Theophanous v Commonwealth of Australia

[2006] HCATrans 76

[2006] HCATrans 076

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M22 of 2005

B e t w e e n -

ANDREW CHARLES THEOPHANOUS

Plaintiff

and

COMMONWEALTH OF AUSTRALIA

Defendant

GLEESON CJ
GUMMOW J
KIRBY J
HAYNE J
HEYDON J
CRENNAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 1 MARCH 2006, AT 10.18 AM

Copyright in the High Court of Australia

MR G.R. KENNETT:   May it please the Court, I appear for the plaintiff with my learned friend, MR R.M. NIALL.  (instructed by Zindilis Barristers & Solicitors)

MR D.M.J. BENNETT, QC, Solicitor‑General of the Commonwealth of Australia:    If the Court pleases, I appear for the defendant with my learned friend, MR C.J. HORAN.  (instructed by Australian Government Solicitor)

GLEESON CJ:   Yes, Mr Kennett.

MR KENNETT:   Your Honours, the matter is before the Court by way of a case stated which can be seen at page 13 of the application book.

KIRBY J:   Is there a defect in paragraph 12 that has been corrected?  It says:

three years imprisonment in respect of counts five and six, one year’s imprisonment on each.

Is it on each of the other counts?

MR KENNETT:   Paragraph 11, your Honour?

KIRBY J:   I am sorry, I was referring to the statement of claim, page 4.

MR KENNETT:   There does seem to be a problem with that paragraph.

GLEESON CJ:   We are concerned with the stated case and it is paragraph 11 on page 15, is it not, that deals with that subject?

MR KENNETT: That is right, your Honour, with respect. I will come back shortly to the factual matters in the statement of claim but the questions posed for the Court are at page 17 of the application book. I can indicate to your Honours that I do not seek to press now the submissions on question 1, the question to do with Chapter III of the Constitution. I propose to address your Honours only on question 2, the acquisition of property issue. As to that ‑ ‑ ‑

KIRBY J:   When was that decision made?  I notice that in your reply you did not press the arguments on Chapter III and I had meantime ploughed through Justice Selway’s opinion in that South Australian case.  It should have been notified earlier, I think.  Anyway, do not worry about it; it is not important.  I am not complaining too much.

MR KENNETT: I need to take your Honours through the statutory scheme that is under attack first and then, secondly, examine the rights upon which that scheme would operate in the event that an order is made, the rights of the plaintiff himself and the derivative or subsidiary rights of his wife and then having done that go to the issues in the case which appear to be in short, firstly, is there an acquisition here in light of the statutory basis of some, at least, of the relevant rights and, secondly, if there is an acquisition, is it outside section 51(xxxi) of the Constitution because it is a penalty or forfeiture for breach of some norm of conduct?

If I could go then to the legislation.  We have given the court officer this morning a short note on the legislation which gives references to the latest reprints of the Acts and notes the amendments that have been made since then.  It is most convenient though, if I may, to use the provisions contained in annexure A to my written submissions, which are taken from the latest consolidation of the two Acts that I need to look at on the government website.  The Act which is under challenge is the Crimes (Superannuation Benefits) Act 1989, and if your Honours have that bundle, it is annexure A to my written submissions. The extracts from that Act begin at page 55 of the bundle.

The process about which we complain is one which is commenced by action by the Minister under section 16.  Section 16 begins on page 65 of the bundle and the Minister is there empowered to authorise the DPP to make an application to the appropriate court for a superannuation order in respect of a person if two conditions are satisfied.  The conditions involve a number of defined terms, which I will come to in a moment.  Firstly, that:

(a)      a person who is or was (whether before, on or after the commencing day) an employee is convicted of an offence; and

(b)      the Minister is of the opinion that the offence is a corruption offence -

The first of the defined terms is “employee”.

KIRBY J:   That is in the nature of a gateway, is it not, and in one sense protective of a Member of Parliament or an ex-member that may have the conviction but it cannot just be prosecuted by the Director of Public Prosecutions on his own bat.  It requires the Minister to reach a view and that opens the gateway and then the Director of Public Prosecutions presumably has some powers under his statute to decide whether to prosecute and then if he does do so it goes to the court.

MR KENNETT:   The Director does not have a choice, your Honour.  It is in section 17 which I will come to shortly, but the first point your Honour makes is right.  It needs the Minister’s decision to start the process.  It is not something the Director can do off his own bat.  I was about to go to the definition of “employee” which is in section 7 on page 64 of the bundle and your Honours will see in subsection (2) various classes of people are taken to be employees, among them relevantly Members of Parliament, other office holders such as federal judges and Federal Magistrates are also included in the class of employees. 

The next relevant term is “offence” and it is defined in section 2 and the definition appears at page 61 at about point 2 on the page.  Your Honours will see an offence includes – it is not limited to offences against laws of the Commonwealth.  It includes “common law offences” and also offences against the law “of a State or Territory” but it needs to be:

an offence punishable by imprisonment for life or for a term longer than 12 months.

The application is to be made to the appropriate court and that is defined also in section 2 on page 58.  In the present case the court to which an application has been made is the court in which the plaintiff was convicted, the County Court of Victoria, but the Supreme Court of the relevant State is also included in the definition of “appropriate court”.

With the Minister having acted under section 16, the Director comes under a power and a duty under section 17 which is on page 66.  Section 17(1) deals with “a person who is taken to have been convicted of an offence because of paragraph 6(1)(b)”.  Your Honours do not have 6(1)(b), but it is a section that provides for a person who has absconded to be taken to have been convicted and to therefore come within the scope of the Act.  It does not have a bearing on the present circumstances.  The present case is governed by subsection (1A) which says if:

(a)      the DPP is authorised . . . in respect of a person who is convicted of 1 or more offences; and

(b)      the person is sentenced to imprisonment –

for the requisite period, in substance a total of more than 12 months, then –

the DPP must make that application to the appropriate court.

In relation to Justice Kirby’s question a minute ago, subsection (2) provides that the DPP cannot make an application otherwise than in accordance with this section.

KIRBY J:   One of your arguments is addressed to proportionality or, as it is sometimes expressed, as appropriate and adapted.  If that provision had been longer than 10 years, would you be here?

MR KENNETT:   As a matter of practicality, your Honour, no, because we would not need to be here.

KIRBY J:   No, but I mean, assume that the statute had that and that was engaged by the facts of the case.  I am just trying to get to whether or not your complaint is about the 12 months, or whether it is some other complaint.

MR KENNETT:   It is not about the 12 months, your Honour.  The issue would be posed in a more dramatic way if the offences caught by the scheme included any offences, even the most minor.  That would raise the issue in a more dramatic and a stark way.

KIRBY J:   But it has to be three steps.  It has to get through the Minister, it has to be a corruption offence of the kind specified and it has to in fact have resulted in an imposition of a term longer than 12 months.  So they are three points that suggest elements of proportionality.

MR KENNETT:   Your Honour, the complaint is not that it is a harsh penalty for a relatively minor offence.  We would accept that if the Commonwealth wishes to impose penalties which some in the community see as harsh, then, subject to it being within a head of power, it is open to the Commonwealth to do so.  The complaint is that in the way the Act operates it does not make an attempt, I will submit, to mould the punishment to the crime, and that is in substance because it is an all or nothing operation.  A person may be convicted of a very serious offence and lose a superannuation benefit accrued over six months or a year.  On the other hand, the person may be convicted of a much less serious offence and lose a superannuation benefit accrued over a period of 20 years.  So it is not so much that it is harsh but that there is not an attempt at a connection between the seriousness of the particular crime and the seriousness of the detriment that is imposed.  That anticipates one of my arguments which will come later. 

I had dealt with section 17.  The next important provision is section 19 on page 67.  Subsection (1) is relevant here:

where an application is made . . . the court must, if satisfied that the offence . . . is a corruption offence, by order, declare:

(a)      that the person was convicted of a corruption offence; and

(b)      that this Part applies –

Subsection (3), although it is not relevant to the present facts, is a part of the scheme to bear in mind.  It operates where a person has interests in a fund, what one might loosely call an accumulation scheme, and in that circumstance the court is required to work out the value of the person’s interest and include an order that that amount be paid to the Commonwealth or a Commonwealth authority.  As I say, that is not the part that will bite, assuming an order is made, in the present case.  That is subsection (4) on page 68 which provides that:

Where any benefits have been paid to the person under any superannuation scheme . . . the court must:

(a)      specify . . . the amount worked out using the formula –

and order that that amount be paid to the Commonwealth or Commonwealth authority, whichever is relevant.  In the present case it would be the Commonwealth.  The amount is the amount that the court thinks reflects the value of the benefits less the amount that the court thinks is equal to the part of those benefits attributable to the person’s own contributions.

GLEESON CJ:   This part of the exercise is only relevant to a contributory superannuation scheme.

MR KENNETT:   Yes, that is right, your Honour.

GLEESON CJ:   But which is the provision that actually bites?  In other words, which is the provision that puts an end to the superannuation entitlement?

MR KENNETT:   This subsection is part of the bite, your Honour, because I think it is the case that parliamentarians make their own contributions to the scheme, but this is the subsection that results in an order that a sum of money representing benefits already paid to a person is to be paid back to the Commonwealth.  Provisions in section 21 provide for the consequences.  Before we go to section 21, can I just note that in 19(4) “superannuation scheme” is defined in section 2 – it is on page 63 – in terms which include a statutory superannuation scheme such as the parliamentary scheme, and “benefit” is also defined in section 2.  It appears back on page 58, and it is defined in terms which include both a lump sum and a pension.

GLEESON CJ:   I think section 21 answers my question.  The reason I asked you the question was that I was interested to know what it was that affects your client’s wife, and it is that provision of section 21 that says that your client ceases to be a member of the scheme, I presume.

MR KENNETT:   It is that paragraph, your Honour, yes. Section 21(1)(a) provides that:

all rights of, and benefits payable to or in respect of, the person or a dependant of the person (being rights or benefits arising out of the person’s membership of any superannuation scheme) cease, or cease to be payable –

So that deals comprehensively with my client’s rights and any rights of his wife or other dependants.  It is then provided in paragraph (c) that:

the Commonwealth or a Commonwealth authority is not liable to pay any employer contribution or benefit under the scheme –

Further consequences are provided for.

KIRBY J:   Some of your arguments are addressed to the position of your client’s wife.  There are no other dependants that the Court needs to be concerned with contingently having entitlements.

MR KENNETT:   It is not in the case stated, your Honour, and I only learnt this recently, but there is a child of the marriage who in some circumstances could become a beneficiary if the parliamentary scheme – I think if she was left an orphan.

KIRBY J:   The wife – and now you mention the child – are not plaintiffs in the action.

MR KENNETT:   No, your Honour.

KIRBY J:   But can we take it that they are aware, and the wife certainly is aware of the proceedings ‑ ‑ ‑

MR KENNETT:   I am sure that is right, your Honour, but I will get that confirmed.

KIRBY J:   ‑ ‑ ‑ in respect of her interest?

MR KENNETT:   Section 21(2) says that where a person has been ordered to pay an amount to the Commonwealth, that is a debt due to the Commonwealth.  Then subsection (3) says that it is also enforceable as if it was an order made in civil proceedings and as a judgment debt.  I should mention subsection (5) also.  The relevant provision here would be paragraph (a):

a person who:

(a)was an employee when the relevant corruption offence was committed but ceases to be an employee before the superannuation order takes effect; and

(b)would, but for that subsection, have been entitled to payment of benefits ‑ ‑ ‑

They are both relevant on reflection.  They are cumulative, but a person in that position, which my client would be if an order were made, becomes entitled to a payout which is an amount worked out using another formula and that formula in substance identifies an amount referable to his own contributions.  So the person who is the subject of the order is removed from membership of the scheme, is paid an amount intended to reflect his or her own contributions and is denied any further access to benefits under the scheme.

Section 21(5) does not specify who is to work out the amount. It is an entitlement which is there objectively on the face of the Act, one assumes, enforced by public law remedies if the person thinks that the amount paid is too low or not paid quickly enough. The next section that I wanted to mention is section 43, which is on page 71 of the bundle, and that provides that when a court is sentencing a person who is convicted of an offence punishable by the relevant term, the court is not to:

take into account the possibility that a superannuation order may be made in relation to the person.

So if the order does come to be made it will necessarily be over and above the sentence which the court has identified as appropriate for the offences.  Now, there is one section of the ‑ ‑ ‑

KIRBY J:   If this is a penalty or forfeiture then a parliamentary instruction to a court considering penalty that it cannot take a matter into account is at least a bit dubious as far as I am concerned. I mean, if the constitutional underpinning of the legislation is that it is a penalty of forfeiture, there is at least a question as to the validity of section 43 as far as I am concerned, but that is not a matter that is really before us.

MR KENNETT: Yes, well, I have not sought to raise any separate point about it, but it is part of the matrix, I would say, that takes this outside the realm of penalties insofar that that is a class of law able to be enacted without the constraints of section 51(xxxi). One section which is not reproduced in the bundle but which on reflection is relevant – and I have given the court officer copies of this also – is section 23 which provides the circumstances in which the superannuation order is taken to be revoked:

A superannuation order made in relation to a person is to be taken to have been revoked if:

among other things:

(a)      the person’s conviction is quashed; or

(b)      the person’s sentence is reduced –

so that it is no longer a sufficient sentence to trigger the provisions.

GUMMOW J:   Is there anything in section 23 that turns that liability into a debt recoverable from the Commonwealth?

MR KENNETT:   So far as I can see, your Honour, no and that is why I raised the point or why I refer to the section.

GUMMOW J:   One would assume that general law considerations would permit an action ‑ ‑ ‑

GLEESON CJ:   For money had and received.

GUMMOW J:   For money had and received, yes.  We have talked about that in some cases.

MR KENNETT:   The curious thing, your Honours, is that there is specific provision in relation to a person who has been “taken to be convicted because of paragraph 6(1)(b)”.  That is in section 23(3).  As your Honours will recall that is a person who was taken to have been convicted because they absconded.  A person in that class where:

(b)      the superannuation order is to be taken to have been revoked -

becomes entitled to -

an amount that the Minister considers to be a fair recompense to the person, having regard to -

a number of factors.  There is no equivalent provision, however, in relation to someone who has been convicted and had the conviction quashed on appeal.  In those circumstances it may be that the intention of the Parliament was that the person in that position would cease to be subject to the continuing effect of the superannuation order but would not necessarily have any rights to the reversal of that which had been affected pursuant to the order, in other words, would not have any right to get back the amount that he or she had been required to pay to the Commonwealth.

Now, I may simply be wrong in my construction of the section but if I am right it is a matter which goes, I would say, to whether it can be regarded as a penalty at all and I will come back to that point when I turn to my arguments.

GLEESON CJ:   Why would there be any relevant difference between a claim to get this amount back and a claim, for example, for overpaid taxes?

MR KENNETT:   It may be significant, your Honour, that the language of revocation is used.

HAYNE J:   What answer would the superannuation authority have to an action brought by the beneficiary against the superannuation authority for enforcement of the superannuation obligation once there has been a quashing of the relevant forfeiture order?

MR KENNETT:   Your Honour, the superannuation authority would probably have no answer to a person who said, “The order in relation to me has been revoked.  I ask that you resume payment of my pension”.

HAYNE J:   Not resume.  “Please to pay me that which I was due from the point where you ceased paying it”.

MR KENNETT:   That is less clear, with respect, I would say.

HAYNE J:   Why?

MR KENNETT:   Because the section uses the language of revocation rather than quashing.  Revocation in its ordinary meaning is something which operates prospectively and because Parliament has made specific provision in relation to a payment of money to one class of persons but not in relation to another class.

HAYNE J:   The provision made in respect of one class is for the payment of a sum greater than that which ordinarily would be their entitlement.  They are to be paid a recompense for standing out the money during the period of absconding.

MR KENNETT:   Your Honours, those were the provisions of the Crimes (Superannuation Benefits) Act that I wished to draw the Court’s attention to. Could I go then to the plaintiff’s history of his superannuation rights and turn first to the case stated. Your Honours will see paragraph 1 on page 13 of the application book, the period that the plaintiff spent as a member of the House of Representatives, 1980 to 2001. He qualified in November 2001 for a retirement allowance under section 18 of the Parliamentary Contributory Superannuation Act, as can be seen from paragraph 3. He converted 50 per cent of that retirement allowance to a lump sum which was permitted under section 18B of the Act. Paragraph 5 records that. He was paid that lump sum which amounted to $367,000 also in November 2001, as appears in paragraph 6. Since that time he has been receiving retirement allowance which, as at December 2004 when the proceeding was commenced, was about $1500 a fortnight gross. One also sees from the case stated that he has been married to Ms Eriksson since 1996 - that is paragraph 2 on page 13 – and they remain married.

In the light of those circumstances, could I touch on the relevant provisions of the Parliamentary Contributory Superannuation Act which is also in annexure A to my submissions. The retirement allowance is payable under section 18 which begins on page 34 of the bundle. Subsection (1) says:

a member who ceases to be entitled to a parliamentary allowance –

and that in effect is the salary that members are paid –

shall be entitled to benefits in accordance with this section.

Relevantly to my client’s circumstances, subsection (1A):

Where the period of service of a member is not less than 12 years, then, subject to –

some other subsections which your Honours do not need to trouble with for the moment, the person becomes entitled to a retiring allowance during his or her lifetime at a rate fixed under subsection (6).  Subsection (6) is on page 37 and it says:

The rate of retiring allowance . . . is such percentage of the rate of parliamentary allowance –

which is payable for the time being to a member and it is a percentage.  There is a table and, unsurprisingly, the percentage increases with the years of service.  The plaintiff served more than 18 years and therefore qualified for a pension at the top of the scale, 75 per cent, as one can see on page 38.

Although it does not add anything to the legal issues, I understand also that during his time in Parliament that the plaintiff held one or more offices and thus qualified for a small additional retiring allowance under subsection (9), which is on page 42 of the bundle.  That provides for additional retiring allowance.  As I say, it does not expand the legal issues before the Court. 

Section 18B on page 44 need not detain your Honours, but that is the section under which the plaintiff was entitled to, and did, convert a percentage of his retiring allowance into a lump sum payment. Then the next important provision is section 19, which provides for benefits to a spouse. That says that:

(1)      Where:

(a)a person who is entitled to a parliamentary allowance dies; or

relevantly in this case –

(b)     a person who is entitled to a retiring allowance . . . dies;

benefits are payable in accordance with this section.

(2)Subject to section 21AA, if the deceased person is survived by a spouse, there is payable to the spouse an annuity, during his or her life‑time, at a rate ascertained in accordance with subsection (3).

Subsection (3) in substance provides for a rate of five‑ sixths of the rate of retiring allowance.  The concept of being survived by a spouse gives rise to a little complexity.  It is provided for in section 4C on page 31 Subsection (2) says that:

a person is a spouse who survives a deceased person if:

(a)the person had a marital relationship with the deceased person at the time of the death of the deceased person –

and relevantly here, subparagraph (b)(i):

the marital relationship began before the retired member became a retired member –

and then also subsection (3) provides another way in which a person can be “taken to be a spouse who survives a deceased person” for the purposes of section 19, and that is if they have previously been married and they no longer have a marital relationship – that is a defined term – but they remain legally married and the spouse remains dependent.

GLEESON CJ:   Which section are you reading from at the moment, Mr Kennett?

MR KENNETT:   Section 4C, your Honour.

GLEESON CJ:   Thank you.

MR KENNETT:   “Marital relationship”, a term that figures importantly in section 4C, is defined by section 4B.  The short point is that Ms Eriksson stands to receive an annuity if she remains married to the plaintiff and if they remain in a genuine marital relationship at the time he dies and obviously if she outlives him.

KIRBY J:   Subject to a double contingency:  first, that he is at the time of his death entitled to the pension and, second, that she had a marital relationship with him at the time of death.

MR KENNETT:   Yes, or if they remain legally married and she is dependent ‑ ‑ ‑

GLEESON CJ:   And, in addition, she had to be married to him at the time he ceased to be a Member of Parliament, is that right?

MR KENNETT:   Well, she was.  In fact ‑ ‑ ‑

GLEESON CJ:   I know she was.  I just thought I heard you mention that somewhere on the way through.

MR KENNETT:   Yes, I went to section 4C(2)(b)(i), which is at the bottom of page 31.  Had that not been the case, one would have had to look at whether the marital relationship had begun after he became a retired member but before he reached 60 or, failing that, if it continued for a period of five years.

KIRBY J:   So is it or is it not necessary to have the relationship at the time that he was a Member of Parliament?

MR KENNETT:   At the time he was a Member of Parliament, your Honour?  No.  The relationship needs to subsist at the time of death.  That is (2)(a) on page 31.  Under paragraph (b), there are three ways of satisfying paragraph (b) and one of them, the one that would be relevant if it were to come to this in the present case, is that:

the marital relationship began before the retired member became a retired member –

and that is simply the fact that is recorded in the case stated in this case.  Her right to receive an annuity obviously is not certain.  Section 4C(2) and (3) do not cover the universe of possibilities, but they do clearly provide that in a significant set of possible circumstances she will, provided he still has a retiring allowance at the time of his death, become entitled to an annuity.

GLEESON CJ:   Is there something in the Family Law Act that deals with this?

MR KENNETT:   There is, yes, your Honour, and this is the next point.  Part VAA of the Parliamentary Contributory Superannuation Act begins on page 51 and reflects the capacity that now exists under the Family Law Act for orders or agreements to be made which split the person’s superannuation interests.  The relevant provision ‑ ‑ ‑

GUMMOW J:   That only went in in 2004, did it not?

MR KENNETT:   I will check that, your Honour, but I am concerned here with the state of the plaintiff’s rights and his wife’s rights as they exist at the moment.  Hence, I am using the most recent consolidation.

KIRBY J:   Is it your submission that this amendment converts the contingent nature of the wife’s rights into something more substantial, something that is vested?

MR KENNETT:   I would not take it that far, your Honour, but it is a further set of circumstances in which the wife may become entitled to a statutory pension or annuity. Section 22CD is the critical provision in Part VAA for our purposes and it is on page 54 in the bundle. What that provides is that if the secretary to the scheme receives a splitting agreement or splitting order – and those terms are both defined in section 22CA; they are creatures of the Family Law Act.

KIRBY J:   Is this on dissolution of the marriage or at any other time?

MR KENNETT:   I think it is dissolution or separation, your Honour, but I will check that, if I may.  Then if the member spouse and the non‑member spouse are both alive at the operative time and if a base amount applies – and that is defined in section 22CA as well; it is an amount which is arrived at in a process under the Family Law Act – in those circumstances then one would go to section 22CD(2), page 54 of the bundle:

If, at the operative time, standard allowance or annuity is payable in respect of the original interest, then the non-member spouse is entitled to an associate immediate annuity from the operative time, at the rate calculated under the Orders –

The orders are a form of delegated legislation.

KIRBY J:   Would this entitle the wife of a former Member of Parliament to get an order, as it were, dividing the fortnightly pension and giving her some, or him some, depending on the sex of the spouse?

MR KENNETT:   In short, your Honour, yes. That would be a statutory benefit payable to the non-member spouse in his or her own right pursuant to section 22CD(2).

GLEESON CJ:   How does the forfeiture then operate?  Suppose the sequence of events is retirement of a member, dissolution of marriage, splitting order, conviction of a corruption offence, superannuation order.  Where does that leave the spouse?

MR KENNETT:   One would have to go back to section 21(1) of the Crimes (Superannuation Benefits) Act at page 69 of the bundle.  That section speaks in terms of “benefits payable to or in respect of, the person or a dependant of the person”.  One would have, perhaps, a difficult question whether the divorced spouse was by that stage a dependant of the person.

GLEESON CJ:   Assuming the answer is no?

MR KENNETT:   If the answer is no, then the result would seem to be that the annuity payable under 22CD is untouched by the superannuation order.

GLEESON CJ:   That is insofar as it goes to the spouse?

MR KENNETT:   Yes, but what we have here ‑ ‑ ‑

GUMMOW J:   These provisions you are taking us to about splitting agreements and so on all depend upon there being a superannuation interest, do they not, within the meaning of Part VIIIB of the Family Law Act?

MR KENNETT:   Yes.

GUMMOW J:   How does the definition of “eligible superannuation plan” in section 90MD draw in the parliamentary scheme?  It draws in the SIS Act, of which we have unhappy memories from Austin’s Case, and an approved deposit plan and an RSA, which is the retirement savings legislation, and so on.  It does not seem to draw in the parliamentary – anyhow, we can derive hours of amusement from pursuing this legislation, I suspect.

MR KENNETT:   I do not have the SIS Act at my fingertips, your Honour, and I do not know whether the parliamentary scheme is included in that scheme but the ‑ ‑ ‑

GUMMOW J:   You would need big fingers, I think.  It seems to assume it.

MR KENNETT:   It does, yes.  The drafters of Part VAA of the ‑ ‑ ‑

HAYNE J:   It assumes it in the definition of “superannuation interest” contained in 22CA, does it not?

MR KENNETT:   Yes.

GUMMOW J:   But then it says it “has the same meaning as in Part VIIIB”, which does not seem to help.  I may be wrong.  Maybe the parliamentary scheme is within the SIS Act.  I just do not know.

MR KENNETT:   It may well be, your Honour.  I had not checked that for myself, but the drafters of Part VAA and the Parliament enacting it have obviously proceeded on the assumption at least that this was a scheme and interest in which were capable of being the subject of orders under the Family Law Act.  I think that is as much as I can say about it at the moment. 

The purpose of taking your Honours through those provisions is to illustrate that – before I say that, your Honour the Chief Justice put to me the situation if the superannuation order is made after the splitting agreement has been brought into effect.  Of course, that is not the present circumstance.  What I am concerned about here is the state of the plaintiff’s wife’s rights at the present time which include the various contingencies I have mentioned, the various circumstances in which she stands to become entitled to her own statutory annuity.

GLEESON CJ:   Mr Kennett, you have probably told us this and I forgot to make a note of it, but in relation to the lump sum payment that was made to your client, that goes back to the Commonwealth under the superannuation order?

MR KENNETT:   Yes, your Honour.

GLEESON CJ:   Pursuant to which section?

MR KENNETT:   It would be encompassed in the declaration that would be made under section 19(4) and that is because “benefits” are defined to include a lump sum and then it would become enforceable as a debt under 21(2) and (3).

GLEESON CJ:   So you go through this exercise of working out what are the employer’s contributions and what are the employee’s contributions, applying that formula both to fortnightly or weekly payments and also any lump sum that has been paid?

MR KENNETT:   That is right, your Honour.

GLEESON CJ:   Thank you.

MR KENNETT:   Now, having made that survey of the plaintiff’s rights and Ms Eriksson’s rights, could I go very briefly back to the case stated.  The Minister has issued an authority under section 16 to authorise the DPP to seek a superannuation order in respect of the plaintiff.  That is at paragraph 13 on page 16 of the application book.  The DPP has acted on that by applying to the County Court of Victoria, and paragraph 14 says that these actions have been taken in respect of three offences of which the plaintiff stands convicted, referred to in the case stated as counts 3, 5 and 6, and one can see the nature of those on page 15 of the application book. 

Your Honours will see that all of the offences took place in the period December 1998 to February 1999.  The plaintiff was sentenced to prison terms which are set out in paragraph 11 at the bottom of page 15, three years’ imprisonment in respect of count 3, and 12 months each in respect of counts 5 and 6.  There is also reference there to count 2.  He was sentenced to five years’ imprisonment for that, but your Honours will see from paragraph 12 that the conviction on count 2 was set aside on appeal.  So the action that has been taken against him under the Crimes (Superannuation Benefits) Act relates to counts 3, 5 and 6.

KIRBY J:   I see that a retrial was ordered.  What is the status of that?  Do we know?  Can we know?

MR KENNETT:   It has not occurred, your Honour, but I am told it will occur shortly.  If the order that the DPP now seeks in the County Court is made, the consequences as a result of the provisions I have taken your Honours through will be, the plaintiff will become liable to pay a substantial sum of money to the Commonwealth, his entitlement to retiring allowance will cease, and the contingent interest, if I can put it that way, of Ms Eriksson in the scheme will also be extinguished.

If I could go then to the legal arguments and begin with the plaintiff’s own rights, there are two important effects which an order would have on him, first the creation of a debt to the Commonwealth representing benefits that he has received. Of course, the particular sums that he has received are not identifiable as such. It is all merged into his asserts. So what we see is simply the creation of a debt. Secondly, a loss of his right to a lifetime retirement allowance under section 18 of the Parliamentary Contributory Superannuation Act.

The Commonwealth, as I understand its written submissions, would not deny that each of those effects has the result of acquiring the plaintiff’s property within the meaning of section 51(xxxi) but for two things. The first thing is that the Commonwealth says the rights are subject to an inherent infirmity, which means that they were always subject to this risk and if the risk comes to pass there is no acquisition. That is the first substantial issue. Then next the Commonwealth says that if there is an acquisition, it is not one that is caught by section 51(xxxi) and its requirement of just terms because it is a penalty or forfeiture directed at enforcing norms of conduct.

HEYDON J:   So the only controversies between the parties begin with paragraph 25 in your written submissions, is that correct?  Everything before then is common ground?

MR KENNETT:   That is as I understand it, your Honour.  The solicitor may correct me on that.  As to the first issue, the question of the statutory basis of the rights, this point, I would submit, is only in answer to my contentions in relation to the rights to future benefits.  It is difficult to see how money in one’s pocket or money in the bank can be regarded as subject to an inherent infirmity that makes it potentially liable to be repaid.  So the point that my learned friend makes that this is all statutory in its origin is, in my submission, a potential answer to my case in relation to future benefits, but not in relation to the creation of a debt.

KIRBY J:   But why is it not analogous to a forfeiture?

MR KENNETT:   Well, that is a separate issue, your Honour.

KIRBY J:   I mean, one can have different views about this, but why is that not the real characterisation of this statute?  There are plenty of such provisions, such as the crimes compensation confiscation legislation.

MR KENNETT:   That is the other big issue, your Honour, that I have to face.  What I am seeking to deal with at the moment is the issue that arises from the statutory basis of my client’s superannuation rights.

GUMMOW J:   When did your client’s rights accrue?  What date?  Some date in 2001, is it not?

MR KENNETT:   His right to receive retiring allowance crystallised when he ceased to be entitled to a parliamentary allowance and that was November 2001.

HEYDON J:   The 9th.

HAYNE J:   Paragraph 3.

MR KENNETT:   Yes.

GUMMOW J:   But what happened on that date? 

MR KENNETT: That was the day he ceased to be a parliamentarian and by operation of section 18(1) of the Parliamentary Contributory Superannuation Act became entitled to a retiring allowance calculated in accordance with that section.

GLEESON CJ:   What would have happened under this legislation if he had died while still a Member of Parliament, but after having served 18 years?

MR KENNETT:   I think the short answer is that an annuity would have been payable thereafter to his wife but I would need to check that.  The answer will be found somewhere in section 4C.

GLEESON CJ:   What if he had died whilst a Member of Parliament but after serving sufficient years, whatever that might be, leaving no dependants?

MR KENNETT:   If he left no dependants then there would have been nobody to qualify for a statutory annuity.

GLEESON CJ:   Would his estate get the benefit of his contributions, for example?

MR KENNETT:   I would need to check that, your Honour. There is, by the way - it is not in my bundle but section 13 of the Parliamentary Contributory Superannuation Act is the section that provides for member contributions.

HAYNE J:   Section 19AB may perhaps be engaged in the circumstances that the Chief Justice puts to you.  Where:

a person dies . . . while entitled to a parliamentary allowance –

that is to say while in office, and:

(b)      the deceased person is not survived by a spouse . . . and no benefits are payable in respect of a child or children of the deceased person or of a former spouse of the deceased person ‑ ‑ ‑

MR KENNETT:   Yes, your Honour, that is the provision.

HAYNE J:   Then “there is payable to the personal representative” a sum calculated in a particular way.

GLEESON CJ:   But what prompted this question was the use of the word “accrue”.

MR KENNETT:   Yes.  I, a moment ago, used the word “crystallise” and I did so consciously because I have a submission which comes ‑ ‑ ‑

GUMMOW J:   Can I put this to you, Mr Kennett?  The Crimes Act, if I can use that expression, came in in 1989.  It might be one thing if, as at 1989, your client had some “accrued rights”, to use that expression the Chief Justice has been exploring with you, it might be another if he did not and thereafter whatever was to accrue to him under the superannuation structure had the sword hanging over it of the 1989 Act.  I think that is what is put against you.

MR KENNETT:   Yes. That is why, when I speak about section 18 coming into effect, I say “crystallise”, because I do submit a little later that prior to that time and, indeed, in 1989 rights, in the loose or very broad sense that one can use that term in talking about section 51(xxxi), rights had accrued to him by virtue of the length of service he had accumulated by that time. I will explain that in a little more detail when I come to it, if I may.

GUMMOW J:   Do you deal with this in your written submissions?

MR KENNETT:   In reply.

GLEESON CJ:   I think that when you are dealing with questions of crystallisation or accrual of rights or identifying these rights it may be significant to take account of the possibility that he died while a Member of Parliament.  That might be an aspect of his rights.

MR KENNETT:   Yes.  Died or retired on invalidity grounds and things of that kind.

If I could go to the question of the acquisition or extinguishment of statutory rights, the question received some attention in Commonwealth v Western Mining 194 CLR, which I do not need your Honours to get out at the moment, where Justice McHugh would have had it that any purely statutory right is inherently and ipso facto defeasible.

GLEESON CJ:   Where did he say that?

GUMMOW J:   Paragraph 124, is it not?

MR KENNETT:   Paragraphs 144 and 145, I think, your Honour.

GUMMOW J:   It is 134, is it not?

MR KENNETT:   Yes, it is paragraph 134, thank you, your Honour, on page 51.  That was a view which other members of the Court did not adopt.

GLEESON CJ:   I presume you invite us to disagree with that.

MR KENNETT:   I do, your Honour, and it is, as I understand it, not one which my learned friend invites your Honours to agree with.

GUMMOW J:   It is a bit too wide on any basis, I think.  We have said in Austin, for example, that the judges’ pension structure is part of their remuneration under section 72 of the Constitution. I do not think Justice McHugh had that in mind but some of the words he uses are sufficiently wide as to not allow, as they would need to allow, for that paramount force of section 72.

MR KENNETT: Yes. The other end of the available spectrum of views would be that the statutory basis of a right in itself is simply not relevant to whether its extinguishment engages section 51(xxxi). That is a view in my written submissions which in my written submissions I invite the Court to adopt.

GUMMOW J:   Take the introduction of a compulsory licensing system of copyright.  Do you say that could not be done unless it was on just terms?  You may be right.

MR KENNETT:   I have to accept, your Honour, that there can be ‑ ‑ ‑

GUMMOW J:   I am not saying it would or would not be right.

MR KENNETT:   I have to accept that there can be licensing schemes, for example, for access to a resource, as in the fishing cases, where the Act may say you get a licence in accordance with the plan and the plan may change from time to time.  In such cases the right, which is really an exemption from a prohibition, could not be regarded as having been acquired in circumstances where the very thing that creates it says that it can be extinguished in such circumstances.

My proposition is addressed to circumstances where Parliament grants a right such as the right to a retiring allowance here which has a value and a stability apart from changes to the statute enacted by Parliament, external changes to the law rather than internal workings of the scheme that has been created.  A right of that kind, I would submit, is no more infirm than any other kind of right, and just as with an interest in land, for example, Parliament can change the law so as to acquire that right but it faces, when it does, the need to comply with the constitutional guarantee.

I have given a reference in my written submissions I think to parts of the judgment in WMC 194 CLR where members of the Court say things which are at least not inconsistent with the position I have just put – page 17, paragraph 17, the Chief Justice and the other reference is page 36, Justice Gaudron ‑ ‑ ‑

GLEESON CJ:   I think you were right in the first place when you referred to paragraphs 144 and 145 of Justice McHugh.  He did come back to the point at those paragraphs.

MR KENNETT:   Yes, he does.  The Chief Justice says at paragraph 17 on page 17:

Where a law of the Commonwealth creates or authorises the creation of a right, a statutory modification or extinguishment of the right effects an acquisition if, but only if, it modifies or extinguishes a reciprocal liability –

Justice Gaudron is to very similar effect on page 36 in paragraph 79.  Both of their Honours resolved that case on the basis that the Commonwealth did not get any corresponding benefit when it extinguished the exploration permit, but their Honours seem to be of the view that if there had been a corresponding benefit, then there would have been an acquisition of property, notwithstanding that the permit was wholly statutory in origin.  That, I would submit, is the correct way of viewing statutory rights.

KIRBY J:   You say the Commonwealth does not embrace Justice McHugh’s view which has been expressed as over broad, but what is your understanding of the alternative hypothesis that the Commonwealth advances?

MR KENNETT:   Well, in between the two ‑ ‑ ‑

KIRBY J:   There are resonances in the written submissions to the notion of defeasibility.

MR KENNETT:   Yes.  Your Honour, I have outlined Justice McHugh’s view which can be seen as one end of the spectrum, and I have outlined the other end of the spectrum, which is the position I would primarily ask the Court to adopt.  In between those positions – and this is the next matter I need to turn to – is a position which accepts or which says that a statutory right may be inherently defeasible and that depends on the character of the right and possibly the terms in which it is granted.

The Commonwealth, as I understand it, would seek to liken the statutory benefits in this case to the cases that have dealt with gratuities.  There are cases that have spoken about pension entitlements and, more recently, I think they were discussed in Allpike’s Case and, more recently, Peverill’s Case dealt with a right to a Medicare benefit.

GLEESON CJ:   It may assist your argument, if it depends on the character of the right.  In the case of a parliamentary superannuation entitlement, if the superannuation entitlement is properly to be regarded as part of the so‑called employees remuneration, then the circumstance that the employee has earned the right before ceasing to be a Member of Parliament and enjoys the right after ceasing to be a Member of Parliament as part of the fruits of the employee’s remuneration, that may affect the character of the right.

MR KENNETT:   Yes, it does, in my submission, and your Honour has identified what I say is the answer to this particular part of the case.  Your Honour Justice Gummow mentioned a moment ago the Court’s view of judges’ pension rights as an aspect of remuneration and it is, I would submit, plain that that is part of the character of superannuation rights.

GLEESON CJ:   Well, it is a fortiori, I should have thought, if there is a constitutional prohibition against diminishing the remuneration during the term of office.  It would produce a very surprising result if once they have gone you can take it away.

MR KENNETT:   Yes, yes, but the case ‑ ‑ ‑

GUMMOW J: What is the interrelation between section 48 of the Constitution and this 51(xxxi)? Is it not put against you that this legislation can all be supported as otherwise providing under section 48?

MR KENNETT:   It is put against me ‑ ‑ ‑

GUMMOW J:   And part of otherwise providing is providing that it will be taken away.

MR KENNETT: Well, with respect, that is certainly right subject to the possible effect of section 51(xxxi) when the rights come to be taken away.

HAYNE J:   But that manner of putting the argument reveals the importance of accurately identifying the right.  The debate between the parties seems to be the level of that premise.  What is the right?  Is the right properly described as a right to superannuation or pension, or is the right properly to be described as a defeasible right to superannuation?  Now, that is the level of debate at that level of premise.  All follows from whichever of those premises you choose.  Why do you say that the relevant premise is one which would identify the right without regard to whatever are the consequences of the Crimes (Superannuation Benefits) Act, for that seems to be the essential first step you take in your argument, is it not?

MR KENNETT:   Your Honour, I am really anticipating the Commonwealth’s argument here, but there are two points that I need to overcome and I have been dealing with the first of them, which is the notion that because it is statutory, even Parliament can take away.  The other point which I still need to come to is the more specific point flowing from the presence on the statute books since 1989 of the Crimes (Superannuation Benefits) Act. 

As to the first and broader of the two issues, I say that a benefit of this kind, a benefit in the nature of superannuation, is an aspect of the remuneration that an MP or any other Commonwealth officer earns by doing a job of work for the Commonwealth. Some may say that parliamentarians are not really working at all or that they do it for free but the fact is they are rewarded pursuant to the Constitution for their service as Members of Parliament and a part of that remuneration package is the statutory superannuation benefits which accrue to them upon their retirement.

That, I would submit, distinguishes the case very starkly from the cases of gratuities, including the case of Dr Peverill, who no doubt provided service to his patients and received an assignment of Medicare benefits in return for those services but nevertheless as between the patient and the Commonwealth, the benefit was a pure gratuity and its character did not change when it was assigned to Dr Peverill as between him and the Commonwealth.  It was still a pure gratuity.  This is a case where there is a pre‑existing relationship between the person and the Commonwealth which involves the provision of work and in return brings with it a salary and later a superannuation benefit.

GUMMOW J:   There is an article by Ms Rosalind Dixon in the latest Sydney Law Review which deals rather perceptively, I felt, with some of these questions.  Have you looked at that?

MR KENNETT:   I have not, your Honour, but thank you for that.  It is perhaps worth noting that the Commonwealth when it modifies public sector superannuation schemes does not make a practice of denying the rights of people who are already members of those schemes.  What it does is close off schemes to new entrants on the basis, it would seem, of an acceptance that the rights that are provided are part of the remuneration that people earn for their work.  So the character of the rights, in my submission, puts them into the category of things that are not to be regarded as inherently defeasible. 

The other and perhaps more difficult point is the specific derogation argument. This is paragraphs 48 and 49 of my learned friend’s written submissions which seem to say that since the enactment of the Crimes (Superannuation Benefits) Act in 1989, rights under the Parliamentary Contributory Superannuation Act have been qualified by the possible impact of a superannuation order.  There are two short responses to that which are set out briefly in my submissions in reply.  The first is that when the Commonwealth makes that argument ‑ ‑ ‑

GUMMOW J:   Which paragraph?

HEYDON J:   Paragraphs 11 to 14?

MR KENNETT:   It is paragraphs 11 and following of the submissions in reply.  The Commonwealth makes the argument it really relocates the interference with property rights from 2006 back to 1989.  As at 1989, as the case stated indicates, the plaintiff was a Member of Parliament and had been a member for approximately nine years.  He had thus qualified for some level of ‑ ‑ ‑

GUMMOW J:   There is nothing in the case stated to quantify those rights at all, is there?

MR KENNETT:   No, there is not, your Honour.  In principle, I suppose, they could be valued ‑ ‑ ‑

GUMMOW J:   But no one sought to do so.

MR KENNETT:   No one has done so. Your Honours will have, I hope, a copy of an earlier form of section 18 of the ParliamentaryContributory Superannuation Act, an historical consolidation of section 18 which shows the form that it was in in 1989. Bearing in mind that at that time the plaintiff had been a Member of Parliament for approximately nine years, one can see from subsection (2)(a) that if he had retired involuntarily at that time, having served more than eight years, he would have qualified, as indeed he ended up qualifying, for a retiring allowance fixed under subsection (6).

GLEESON CJ:   Am I right in thinking that under the legislation that we looked at in Austin parliamentarians are assessed to tax annually upon increments in the value of their superannuation entitlements?

MR KENNETT:   I would have to look at the legislation more closely, your Honour.  I do not know the answer to that.

GLEESON CJ:   It just might be relevant to the question of the inherent defeasibility of these rights if in fact people are taxed annually on their value.

MR KENNETT:   Yes, it would.  I will look into that question over the lunch break, your Honour.

GUMMOW J:   The reference to Ms Dixon’s article is Volume 26, No 4 Sydney Law Review.  It is the issue for December 2005 and the article commences at page 639.

MR KENNETT:   Thank you, your Honour.  As at 1989 when the Crimes (Superannuation Benefits) Act entered the statute book, the plaintiff was in a position where, if he had left Parliament other than voluntarily at that moment, he would have qualified for a lifetime retiring allowance.  Whether he left voluntarily, of course, was up to him and thus he had rights, at least in a broad sense, accrued, again in a broad sense, under the Parliamentary Contributory Superannuation Act. 

What the introduction of the Crimes (Superannuation Benefits) Act did was to impose a new vulnerability on those rights to which they had not previously been subject and a vulnerability which, at least if it were to come to pass, would be to the direct benefit of the Commonwealth.  That, I would submit, is itself an acquisition of the property of the plaintiff and, indeed, the property of every other parliamentarian of more than eight years service as at the date of commencement of the Crimes (Superannuation Benefits) Act.

The point is made well, with respect, in a different context, in the Chief Justice’s judgment in Smith v ANL Ltd 204 CLR 493, beginning at paragraph 7 at the very bottom of page 499. The legislation that was in question in that case:

did not operate immediately to divest the appellant of his right of action against the respondent.  However, it did have the effect that, after the expiration of a further six months, he did not have a right to bring an action . . . The combined legal effect of the two provisions . . . was that the appellant’s pre‑existing common law right was modified; and a corresponding benefit was conferred on the respondent.

Then a little further down your Honour points out that in those circumstances:

then modification of a right to bring an action, in circumstances where a corresponding advantage accrues to the party against whom action may be brought, would ordinarily involve an acquisition of property.

I would say it is the same here when an existing right, a right which will in time crystallise ‑ ‑ ‑

GUMMOW J:   There was a common law right there, though.

MR KENNETT:   That was a common law right and my submission is ‑ ‑ ‑

GLEESON CJ:   It might be otherwise if the modification of the right is by way of a penalty or forfeiture.

MR KENNETT:   Maybe, but it is hard to see the penalty, with respect, in the introduction of the capacity to impose a penalty.  It is useful also to look at the first couple of sentences of paragraph 8 on page 500:

The extent of the disadvantage may be a material matter in deciding whether just terms have been provided.  The circumstance that the appellant could have avoided the adverse consequences of the legislation by taking action does not, in my view, mean that there was no acquisition.

So it is here, in my submission.  It may well be that just terms for introducing that new qualification on people’s superannuation rights would not have amounted to much.  It may have been a very small sum indeed worked out actuarially, but that is not the point.  The point is that an acquisition was effected and no attempt was made to provide just terms for it.

GUMMOW J:   Just a minute.  You would have to give effect to it by some remedy, would you not, which would require quantification?

MR KENNETT:   Give effect to the right?

GUMMOW J:   Yes, as at that date.  It is a long while ago, apart from anything else.

MR KENNETT:   If one had sought to bring the right to account then it would have been necessary to place a value on it.

GLEESON CJ:   It is the sort of thing that would have been valued if your client and his wife had been divorced at about that time.  Typically, as I understand it, in relation to the operation of the Family Law Act, leaving aside the splitting orders that now apply, if one party to a marriage had accruing entitlements under pension or superannuation arrangements, in a business context, for example, then the other party to the marriage would have that taken into account in some way.

MR KENNETT:   It would be valued for that purpose, yes.  For the purposes of today, of course, I am not seeking an award of compensation for the taking away of a right.  I am seeking to establish that there has not been compensation and therefore that the legislation is simply invalid.  So, for the purpose of today, it is useful to bear in mind that the rights I am speaking of could in principle have been valued but it is not necessary for your Honours’ purposes today to know what the value of them was.

My other response to the specific derogation point is to say that a law which authorises the taking away of property in certain circumstances is, at least prima facie, a law with respect to the acquisition of property.  It would be circular to say that when that taking away occurs it is not an acquisition because it is something that the law had made possible.  So what we have here in the Crimes (Superannuation Benefits) Act is a law which specifically authorises a taking which I say is an acquisition of property.

GLEESON CJ:   Is this an argument that only matters in the case of people who were Members of Parliament at 1989?

MR KENNETT:   Yes, it is, your Honour – no.  My first response which points out that my client had valuable rights at that time, that is only a response which can bear any fruit for someone who was a member at the time.  But the other response I would make is a more general one, which is that if the Commonwealth passed a law empowering the Minister to acquire any interest in land held by a trading corporation and then after the enactment of that law a trading corporation buys some land and then the Minister resumes it, it would be very difficult, I would submit, to avoid the commonsense characterisation of that as an acquisition of the corporation’s interest in land and it would not be sufficient for the Commonwealth to say that “This Act was passed years ago and you knew when you bought the land that we might acquire it”. 

The fact that something that comes to pass is something that might possibly have been predicted in relation to an interest is not, I would submit, something that makes the interest itself inherently defeasible unless the explanation for the argument in this case is that it is a statutory interest that is at stake rather than an interest in land, but that would take us back simply to the argument that I have already rehearsed about the character of statutory rights.  It would not add anything to the issues in the case.

Your Honours, that completes what I wanted to say in-chief about the issue relating to statutory rights and inherent defeasibility.  The other issue in the case is the issue of penalties and forfeitures.

KIRBY J:   If one took a view that the legislation amounted to a penalty or forfeiture, then one could assume in favour of your submission that you could make out the issue of property, is that not correct?  Logically it is not necessary to determine that if the determination of the forfeiture question is adverse to your client’s interest.

MR KENNETT:   That would be right, yes.  The issue arises in this case in a slightly different way from the way a similar issue arose in Lawler’s Case. In that case, if the prosecutor had been right, the argument would simply never have reached section 51(xxxi), a point which Justice Dawson pointed out. That is because if the forfeiture in that case had been disproportionate or not authorised for some reason by the fisheries power, then it would simply have been beyond power. One would not have needed to turn to section 51(xxxi).

The situation is a little different here because here there is a connection between the Crimes (Superannuation Benefits) Act and the various heads of power that have authorised the provision of superannuation benefits.  That is why I think I said earlier that the Crimes (Superannuation Benefits) Act is within power but for the possible effect of section 51(xxxi).

GUMMOW J: What are the possibilities other than section 48 of the Constitution, plus 51(xxxvi)?

MR KENNETT: Well, it would seem, your Honour, to be section 48 in conjunction with 51(xxxvi). Section 51(xxxix) may play a role, but I am certainly not here to suggest that the legislation providing for public sector superannuation does not have a head of power to support it. Obviously I say that it does as my client is the beneficiary of it up till now. But what follows ‑ ‑ ‑

GUMMOW J: Section 51(xxxix) may be more important to public servants generally.

MR KENNETT:   Yes.

GUMMOW J: It could link back to section 61, I suppose, but here you have section 48 specifically for Members of Parliament.

MR KENNETT:   That would seem to provide a sufficient basis for it, your Honour.  In the present case the question is not whether the putative penalty is simply outside power altogether as it was in Lawler, but whether the putative penalty is within the scope of section 51(xxxi). As to that, the fact that is has a connection with another head of power cannot be enough in itself because it is well known that section 51(xxxi) is taken generally to abstract from the other heads of power the capacity that would otherwise exist under them to acquire property. If one could answer the question by saying it is within another head of power, then a guarantee would be ineffective.

Now, as your Honours will have seen, there are various classes of laws that have been regarded as falling outside section 51(xxxi) notwithstanding that they affect acquisitions. Taxation is an example.

GUMMOW J:   Does section 44(ii) play any part in this?

MR KENNETT:   It does not play a part in the present case, your Honour, although that does find reflection in, I think, section 22 of the Parliamentary Contributory Superannuation Act which provides that if one ceases to be a member by operation of section 44, then one is not entitled to retiring allowance under the Act.  That disqualification does not operate, of course, if one is convicted of offences after ceasing to be a Member of Parliament.

GUMMOW J:   Yes.

MR KENNETT:   To go back to the sundry classes of acquisitions which do not engage section 51(xxxi), penalties and forfeitures are a long‑established example of such laws. The present law one can say is punitive in a general or colloquial sense, but I submit that one cannot conclude that that is enough to take it outside section 51(xxxi). I would submit that a law does not escape the clutches of section 51(xxxi) on the footing that it is a penalty unless the fact that it is a penalty is the aspect of it that results in it being supported by another head of power. In other words, the punitive nature has to be the basis for its connection with power, not just an incidental way in which one can colloquially describe it.

I say this because the penalties exception in section 51(xxxi) is a recognition that a penalty is generally a necessary means of effectuating rules enacted under another head of power and therefore penalties are necessarily contemplated by those other heads of power and just terms for a penalty would be incongruous. But that rationale for regarding penalties as outside section 51(xxxi) disappears, I would say, if the punitive function is not what provides the connection with another head of power.

GLEESON CJ:   But you would not deny, would you, Parliament’s power to impose mandatory sentencing?

MR KENNETT:   No, your Honour.

GLEESON CJ:   In mandatory sentencing the connection between or the proportionality between punishment and crime disappears.  That is the point of it being mandatory.

MR KENNETT:   Yes, that is true.

KIRBY J:   The Privy Council recently divided on the question of whether death in a statute was now to be viewed as mandatory or was to be viewed as the maximum.  For  my own part, I would not necessarily want in this case to foreclose questions of whether mandatory sentencing is viewed today, which is the point that the Privy Council was considering, compatible with the judicial function.

MR KENNETT:   A mandatory death sentence would certainly raise important questions of that kind.

GLEESON CJ:   Yes, I was just talking about mandatory sentencing.

MR KENNETT:   A mandatory prison sentence may ‑ ‑ ‑

GLEESON CJ:   Or a mandatory fine.

KIRBY J:   It may be the principle is the same though.

MR KENNETT:   Maybe.

GLEESON CJ:   I thought we actually held three or four years ago that mandatory sentencing in the Northern Territory was permissible.  I forget the case.

MR KENNETT:   The Court held unanimously and at some time further back in Palling v Corfield that a court could be required to impose a particular level of penalty when it was sought by the prosecutor.

KIRBY J:   The only point of my intervention on this was to point out that this is an area in which there is a developing jurisprudence.

MR KENNETT: Yes. The point here, as I will submit in a moment, is that we are in an area of discourse, perhaps unlike issues of judicial power – we are here in an area of discourse where proportionality can be relevant. The proposition that I put a moment ago that to escape section 51(xxxi) the Commonwealth needs to be able to show that the punitive function of the law is what makes it valid or is sufficient in itself to make it valid – perhaps that is a better way of putting it. That creates two problems, I submit, for the Crimes (Superannuation Benefits) Act.  It means that it is not supportable qua penalty, firstly, because of the proportionality problem and, secondly, because it is not aimed at breaches of Commonwealth laws. 

Could I turn to proportionality.  A penalty acquires that character because it is something directed at promoting or securing compliance with some legal norm.  It can do so by retribution or deterrence or sometimes by seeking a means of incapacitation, as Justice Dawson described, the forfeiture of a boat in Lawler’s Case.

GLEESON CJ:   Lawler’s Case would be wrongly decided if your argument on this point is correct, would it not?  Part of what was decided in Lawler was that it did not make any difference that the owner of the forfeited vessel had no involvement in the crime. 

MR KENNETT:   I do not seek to reopen Lawler and I can live with its holding.  Lawler was a case where the owner of the boat was not involved in the commission of the offence, but there were both historical and practical reasons which the Court discussed carefully and which led to the view that the forfeiture of the boat was nevertheless sufficiently connected with the offence and not disproportionate.

GLEESON CJ:   What was the case about the birds in the boot of a motorcar?

MR KENNETT:   I think it is Burton v Honan, your Honour.

GLEESON CJ:   Right.  If somebody borrows your motorcar and uses it to transport a boot full of illegal parrots out to the airport for export without a permission, you can end up losing your car, can you not?

MR KENNETT:   You could, at least when the case was decided, yes.

GLEESON CJ:   There are plenty of examples of Commonwealth laws that provide for forfeiture of property associated with crime in some way that have a quite disproportionate consequence upon the person who forfeits the property.

MR KENNETT:   Yes.  Where the property is something that has been used in the commission of the crime as in Lawler, or the property is the illegal imports in a customs case, or perhaps also where the property is the proceeds of crime, there ‑ ‑ ‑

GUMMOW J:   There is a very significant public interest in dealing with corruption by public officers, in particular, parliamentarians, is there not?

MR KENNETT:   I have to accept that, your Honour, but the point is that ‑ ‑ ‑

GUMMOW J:   So these arguments about proportionality have to push uphill, it seems to me.  This is a long way from the parrots in the boot of someone else’s car.  This is a betrayal of public office.

MR KENNETT:   The point about the forfeiture cases ‑ ‑ ‑

GUMMOW J:   And betrayal of public office said to be accompanied by a right to retain the benefits that accrued only by reason of the exercise of the public office, one would assume not corruptly.

HAYNE J: The argument seems to flirt with the notion, though not embrace it, that that which is to be provided under section 48 is not subject to diminution or reduction whether while holding office or subsequently. Now, that is a very large argument to advance, is it not?

MR KENNETT:   It would be. I do not think, with respect, that I go that far, but the distance I do go is to say that where statutory rights have accrued pursuant to section 48, then, as a general proposition, if the Commonwealth wants to take them away, it needs to buy them out rather than simply extinguish them.

GUMMOW J:   Yes, but putting it positively, you say it is within power under section 48 to legislate for superannuation benefits for corrupt politicians who have been so held after trial. It is all very well talking about these rights but you have to look at it a little more precisely, I think.

MR KENNETT:   It is within power to legislate the superannuation benefits to politicians generally, and that may, or may not, include some who commit corrupt behaviour.

GUMMOW J:   It would be a very bold explanatory memorandum that said that in the 1948 Act.

GLEESON CJ:   If you look at this problem of proportionality from the point of view of your client’s wife – there is no suggestion she has done anything wrong and there is no suggestion she is being punished, but the forfeiture by way of penalty imposed on your client affects her rights because of the nature of her rights, which were inherently dependent on his rights.  How would you apply any considerations of proportionality to her position?

MR KENNETT:   In her position I do not think I would use the word “proportionality”.  I would simply say there is no suggestion of misconduct by her.  Whatever it is in relation to her, it is not a penalty.  There have been cases, and Lawler is one, where forfeiture of property of innocent third parties has been upheld, but they are cases where the property has a very distinct connection with the commission of an offence or with a breach of Commonwealth law.  So, for example, if it is the car that has been used to commit an offence or the boat that has been used to commit an offence or where the property is – perhaps the particular goods that have been unlawfully imported and then sold on to an innocent third party, in those cases one can see a distinct public interest.

KIRBY J:   That is simply the terms of that legislation.  Why in principle is that mandatory in every case or why is that a limiting factor?

MR KENNETT:   I would say, your Honour, that one needs a connection such as that to take measures such as those out of the class of a pure and simple acquisition of property and into the class of something that necessarily can be done as a means of enforcing Commonwealth laws.

GLEESON CJ:   But I thought Justice Gummow was putting to you that there is such a connection here.  By hypothesis we are dealing with a corrupt offence which involves an abuse of office.  In other words, it is the abuse of office that exposed this superannuation entitlement to the forfeiture.

MR KENNETT:   The superannuation entitlement is not the fruits of the crime.  One can see that in the present case simply because the plaintiff was a Member of Parliament for 20‑odd years engaged, so the courts have held, in corrupt conduct in the space of two or three months towards the end of that time.  The corrupt conduct was not in any sense the means by which he acquired superannuation benefits and the period in respect of which he has accrued superannuation benefits is a very long one.

GUMMOW J:   He acquired them on what one would assume was the basis that he would be discharging his public obligations as a Member of Parliament in a manner that was not corrupt.  There would have to be some basic assumptions about how the constitutional system works, and that surely is one of them.  If you get into this question of proportionality, it seems to me you are putting your head in the mouth of the tiger.

MR KENNETT:   Your Honour, my task would be a great deal harder if he were stripped of salary and superannuation benefits.

GUMMOW J:   It is an accident of time, is it not?  If your client had been tried and convicted somewhat earlier, would not section 44(ii) have operated?

MR KENNETT: May well have done, your Honour. May well have done and then section 22 of the Act would have operated.

GUMMOW J: That indicates what the policy of the Constitution is – out.

MR KENNETT:   Out of Parliament?

GUMMOW J:   Yes.

HAYNE J:   Out of the benefits of office.

MR KENNETT:   Well, the scheme that Parliament enacted was one which granted rights over a lifetime to somebody who served in Parliament and until retirement.  The rights that have been granted by Parliament are what we need to grapple with here, I would submit. 

GLEESON CJ:   But it does not get you far, does it, to say even if one were inclined to agree with it – and maybe one would not be – that the penalty is Draconian?  It used to be said to barristers trying to plead mitigation for people convicted of customs offences that where offences are of a kind that are difficult to discover you have to expect that where they are discovered they will be visited with very severe consequences.  That is one of the justifications for these extreme penalties in relation to forfeiture of property involved in customs offences.  Why would not that kind of consideration apply to conduct of this kind?

MR KENNETT:   As to the plaintiff himself, as I have said, it is not the severity that I complain about.  I will expand on that, if I may, in a moment.  As to the plaintiff’s wife, there is not in this case in relation to her the kind of justification for extreme or Draconian measures that there is in cases of offences that are hard to police and hard to prevent.  In Lawler’s Case and also in Airservices in relation to the statutory liens in that case, there were very careful reasons articulated by members of the Court as to why drastic measures – and the word “drastic” was used, at least in Lawler’s Case – were nevertheless appropriate and adapted to securing compliance with a statutory regime. 

Those reasons related to difficulty of enforcement and the need, if possible, to recruit the owners of boats and planes and so forth in making sure that their equipment was not used unlawfully. But there is not a justification of that kind here, I would say, in relation to the wife’s rights. There is not the kind of connection with the offence that would bring a forfeiture of her rights into the class of forfeitures that are both within power and not subject to section 51(xxxi).

HAYNE J: Would it be contrary to section 51(xxxi) to enact a law that a member convicted of an offence shall repay to the Commonwealth the whole of the allowance or other benefit received by that member between the date of offence and the date of conviction?

MR KENNETT:   I am not sure that I can give a firm answer to that.

HAYNE J:   A safe answer, Mr Kennett, is I think the word you are searching for, because you know what is coming next.

MR KENNETT:   A safe answer, your Honour, would be a wonderful thing.  My task would be a great deal more difficult if the law was framed in those terms.  If the benefit clawed back were precisely related to the period of offending, or perhaps also period of offending to condition, that would make the argument I am now putting much more difficult.

HAYNE J:   Do you proffer any criterion that would distinguish between the case I have just put to you and the case now under consideration other than that they are factually different?

MR KENNETT:   The difference would be that in the case your Honour puts to me, it would be difficult to escape from the conclusion that the benefits being clawed back were benefits that had been acquired through or in connection with corrupt conduct, so it would be analogous, at least strongly arguably analogous, to proceeds of crime legislation.  One does not have that feature here because the whole of the benefit is taken away without regard to the particular period in which the corrupt conduct occurred.

Penalties of course involve, for the purpose of section 51(xxxi) at least, a purpose, the purpose being promoting compliance with legal norms, and it is a purpose that would be wholly defeated by the need to provide just terms. Faithful pursuit of purpose in circumstances such as these is assessed by looking at whether the law is appropriate and adapted to the purpose. That phraseology occurs in Lawler’s Case in the judgments of Justice Brennan and the joint judgment of Justices Deane and Gaudron. 

The same terminology is used in Airservices by your Honour the Chief Justice and Justice Kirby and also by Justice Callinan.  There is a footnote in Airservices, footnote (152) at page 181, in the judgment of the Chief Justice and Justice Kirby which refers to Cunliffe’s Case and makes the point that “appropriate and adapted” and “proportional” are very similar notions in this area of discourse.  I adopt that, with respect, where one is looking for faithful pursuit of purpose.  The question whether the law is proportional can be a powerful indicator of what the true purpose of the law is.  Indeed, in Lawler’s Case Justice McHugh described the exception from section 51(xxxi) in terms of a reasonably proportional consequence of breach of a Commonwealth law.

I have said that I do not rely in this limb of my argument on the fact that it is harsh per se but I do point to some aspects of the regime in paragraph 32 of the written submissions.

KIRBY J:   Is this an argument that it is so harsh that it, as it were, moves on into constitutional disproportionality or a failure to have an appropriate and adapted connection?

MR KENNETT:   The way I put it, your Honour, si that it is a lack of proportion that points to the purpose not being properly analysed, not being the imposition of a penalty, but rather being something else where the something else ‑ ‑ ‑

KIRBY J:   The difficulty is that the expression “appropriate and adapted” does not really give very many clues as to what its content is, hence the search for other formulae, but “proportional” has the same problem as “appropriate”, that it seems to be inviting the Court in deciding questions of constitutional power to be looking at some aspect of merits which the Court says, on the other hand, that it does not really do because that is a matter for Parliament to decide.

MR KENNETT:   Yes.  As I understand it, your Honour, it is not a test which is intended to be an invitation to the Court to judge the wisdom of a law, or the justice of it.

KIRBY J:   No.  What was that case that Justice McHugh used proportionality?  You cited it.

MR KENNETT:   His Honour uses the phrase in Lawler’s Case.

GUMMOW J:   What page of 179 CLR?

MR KENNETT:   At 292 ‑ ‑ ‑

KIRBY J:   Do not worry to go to it now.  It is just that I ‑ ‑ ‑

MR KENNETT:   I can give your Honours the references.  It is pages 292, 294 and 295 where his Honour uses that phrase.

GUMMOW J:   Has anyone else ever said “reasonably proportional consequence of breach”?  This notion that proportionality has a role to play in the defence power, undoubtedly in some aspects of the external affairs power, this is the first indication I have seen of its intrusion into the power in 51(xxxi).

MR KENNETT:   It intrudes in a fairly particular and limited way, your Honours.  Justice McHugh uses the phrase at the bottom of page 292 and then ‑ ‑ ‑

GUMMOW J:   That is to say, it is ordinarily linked to notions of purposive heads of power.

MR KENNETT:   Yes.  Page 294 at about points 5 to 6 and then page 295 at about point 6.

KIRBY J:   Well, Mr Kennett, if you can ever explain to me what “appropriate and adapted” means, then I will drop reference to proportionality, but meantime there are these two streams in the Court and “appropriate and adapted” which goes back to Marbury v Madison is just (a) an uncommunicative expression and (b) a possibly dangerous one in suggesting the courts are concerned with what is appropriate.

MR KENNETT:   It does have those difficulties.  Both of the approaches, “appropriate and adapted” or “proportional”, are ways of asking the question is this law and truth directed at the purpose which, for example, my learned friend says it is or Parliament says it is ‑ ‑ ‑

KIRBY J:   He says it is.  You say it is not.  Now, what is your basis given what Justice Gummow said earlier to you that there is a high purpose in Parliament in suppressing and sanctioning corrupt acts by Members of Parliament in the misuse of their power as such?  Now, if that is the starting point then whatever you use, “appropriate and adapted” or “proportionate”, you are behind the eight ball in dealing with the facts of the case and the provisions of the Act.  Why do you say you get to the line?

MR KENNETT:   Parliament when it pursues its purposes, those purposes with respect of which the Parliament can make laws, to adopt the terms of section 51(xxxi), when Parliament pursues its purposes by acquiring people’s property the Constitution says that it has to give them just terms. Now, there are certain exceptions where something simply must be within the Parliament’s power and that something cannot be done without having an effect on property rights.

One of those exceptions and that is the exception that - or a closely related pair of exceptions, I suppose I should say, which the Commonwealth prays in aid, are penalties and forfeitures.  I think I have said what I can say about forfeitures but as to penalties my submission is that in order to have the character of a penalty for these purposes the law must be one which is in truth directed at penalising breaches of a norm of conduct.  One of the ways in which one assesses whether that is the true purpose of the law is by looking at whether it is proportional or, to use the other way of putting it, appropriate and adapted.

GUMMOW J:   What do you say about Justice Dawson’s judgment in Lawler at page 289, the last paragraph?

MR KENNETT:   Page 289, your Honour.

GUMMOW J:   Yes, 289, adding to that the fact that corrupt public officeholders could be impeached.  There is a long history of impeachment.  In times past they were executed.

MR KENNETT:   I would say that general forfeiture of the whole of a person’s property disappeared from the law of England and from the law of the Australian colonies in the 19^th century.

GUMMOW J:   Not very long before Federation.

MR KENNETT:   No, but nevertheless before Federation.

GUMMOW J:   Beyond recall.

MR KENNETT: I would say yes, by reason of the constitutional guarantee in section 51(xxxi). Forfeiture exacted as a genuine penalty or as a form of preventing reoffending can be ‑ ‑ ‑

HAYNE J:   Does the point come to this, that you say because of 51(xxxi) it is beyond power to enact a law which says in consequence of your commission of a corruption offence we take back from you something that you earned because of the office that you have used corruptly?

MR KENNETT:   What I say, your Honour, is that it is beyond power to enact a law which takes back the whole of the benefit payable to the person by reason of holding the office without regard to the particular degree to which that holding of the office is tainted by the offences of which he or she stands convicted.

GUMMOW J:   It would not be open to your client to seek re‑election, would it, by reason of his conviction?

KIRBY J:   Does not section 48 say something about this?

GUMMOW J:   He would be incapable of being chosen, would he not?

MR KENNETT:   Yes, that would seem to be right.

GUMMOW J:   Yes, so the Constitution contemplates some permanent change in status, really.

MR KENNETT:   The Constitution contemplates that persons who have engaged in certain conduct will not be Members of Parliament and the statutory scheme under discussion certainly contemplates a purpose that persons who have engaged in certain forms of conduct will not be any longer on the public payroll.  That is a different thing, I would submit, from imposing a penalty for the crime.  The Parliament may take the view that it is improper for ‑ ‑ ‑

GUMMOW J:   He could at this moment because he has finished his sentence, has he?

MR KENNETT:   That is right, your Honour, yes.

KIRBY J:   Is that subject to the order of retrial?

MR KENNETT:   He faces retrial for another count.  The Parliament could take the view that it was undesirable for undesirable people to be drawing a pension or an allowance from the public payroll and it could seek to do something about that but I would submit that if that is the motivation for action then what Parliament needs to do is buy out their interests and say farewell rather than seeking to do what it has done here, simply extinguish the interests.  The purpose of getting undesirable people off the public payroll, of course, is distinct from the purpose of punishment for an offence and it is ‑ ‑ ‑

GUMMOW J:   It is not a question of off the payroll.

MR KENNETT:   I am speaking here of the Crimes (Superannuation Benefits) Act.  The purpose of removing such people from the payroll of the Commonwealth is unlike the purpose of punishment for an offence, not something that would be wholly defeated or annihilated as sometimes said by ‑ ‑ ‑

KIRBY J:   There is mention in the submissions of the Oklahoma Case and the legislation in that case seems to be quite different from this legislation but have you examined - is there United States legislation similar to this legislation for members of the Congress?

MR KENNETT:   We have not done a search of the United States ‑ ‑ ‑

KIRBY J:   Or British legislation or legislation in other Commonwealth countries that are similar to this that have Constitutions like our own?

MR KENNETT:   We have not searched overseas, your Honours, but we have looked at what the Australian States have done.  Victoria, Queensland and Western Australia, the three States that we have found, have addressed this problem through legislation. 

In Victoria it is Part 3A of the Sentencing Act 1991 which allows the court to make a superannuation order as part of the sentencing process and having regard to various matters and on the court’s assessment of whether it is appropriate to make the order. The matters to be taken into account include the financial circumstances of the offender, the nature of the burden it would impose, the length of the period of service by the offender before the offender committed the offence, and, of course, the gravity of the offence. In Queensland, the provisions ‑ ‑ ‑

KIRBY J:   The problem with the State laws is that there is no State equivalent to the just terms provision in the federal Constitution but there is in the United States Constitution and that is why I asked about the federal law in the United States. You have not examined that?

MR KENNETT:   I have not, your Honour.

KIRBY J:   I think you should but I would like a note on the State legislation.

MR KENNETT:   Very well, your Honour.  The other State Acts are the Public Officers Superannuation Benefits Recovery Act (Qld) and the Salaries and Allowances Act 1975 (WA).

GLEESON CJ:   Is that a convenient time, Mr Kennett?

MR KENNETT:   Yes, your Honour.

GLEESON CJ:   We will adjourn until 2.15 pm.

AT 12.44 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.18 PM:

GLEESON CJ:   Yes, Mr Kennett.

MR KENNETT:   Your Honours, can I deal with some of the questions I was asked before lunch.  Firstly, I said that I was fairly sure that the plaintiff’s wife was aware of the proceedings, and that was correct.  Next, Justice Gummow asked how the Parliamentary Contributory Superannuation Scheme fitted into the regime of the Family Law Act.  The answer is that statutory schemes such as this one are public sector superannuation schemes, as defined in the SIS Act, section 10, and they are therefore superannuation funds within the meaning of section 10 of that Act.

GUMMOW J:   Yes, that is what we suspected.

MR KENNETT:   That makes them eligible superannuation plans under the Family Law Act.

GUMMOW J:   Yes, thank you.

MR KENNETT:   The Chief Justice referred to the suggestion made in Austin’s Case that – or the recognition perhaps is a better way of putting it, that the pension payable, at least to a judge, is part of the remuneration, the judge’s remuneration, for the purpose of the constitutional guarantee that relates to that.  That is referred to in the joint judgment in Austin’s Case 215 CLR 235 paragraph 72. The Chief Justice also asked whether interests accruing to a member under the parliamentary scheme were subject to taxation on their notional value from year to year. The answer I think is yes, but only from 1997 when the superannuation surcharge legislation was introduced.

It may, however, be relevant to note that the interests accruing gradually to members under the scheme were something which, albeit some years later, the Parliament considered capable of being taxed on their value.  With the Court’s leave we can do a short note giving references to the particular Acts and how they reached that statutory scheme.

GLEESON CJ:   Yes, thank you.

MR KENNETT:   We will also do, with the Court’s leave, a short note on the federal position in the United States which Justice Kirby asked me about.  Finally, there is an aspect of the statutory ‑ ‑ ‑

KIRBY J:   You might just see if in any of the other Commonwealth countries, many of which would have constitutional laws forbidding acquisition of property except on just terms, whether this has been a matter of debate.  There may be some reports in the law reports of the Commonwealth series.

MR KENNETT:   Yes, your Honour.  There is an aspect of the scheme of the Crimes (Superannuation Benefits) Act which I did not mention and perhaps should have mentioned.  It does not expand the issues before the Court but it is part of the overall picture and that is that Part 3 of that Act provides for making of restraining orders.  A restraining order can prevent a person dealing with his or her property as a means of securing ‑ ‑ ‑

KIRBY J:   What issue does this go to?

MR KENNETT:   I do not think it raises a separate issue for the Court but I did wish your Honours to be aware that the payment of amounts under superannuation orders can be enforced by the specific means of putting a restraining order into place in relation to property which a person has.  I understand, although again it is not in the case stated but it is a matter of public record, that there is such an order in place in      relation to the plaintiff’s property, although I do not seek any separate answers or orders from the Court in respect of that.

GUMMOW J:   Section 33 imposes a charge, does it not, a charge in favour of the Commonwealth?

MR KENNETT:   I am mysteriously missing that page, your Honour, from my copy.  I will get my learned junior’s.  Yes, there is a statutory charge on the property under section 33.

GUMMOW J:   So were you saying to us that there is such a charge in existence in respect of your client’s property?

MR KENNETT:   There is, your Honour.  As I say, it has not been included in the pleadings or the case stated.

HAYNE J:   You say that there is a charge in place.  How can that be?

MR KENNETT:   I think I was wrong a moment ago, your Honour, when I said there was a charge.

HAYNE J:   The charge comes into play upon the making of the later of the two orders, one of which is a recovery order, “recovery order” defined as being:

a superannuation order containing an order of the kind mentioned in subsection 19(4).

Now, do we have such an order that has yet been made?

MR KENNETT:   We do not, your Honour.  What we have is an order under section 25.

HAYNE J:   Does it follow that there is yet no charge?

MR KENNETT:   I will get some instructions on that, your Honour, before I ‑ ‑ ‑

KIRBY J:   I just do not see the relevance of this.  It is not mentioned in the case stated.  You are not seeking any relief in it.  Is it just part of the matrix of the statute?

MR KENNETT:   It is, your Honour, yes, no more than that.

HAYNE J:   Well, if anything is to be made of it, Mr Kennett, it would seem to me that the case stated ought to reflect the fact accurately and application might be made to amend the case stated in a specific respect and, subject to seeing it, I would be minded to make an order amending the case stated to the necessary extent, but ultimately it is of course a matter for you.

MR KENNETT:   What I will do, your Honour, is give that some further thought if I may and discuss it with my learned friend and see if it can be done in a non-controversial way.

HAYNE J:   I do not want to put you under undue pressure, Mr Kennett, but my willingness to vary the basis on which this thing comes to the Full Court diminishes as the day goes on.

MR KENNETT: I understand that, your Honour. Before lunch I was dealing with the issue of proportionality as it relates to whether or not the law we are speaking of is a penalty. I was almost finished on that topic but I needed to take your Honours back to the points that are made about it in paragraph 32 of my written submissions, the three reasons given there why, in my submission, the connection between crime and penalty, the so‑called penalty, is not sufficiently close to give this law the character of a penalty and therefore a character outside section 51(xxxi).

The first and second dot points largely reflect the discussion that we had before lunch.  The third dot point is one which I do not think I have emphasised so far and which I should, and that is that the superannuation order necessarily operates in addition to the penalty imposed on sentencing by the court.  That is of particular relevance, I would submit, in that it goes some way to ‑ ‑ ‑

GLEESON CJ:   Was one of the matters that the sentencing judge took into account the liability to forfeiture of superannuation benefits?

MR KENNETT:   No, your Honour, he is not entitled to.  What a sentencing judge can and ordinarily will take into account where the offender is a Commonwealth officer and where the offence is a corruption offence is the aspect of the offence that is an abuse of office.  Your Honour Justice Gummow was putting to me before lunch that there is a high public interest in the sanctioning of corrupt conduct by public officials, and indeed there is, and that public interest can be expected to be reflected in the sentence that the official receives under the relevant sentencing statute.  So that when the superannuation order comes to operate on the person, it operates on a person who has already been sentenced with the full weight of the law and sentenced in the light of the fact that what he or she has done is an abuse of office.

HAYNE J:   So much follows from the requirements of the Crimes Act, section 16A(2)(a).  I would have thought the court must take into account “the nature and circumstances of the offence”.

MR KENNETT:   Yes, thank you for that reference, your Honour.  Now, in taking your Honour’s through the statutory scheme of the Crimes (Superannuation Benefits) Act I spent a few minutes on section 23 which, as I put it, appears to provide, in the event that the superannuation order is taken to be revoked, for fair recompense then to a person who was subject to the order because they had absconded, but does not, at least on its face, provide any recompense or any restitution for a person who has suffered detrimental effects from the order having been convicted and whose conviction is then quashed.  If that construction of section 23 be right, then the Act can be seen to impose a very substantial detriment on someone who is convicted on an offence, notwithstanding that the conviction is quashed on appeal.

HAYNE J:   What difference is there between that detrimental effect and the detriment the person would suffer upon conviction if sentence commences to be served and conviction is later quashed?  Why does this stand apart from what otherwise is the ordinary operation of the criminal law in dealing with its consequences when an appeal upsets a conviction?

MR KENNETT: Two reasons, your Honour. The first is that it is hard to take back a period of imprisonment, but relatively simple to pay back a sum of money. The second is that we are here speaking of the operation of a constitutional guarantee that fixes on property. There is no parallel guarantee fixing upon unwarranted criminal punishment. The consequence that I urge upon your Honours is one that flows from the fact that the Constitution sees fit to make particular provision in relation to the protection of property.

Your Honours, that leaves me with the second reason why I submit that this law cannot be characterised as a penalty for relevant purposes and that is the scope of the class of offences to which it is directed.  A Commonwealth law that imposed a fine on anyone convicted of, for example, murder or assault would not be within power, I would submit, even if properly seen as a penalty for those forms of conduct, for the obvious reason that it is just not a law with respect to a subject matter of Commonwealth power.  The Crimes (Superannuation Benefits) Act imposes an extra penalty, calling it that for the moment, for a mixture of common law, Commonwealth, State and Territory offences. 

I would submit that looked at in that way it would itself clearly be ultra vires the Commonwealth but for the connection that it has with the rights of Commonwealth officers because it is a law about their entitlements. But my further submission is that the connection with Commonwealth officers is not a connection in itself capable of taking the law outside section 51(xxxi). It is the punitive aspect that needs to do that, that needs to play that role if anything is going to do so. But for these purposes, a penalty, if it is to be within Commonwealth power on that footing, needs to be a penalty for a breach of a norm imposed by the Commonwealth.

HAYNE J:   How is that consistent with the reference in section 44(ii) to conviction being under sentence “for any offence punishable under the law of the Commonwealth or of a State”?

MR KENNETT:   Section 44 imposes a specific consequence as a result of conviction of a law of a State. Naturally, the Constitution can do that. My submission is if the Commonwealth through its legislation seeks to impose a consequence for the breach of a law of a State, the Commonwealth needs to find a connection with one of its heads of power in order to do that. The connection cannot be supplied simply by the link between crime and sentence. The connection must be found somewhere else, such as here, in the fact that it only applies to Commonwealth officers.

HAYNE J:   The plaintiff in this case was convicted of Commonwealth offences, was he not?

MR KENNETT:   True.

HAYNE J:   Is the point you make one that ultimately must depend upon some contention about lack of capacity to sever?

MR KENNETT:   If it is to assist my client, your Honour, yes, it does need that step.  There are some references in Lawler’s Case 179 CLR 270 which describe penalties standing outside section 51(xxxi) in terms of penalties for breaches of Commonwealth law. They are, perhaps, not exhaustive on the point but support my proposition, I would say, that the Commonwealth can impose penalties for breaches of its own laws but if it wants to sanction breaches of State law it has to find some other basis for the legislation to be valid. In the last paragraph of page 278 Justice Brennan speaks in terms of:

A law which imposes a penalty or sanction for breach of a provision prescribing a rule of conduct –

There, in this case, is lacking a Commonwealth provision prescribing a rule of conduct and, indeed, there is a capacity to impose these orders as a consequence of common law offences.  Then at page 292, again in the bottom paragraph on the page, Justice McHugh speaks of:

a reasonably proportional consequence of a breach of a law passed under a power conferred by section 51 of the Constitution –

I would observe that it perhaps need not be section 51 – it could be section 52, for example – but my point is that one needs to have a Commonwealth norm being enforced. The question of severance does rear its head at that stage and as to that ‑ ‑ ‑

GUMMOW J:   Do you deal with severance in your written submissions?

MR KENNETT:   I do not, your Honour.  I do not think either side has come to it yet.  The Crimes (Superannuation Benefits) Act describes itself in the long title as:

An Act relating to certain superannuation benefits paid or payable to or in respect of certain persons convicted of corruption offences –

It is, on its face, I would submit, a comprehensive scheme dealing with Commonwealth officers and intended to operate as such.  The operation of the scheme would be certainly compromised if it were to have a partial operation – if it were to be read down, for example, so as to only apply where someone is convicted of a Commonwealth offence – and there is not, I would say, sufficient basis in the legislation to assume that Parliament intended it to have that partial operation in the event that it was invalid in one aspect.

Discussion of these issues, the locus classicus, I suppose, of severance in this Court’s jurisprudence is Pidoto’s Case.  I will just give your Honours the references; I do not propose to go to them.  Pidoto v Victoria 68 CLR 87 at 107 through to 110 in the judgment of the Chief Justice, and there is further useful discussion in the Industrial Relations Act case, Victoria v The Commonwealth 187 CLR 416 at 501 to 503. Those are my submissions, if the Court pleases.

GLEESON CJ:   Thank you, Mr Kennett.  Yes, Mr Solicitor.

MR BENNETT:   If the Court pleases, I propose to deal first with a small number of questions asked from the Bench of my learned friend, then with the question of penalties, and finally with the question of inherent susceptibility. The preliminary matters are these. First, your Honour Justice Kirby asked about the validity of section 43 of the Crimes (Superannuation Benefits) Act which is the section dealing with the Court not taking into account certain matters on penalty.  Your Honour, that does not arise in this case before your Honours.

KIRBY J:   No, I realise that.

MR BENNETT:   In our respectful submission, it would be inappropriate for the Court to say anything about it, but may I just say this, that in Truong’s Case we put in very detailed submissions to the effect that where it falls under a head of Commonwealth power to do so, it is permissible for the Commonwealth to direct a State court dealing with a State matter as to how to proceed, the classic example in that case being where the Commonwealth gives a specialty undertaking to achieve extradition and then passes a Commonwealth law saying in those circumstances the State cannot prosecute for an offence the Commonwealth has undertaken, the person will not be prosecuted for.  That is a classic example, we would submit.  It would involve, if I were obliged to argue this issue, seeking leave to overrule ‑ ‑ ‑

KIRBY J:   Can I just say that that seems to be addressed at where the law bites as distinct from the performance of the judicial function, where the essence of the judicial function is to weigh the seriousness of the circumstance and the impact on the offender, and yet it takes that latter matter out of the judicial consideration.

MR BENNETT:   Well, it would be open under the bankruptcy law to say that in sentencing an offender for certain types of offence, the offender’s bankruptcy shall not be taken into account.  That would be a proper Commonwealth law.  But your Honour, may I give one other example?  There is a decision which is closer to the example your Honour puts to me in a case – I do not have the reference with me – it is R v Reid in the Court of Criminal Appeal of Victoria in about 1999 where it was held that a Commonwealth law dealing with the taking of evidence overseas in criminal matters could validly provide that such evidence taken pursuant to it must be admitted by a State court, notwithstanding that it might otherwise be hearsay in a State criminal prosecution.

KIRBY J:   I do not know why you are leading into a debate on this when you say it should not be mentioned because it is not in issue because again, that seems distinguishable.  We are talking about the actual performance of the judicial function at the critical moment in weighing what is the penalty that is proper and then, though an order is a very serious burden on the person standing for sentence, the Parliament has purported to say it cannot be taken into account.

MR BENNETT:   Your Honour, in my respectful submission, it would be open to the Commonwealth in a Racial Discrimination Act to say that a sentencing court in a State may not take a person’s race into account adversely to that person.  There are many situations in which it is within Commonwealth power because it falls under a particular head of power to direct a State court and not to take matters into account in weighing a result is one thing which, in my submission, can be directed.  But it does not arise in this case, as your Honour says.  I am merely answering your Honour’s question.

KIRBY J:   You are tempting me to think it might arise.

MR BENNETT:   Yes.  Your Honours, it was dealt with very fully in our submissions in Truong.  It was not necessary for the Court to deal with it there.

KIRBY J:   I will not subject myself to the displeasure of reading those again.

MR BENNETT:   If your Honour pleases.  That was the first of the short matters.  The second is that your Honour Justice Gummow asked about a possible omission in section 23 in relation to a person where the conviction was quashed.  My learned friend dealt with that a few moments ago by saying that made the Act even worse in its effect.  The answer, your Honour, is section 20(2)(b) which provides that a superannuation order does not take effect until any appeals have been heard and determined.  So if an appeal were ultimately allowed, the superannuation order would never have taken effect, so the problem simply does not arise and is successfully avoided by the legislation.

The third matter is that your Honour Justice Kirby asked about the position overseas.  We have obtained some materials about the United States.  There is some lengthy legislation there which seems to cover members of Congress dealing with forfeiture of pensions, legislation similar to the Crimes (Superannuation Benefits) Act.  There was legislation in England which is referred to in the submissions, the abolition of fines and forfeitures legislation, which expressly preserved the forfeiture of superannuation benefits in section 2.  We would seek the same leave that my learned friend has been given to provide material from other Commonwealth and common law countries that might be of assistance in relation to that.

KIRBY J:   The greatest interest would be if the issue of just terms or fair compensation has been debated in the United States.

MR BENNETT:   Yes.  We do have some authority on that which I will take your Honours to in a moment.  Coming to the question of penalty or forfeiture, may I first deal with a number of submissions my learned friend made and then make my own submissions.  My learned friend made this submission which we submit cannot be right.  His submission, as I wrote it down, was this.  A law does not escape placitum (xxxi) as a penalty unless the punitive aspect is the aspect which brings it within power.

Now, if that were the test, there would be no exception in relation to penalties because the Commonwealth has no general criminal power at all.  The power to create criminal offences only arises as incidental to the specific heads of power.  It is never ever going to be the punitive nature of the matter which brings it within power.  It is always going to be the relationship to the head of power.  So on my friend’s test there would be no exception at all.  It is a meaningless distinction.  If one takes obvious examples of bankruptcy offences, it is not the punitive nature which brings it within power, it is the fact that it is incidental bankruptcy.  The same would apply to currency offences or trespassing in a lighthouse or any other offence that arises under a specific power.  So my friend’s submission is just simply untenable.

Now, your Honour Justice Kirby suggested that there may be problems in relation to mandatory sentencing.  We simply refer the Court to two decisions, a decision of this Court in Palling v Corfield (1970) 123 CLR 52. That was applied recently in the Northern Territory in a case called Wynbine v Marshall (1997) 117 NTR 11. That is the reports at the back of the Australian Law Reports. Those cases have upheld the concept of mandatory sentencing.

KIRBY J:   That was the Court of Appeal of the Northern Territory, was it?

MR BENNETT:   Yes, your Honour.  The issue in relation to the death penalty, of course, cannot arise in Australia, so I do not deal with that.  Now, my learned friend then submitted that to come within the penalty exception the penalty must be directed to creating a norm of conduct.  Now, that is a submission that comes from nowhere and it is simply not correct again.  There are reasons for penalties in particular cases or in general other than the creation of a norm of conduct.  One obvious example is rehabilitation where a particular penalty may be directed to rehabilitation of the offender in general terms rather than the maintenance of a particular norm of conduct.

The criminal law in general is directed to the maintenance of norms of conduct, but that certainly does not apply to all penalties and there are situations where penalties have other purposes.  In any event, we would describe the exception in more general terms than merely as penalty.  It certainly covers forfeitures – I will not repeat the fishing boat cases your Honours have been taken to and the importation of goods cases like Burton v Honan.

GLEESON CJ:   Mr Kennett put an argument, as I understood it, based on the proposition that the rule of conduct for which this was the sanction was a State rule of conduct rather than a Commonwealth rule of conduct.

MR BENNETT:   Well, your Honour, that does not matter, in my respectful submission, so long as it falls under a Commonwealth head of power.

GLEESON CJ:   So long as what falls under a Commonwealth head of power?

MR BENNETT:   The subject matter of the offence.  It would be open tom the Commonwealth to say, for example – and I think it has done this – that a bankrupt who commits certain State financial offences also commits a Commonwealth offence thereby.  One could think of numerous examples where the Commonwealth might say trespassing on a lighthouse is a Commonwealth offence although trespassing is already a State offence.  It might simply say a person who is successfully prosecuted for the State offence of trespass in relation to a lighthouse shall pay the following additional penalty.

GLEESON CJ:   It occurred to me as a possibility that in Lawler 170 CLR 270 Justice Brennan at the bottom of page 278 was there talking about a rule of conduct which was a law with respect to a head of power other than section 51(xxxi), simply because he was directing his attention to the validity of the law imposing the rule of conduct rather than excluding the possibility of a Commonwealth provision providing a penalty or forfeiture in respect of a breach of a State law, being a breach of a State law which affects a matter within Commonwealth power. Here the State law, as I understand it, is a law that says if you committed bribery you are guilty of an offence.

MR BENNETT:   Yes.

GUMMOW J:   Not just that.  Because paragraph (c) of the definition of “corruption offence” is wider, is it not?  Paragraphs (a) and (b) are linked back to employment and therefore into Commonwealth activities, but (c) is not, is it?  It just says “for the purpose of perverting, or attempting to pervert, the course of justice”, which would be State justice, I suppose.

MR BENNETT:   That is so, your Honour.  It could be.  It could federal or State justice.  Indeed, there may be questions as to the – yes.  Your Honours note the definition of “offence” includes an offence against the law of a State and stealing from one’s employer, or embezzling one’s employer’s funds, or obtaining money under ‑ ‑ ‑

GUMMOW J:   It is not only an offence.  It has to be a corruption offence as well, does it not?

MR BENNETT:   Yes, your Honour, but the examples I have given would be corruption offences if they involved an abuse by the person of his or her office as an employee.

GUMMOW J:   Yes.

MR BENNETT:   That such a person could be prosecuted under a Commonwealth offence if there was one – and there generally would be – or under a more general State offence.

GUMMOW J:   Yes.

MR BENNETT:   This definition would apply even if it were a State offence that the person was charged with.  In my respectful submission, there is no reason why that should not be so.  If the Commonwealth has power to prevent its employees from embezzling from it, it can, if it chooses, vindicate that by saying, “If you are convicted under State law of embezzling from the Commonwealth, this additional consequence will flow”.

GLEESON CJ:   That is just an aspect of the fact that the powers under section 51 are concurrent.

MR BENNETT:   Yes.

GLEESON CJ:   In other words, recognising the existence of the Commonwealth power under section 51 does not exclude the possibility of State laws on the same topics.

MR BENNETT:   Precisely.  There is no reason why the Commonwealth law on a Commonwealth matter should not choose to operate on some State activity, such as a conviction for a State offence which is relevant to a Commonwealth matter.  Stealing from one’s employer or trespassing on the land of a lighthouse are two very simple and obvious examples.

GUMMOW J:   What about perverting the course of State justice, without more?

MR BENNETT:   Paragraph (c) is in a slightly different category to (a) and (b).

GUMMOW J:   Yes, that is why I am worried about it.

MR BENNETT:   There are two answers to your Honour’s concern.  The first is that if there were a problem with it, it would be severable and does not arise in this case.  The second answer is that the view is no doubt taken that in relation to Commonwealth employees at a particular level, certainly Members of Parliament and perhaps other Commonwealth officers, certain types of offence – and perverting the course of justice is the key one – are regarded as being so contrary to the nature of one’s duties and functions and so inconsistent with one’s holding the office that it can be treated in the same way.  That is the nexus.  The nexus comes not from the offence but from the Commonwealth employment.  In my respectful submission, in relation to Members of Parliament it is easy, I suppose, to say that it is so inconsistent with the trust reposed in a person as a Member of Parliament that that person should seek to pervert the course of justice, that the Commonwealth can impose consequences upon it, maybe additional penal consequences to those imposed by the State.

GLEESON CJ:   Is that word “corruption” in paragraph (b) in the definition of “corruption offence” a defined term?

MR BENNETT:   No, your Honour.  There are cases discussing what it means but it is not defined in this Act.

GLEESON CJ:   Does the Independent Commission Against Corruption Act (NSW) apply only to State officials?

MR BENNETT:   Yes, your Honour, and that has a very extended definition of “corruption” ‑ ‑ ‑

GLEESON CJ:   It certainly does.

MR BENNETT:   - - - which has had some consequences in the past with some differing views on what the words mean.  That is a matter of construction of a particular statutory definition.  The important part of (b) for power purposes of course is not the corruption but the fact that it relates to the powers and duties of the employee.

GLEESON CJ:   But the meaning of the word “corruption” in (b) is at large, is it?

MR BENNETT:   Yes, your Honour, at large except insofar as it is qualified by the preceding words of (b).

GLEESON CJ:   I am just trying to work out the scheme of this defined concept of “corruption offence” involving (b) and (c) as well as (a).

MR BENNETT:   Yes.  It is degree of inconsistency with one’s duties, I suppose.

GLEESON CJ:   Paragraph (a) is abuse of office, (b) is corruption that presumably does not – what is the difference between corruption ‑ ‑ ‑

MR BENNETT:   Your Honour, abuse of office need not be financial.  If one was in a Commonwealth position involving the care and custody of minors or the supervision of young people and one engaged in sexual misconduct in that situation, that might well be an abuse of office but it would not be corruption.

GLEESON CJ:   You take “corruption” to mean financial corruption?

MR BENNETT:   Yes, your Honour.

GLEESON CJ:   And “perverting . . . the course of justice” seems to complete the scheme.  That need have no connection with the office of the employee, need it?

MR BENNETT:   And it could be of course because of State or Territory justice but, your Honour, it is regarded as so inconsistent with the nature of the offices as to fall within it.  Of course one could debate whether other offences should or should not be brought within it.  One could debate whether murder should have been here or not, whether that is so inconsistent with the nature of one’s office that certain consequences flow from it.  That is a matter for the Parliament, a matter for debate.  It does not arise in the present connection because in the present connection the three things having what I would submit is a much closer connection have been selected, two having a direct connection and one having what one might call an integrity connection or a character connection with the nature of the office.  It is almost analogous to the debate that existed in this Court some months ago involving a solicitor who was convicted of sexual offences.

GLEESON CJ:   It may be, I suppose, that perverting the course of justice was regarded by the legislature as such an obvious possibility as a form of abuse of office by an employee that they decided to include that even though there may be examples of cases where perverting the course of justice is unrelated to the office.

MR BENNETT:   Yes, precisely, your Honour.  I suppose simply attempting to bribe a judge might be less closely related than the person who says, “I am a Member of Parliament and I seek a favourable result in this case”.  There are, of course, different categories of attempting to pervert the course of justice and it may not involve, of course, communication with the court itself.  It may involve a witness or even a lawyer.  But the view is taken that it is an offence having a general – I am sorry, which is generally regarded as so inconsistent with the continuation of office of the type in question, with the holding of office of the type in question, that it ought to be brought within this additional penalty provision, or forfeiture provision.  The wisdom of that is not a matter for the Court, bearing in mind that (c) is not before the Court and is, in any event, clearly severable if there were a problem with it.  One general aspect of the cases that describe the exceptions and talk about ‑ ‑ ‑

GUMMOW J:   Just before you leave Lawler, Mr Solicitor, could you just look again at 278, Justice Brennan’s statement there.

MR BENNETT:   Yes, your Honour.

GUMMOW J:   As the Chief Justice said, it is in a particular context.  This may be in your favour really:

a penalty or sanction for breach of a provision prescribing a rule of conduct –

The rule of conduct here really is that the federal employee will not suffer convictions of this description under federal or State law, but it is a head of federal power because it is connected with their Commonwealth employment.

MR BENNETT:   Precisely, your Honour.  That is what I am endeavouring to put.  It is significant that ‑ ‑ ‑

GUMMOW J:   As Justice Hayne says, in the nature of a continuing character test.

MR BENNETT:   Yes, in part, yes.  Of course, forfeiture is on a different basis which is discussed higher up on that page, and on the following page his Honour refers to laws imposing fines and penalties and refers to the fact that they can fall on innocent people as they did in many of these cases.  That is simply a consequence of a general forfeiture provision.  The wisdom of it is a matter for Parliament.  But a general forfeiture provision which may from time to time fall on the innocent owner of a fishing boat, or the innocent owner of an aircraft or taxi in which a smuggler transports contraband, is simply a consequence of a broad brush having been used in the legislation.  It is a matter of the wisdom of the legislation, not a matter of power.

One of the reasons those things do not fall within 51(xxxi) is that the word “acquisition”, particularly in a context which talks about acquisition for any purpose in respect of which the Parliament has power, is that the subject matter of the placitum is acquisition for the sake of the acquirer and for the sake of doing something with the property, rather than acquisition for the purpose of deprivation of the previous owner.

Now, there were hints of that in a different context of course in Clunies-Ross where it was held that the purpose of removing the former feudal lord from his formal feudal manor on an island territory was not a purpose which fell within the words “acquisition for a public purpose” in the Acquisition of Lands Act.

The Court in that case left open the question of whether section 51(xxxi) itself could ever apply to such an acquisition. The Commonwealth in that case submitted that it could, but we would submit that there is at least a fairly strong argument that it could not. I exclude, of course, cases of acquisition for the purpose of use in the sense of a negative use like a buffer zone around a hospital or an airport where one acquires land for the purpose of making sure nothing is done on it. That is clearly acquisition for a public purpose, but where the purpose of the acquisition is mere deprivation of the owner, as in the case of a fine or penalty then, in my respectful submission, section 51(xxxi) has nothing to say about it. It is not talking about that sort of acquisition, and for reasons which include the same reason as the reason why taxation does not fall within it, or the acquisition of railways from States under the express power to take that course.

The provision is designed to deal with particular types of acquisition, namely, when one acquires for any Commonwealth purpose under any of the other placita except perhaps taxation, property to be used for a purpose.  Even under the taxation placitum, 51(xxxi) would apply if one acquired land to be used as a tax office.  That would be different to acquiring property by taxation, of course.  It is simply not within the subject matter of the placitum read as a whole.  There is an American case which considers some of these issues ‑ ‑ ‑

GUMMOW J:   They have the word “taking”, have they not?

MR BENNETT:   Yes, they have, your Honour.  The case is Bennis ‑ ‑ ‑

KIRBY J:   This is on the question of forfeiture or penalty?

MR BENNETT:   Forfeiture, your Honour.  This is the case of Bennis v Michigan (1996) 516 US 442, and I hand up 10 copies to the Court. This is a case where the forfeiture not only operated against an innocent party but operated against an innocent party who was in a sense the victim of the crime.

This is a case where a Michigan law, which is set out on the third page of the document I have handed to your Honours, section 6000.3801 – your Honours see in the first column on that third page:

Any building, vehicle, boat, aircraft, or place used for the purpose of lewdness, assignation or prostitution or gambling . . . is declared a nuisance, . . . and all . . . nuisances shall be enjoined and debated as provided in this act –

Then the next section, in the middle of the column, an order of abatement is in effect an order of forfeiture.  In this case a husband used a car which he owned jointly with his wife for the purpose of an assignation with a prostitute and the State of Michigan forfeited the car, including, of course, the wife’s interest in the car, and that was ‑ ‑ ‑

GLEESON CJ:   A bit rough.

MR BENNETT:   Well, it was upheld, your Honour.  The relevant passage is commendably short.  It is on page 6 of the document your Honours have and it is page 452 of the report.  It is the paragraph beginning “Petitioner also claims”.  Do your Honours have that paragraph?

GLEESON CJ:   Yes.

MR BENNETT:  

Petitioner also claims that the forfeiture in this case was a taking of private property for public use in violation of the Takings Clause of the Fifth Amendment, made applicable to the States by the Fourteenth Amendment.  But if the forfeiture proceeding here in question did not violate the Fourteenth Amendment, the property in the automobile was transferred by virtue of that proceeding from petitioner to the State.  The government may not be required to compensate an owner for property which it has already lawfully acquired under the exercise of governmental authority other than the power of eminent domain.

In other words, they draw the same distinction that we draw, but with slightly different words, that the takings clause is confined to eminent domain situations, where one is acquiring property for the purpose of acquiring that property, not for the purpose of depriving the owner of it.

GLEESON CJ:   Well, just a minute.  I am not suggesting that this is important for the outcome of the present case but you cannot confine the constitutional protection contained in the words “on just terms” in paragraph 31 to cases in which the Commonwealth wants the property being acquired for its own sake.

MR BENNETT:   It does not need to be the Commonwealth, your Honour.

GLEESON CJ:   Or anybody wants the property being acquired for its own sake.

MR BENNETT:   It need not be the specific property because of the cases about money, cause of action and so on, but if one takes Smith v Australian National Line, for example, the beneficiary of the amendment to the plaintiff’s rights by the insertion of a limitation period was the tort defendant.

GLEESON CJ:   Yes, but that was not because there was any property that somebody wanted for its own sake as property.  This would give a very narrow operation to the guarantee if it only operated in cases where the Commonwealth or somebody else wanted, for example, to use property that was being acquired.

MR BENNETT:   Your Honour, in that case, which is probably the high‑water mark, the rights being acquired were in effect given to the tort defendant for the benefit of the tort defendant.  The purpose of the acquisition of those rights was so that the tort defendant would be benefited by them.  The purpose was not to deprive the tort plaintiff of the rights.  The purpose was to benefit the tort defendant.

GLEESON CJ:   In the case of taxation the Commonwealth wants the money for its own sake.

MR BENNETT: Taxation is an exception for a different reason, your Honour, and that is because taxation is one of the powers in section 51 which is said when read with 51(xxxi) to fall outside it. It would be inconsistent with a power to impose taxation that one could only impose it on just terms, which presumably would involve paying it back or giving direct benefits to the person who paid it. It would be simply inconsistent with the power and the particular, the taxation, prevails over the more general. The same would apply in ‑ ‑ ‑

KIRBY J:   It might be a very popular ruling by the Court.

MR BENNETT: It might be, your Honour, and it would be hard to find an advocate who did not have a conflict of interest too. If one takes the power in relation to placitum (xxxiii) which is always given as another implied exception when one reads section 51 as a whole, that is:

the acquisition, with the consent of a State, of any railways of the State on terms arranged between the Commonwealth and the State –

Clearly those terms do not have to be just under section 51(xxxi) because that power read with the other power clearly overrides it.

GUMMOW J:   But it is consensual.

MR BENNETT: Yes, your Honour, it is, but nevertheless, if it were to be argued that the terms had to be just terms because of placitum (xxxi), the argument would be rejected. That power has been referred to as an example of a power standing outside the breadth of 51(xxxi), and taxation is in the same category. We are not concerned with those powers here. In my respectful submission, what is important for present purposes is that taxation, like penalties and like forfeitures, the concept is simply inconsistent with the concept of just terms. One does not give just terms to a person who is fined. Maybe the fine should be just for other reasons but if one were giving section 51(xxxi) just terms, one would have to return the fine. The same with a forfeiture, particularly a forfeiture in relation to an innocent owner of goods. In my respectful submission, section 51(xxxi) has nothing to say about that.

GLEESON CJ:   A slightly different way of putting that would be that where a person is compelled by law to part with property as a sanction for conduct that the Commonwealth wants to prohibit or discourage, then there is an incongruity between that legislative purpose and any requirement about terms at all.

MR BENNETT:   Yes, precisely, your Honour.  So we submit that forfeiture stands outside it.  Now, the main authorities for that – I will not take ‑ ‑ ‑

HAYNE J:   Just before you go to that and staying with the decision in Bennis and looking for the moment at the dissenting opinion in Bennis, particularly at 459 and following, their Honours there identify three classes of case in which forfeiture has been upheld: pure contraband, proceeds and tools or instrumentalities that a wrongdoer has used in the commission of a crime.

MR BENNETT:   Yes.

HAYNE J:   Do any of the decided cases in this Court go beyond those three classes or types of forfeiture?

MR BENNETT:   Your Honour, can I just say this before I answer that question by way of preliminary answer, that the dissent seems to be discussing, as does the bulk of the majority decision, not the takings clause of the Fifth Amendment, but the more general prohibitions in the United States Constitution about due process and not suffering certain types of penalty without due process and so on.

KIRBY J:   Yes, they refer to the Eighth Amendment and the prohibition on excessive fines at 471.

MR BENNETT:   Yes, that is the area they seem to be discussing there rather than the – and that is why I took your Honours simply to that short paragraph at the end of the majority judgment.

HAYNE J:   I understand, and we can read the decision and be persuaded or not persuaded by the cogency of the reasoning in it, but I just want to understand whether the categories there identified by Justice Stevens would represent the limit of what the decided cases in Australia have treated as forfeitures standing apart from 51(xxxi).

MR BENNETT:   Well, your Honour, one could imagine other categories.  A forfeiture of goods which are dangerous because of quarantine laws or because of radioactivity.

HAYNE J:   That is pure contraband in the first category I would have thought, Mr Solicitor.  Can you take me to any case which goes beyond these categories?  I am not conscious of one.  I just want to be sure that I am ‑ ‑ ‑

MR BENNETT: No, I am not conscious of one where it has arisen, your Honour. But I do submit that forfeiture can arise in relation to areas other than criminal activity and quarantine is an obvious example. If a person comes into Australia suffering from some highly infectious disease, one might quarantine under federal law not only that person but that person’s luggage and clothing and so on, and one might forfeit it and destroy it if there was a danger under federal law. That would be a forfeiture as to which section 51(xxxi) would have nothing to say.

I think one of the cases referred to a sequestration order in a bankruptcy as an exception to section 51(xxxi), in a sense, the ultimate exception where all a person’s property is taken from the person and vested in someone else. But, of course, it is because bankruptcy is a separate power and one is not acquiring – it simply is not an acquisition of the type to which section 51(xxxi) speaks, and if it were, it would make nonsense of the bankruptcy power.

GLEESON CJ:   By hypothesis, section 51(xxxi) is speaking of acquisitions in respect of which it is possible to speak sensibly of just terms.

MR BENNETT:   Yes, that is so, your Honour.

GLEESON CJ:   Or, to put it more briefly, terms.

MR BENNETT:   One might under the weights and measures power after a conversion to metric measurements have provision for the forfeiture of weights used in shops which were of the old measurements.  These are sort of obscure hypotheses, but I simply give these examples to show that the concept of forfeiture need not be related to acquisition.  It can be related to deprivation and, indeed, usually it is a bright line distinction.

GLEESON CJ:   Well, health is probably your best example because if you had an outbreak of bird flu in Australia, no doubt the authorities would go around destroying all sorts of poultry, as is happening in Europe at the moment.

MR BENNETT:   Yes, that is a very good example, and if the poultry were taken away to be examined in laboratories before destruction, that would not make any difference.  The nature of the taking is just not the sort of taking that the section is talking about.

GUMMOW J:   That is the sort of category that Justice Gaudron and Justice Deane, is it, were talking about in one of these cases in 179 CLR, is it not?

MR BENNETT:   Yes.  Well, your Honours, I do not propose to take your Honours through the cases.  I was going merely to list them.  We have given your Honours the reference in the submissions.  The leading cases are Lawler (1994) 179 CLR 270, the Mutual Pools Case, Burton v Honan, and there is a recent case in the Supreme Court of South Australia which is probably closer to this case than any other one because it involves this Act, although it is not a decision of this Court, and that is the decision in Director of Public Prosecutions v Pirone (1997) 68 SASR at page 106.  There is a lengthy judgment by Chief Justice Doyle – not lengthy – there is a judgment by Chief Justice Doyle and there is a concurrence by each of the other justices who sat on the case, Justices Bollen and Duggan.

This involved an officer of the Federal Police and the constitutional point was raised. Your Honours see at page 112 the argument was put that it was an acquisition under section 51(xxxi) and not unjust terms and at point 5 of the page his Honour at the beginning of the paragraph says this:

There is a growing body of case law relating to s 51(xxxi) of the Constitution, and no doubt that body of case law will grow further. But there is one principle that is clear –

and he then quotes from Justice Brennan, as he then was, in Lawler:

“A law which imposes a penalty or sanction for breach of a provision prescribing a rule of conduct and which . . . is a law with respect to a head of power other than s 51(xxxi) cannot be classified . . . To place it within the s 51(xxxi) category would be to annihilate the penalty or sanction and thus to weaken, if not destroy, the normative effect of the prescription.

It then refers to Mutual Pools.

GUMMOW J:   I think the bird flu example would be within the reasoning of Justices Deane and Gaudron in Mutual Pools 179 CLR 155, which you just referred to, at 189 to 190. It would be:

a means for enforcing, some general regulation of the conduct, rights and obligations of citizens in relationships or areas which need to be regulated in the common interest.

Then they go and they give various examples.

MR BENNETT:   Your Honours, at page 113 his Honour sets out some of the arguments put the other way and they bear some resemblance to the arguments my learned friend has put.  Your Honours see it about line 5:

Heavy reliance was placed upon an absence of any connection between what is forfeited to the Commonwealth and the commission of the offence . . . Counsel pointed to the harsh effect of the law . . . could result in the loss of benefits or entitlements earned over many years before the offending occurred . . . is made after sentence has been passed . . . compensation has already been ordered and paid . . . 

All of this was put in support of a submission that these provisions could not be characterised as a law for the penalising of offences or for punishing offenders, and so could not be supported as such a law drawing support from a substantive head of Commonwealth power.

Echoes again of my learned friend’s submissions.  What we say is that the exception is broader than that.

It was further argued that the same matters . . . was disproportionate . . . 

It was also argued that this was a law with respect to the acquisition of property, and that that acquisition was not on just terms.

There was a concession that there were no just terms.  He then turned to the characterisation of the law and said at the top of page 114 at point 2 in the second full paragraph:

In my opinion these provisions can be described as laws imposing liabilities upon the members and staff of the AFP . . . in respect of breaches of the law by them.  The breaches of the law in respect of which the liabilities are imposed are breaches involving, relevantly, misuse of that person’s office in the AFP.

That is the same here except for paragraph (c) which, as I have said, is in a separate category.  Then he said that is within the executive power.  Here it is within the legislative power and what is ancillary to the legislative power.  There is a discussion of the general matters.  I simply commend to your Honours the three paragraphs beginning “As I have said”, “At a higher level of generality” and “In that respect”.  Those three paragraphs, in my respectful submission, put the position very clearly.  The provisions there are ultimately held to fall within 51(xxxix) by virtue of the management of the Australian Federal Police. 

There has been some discussion of what power the present law falls under. There are a number of ways that there is power to pass this legislation. One of course is section 48 in conjunction with section 51(xxxvi). That is the obvious one. It would also probably fall within section 51(xxxix) in conjunction with section 61 in relation to executive power, the payment of legislators possibly being part of executive power. The third way one could get it is section 51(xxxix) in its relation to legislative power. Again, it is incidental to legislative power to pay legislators and deal with their superannuation. Whichever of the three routes one goes, it does not matter very much. It is a provision under another head of power which involves an acquisition for the purpose of deprivation rather than an acquisition for the purpose of receipt.

KIRBY J:   What is that case where Justice Dixon said you cannot use other heads of power in section 51 to justify acquisition and thereby walk out of paragraph (xxxi) and that you have to read the section distributively and that you just cannot, as it were, excise paragraph (xxxi) in order to avoid its burdensome requirement?

MR BENNETT:   That is clear, your Honour.  Where the acquisition ‑ ‑ ‑

KIRBY J:   What was the case, do you remember?

MR BENNETT:   I think it was Schmidt v The Attorney-General 105 CLR 361, your Honour.

KIRBY J:   Yes, that is right.

MR BENNETT:   But, your Honour, all that is saying is this.  If one has a classic eminent domain acquisition, obviously that can be done for the purpose of any of the powers when the Commonwealth acquires property for government offices, a post office, a road or a lighthouse or anything else.

GLEESON CJ:   Well, you cannot acquire property from a trading corporation other than on just terms and then say that is a law with respect to trading corporations.

MR BENNETT:   No, that is so, your Honour, if the purpose was the acquisition, but if one said, for example ‑ ‑ ‑

KIRBY J:   I am just trying to reconcile that with your submission about taxation being excised and you can do all sorts of nasty things under the taxation power and just forget about paragraph (xxxi).  I am still playing with this idea of just taxation.  But take any other head of power ‑ ‑ ‑

MR BENNETT: Yes. Well, your Honour, it depends what one is doing under that head of power. If, for example, in order to avoid confusion between old and new memorandum and articles of association, the corporations law were to say when a corporation amends its articles or memorandum all copies of the old articles and memorandum shall be handed over to the ACCC, and the purpose of the law, let us assume, is to prevent confusion arising from copies of the former articles lying around, that would not be an acquisition under section 51(xxxi). The purpose is not to acquire; the purpose is to deprive. We put it very simply, that one exception to section 51(xxxi) is that it does not apply to acquisitions for the purpose of deprivation as opposed to acquisitions for the purpose of receipt.

GUMMOW J:   Is there any case that says that?

MR BENNETT:   No, your Honour.

GLEESON CJ:   That sounds a little over broad.

MR BENNETT: Well, your Honour, it is taking the examples – there is no example of which I am aware where there has been an acquisition which has been regarded as falling within section 51(xxxi) where it has been for the purpose of deprivation rather than the purpose of receipt.

GLEESON CJ:   But all you would need is a levelling government that wanted to take from the rich without necessarily giving to the poor.

MR BENNETT:   That would be a taxation power, your Honour, if that were done.  Also, of course, as has been said on many occasions, one does not test the scope of a power by taking extreme examples of its misuse and there are a number of cases where ‑ ‑ ‑

KIRBY J:   The problem is one of reconciling the principle that Justice Dixon expressed in Schmidt with the principle that you excise forfeitures and fines and penalties because to allow them to be only provided on just terms would undermine the very purpose of having forfeitures, fines and penalties.  How does one reconcile those two principles, that you are not able to just walk out of the requirements of paragraph (xxxi) by ‑ ‑ ‑

MR BENNETT:   If the sole purpose is deprivation, and that is a purpose which properly falls under another head of power, then the nature of it is necessarily inconsistent with the giving of just terms.

GLEESON CJ:   Can you not just say that is not relevantly an acquisition and the reason it is not relevantly an acquisition is because what the placitum is talking about is an acquisition to which terms, specifically just terms, may be relevant?

MR BENNETT:   Yes, your Honour.  That is another way of putting what I ‑ ‑ ‑

KIRBY J:   But in the word “relevantly” is wrapped up the problem.  It is, in a sense, stating the problem rather than solving it.  What is relevant?  That which I hold is enough to take you out of the section.  Why does it take you out of the section?  Because it is relevant.

GLEESON CJ:   It is just a short way of saying acquisition within the meaning of section 51(xxxi) of the Constitution.

MR BENNETT:   Yes, your Honour.  The word has a meaning because of the context.  The context is a context that talks of acquisition for a purpose and just terms.

GUMMOW J:   It need not be an acquisition from the Commonwealth.

MR BENNETT:   No, it need not be, your Honour, but ‑ ‑ ‑

GUMMOW J:   The Trade Practices Case established that.

MR BENNETT:   It can…..the extinguishment of a cause of action.  It can be a variation of a chose in action and so on.  All those things can be acquisitions but only where the purpose is the benefit of the acquirer, not where the purpose is detriment to the person from whom it is taken.

GUMMOW J:   Yes.  What you are saying depends upon the distinction between “taking” and “acquiring”, does it not?

MR BENNETT:   Yes, your Honour.  It is like buying and selling.

GUMMOW J:   The difference between the Australian provision and the American provision.

MR BENNETT:   There is a bright line one can draw because there is almost no case one can think of where there is both the purpose of deprivation and the purpose of receipt.  Indeed, States and Territories are often criticised where they are said to be using traffic fines or parking fines for the purpose of revenue raising rather for the purpose of enforcing a norm, and the reason for that is that it involves a confusion between the purpose of receipt and the purpose of deprivation. 

The only possible example, I suppose, where one might get confusion between the two is the example that was put to me a few minutes ago about law attempting total financial equalisation between all Australians but that, as I say, would be a matter of taxation, not a matter of acquisition and there would be other possible problems with such a law.

Whether or not one accepts the blanket distinction that I have drawn – and one need not accept it to accept my argument – forfeitures are clearly a category which has been held on numerous occasions to fall outside it and that is really as far as I need to go for the purpose of the first submission.

Now, in relation to the other submission we submit this, that I do not go to the extent which was put in some of the cases of saying that no acquisition of a federally conferred right can fall within placitum (xxxi).  I do not go that far but what I do submit is that where one has a scheme of regulation or of largesse or of any governmental purpose, which is inherently capable of frequent amendment and inherently one which may require frequent amendment, then it is an inherent characteristic of a right under such a scheme that it can be varied.

It is hard to define precisely what matters fall within that.  Peverill we know was one example.  That was a case where there was a scheme of Medicare benefits which was amended from time to time.  Would your Honours pardon me a moment?  It is ‑ ‑ ‑

GUMMOW J:   179 CLR 226.

MR BENNETT:   Sorry, what ‑ ‑ ‑

GUMMOW J:   You were taking us to Peverill, were you not?

MR BENNETT:   Yes.

GUMMOW J:   All these cases were decided on 9 March 1994.  There is four of them.  In a way, they all have to be read together.

MR BENNETT:   Yes.  Your Honours, if one looks at the context of this legislation, one sees that it is in a context where control of superannuation is the subject of amendment almost as frequently as the control of income taxation or industrial relations.  It is one of those Acts where ‑ ‑ ‑

GUMMOW J:   What about copyright?

MR BENNETT:   Yes, possibly – more so than copyright though, your Honour.

GUMMOW J:   That will send a few international shivers out, I would have thought.

HAYNE J:   This seems to be a principle that is predicated upon the propensity of our legislators to change the law.  That does not seem an especially stable legal principle.

MR BENNETT:   Well, your Honour, that is one way of putting it.  We would put it rather as on a type of complex government regulation which of necessity is going to involve regular amendment to keep it up to date.

HAYNE J:   What, to make it more transparent and more accountable, Mr Solicitor?  You have not dropped those words in yet.  They are the only two that are missing I think.

MR BENNETT:   Well, I have not yet, your Honour, but it is of interest when one looks at legislation like the Superannuation Act 1922 which applied to all Commonwealth officers. When one looks at the tables at the back of that and one sees the frequency with which it was amended, often several times a year, prior to the enactment of the Crimes (Superannuation Benefits) Act ‑ ‑ ‑

GUMMOW J:   But was the Parliamentary Contributory Superannuation Act 1948 the first one, or was it dealt with elsewhere before?

MR BENNETT:   As far as we have been able to find, that was the first one, your Honour.

GUMMOW J:   Yes, I thought so.  Is there any precursor of the Crimes (Superannuation Benefit) Act 1989?

MR BENNETT:   Not as an independent Act, your Honour, but there was ‑ ‑ ‑

GUMMOW J:   Was there anything in the Crimes Act before ‑ ‑ ‑

MR BENNETT: No, your Honour, not so far as I am aware, but there is a provision in the – yes, section 22 of the Parliamentary Contributory Superannuation Act 1948 provided for a forfeiture if a member became subject to the disabilities in 44 placitums ‑ ‑ ‑

GUMMOW J:   Yes, Mr Kennett mentioned that I think.

MR BENNETT:   Yes.  Well, the significance of that is that the Crimes (Superannuation Benefits) Act was not something totally out of the blue. There was already a partial achieving of that result with the anomaly that it only applied where the conviction occurred while the person was a member. If one looks at it that way, all this Act did was just remove a little anomaly that someone discovered, namely, that section 22 only applied on a disqualification and did not apply to a conviction after one had ceased to be a member for conduct while one was a member. All the Act was doing was fixing up a little anomaly, filling in a little gap.

Now, that is really part of the submission that where one has something like legislative superannuation schemes, that is something which inherently is liable to frequent variation. In the document we have handed up we have referred to one amendment which had the effect of reducing in a blanket way all government pensions by two-fifths. That was section 24 of the Financial Emergency Act 1931. So what we get from that is that it was well understood prior to and in 1948 that statutory superannuation schemes may be the subject of legislative amendment from time to time. It is interesting the PCS Act itself has since been the subject of frequent amendment. That is just an application of what I am saying, although it is, of course, after the relevant event.

We have listed in paragraph 5 of this additional document a number of cases which talk about entitlements which are inherently subject to modification.  One can draw a distinction between different types of statutory rights in this area.  There is a distinction, for example, between rights in a mining lease on the one hand, a right to explore on the other, or fishing rights of various kinds under complex fishing schemes.  There are all sorts of areas which are, of necessity, subject to schemes which may need to be varied from time to time for a variety of reasons.  Where one has a benefit under one of those schemes, the benefit is inherently subject to such variation.

Let me put that a slightly different way and do it by working backwards in time.  There can be no doubt that any money accruing to Dr Theophanous after the passage of this legislation in 1989 was, on any view of it, money or accruing entitlements which were subject to the scheme as a whole, which included the Crimes (Superannuation Benefits) Act.

GUMMOW J:   Yes, I can understand that, but Mr Kennett points to the previous service as a Member of Parliament before 1989.  Then he seems to be saying there was some relevantly accrued rights that were protected by 51(xxxi) at 1989 and somehow they are carried forward and vitiate what happened many years later.

MR BENNETT:   Yes.  We put that on two bases, your Honour.  What we say is that as to what accrued after 1989 there cannot be any doubt that this principle applies because after 1989 part of the scheme ‑ ‑ ‑

GUMMOW J:   You have to read all the Acts together.  You have to read the Acts together.

MR BENNETT:   Yes, your Honour.

GUMMOW J:   That is what you are saying.

MR BENNETT:   Yes, for that reason, anything that accrued after 1989 was inherently subject to the existing legislation that was passed in that year.

GLEESON CJ:   If after 1989 you had asked a lawyer what are Dr Theophanous’ rights in relation to parliamentary superannuation, it would have been an inaccurate and incomplete answer that ignored the operation of this statute.

MR BENNETT:   Yes, precisely, your Honour.  In relation to the rights before that date, that is where we rely on the propensity of this sort of legislation, this sort of scheme, to be amended from time to time.  Various words can be used but it is, we would submit, inherently subject to variation.  The fact that the particular variation has not occurred yet does not mean that the rights you have are not subject to it.  They are contingent rights or, perhaps more accurately, analogous to executory limitations at common law, but they are rights which in an overall scheme, the overall scheme being what Parliament legislates from time to time in relation to schemes of this type.

GUMMOW J:   Would it be open to make in the County Court, on this application which I understand is pending, a superannuation order that somehow limited its effect to the pre-1989 situation of Mr Kennett’s client?

MR BENNETT:   That would be the result, your Honour, if this Court were to hold that there was pro tanto invalidity in relation to rights accruing before and after that date and then the order that would be made would no doubt require the Court to calculate the pro tanto entitlement if that were the result.  What we submit is that there is no doubt we win on what is after that date and, for the reasons I have submitted, we win on what is before that date.

GLEESON CJ:   How long do you think you will need to complete your submissions?

MR BENNETT:   Not very long, your Honour.  I would think less than 10 minutes.

There are various dicta in the cases discussing the sorts of schemes which can be dealt with this way.  We have listed the cases in paragraph 5 of the supplementary document your Honours have.  They are primarily WMC, Georgiadis, Davey, Bienke, Allpike and Smith.  All those cases – and the passages we have extracted from them and specifically referred to ‑ draw this distinction about entitlements which are inherently subject to modification.  There is no doubt, of course, that if a right is expressly subject to modification then there is not acquisition if the modification occurs, but we submit these cases establish that if there was an inherent subjection to modification that applies. 

Now, it may not be easy to define precisely when a right is inherently subject to modification.  The nearest one can get to it is to say where the right is part of a regulatory scheme of a type which is likely to require frequent variation as circumstances change and as attitudes change from time to time, then that is a right of the relevant type.  The examples illustrate that very clearly, the fishing schemes – a number of cases refer to pension schemes.  Some of them, of course, refer to voluntary pensions but there is no reason for them to be so confined.  A scheme involving complex pension calculations which is going to continue for many years after a person ceases to be an employee is something which may well be subject to variation for a variety of circumstances.  We rely on the passages I have provided.

There were also some American cases we have given your Honours the references to where a similar view has been taken in relation to pension schemes.  United States v Teller 107 US 64 (1882) at 68 is quite a good example. I will not take your Honours to it. Allpike v The Commonwealth (1948) 77 CLR 62 in this Court is a neat example. That is a case where military back pay was being dealt with and Commonwealth legislation provided a facility under which it could be paid to persons other than the estate. That was a case where a soldier left his entire estate to a female acquaintance who was no relation and the Commonwealth officer under powers under the Commonwealth Act ordered that the military back pay and allowances and so on be paid to the deceased’s brothers and sisters rather than to the sole beneficiary under the will. That was challenged under section 51(xxxi) and the approach taken was that that sort of scheme

was one that could be varied from time to time and it was part of the regulation of the payment of military officers to be able to determine who the payment went to after death and that was within the defence power and not the sort of acquisition to which section 51(xxxi) applied. There is some dicta there about pensions which is of value.

For those reasons we would submit that there is a second factor which takes this case outside section 51(xxxi), the first factor being the fines, penalties, et cetera exception, it is not the type of thing that falls within the section, the second being that there can never be an acquisition of property if the property is defeasible and the defeasance occurs. That applies to cases where the defeasibility is implied and may be legislative because of the nature of the statutory scheme under which it is paid.

Those are our submissions, if the Court pleases.

GLEESON CJ:   Thank you, Mr Solicitor.  Yes, Mr Kennett.

MR KENNETT:   Your Honours, my learned friend made the submission that there is a sufficient connection here if the subject matter of the offence falls within a Commonwealth head of power.  This was in answer to my proposition that if a law is to be justified on the footing that it is a penalty, it needs to be a penalty for a breach of a Commonwealth norm.  My friend then gave examples of ways in which the Commonwealth might frame a norm of conduct by reference to – or incorporating by reference a norm of conduct under a State law.  One cannot deny that the Commonwealth can do that within its heads of legislative power, but my complaint here is that the Commonwealth has not done that.  The Commonwealth has imposed a consequence indifferently on breaches of common law, its own laws, State laws and Territory laws.

HAYNE J:   In the case of a Member of Parliament, can you put forward any case of corrupt use of office which would not constitute a crime against the law of the Commonwealth?  I should say to you, I cannot at the moment think of an example.

MR KENNETT:   It would, I think, depend how broadly one understood the term “corrupt”.  There may be cases of exercises of one’s power as ‑ ‑ ‑

GUMMOW J:   What we have to do in this case, after all, is deal with this application presently pending against your client at the County Court, do we not, under section 17?

MR KENNETT:   Yes.

GUMMOW J:   We know the crimes on which he was convicted and which he is still standing in peril of prosecution.  They are 29D of the Crimes Act and 73A Crimes Act.  Section 29D is the old defrauding the Commonwealth section - it has been there forever - and 73A is specifically linked to Members of Parliament.  Well, they are pretty obviously corruption offences within the definition in the Crimes (Superannuation Benefits) Act.

MR KENNETT:   They are all Commonwealth offences, your Honour.  I cannot get around that.

GUMMOW J:   Your client is not within the wider net of section 7 which includes apprentices.  He is squarely in 2(a), a member of the Parliament.  So that is the gateway into it all.

MR KENNETT:   Yes.

GUMMOW J:   One follows that path.  Where is there any invalidity in respect of your client, which is what his standing is to come here?

MR KENNETT:   Well, this aspect of my complaint about the scheme, your Honour ‑ ‑ ‑

GUMMOW J:   You want to put an end to this pending application in the County Court.

MR KENNETT:   Yes, but I want to do so by convincing your Honours that the scheme as a whole goes beyond what is permissible for the Commonwealth.  One of the ways in which I say it does that, albeit not a way that is reflected directly in the case of my client, is that it draws the net too widely in terms of the norms of conduct that it purports to uphold.  There is not a stated or identified Commonwealth norm of conduct for which these consequences are prescribed as the penalty.  That may be what my submission comes down to.

My friend placed heavy emphasis on the distinction between acquisition for the sake of the acquirer on the one hand, and acquisition as or for deprivation on the other.  There are, of course, a string of modern cases in which this Court has held that the extinguishment of a cause of action – a chose in action – can constitute an acquisition of property, notwithstanding that neither the property itself nor any equivalent of it is bestowed on anybody else or used by anybody for any purpose.

The most recent example is Smith v ANL.  Another example of course is Georgiadis’ Case.  Now, my friend points out of course that these cases all involve the conferral of a benefit on the acquirer and that, according to the modern jurisprudence, is what gives rise to the acquisition.  Acquisition consists in these cases in the extinguishment of an interest being mirrored by the conferral of some correlative benefit on somebody else.

This is not a matter, I would submit, of purpose and certainly not a matter of the purpose to which the property acquired is being put. Here one does have the corresponding benefit, assuming there is an acquisition, on the Commonwealth and it cannot be taken out of section 51(xxxi) by saying it is a mere deprivation.

There was some discussion between your Honour the Chief Justice and my learned friend about a class of acquisitions – or at least of the consideration that section 51(xxxi) applies to acquisitions that admit of just terms, acquisitions in relation to which just terms is not an incongruous or irrelevant concept. That is one of the bases upon which the exceptions to the placitum have been explained. There is some discussion I think in the joint judgment of Justices Deane and Gaudron in Mutual Pools, also a lengthy discussion by Justice McHugh in Airservices. Because the paragraph is framed as a legislative power, it operates as a guarantee to the extent that it confers power. One would have to accept that there are classes of acquisition – taxes are one – where the notion of just terms would be incongruous. The laws cannot be taken to be authorised by section 51(xxxi) and are thus not part of the area carved out of other powers by the subsection.

Penalties, forfeitures are other examples but of course, as was observed in Airservices by Justice Callinan and also by the Chief Justice and Justice Kirby, it is not enough to apply the label of a forfeiture to something; one needs to go behind it and look at whether this really is an acquisition of a nature which does not admit of just terms.  That, with respect, is the issue that we have been seeking to agitate today. 

I will not go back of course over my submissions in-chief, but the point to a large extent of those submissions has been to put the proposition that this law cannot be characterised for relevant purposes as a penalty for an offence.  It must be seen as having a purpose beyond that or different to that, possibly the purpose of severing contact between people who have been engaged in corruption and the Commonwealth, but that itself is not a purpose I would submit that makes just terms irrelevant or incongruous.  It is a purpose which might be less aptly or effectively or efficiently pursued, subject to a right of just terms but that, with respect, is a consequence of having a constitutional guarantee.  It does not make things inefficient from the point of view of the legislature.

The final point in reply I think is this.  In relation to the defeasibility said to arise from 1989 by the introduction of the Crimes (Superannuation Benefits) Act into the statute book, my learned friend put it that as to rights accruing after 1989 his argument meant that as to those rights there could be no acquisition when the superannuation order comes to be made.  I have said in-chief why I do not accept that, but assuming that to be right for the moment, my friend goes on to say as to the rights accruing before 1989 he would rely on the more general proposition of inherent defeasibility which he also advanced.

Now, the consequence of that, your Honours, is this.  If the argument of general defeasibility is not accepted –and I submit it should not be – then one seems to have here a bundle of rights, some of which are being acquired and some of which are not, because they are inherently defeasible.  But it would seem to be very difficult, I would submit, to sever the operation of a superannuation order in relation to those two bundles of rights, partly because there is simply no scope in the Act – and this really is my client’s complaint about it – there is no scope in the Act to distinguish in the making of an order between different periods of service to frame the order to meet the circumstances of the case.

The order is all or nothing and if it operates in part to bring about an acquisition of property then it must follow, I would say, that it is wholly beyond power and the statute which authorises it is beyond power.  Your Honour, those are the matters I wanted to raise in reply. 

I have been instructed to seek an amendment of the case stated along the lines that I touched on just after lunch.  I am not in a position to formulate a precise amendment at the moment but ‑ ‑ ‑

GLEESON CJ:   You can put that application in writing within five days and your opponents, if they want to say anything about it, can have another five days to comment on it.

MR KENNETT:   Thank you, your Honour.

GLEESON CJ:   Very well.  We will reserve our decision in this matter and we will adjourn until 10.15 tomorrow.

AT 4.15 PM THE MATTER WAS ADJOURNED