Electoral Act, s 112B.

Section 114A sets out the procedure for ascertaining the number of votes for candidates in a Legislative Council election. A candidate who receives a number of first preference votes equal to or greater than the quota is declared elected, and any surplus votes for that candidate are transferred to other continuing candidates, in order of voting preference, as provided in s 114A.

These provisions for grouping of candidates are reflected in Pt 12 of the Electoral Act, in which ‘group’ is defined to mean ‘2 or more candidates whose names are grouped on a ballot-paper in accordance with section 69A’.[17] A group of candidates has a ‘registered agent’ for the purposes of Pt 12, who is either appointed jointly by the group, or determined in accordance with s 207B.
[17]Electoral Act, s 206(1).

Public funding of election expenditure

Section 211 of the Electoral Act sets out the ‘entitlement’ to public funding of political and election expenditure. The sum of $1.20 was payable for each first preference vote given for a candidate in the 2018 Victorian general election.[18] For elections held after 24 November 2018, the entitlement is $6 for every first preference vote given for a candidate for election to the Legislative Assembly, and $3 for each first preference vote given for a candidate for election to the Legislative Council.[19]
[18]Electoral Act, s 211(2).
[19]Electoral Act, s 211(2A). These amounts are indexed annually in accordance with the formula in s 217Q.

The payment of the public funding entitlement is governed by s 212, which relevantly provides:

…
(3) If an amount is payable in respect of votes given in an election for a candidate endorsed by a registered political party, the Commission must make the payment to the registered officer of the registered political party within 30 days after the Commission has been given the statement.
…
(4A) The registered officer of a registered political party or a candidate who receives a payment from the Commission under this section must pay the amount of the payment into the State campaign account.
…

Political donations

The Amendment Act was introduced into the Legislative Assembly in May 2018, and was assented to on 31 July 2018. Most amendments came into effect on 25 November 2018 – the day after the 2018 Victorian general election. It made substantial amendments to Pt 12 of the Electoral Act, which deals with election expenditure and political donations.

Significantly, the Amendment Act introduced much stricter limits on political donations than had previously applied. Political donations are now capped at $4,000 for each four year election period,[20] in order to ‘ensure a level playing field and provide equal participation in the electoral process, reducing the potential for those with “deep pockets” to try and exert greater influence’.[21] Foreign and anonymous political donations are now prohibited.[22] It is an offence to make or accept an unlawful political donation.[23] In addition, political donations accepted in contravention of these prohibitions are forfeited to the State.[24] It is also an offence to enter into or carry out a scheme with the intention of circumventing a prohibition or requirement under Pt 12.[25]
[20]Electoral Act, s 206(1) – definition of ‘general cap’ and s 217D. The amount of the general cap is indexed annually, in accordance with the formula in s 217Q. The general cap for the 2020-2021 financial year is $4,160.
[21]Victoria, Parliamentary Debates, Legislative Assembly, 10 May 2018, 1351 (Mr Pakula, Attorney-General).
[22]Electoral Act, ss 217A, 217B.
[23]Electoral Act, s 218(5A).
[24]Electoral Act, ss 217C, 217G.
[25]Electoral Act, s 218B.

At the same time, the amendments provided for significantly increased public funding for campaign expenses incurred by political parties and candidates.[26] This increase recognises that the caps on political donations will reduce the funds that can be raised by candidates and political parties.[27]
[26]See [31] above.
[27]Victoria, Parliamentary Debates, Legislative Assembly, 10 May 2018, 1351 (Mr Pakula, Attorney-General).

The scheme of Pt 12 hinges on the concept of a ‘political donation’. That term is defined in s 206(1) to mean a gift to any of the persons and entities listed in the definition, which include a registered political party.

The definition of ‘gift’ in s 206(1) is critical in this case:

gift means any disposition of property otherwise than by will made by a person to another person without consideration in money or money’s worth or with inadequate consideration, including the following—
(a) the provision of a service;
(b) the payment of an amount in respect of a guarantee;
(c) the making of a payment or contribution at a fundraising function;
(d) the disposition of property from a registered political party, a branch of a registered political party or an associated entity—

but does not include the following—
(e) a payment under this Part;
(f) a gift to an individual that was made in a private capacity to the individual for their personal use, and that the individual has not used, and does not intend to use, solely or substantially for an election;
(g)an annual subscription paid to a registered political party by a person in respect of the person's membership of the registered political party;
(h) an annual affiliation fee paid to a registered political party by an associated entity;
(i) an annual levy paid to a registered political party by—
(i) an elected member or a member of staff of the elected member (including an electoral officer); or
(ii) an employee or elected official of the registered political party;

(j) a gift made by a registered political party to the nominated entity of the registered political party or received by a registered political party from the nominated entity of the registered political party;
(ja) a gift made for Commonwealth electoral purposes that is not paid into the State campaign account;
(k) the provision of volunteer labour;
(l) the provision of labour shared between—
(i) a registered political party and any other branch of the registered political party; or
(ii) an associated entity and any other branch of the associated entity; or
(iii) a third party campaigner and any other branch of the third party campaigner;

(m) if the provision of labour to which paragraph (l) applies includes the provision of an asset or piece of equipment to be used by the person in providing the labour, the asset or piece of equipment;
Example
If a person from the first branch of a registered political party, associated entity or third party campaigner is shared with another branch of the registered political party, associated entity or third party campaigner and brings with them a mobile phone supplied by the first branch of the registered political party, associated entity or third party campaigner to use while providing their labour, the provision of the mobile phone is not a gift.
If a person from the first branch of a registered political party, associated entity or third party campaigner is shared with another branch of the registered political party, associated entity or third party campaigner and provides their labour from an office supplied by the first branch of the registered political party, associated entity or third party campaigner, the provision of the office is not a gift.

A ‘disposition of property’ is also defined to mean ‘any conveyance, transfer, assignment, settlement, delivery, payment, gift or other alienation of property’, including a number of specific matters that are not relevant here.

State campaign accounts

The Amendment Act also introduced a requirement for registered political parties and candidates to maintain a ‘State campaign account’, in order to ’separate political donations from the funds used for administration, operations, Federal elections, or other activities, particularly the non-political campaigns of third party campaigners’.[28] Section 207F of the Electoral Act now requires the registered officer of a registered political party and the registered agent of a candidate or group to keep a separate State campaign account for the purpose of State elections.
[28]Explanatory Memorandum, Electoral Legislation Amendment Bill 2018, p26.

Public funding paid to a registered political party, candidate or group under s 212 must be paid into the State campaign account.[29] So must all political donations received by the registered political party, candidate, or group.[30]
[29]Electoral Act, s 212(4A).
[30]Electoral Act, s 207F(2).

Certain amounts must not be paid into the State campaign account of a registered political party; specifically, amounts kept for Commonwealth electoral purposes,[31] annual subscription fees, affiliation fees, and levies,[32] payments of administrative expenditure funding,[33] and payments of policy development funding.[34] There are no other prohibitions on payments into the State campaign account of a registered political party, although s 207F(7) contemplates that the regulations may prescribe what other amounts may, and must not, be paid into a State campaign account. To date, no such regulations have been made.
[31]Electoral Act, s 207F(3).
[32]Electoral Act, s 207F(4).
[33]Electoral Act, s 207GG.
[34]Electoral Act, s 215A(6).

All ‘political expenditure’ by a registered political party, candidate or group must be paid out of the State campaign account.[35] ‘Political expenditure’ is defined to mean:[36]

… any expenditure for the dominant purpose of directing how a person should vote at an election, by promoting or opposing –
(a)the election of any candidate at the election; or
(b)a registered political party; or
(c)an elected member –
…

[35]Electoral Act, s 207F(6).

[36]Electoral Act, s 206(1) – definition of ‘political expenditure’. The definition excludes certain expenditure incurred by an associated entity or third party campaigner outside the election campaigning period.

The effect of these provisions is to tie political donations and public funding to political expenditure, through the mechanism of the State campaign account.

Would the proposed payment be a ‘political donation’?

The proposed payment would involve a disposition of property, and would be a gift, and hence a political donation, if it was made by the Liberal Party to the National Party ‘without consideration in money or money’s worth or with inadequate consideration’.[37]
[37]Electoral Act, s 206(1) – definitions of ‘gift’ and ‘political donation’.

Plaintiffs’ submissions

The plaintiffs submitted that the word ‘consideration’ in the definition of gift should, in the context of the Electoral Act, be given its legal technical meaning, being ‘a promise given or an act done in exchange for an act or promise by another party’.[38] While the phrase ‘without consideration in money or money’s worth or with inadequate consideration’ should be construed as a whole, it was useful to address its two component parts – ‘without consideration in money or money’s worth’ and ‘or with inadequate consideration’ – separately.
[38]Citing Brooks v Commissioner of Taxation (2000) 100 FCR 117, [36].

The plaintiffs contended that the phrase ‘without consideration in money or money’s worth’ should be given a meaning consistent with that adopted by the Court of Appeal of the Supreme Court of Western Australia in Scaffidi v Chief Executive Officer, Department of Local Government and Communities.[39] In that case, ‘consideration in money or money’s worth’ was held to include ‘the provision of services having value in return for the conferral of a financial benefit’,[40] which need not ‘be something which can readily be valued by reference to its price in some kind of open market’.[41]
[39](2017) 52 WAR 368 (Scaffidi).
[40]Scaffidi, [144].
[41]Scaffidi, [156].

In relation to the phrase ‘or with inadequate consideration’, the plaintiffs submitted that the relevant question was ‘whether the consideration is equal in value to that which the party gives up or loses’.[42] The Australian Electoral Commission has adopted that approach in relation to the Commonwealth Electoral Act 1918 (Cth), advising donors that inadequate consideration is ‘where the benefits obtained are clearly of a lesser value than the payment made’.[43] Relying on Scaffidi,[44] the plaintiffs contended that the value of the disposition and the value of the consideration must be capable of comparison, and that difficulty in determining the precise value of something does not mean that it does not have value.
[42]Citing Hitchcock v Coker (1837) 112 ER 167, 175 (Tindale CJ).
[43]Australian Electoral Commission, Financial Disclosure Guide for Election Donors: 2019 Federal Election, May 2019, 12.
[44](2017) 52 WAR 368.

Considering those component parts of the phrase together, the plaintiffs submitted that a payment will constitute a ‘gift’ when it is made without the recipient giving something of value in return, and where there is insufficient equivalence between the payment made and the thing given in exchange for the payment.

The plaintiffs argued that the proposed payment by the Liberal Party to the National Party of one-third of the public funding entitlement would not be a gift, because the promises made by the National Party to the Liberal Party in the 2018 Coalition Agreement in exchange for the payment constitute consideration ‘in money or money’s worth’ that would not be inadequate. They placed particular emphasis on the promises by the National Party, now performed, to run joint tickets with the Liberal Party in the three Legislative Council regions, with a Liberal Party candidate in first place on each ticket, and not to contest any other region without the Liberal Party’s agreement. They also relied on a number of other promises of value to the Liberal Party in the 2018 Coalition Agreement, including that the leader of the Parliamentary Liberal Party would be either the Premier or the Leader of the Opposition, and would allocate portfolios within Cabinet or Shadow Cabinet ‘as he shall see fit in consultation with the Leader of the Parliamentary Nationals’.

The plaintiffs did not concede that the promises in the 2018 Coalition Agreement were in the nature of unenforceable political promises,[45] and nor did they accept that the parties to the proceeding could not commence proceedings to enforce those promises.[46] They argued that these were side issues, because the enforceability of the promises did not affect whether they amounted to adequate consideration in money’s worth.
[45]Relying on Baldwin v Everingham [1993] 1 Qd R 10, 20; Coleman v Liberal Party of Australia, New South Wales Division (No 2) (2007) 212 FLR 271, [36]-[40]; Butler v Mulholland (No 2) [2013] VSC 662, [105]; James v Wilson [2019] NSWSC 17, [69]-[71] and, more generally, A v C (2015) 123 SASR 477, [24].
[46]Relying on Clarke v Australian Labour Party (1999) 74 SASR 109, [64]-[65], [91]; Coleman, [10].

The plaintiffs pointed out that the Electoral Act expressly permitted group tickets comprising candidates endorsed by two registered political parties. They emphasised that the proposed payment involved no risk of corruption or undue influence on the political process, and prohibiting it was not within the purpose of the Amendment Act. They further submitted that construing ‘gift’ in the way contended for by the VEC would deny the National Party a substantial share of the public funding referable to the three group tickets it ran with the Liberal Party in the Legislative Council. That would have the effect of increasing its vulnerability to the insidious effects of political donations that the 2018 amendments were designed to address.

VEC’s submissions

The VEC submitted that the doctrine of consideration is based on the idea of reciprocity or mutuality: ‘”something of value in the eye of the law” must be given for a promise in order to make it enforceable’.[47] In the context of contract law, something will constitute consideration for a promise if it is given by the person to whom the relevant promise is made, in exchange for the promise, and is recognised by the law as being legally valuable. In the context of conveyancing, ‘consideration’ has a wider meaning, and is understood as the motive for the transfer.[48] Good consideration in the conveyancing context extends to some kinds of consideration, such as ‘natural love and affection’, which would not be sufficient consideration to support a contract.
[47]Citing Director of Public Prosecutions (Vic) v Le (2007) 232 CLR 562, [108] (Kirby and Crennan JJ) (DPP v Le).
[48]Citing Chief Commissioner of State Revenue (NSW) v Dick Smith Electronics Holdings Pty Ltd (2005) 221 CLR 496, [22]-[24] (Gleeson CJ and Callinan J).

In the context of the Electoral Act, a disposition of property is a ‘gift’ if made ‘without consideration in money or money’s worth’. The VEC submitted that this phrase should be construed to require:

(a) first, that the thing said to constitute consideration for the disposition must be given by the person to whom the disposition is made, in exchange for the disposition;

(b) second, that the thing must be recognised by the law as being legally valuable.[49]

[49]Relying on Wheatley v New South Wales [2018] NSWSC 178, [95] and Wheatley v New South Wales [2018] NSWCA 315, [131].

This construction was submitted by the VEC to be consistent with the purposes of the Amendment Act to ‘enhance the integrity of the electoral system by prohibiting political donations from certain sources and introducing a political donations disclosure and reporting scheme’,[50] and to ‘limit any improper influence of private donations in the political process’.[51] The risks posed by unregulated political donations are well recognised; some of them were explained by the High Court in McCloy v New South Wales:[52]

A candidate for office may be tempted to bargain with a wealthy donor to exercise his or her power in office for the benefit of the donor in return for financial assistance with the election campaign. This kind of corruption has been described as “quid pro quo” corruption. Another, more subtle, kind of corruption concerns “the danger that officeholders will decide issues not on the merits or the desires of their constituencies, but according to the wishes of those who have made large financial contributions valued by the officeholder”. This kind of corruption is described as “clientelism”. It arises from an office-holder’s dependence on the financial support of a wealthy patron to a degree that is apt to compromise the expectation, fundamental to representative democracy, that public power will be exercised in the public interest.

[50]Amendment Act, s 1(a)(ii).

[51]Victoria, Parliamentary Debates, Legislative Assembly, 10 May 2018, 1350 (Mr Pakula, Attorney-General).

[52]McCloy v New South Wales (2015) 257 CLR 178, [36] (French CJ, Kiefel, Bell and Keane JJ). See further [35]-[39] (French CJ, Kiefel, Bell and Keane JJ) and [181]-[183], [185]-[188] (Gageler J).

The VEC did not suggest that the promises in the 2018 Coalition Agreement involved any form of corruption. Its submission was that an interpretation of ‘consideration in money’s worth’ that includes unenforceable political promises would undermine the purpose of Pt 12, Divs 3, 3A and 3B of the Electoral Act. The VEC argued that the promises in the agreement could not constitute consideration in money or money’s worth because they were unenforceable political promises and were not given or performed in exchange for the proposed payment.

It submitted that the difficulty with the plaintiffs’ approach was that there was no touchstone to differentiate the promises in the 2018 Coalition agreement from other more objectionable political promises. The VEC argued that accepting the plaintiffs’ construction of the definition of ‘gift’ would allow a truck to be driven through the definition of ‘political donation’, with the result that all sorts of payments would bypass the restrictions on political donations under Pt 12 of the Electoral Act. An example given in oral argument was a candidate paying $1 million to a registered political party or group, in exchange for a place on a group ticket.

As to the enforceability of the 2018 Coalition Agreement, the VEC characterised the promises exchanged in it as political rather than contractual in nature. It submitted that it was clear from the document that there was no intent to create legal relations between the parties.[53] Further, none of the parties to the agreement is a legal entity, and none of them could commence a legal proceeding to enforce the promises set out in it.[54]
[53]Relying on John Cooke & Co Pty Ltd v Commonwealth (1922) 31 CLR 394, 416, 418; South Australia v Commonwealth (1962) 108 CLR 130, 140-141 (Dixon CJ), 148-149 (McTiernan J), 149 (Taylor J), 150 (Menzies J), 154 (Windeyer J); PJ Magennis Pty Ltd v Commonwealth (1949) 80 CLR 382, 409 (Dixon J); Administration of Papua and New Guinea v Leahy (1961) 105 CLR 6, 11 (McTiernan J), 21 (Kitto J); Tipperary Developments Pty Ltd v Western Australia (2009) 38 WAR 488, [122] (McLure JA).
[54]Citing Liberal Party of Australia (Victorian Branch) v Rae [2018] VSC 731, [7].

The VEC pointed out that the 2018 Coalition Agreement made no mention of public funding payable in respect of the joint tickets in the three Legislative Council regions. The promises in the agreement about running joint tickets were not expressed to be given in exchange for any promise to divide the public funding. Nor was there evidence of any discussion between the representatives of the two parties about the division of public funding for votes given for the joint tickets. If there had been any exchange of promises, one would expect it to have been discussed during the negotiations in 2018. It submitted that the proposed payment would therefore not be in consideration for the promises made by the National Party in the 2018 Coalition Agreement.

In addition, the VEC submitted that it was not possible to ascribe any value to those promises, and so it was not possible to compare their value with the value of the proposed payment. It followed that the promises could not be adequate consideration for the proposed payment.

The VEC raised a further matter that it said indicated that the proposed payment would be a political donation. As required by s 212(3), the entitlement was paid into the Liberal Party’s State campaign account. If the proposed payment is not a political donation, there will be no requirement for Mr Harris to pay it into the National Party’s State campaign account. That would mean that a proportion of the public funding entitlement properly paid to the Liberal Party in respect of the joint tickets would be transferred to another political party, without any requirement for it to be dealt with in accordance with Pt 12 of the Electoral Act. The VEC submitted this would be an outcome that Parliament was not likely to have intended.

Findings

I accept that, since 2008, there has been an understanding between the Coalition parties that the public funding entitlement for their joint tickets in the Legislative Council would be apportioned between the National Party and the Liberal Party on a one-third, two-thirds basis. While the plaintiffs characterised this understanding as ‘the Public Funding Agreement’, it lacks the formality and certainty typical of a funding agreement. It was never reduced to writing, and there is no evidence that it was ever considered or approved by the parties’ governing bodies. As will be seen, nothing turns on whether it is an enforceable agreement or, as I describe it, an understanding.

The understanding was reached in the context of the 2008 Coalition Agreement and, in particular, the agreement that the Coalition would run joint tickets in the Western Victoria, Northern Victoria, and Eastern Victoria regions of the Legislative Council, with a Liberal Party candidate occupying the first place on each ticket. The apportionment of one-third to the National Party and two-thirds to the Liberal Party was reached by reference to the representation that each party, standing separate tickets, had achieved at the 2006 election and expected to achieve at the 2010 election.

I find that, by 2018, this understanding was considered by both parties to be a settled feature of the relationship between them. They did not revisit it in 2018 because, in the 2018 Coalition Agreement, they had again agreed to run joint tickets in the same three Legislative Council regions, with no change to the allocation of places between candidates endorsed by each party.

At the 2018 election, the National Party ran a joint ticket with the Liberal Party in the three Legislative Council regions, with a Liberal Party candidate placed first on each ticket. The National Party forbore from running a National Party ticket in those regions. This meant that the National Party gave up the opportunity for a National Party candidate to receive first preference votes for votes cast above the line for the joint ticket in each region, and hence the opportunity to receive public funding under s 211(2) in respect of these votes. I have concluded that this amounts to adequate consideration in money’s worth for the proposed payment. I explain my reasoning further below.

Consideration

The definition of ‘gift’ in s 206(1) of the Electoral Act involves a disposition of property without consideration in money or money’s worth, or without adequate consideration. As both sides accepted, ‘consideration’ can be used in various senses, and its meaning will depend on the context.

In a contractual context, ‘consideration’ means something of value in the eye of the law given by one party to a contract in exchange for the other party’s promise. In order to support a contract, the consideration need only ‘reach a threshold of legal recognition’ to be sufficient to support a contract.[55] It need not be adequate – that is, it need not be of equivalent value to the promise.
[55]JW Carter, Contract Law in Australia, 7th edition, 2018, LexisNexis Butterworths, 124, [6-23].

In many other contexts, consideration is used more broadly to denote the motive for a transfer or disposition of property. The distinction was explained by Dixon J in Archibald Howie Pty Ltd v Commissioner of Stamp Duties (NSW), in which there was a question whether stamp duty should be assessed on the basis that certain shares had been transferred ‘without consideration in money or money’s worth’:[56]

In the context I think that the word ‘consideration’ should receive the wider meaning or operation that belongs to it in conveyancing rather than the more precise meaning of the law of simple contracts. The difference is perhaps not very material because the consideration must be in money or money’s worth. But in the law of simple contracts it is involved with offer and acceptance: indeed properly understood it is perhaps merely a consequence or aspect of offer and acceptance. Under s. 66 the consideration is rather the money or value passing which moves the conveyance or transfer.

[56](1948) 77 CLR 143, 152.

Consideration is often used in its conveyancing sense in revenue statutes.[57] It has also been held to have that meaning in the context of the Confiscation Act 1997 (Vic), which provides for the forfeiture of proceeds of crime.[58]
[57]See, e.g. Federal Commissioner of Taxation v St Helen’s Farm (ACT) Pty Ltd (1981) 146 CLR 336, 375-376, concerning whether an issue of shares was a gift for the purposes of the Gift Duty Assessment Act 1941 (Cth); Dick Smith Electronics, [22]-[24] (Gleeson CJ and Callinan J), [71]-[72] (Gummow, Kirby and Hayne JJ), concerning the assessment of duty on a transfer of shares under the Duties Act 1997 (NSW); Commissioner of State Revenue v Lend Lease Development Pty Ltd (2014) 254 CLR 142, [49], concerning the dutiable value of land transferred, for the purposes of the Duties Act 2000 (Vic).
[58]DPP v Le, [6] (Gleeson CJ), [108] (Kirby and Crennan JJ), concerning whether property should be excluded from forfeiture because it was acquired from the accused for sufficient consideration.

The meaning of ‘consideration in money or money’s worth’ in a political context was considered by the Court of Appeal of the Supreme Court of Western Australia in Scaffidi.[59] The appellant was the Lord Mayor of the City of Perth, and was obliged by the Local Government Act 1995 (WA) to lodge an annual return disclosing all gifts received during the relevant year. A ‘gift’ was defined to mean ‘any disposition of property, or the conferral of any other financial benefit’ made ‘without consideration in money or money’s worth’ or ‘if the consideration is not fully adequate’.[60] The State Administrative Tribunal had found the appellant to have committed a serious breach of the disclosure requirement, by failing to disclose accommodation and travel paid for or provided by others. Some of the accommodation and travel was provided in connection with the appellant’s attendance at meetings of the Australian Press Council, of which she was a member. The Tribunal concluded that the provision of accommodation and travel constituted a ‘gift’, being the conferral of a financial benefit without consideration. It rejected the appellant’s submission that her preparation for and attendance at the relevant meetings amounted to ample consideration for the accommodation and travel, on the basis that consideration in money’s worth was limited to something that could readily be valued by reference to its price on an open market.
[59](2017) 52 WAR 368.
[60]Local Government Act 1995 (WA), s 5.82(4). In 2019, the Local Government Legislation Amendment Act 2019 (WA) repealed s 5.82 and inserted a new Sub-Div 2A – Disclosure of gifts, into Pt 5, Div 6 of the Local Government Act 1995 (WA).

After reviewing numerous authorities concerning the meaning given to ‘consideration’ in different contexts,[61] the Court of Appeal concluded that the Tribunal had erred in construing ‘consideration in money’s worth’ in the definition of ‘gift’ as limited to something that ‘could be bought and sold in an open market at an objective and predictable price’.[62] It continued:[63]

The requirement to determine whether consideration in money’s worth is fully adequate implies that the value of the financial benefit and the value of the consideration must be capable of being compared. However, there is no warrant in this language for requiring that either value must be readily ascertainable by reference to its price in some kind of open market. The fact that the precise value of something may be difficult to determine does not deny that it has value. There is no adequate foothold for the respondent’s construction in the text of the definition read in the context of the relevant substantive provisions.

[61]Scaffidi, [132]-[143].

[62]Scaffidi, [148].

[63]Scaffidi, [149].

The Court of Appeal further held that consideration in money’s worth had passed from the appellant to the provider of accommodation and travel. Although the value of the appellant’s preparation, attendance, and participation could not be precisely calculated, it was clearly ‘fully adequate’ consideration for the travel and accommodation provided in connection with the meetings. There was no proper basis for characterising them as gifts.[64]
[64]Scaffidi, [160]-[164].

The facts in Scaffidi may be contrasted with those in Wheatley v State of New South Wales,[65] in which two candidates endorsed by the Liberal Party of Australia (New South Wales Division) (NSW Liberal Party) in the 2015 State election had made substantial payments into the party’s campaign account. The New South Wales Electoral Commission contended that the payments were political donations that exceeded the cap prescribed by the Election Funding, Expenditure and Disclosures Act 1981 (NSW) (EFED Act). The NSW Liberal Party maintained that the payments were not political donations, but were rather self-funding contributions to the candidates’ own campaigns that were authorised under the EFED Act. That argument was rejected by the trial judge, Adamson J, who made the orders sought by the Commission.
[65][2018] NSWCA 315 (Wheatley), on appeal from State of New South Wales v Wheatley [2018] NSWSC 178 (NSW v Wheatley).

An issue at trial and on appeal was whether the payments were gifts, and hence political donations. The definition of ‘gift’ in the EFED Act was very similar to the definition in s 206(1) of the Electoral Act: a ‘gift’ was defined to mean a disposition of property made by a person to another person ‘without consideration in money or money’s worth or with inadequate consideration’.[66] The NSW Liberal Party argued that the payments were not gifts, because the candidates had a legitimate expectation or entitlement that the party would apply the amounts they had paid towards their respective election campaigns. This argument failed, because it was inconsistent both with the facts and with the scheme of the EFED Act. On the facts, the ‘so-called implied promise’ was not fulfilled,[67] and there was no appeal from the trial judge’s finding that not all of the funds paid by the candidates were spent for the purposes of their campaigns. The Court of Appeal also upheld Adamson J’s conclusion that, even if the party spent a sum equivalent to the payments on the candidates’ campaigns, the expenditure ‘would not amount to consideration since the Party had no obligation to do so’.[68]
[66]Election Funding, Expenditure and Disclosures Act 1981 (NSW), s 84(1) – definition of ‘gift’.
[67]Wheatley, [130] (McColl JA, Gleeson JA and Simpson AJA agreeing). See also NSW v Wheatley, [93].
[68]Wheatley, [131] (McColl JA, Gleeson JA and Simpson AJA agreeing). See also NSW v Wheatley, [95].

I do not understand Wheatley to stand for the proposition that something can amount to consideration only if it is done or paid under some obligation. The references to ‘obligation’ in the judgments of the trial judge and the Court of Appeal must be understood in the context of the arguments in that case. The NSW Liberal Party argued that the funds paid by the candidates into the party’s campaign account were impressed with an obligation to spend it for the candidates’ benefit. Adamson J rejected that argument, on the basis that there was no express declaration of trust, and the common law concepts of trusts and restitution were antithetical to, and excluded by, the EFED Act.[69]
[69]NSW v Wheatley, [95]-[98].

In the context of the Electoral Act, my view is that ‘consideration’ is not used in its contractual sense. The definition of ‘gift’ in s 206(1) is not concerned with the enforcement of a promise, and so it is not relevant whether the consideration would be sufficient to support a contract – or whether there was offer and acceptance, or an intention to create legal relations. The definition in s 206(1) is rather concerned with distinguishing between a gift and a disposition of property moved by something of value passing the other way, for the purpose of regulating political donations. This conclusion is reinforced by the requirement that the consideration be adequate, since a characteristic of a gift is that it is not given in exchange for something of comparable value. By contrast, in the law of contract the main enquiry is whether consideration is legally ‘sufficient’, and not whether it is ‘adequate’ in the sense of being equivalent in value to the promise.[70] My conclusion is also consistent with the meaning given to ‘consideration’ in a similar context in Scaffidi.
[70]Carter, op cit, 125-126 [6-25]-[6-26].

All of that brings me to the conclusion that a disposition of property will not be a ‘gift’, for the purposes of Pt 12 of the Electoral Act, if it is made in exchange for something of monetary value that is capable of being compared with the value of the property. In that event, the disposition of property will be made for ‘consideration in money or money’s worth’. The consideration need not carry a price tag or be a tradeable commodity; it may be in money’s worth even if its precise value is difficult to determine.[71]
[71]Scaffidi, [149].

Whether the consideration is adequate or inadequate involves a separate inquiry, in which ‘no more is required than a comparison of the value of what was promised or paid with the value of what was given’.[72] Consideration will be inadequate if its value is not equivalent to the property transferred.[73] In many cases, this comparison will be straightforward. In others, where the precise value of the consideration is difficult to determine, assessing its adequacy may involve a degree of judgment.[74]
[72]McGain v Federal Commissioner of Taxation (1966) 116 CLR 172, 176. See also Scaffidi, [146], [149].
[73]McGain, 175.
[74]McGain, 176; Scaffidi, [139]-[140], [149].

I have concluded that the proposed payment would be made for consideration in money’s worth, because it would be made in exchange for the National Party running a joint ticket with the Liberal Party in the three Legislative Council regions at the 2018 election, with a Liberal Party candidate in first place on each ticket. That involved the National Party foregoing first preference votes for its own candidates and the corresponding entitlement to public funding. Section 211(2) of the Electoral Act gives a monetary value to that entitlement, in the amount of $1.20 for each first preference vote.

As to the adequacy of the consideration, it is not a simple matter to compare the value of the consideration with the value of the proposed payment. The evidence does not enable me to give a precise value to the public funding entitlement that the National Party gave up when it ran the three joint tickets with the Liberal Party. As the VEC submitted, it is not possible to know exactly what the National Party’s public funding entitlement would have been if the parties had run separate tickets in the three Legislative Council regions.

However, I am satisfied that it would have been in the order of one-third of the total amount of public funding paid to the Liberal Party for the three regions. There are two reasons for that conclusion:

(a) First, before 2008, the National Party and the Liberal Party ran separate tickets in the three Legislative Council regions, generally with the result that two Liberal Party candidates and one National Party candidate were elected. [75] This was the basis on which the parties agreed to divide the public funding entitlement for the three regions on a two-thirds, one-third basis.

(b) Second, the first preference votes for the Liberal Party candidate in first place on each joint ticket at the 2014 election were 160,000 in the Western Victoria region, 177,415 in the Northern Victoria region, and 180,013 in the Eastern Victoria region.[76] If a National Party candidate had been in first place on the joint ticket in any one of the three regions, the National Party would have been entitled to roughly one-third of the public funding paid in respect of the joint tickets. It is likely that the same would have occurred at the 2018 election. A total of 432,755 first preference votes were given for candidates endorsed by the Liberal Party in first place on the three joint tickets at the 2018 election.[77] Although the evidence did not break down those first preference votes by region, I am comfortable inferring that about one-third were given in each region.

[75]Affidavit of Peter Walsh dated 20 February 2020, [3]. While no National Party candidate was elected in the Western Victoria region at the 2006 election, this was expected to occur at the 2010 election.

[76]Affidavit of Matthew Harris dated 8 April 2020, Exhibit MH-3.

[77]Notice to Admit dated 18 June 2020, [4].

In other words, I am satisfied that the consideration that has been given by the National Party is adequate consideration for the proposed payment.

It remains to address a number of other arguments advanced by the VEC.

Effect of 2018 Coalition Agreement

The VEC argued that the promises relating to joint tickets in the Legislative Council could not be consideration for the proposed payment, because they were promises made in exchange for the promises given by the Liberal Party in the 2018 Coalition Agreement, which made no reference to apportionment of the public funding entitlement. I understood this to be a submission that these promises would be illusory consideration for the proposed payment, because they were promises to perform duties already owed under the 2018 Coalition Agreement.

The difficulty with this argument is that it assumes that the 2018 Coalition Agreement is a legally enforceable contract, contrary to the VEC’s position that the 2018 Coalition Agreement contains political promises that do not attract legal consequences. The argument falls away if one accepts, as I do, that the 2018 Coalition Agreement is an inherently political agreement that is not enforceable as a contract between the parties.

As the VEC submitted, it is clear from the terms of the 2018 Coalition Agreement and the nature of the promises in it that the parties did not intend to create legal relations. Those promises include an agreement that the parties will act in coalition, whether in Government or in Opposition, even if one party has enough seats to be able to govern in its own right.[78] The parties agree that the leader of the parliamentary Liberal Party will be Premier of Victoria when the parties are in government, and the Leader of the Opposition when they are not.[79] There is agreement as to how many positions the National Party is to hold in Cabinet or Shadow Cabinet,[80] and how portfolios are to be allocated.[81] The agreement also allocates between the parties the parliamentary offices of Speaker and Deputy Speaker of the Legislative Assembly, and President and Deputy President of the Legislative Council.[82]
[78]Second affidavit of Matthew Harris dated 13 May 2020, Exhibit MH-12 – Victorian Coalition Agreement, cl 3.
[79]Coalition Agreement, cll 4.3, 5.2.
[80]Coalition Agreement, cll 4.5, 5.4.
[81]Coalition Agreement, cll 4.7, 5.6.
[82]Coalition Agreement, cll 4.8, 5.7, 5.8.

These all strike me as purely political promises ‘depending entirely on political sanctions’.[83] It would be impossible for a court to enforce them without infringing the principle of exclusive cognisance – that is, the principle that the internal proceedings of Parliament are non-justiciable, because each House of Parliament has the exclusive right to manage its own affairs without external interference.[84]
[83]South Australia v Commonwealth (1962) 108 CLR 130, 141 (Dixon CJ).
[84]See generally O’Sullivan v Andrews (2016) 50 VR 600.

Moreover, the parties to the 2018 Coalition Agreement are unincorporated associations that lack the capacity to enter into a contract,[85] let alone bring a legal proceeding to enforce it.[86] The authorities cited by the plaintiffs against this proposition[87] all concern the quite different question of whether a court has jurisdiction to determine a dispute within an unincorporated association that is also a registered political party, notwithstanding the authority of Cameron v Hogan.[88] In any event, this Court has recently declined to follow those authorities. In Setka v Carroll,[89] Riordan J held that the Court does not have jurisdiction to interfere with internal decisions of a voluntary unincorporated association, including a registered political party, other than to protect or enforce a contractual or other right recognised in law or equity.[90]
[85]Watson v J & A G Johnson Ltd (1936) 55 CLR 63, 67 (Latham CJ) and 68 (Starke J); Carlton Cricket & Football Social Club v Joseph [1970] VR 487, 488.
[86]Green v Bradbury (2011) 191 FCR 417, [61]-[62]. See also Alstonv Cormack Foundation Pty Ltd (2018) 358 ALR 263, [262]-[277], in relation to the legal status of the Liberal Party.
[87]See [50] above.
[88](1934) 51 CLR 358.
[89](2019) 58 VR 657 (Setka v Carroll).
[90]Setka v Carroll, [2], [23]-[68].

Statutory purpose

The VEC was concerned that a finding that the proposed payment would be made for adequate consideration in money’s worth would undermine the effectiveness of Pt 12 of the Electoral Act, and ‘would allow a truck to be driven through the provisions dealing with political donations and caps’. I do not consider that my finding in this case, or the construction of the definition of ‘gift’ set out at [75]-[77] above, is likely to have that effect.

To the contrary, I consider there is some force in the plaintiffs’ submission that a finding that the proposed payment would be a political donation would run counter to the purposes of the Amendment Act and the scheme of the Electoral Act. It would deny the National Party the share of the public funding entitlement that the Liberal Party wishes to pay to it, increasing the National Party’s reliance on political donations to fund future political expenditure. In addition, the proposed payment would be made in exchange for the National Party’s participation, through its endorsed candidates, in group tickets that are permitted by the Electoral Act. As noted, s 69A(3) expressly provides for group tickets comprising candidates endorsed by different registered political parties.

The example of concern put forward by the VEC in oral argument involved a candidate effectively buying a position on a group ticket, by paying $1 million to the relevant political party or group to secure a place on the ticket. It is difficult to see that such a payment would be made in exchange for something of comparable monetary value. A promise of a place on a group ticket would be an inherently political promise, unlikely to be enforceable, or amount to adequate consideration in money’s worth. Such a payment would also be unlikely to give rise to obligations under the common law of trust and restitution, for the reasons discussed by the trial judge in Wheatley.[91]
[91]NSW v Wheatley, [95]-[101].

There is another obstacle in the way of the truck that the VEC is concerned about. Section 151 of the Electoral Act prohibits bribery, in the following terms:

(1) A person must not—
(a) ask for, receive or obtain; or
(b) offer to ask for, receive or obtain; or
(c) agree to ask for, receive or obtain—

any property or benefit of any kind, whether for the person or any other person, on an understanding that the person’s election conduct will be in any manner influenced or affected.
…
(2) A person must not, in order to influence or affect any person’s election conduct, give or confer, or promise or offer to give or confer, any property or benefit of any kind to the person or any other person.
…
(3) In this section, person’s election conduct means—
(a) the way in which the person votes at an election; or
(b) the person’s nomination as a candidate for an election; or
(c) the person’s support of, or opposition to, a candidate or a political party at an election; or
(d) the doing of any act or thing by the person the purpose of which is, or the effect of which is likely to be, to influence the preferences set out in the vote of an elector.

(4) This section does not apply in relation to a declaration of public policy or a promise of public action.

The offences created by ss 151(1) and 151(2) are indictable offences, carrying maximum penalties of 5 years imprisonment or a fine of 600 penalty units.[92]

[92]Electoral Act, ss 151(1A), (2A).

The full extent of these offences is yet to be established, as is the breadth of the definition of ‘person’s electoral conduct’ in s 151(3).[93] However, any would-be candidate thinking of ‘buying’ a place on a group ticket would do well to consider s 151 before proceeding.
[93]Similar provisions were considered in Scott v Martin (1988) 14 NSWLR 663 and Green v Bradbury (2011) 191 FCR 417, both of which concerned election petitions rather than prosecutions for an offence. See also Colin A Hughes, ‘Electoral Bribery’ (1998) 7(2) Griffith Law Review 209.

State campaign account

The VEC raised a further contextual matter in support of its contention that the proposed payment would be a political donation within the meaning of Pt 12 of the Electoral Act. As discussed above, the State campaign account of a registered political party, group or candidate is the mechanism by which political donations and public funding are tied to political expenditure. Political donations and public funding must be paid into the relevant State campaign account, and political expenditure must be paid out of the State campaign account.[94]
[94]See [35]-[39] above.

The VEC pointed out that s 212(4A) of the Electoral Act required the public funding paid by the VEC to the Liberal Party to be paid into the Liberal Party’s State campaign account. If the proposed payment to the National Party would not be a political donation, there is nothing in Pt 12 that would require it to be paid into the State campaign account of the National Party. The VEC submitted that this was an outcome that Parliament was not likely to have intended.

I do not consider this further matter to have any bearing on the construction of the definition of ‘gift’ in the Electoral Act, or my conclusion that the proposed payment would not be a political donation. The Electoral Act neither requires nor prohibits the payment of the proposed payment into the National Party’s State campaign account. However, s 207F(6) of the Electoral Act requires that all political expenditure by the National Party come from its State campaign account. This has the effect that, unless the proposed payment were paid into the National Party’s State campaign account, it could not be used for political expenditure. There is therefore a strong incentive for the National Party to pay the proposed payment into its State campaign account.

Further, it is not obvious what transparency would be lost if the National Party chose not to pay the proposed payment into its State campaign account. As a registered political party, it must provide the VEC with an annual return setting out its total income and expenditure, not limited to payments into and out of its State campaign account.[95] The proposed payment would have to be included in the total income reported by the National Party in its annual return for the financial year in which the payment is received.
[95]Electoral Act, s 217I.

Can the entitlement be apportioned through a Group State Campaign Account?

I have accepted the plaintiffs’ primary contention that the proposed payment would not be a political donation. Their alternative contention proposed distributing the proposed payment through a separate State campaign account established for the group tickets. To that end, the plaintiffs sought an alternative declaration, that the National Party and the Liberal Party are entitled under the Electoral Act to:

(a)establish a State Campaign Account under s 207F of the Electoral Act in the name of the Liberal/National Group ticket (the Group State Campaign Account);
(b)themselves transfer into the Group State Campaign Account the entitlement arising under s 211(2) of the Electoral Act which was paid to them in respect of the 2018 election for the Legislative Council regions of Eastern Region, Northern Region and Western Region; and
(c)distribute the amount standing to the credit of the Group State Campaign Account from time to time in the proportions of one-third to the National Party and two-thirds to the Liberal Party.

The plaintiffs’ argument in support of their alternative contention was as follows:

(a) Section 207F(1) of the Electoral Act expressly contemplates that a State campaign account may be kept by a group, through its registered agent.

(b) Under s 212(3), the public funding entitlement of a candidate endorsed by a registered political party must be paid by the VEC to the registered officer of that registered political party.

(c) Section 212(4A) then requires the registered officer ‘to pay the amount of the payment into the State campaign account’. This provision does not specify in terms the State campaign account into which the amount must be paid, and does not require it to be paid into the State campaign account kept by the registered political party.

(d) The Electoral Act conceives of a group as a ‘meaningful political unit, for which votes can be cast’ and to which political donations may be made.[96] The interpretation of s 212(4A) that best aligns with statutory context and purpose is one that would permit the registered officer to pay the amount received under s 212(3) in respect of a group ticket into the group’s State campaign account. Any more restricted reading would constrict the ability of groups to form and function as they see fit.

[96]Outline of submissions of the plaintiffs dated 11 June 2020, [79].

I cannot accept this alternative contention. It is certainly the case that the Electoral Act provides for a State campaign account to be kept for a group. There may be circumstances in which the public funding entitlement of the candidate in first position on a group ticket may be paid into the State campaign account of the group, rather than the account of the registered political party that endorsed that candidate. However, those circumstances are not present in this case, for the following reasons:

(a) First, there is no suggestion that a State campaign account already exists for any of the groups endorsed by the plaintiffs in the Western Victoria, Northern Victoria, or Eastern Victoria regions of the Legislative Council at the 2018 election. The plaintiffs propose to establish one Group State Campaign Account for all three groups, well after the 2018 election. This is not what is contemplated by s 207F(1), in relation to State campaign accounts, or s 207B, which provides for the appointment of a registered agent by a group.

(b) Second, a ‘group’ is defined in s 206(1) to mean ‘2 or more candidates whose names are grouped on a ballot-paper in accordance with section 69A’. A group exists for no longer than the relevant election period, beginning with the day on which the writ for the election is issued,[97] and ending on the day on which the writ is returned.[98] It is not necessary in this case to determine the precise duration of the three groups’ existence, but it is clear that they have long since ceased to exist. If the Coalition runs joint tickets in the three Legislative Council regions at the next general election, the candidates whose names are grouped together on the ballot papers will constitute three new groups.

(c) Third, s 207F(1) provides for a State campaign account to be kept by the registered agent of a group, from which the political expenditure of the group must be paid. Any amount remaining in the State campaign account of a group when one or more of the group members is not successful must, after debts have been paid, be paid in accordance with s 207F(8). That is, s 207F contemplates that a group State campaign account will be kept only for the duration of the election in which the group is nominated.

(d) It follows that it is no longer possible for a State campaign account to be kept for any of the three groups who stood on joint tickets at the 2018 election.

[97]Electoral Act, ss 61, 63.

[98]Electoral Act, s 121

There is a further reason why the plaintiffs’ alternative proposal would not achieve their desired outcome.

Even if a Group State Campaign Account could now be established for the three 2018 groups, with the same registered agent for all three groups, there are two more steps required to distribute the public funding entitlement referable to those group tickets in the proportion of one-third to the National Party and two-thirds to the Liberal Party. First, the Liberal Party would have to pay $757,321.25 into the Group State Campaign Account, and the National Party would have to pay the $1,410.50 it received. Then, the registered agent of the groups would have to make payments of one-third of the total to the National Party and the remaining two-thirds to the Liberal Party. There is a question whether these alternative proposed payments would comply with Pt 12 of the Electoral Act, in particular the general cap on political donations imposed by s 217D.

Section 212(4A) requires that the registered officer who receives a payment of public funding from the VEC under s 212 ‘must pay the amount of the payment into the State campaign account’. I do not accept the plaintiffs’ argument that this permits payment of the amount into any entity’s State campaign account. Read together with s 212(3), it is clear that the registered officer is obliged to pay the amount into the State campaign account kept for the registered political party that endorsed the candidate in respect of whom the payment was made. In this case, s 212(4A) required the registered officer of the Liberal Party to pay the full amount received from the VEC under s 212 in respect of the 2018 election into the Liberal Party’s State campaign account.

The plaintiffs have not explained why the alternative proposed payments would not be gifts and hence political donations for the purposes of Pt 12 of the Electoral Act. More particularly, they have not identified any consideration that would support the alternative proposed payments.

I have accepted that the proposed payment by the Liberal Party to the National Party would be made for consideration given by the National Party to the Liberal Party. However, it does not follow that the alternative proposed payments in to the proposed Group State Campaign Account would be made in exchange for adequate consideration in money or money’s worth given by the groups. Nor does it follow that the alternative proposed payments out of the Group State Campaign Account would be made in exchange for something of equivalent monetary value given to the group by the National Party and the Liberal Party respectively. The alternative proposed payments made into and out of the Group State Campaign account would be in disparate amounts. It is proposed that the National Party would pay $1,410.50 in, which on no view could amount to adequate consideration for a payment out in the order of $250,000. In addition, the analysis in Wheatley stands in the way of a conclusion that the alternative proposed payments in to the Group State Campaign account might be impressed with a trust or some other obligation to distribute the funds back to the National Party and the Liberal Party in the agreed proportions.[99]
[99]NSW v Wheatley, [95]-[98] and Wheatley, [131] (McColl JA, Gleeson JA and Simpson AJA agreeing), discussed at [72]-[74] above.

I do not accept the plaintiffs’ alternative contention, because the relevant groups no longer exist and it is not possible to establish the proposed Group State Campaign Account for them. Further, the alternative proposed payment into that account by the Liberal Party, and the alternative proposed payments out of the account to the National Party and the Liberal Party, would be political donations in excess of the general cap, and would be unlawful under s 217D of the Electoral Act.

Disposition

I am satisfied that it is appropriate to make a declaration in the following terms:

A payment by the Liberal Party of Australia (Victorian Division) to the National Party of Australia – Victoria of one-third of the amount of the entitlement paid by the Victorian Electoral Commission to the registered officer of the Liberal Party pursuant to s 212(3) of the Electoral Act 2002 (Vic) in respect of the 2018 election for the Legislative Council regions of Western Victoria, Northern Victoria and Eastern Victoria:
(a) would be a payment made for adequate consideration in money’s worth;
(b) would not constitute a ‘political donation’ within Part 12 of the Electoral Act; and
(c) would not otherwise be prohibited by the provisions of Part 12 of the Electoral Act.

Although the declaration concerns the lawfulness of a payment that has not yet been made, it ‘involves no mere hypothetical question’.[100] To the contrary, I am satisfied that it will determine a real controversy arising from a concrete situation.[101]
[100]Ainsworth v Criminal Justice Commission (1992) 175 CLR 564, 582 (Mason CJ, Dawson, Toohey and Gaudron JJ).
[101]Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334, [47]-[48] (Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ); Plaintiff M61/2010E v Commonwealth (2010) 243 CLR 319, [103].

There is no need, and no basis, to make the alternative declaration sought.

I will hear the parties on the question of the costs of the proceeding.

[2020] VSC 676

14 October 2020