High Court battle looms for Allan over electoral funding laws

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High Court battle looms for Allan over electoral funding laws

By Chip Le Grand

Inaction by Premier Jacinta Allan on a pledge to consider overhauling electoral laws is likely to trigger a High Court challenge by independent candidates who say the rules create an unconstitutional constraint on political communication.

Correspondence seen by this masthead between the premier and lawyers for a group of independents who unsuccessfully contested the 2022 Victorian election reveals the candidates, who say the rules limit their fundraising and restrict their ability to fairly campaign, have run out of patience.

Former judge Ron Merkel, SC, has been briefed to represent the group of independent candidates.

Former judge Ron Merkel, SC, has been briefed to represent the group of independent candidates.Credit: Joe Armao

It comes after Allan promised to consider changing the laws before the next state poll – due in 2026 – following the government’s own review that demanded changes to level the playing field.

The candidates’ demand for the government to act by November was not met, leaving litigation as the likely next step in a high-stakes dispute.

One of Australia’s leading practitioners of public and administrative law, former Federal Court judge Ron Merkel, SC, has been briefed to make the independents’ case, which is being funded by Climate 200 and other donors.

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University of Sydney constitutional law expert Anne Twomey said the High Court had consistently taken a dim view of laws that, in its judgment, unfairly tilted an electoral contest.

“The High Court has previously struck down the validity of laws that disproportionately favour incumbents in relation to elections,” Twomey said.

“On this basis, a challenge to the Victorian law about nominated entities has good prospects of success.”

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The dispute centres on a carve-out from Victoria’s tightly capped campaign donation laws that allows the three major parties – the Liberals, the Nationals and the ALP – to access unlimited campaign funds from so-called “nominated entities” – trusts that control legacy assets such as property and shares.

Although the maximum political donation to any party or candidate is $4670 over Victoria’s four-year electoral cycle, this limit does not apply to funds transferred by nominated entities into the campaign accounts of the major parties. There is also no limit on total campaign expenditure.

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The laws grandfather this financial advantage by preventing political parties or independent candidates from establishing their own nominated entities after 2018 – the year the laws were introduced under former Labor premier Daniel Andrews with support from the Greens.

The biggest losers under this arrangement at the 2022 state election were teal candidates unable to access large donations from the Climate 200 group convened by Simon Holmes à Court. That money helped bankroll the federal electoral success of Monique Ryan in Kooyong and Zoe Daniel in Goldstein.

In the four years leading up to the 2022 Victorian state election – the first in which donation caps were in place – the Victorian branch of the Labor Party received $5.64 million from its nominated entity, Labor Services & Holdings, and the Victorian Liberal Party received $2.7 million from its nominated entity, the Cormack Foundation.

The nominated entity of the National Party in Victoria, Pilliwinks Pty Ltd, supports the party’s political activities by providing financial loans. In its most recent annual return to the Australian Electoral Commission, Pilliwinks listed a $901,427 debt owed by it to the party.

Melissa Lowe is one of the independent candidates challenging the validity of Victoria’s electoral laws.

Melissa Lowe is one of the independent candidates challenging the validity of Victoria’s electoral laws.Credit: Eddie Jim

Kiera Peacock, a lawyer representing four independent candidates from 2022 – Sophie Torney, Melissa Lowe, Nomi Kaltmann and Paul Hopper – wrote to Allan in July urging the government to remove the nominated-entity exception.

This came after a government-commissioned independent review of electoral laws recommended an end to the exception for nominated entities.

Peacock’s eight-page letter sets out the arguments that would frame the likely High Court case.

She said the nominated-entity provision was “blatantly designed to serve the established major parties” and that the exception could be removed from the electoral laws without compromising their stated purpose – to improve the integrity of the electoral system and reduce the influence of private donations.

Nomi Kaltmann ran as an independent for the seat of Caulfield at the last state election.

Nomi Kaltmann ran as an independent for the seat of Caulfield at the last state election. Credit: Eamon Gallagher

“The exception is structured so that no other political participant has access to the same regime as these three major parties,” wrote Peacock, a political law specialist and member of the Climate 200 advisory council.

“In a system which has strict donation caps, this has the potential to provide a significant financial advantage to the three major parties against any independent candidate, minor party or new political entrant. Such a law is an impermissible burden on the implied freedom of political communication.”

For more than 30 years the High Court has held that the Constitution provided an implied freedom of political communication.

In a 2012 speech, Ron Merkel explained that although laws can limit this freedom, they are governed by a principle of proportionality. Governments must demonstrate that laws restricting political communication are suitable, necessary and adequately balanced.

In her letter to Allan, Peacock makes clear that a High Court challenge to Victoria’s electoral laws is likely to turn on whether the laws are adequately balanced.

“Our clients are strongly of the view that the law does not strike an adequate balance,” she said. “It creates an unconstrained pool of money which is available to the political campaigns of certain political parties but not to their opponents.”

In her response, Allan said her government was considering the recommendations of the Electoral Review Expert Panel and a parliamentary inquiry into the conduct of the last state election, which also called for the nominated-entity exception to be scrapped.

“The government is carefully considering the recommendations in these reports, as well as recommendations in other reports relating to the Act,” the premier wrote in a letter dated October 10.

“The government will use best endeavours in accordance with the Act to progress electoral reforms recommended by the expert panel ahead of the 2026 Victorian state election.”

Premier Jacinta Allan.

Premier Jacinta Allan.Credit: Simon Schluter

In response to questions from this masthead, Allan did not provide further detail on what work had been done to progress electoral law reform. A spokesperson said the government would “respond in due course”.

In her most recent letter to Allan on October 30, Peacock set a deadline of the parliamentary sitting week starting November 12 for the government to introduce what the independents describe as straightforward amendments.

“Failing that, our clients intend to proceed with filing an application in the High Court seeking to have the provisions declared invalid.”

The independents are expected to file their application before the end of this year.

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