High Court upholds validity of ban on developer donations to political campaigns

McCloy v New South Wales [2015] HCA 34

On 7 October 2015, the High Court upheld the constitutional validity of NSW laws which imposed caps on political donations, banned donations from property developers and prohibited indirect campaign contributions. The Court held that the laws did not impermissibly burden the implied freedom of political communication.

Facts

Property developer and former Newcastle mayor Jeff McCloy challenged the validity of three related sets of provisions in the Election Funding, Expenditure and Disclosures Act 1981 (EFED Act). The relevant provisions:

• imposed caps on political donations;
• banned donations from property developers; and
• banned indirect campaign contributions (for example, providing office accommodation or vehicles for election campaigning).

The High Court challenge was mounted by Mr McCloy and two corporations of which he was a director. Mr McCloy had contributed money to political campaigns during the 2011 state election. Under the EFED Act’s definition of ‘property developer’, however, Mr McCloy was banned from making political donations as a ‘close associate’ of the corporations he controlled.

The plaintiffs challenged the validity of the three sets of provisions on the same ground — that they impermissibly burdened the Constitution’s implied freedom of political communication.

NSW accepted that the EFED Act indirectly burdened political communication by restricting funding available for political communication. The critical question was whether that burden was justified.

Decision

The High Court unanimously upheld the validity of the donation caps and the ban on indirect campaign contributions. Six judges (French CJ, Kiefel, Bell, Keane, Gageler and Gordon JJ) also upheld the validity of the ban on property developer donations.

Donation caps

In relation to the general donation caps — which apply to all donors, not just developers — the plaintiffs argued that donors were entitled to ‘build and assert political power’ by paying for access to politicians.

The joint judgment (French CJ, Kiefel, Bell and Keane JJ) rejected this argument. They emphasised the difference between an individual right, like that enshrined in the First Amendment of the US Constitution, and the implied freedom, which is a ‘constitutional restriction on legislative power’.

The plaintiffs also argued that the caps lacked a legitimate purpose. They argued that their aim was not to prevent corruption, but simply to limit an individual’s ability to make large donations in pursuit of political power. According to the plaintiffs, this purpose was incompatible with a system of representative government.

Again, the joint judgment disagreed. Their Honours emphasised the importance of creating a ‘level playing field for those who wish to engage in electoral discourse’. Not only are donation caps compatible with a system of representative government — they ‘preserve and enhance it’.

The ban on indirect campaign contributions was essentially an anti-avoidance provision, and was held valid for the same reasons as the donation caps.

Property developer donations

The plaintiffs argued that the developer ban was based on the fear that property developers were more likely to make corrupt payments than others. They argued there was ‘nothing special about property developers’ justifying that concern.

In rejecting that submission, the joint judgment highlighted NSW’s recent history of corruption in the land development sector. They noted that watchdog bodies including the state’s Independent Commission against Corruption had published eight adverse reports concerning developers since 1990.

The joint judgment emphasised that, while a proportionality assessment does not entitle the court to substitute their views for those of Parliament, it necessarily involves a value judgment. When considering the impact of legislation on the implied freedom, courts must examine the Act’s ‘public benefits’.

In this case, public interest in removing the risk and perception of corruption justified the restriction on communication.

Justice Nettle dissented in relation to the property developer donations. His Honour held that the ban arbitrarily discriminated against property developers and deprived them of the ability to participate in the political system.

Commentary

The High Court emphatically concluded that donation caps, far from being an impermissible burden on political communication, enhance representative democracy by creating a level playing field. In doing so, the joint judgment reiterated that the equality of opportunity to participate in political life — regardless of wealth or influence — is part of the democratic system guaranteed by the Constitution.

It is also interesting to note the significant role NSW’s recent history of corruption had on the outcome. The High Court appears to have effectively taken judicial notice of corruption in land development, at least in NSW.

More broadly, this case is a useful reminder that a Constitutional implied right is not akin to an individual right, but rather a ‘constitutional restriction on legislative power’.

The full judgment can be found here.

Louis Andrews is a legal researcher for the Human Rights Law Centre.