Common(wealth) Knowledge #11: Conflicts of interest in the government
Reports have emerged surrounding 3 Labor ministers this week.
On August 30, it was revealed that three Labor ministers - Bill Shorten, Kristy McBain, and Tim Ayres - may have violated the government’s ministerial code of conduct by owning shares in companies. This is a concern because it could potentially be a conflict of interest, and thus affect any decisions they make or how they vote.
So, in this edition of Common(wealth) Knowledge, we’re going to assume the worst and ask ‘what happens when a financial conflict of interest compromises a ministerial decision?’
Before starting, it’s worth pointing out that this is not a common occurrence, although it happens more times than it should, with the number of times that it should happen being zero. However, conflicts of interest also arise at other levels of the Executive government, and the principles there generally also apply to Ministers.
Ministers have responsibilities for making decisions that fall under their ministerial portfolios. Laws passed by Parliament will delegate decision-making authority to the ‘Minister administering the Act.’ If an Act gives power to several Ministers, it will specify which Minister/s it gives each power to.
However, there is too much work for a Minister to do on their own. So legislation will either delegate authority to the Department’s staff or will give the Minister the discretion to choose whether or not to delegate tasks to staff. In Section 451(2) of the Biosecurity Act 2015 (Cth), the Act allows biosecurity officers, who are staff in the Department of Agriculture, to carry out certain duties, as well as the Minister. As we shall see, the jobs carried out by staff may mean that the impartiality of the Minister’s decision is compromised by the conflicting interests of departmental staff, not just their own interests.
However, some decisions are simply too important to be left to the staff, so Parliament will give the power to “the Minister personally,” to prevent any delegation. In particular, decisions involving national security or equally impactful matters, such as the emergency powers described in Section 474 of the Biosecurity Act, are left to the Minister.
The only exception to this is that the High Court of Australia, in Re Patterson; Ex Parte Taylor (2001), ruled that Parliamentary Secretaries, also known as Assistant Ministers, can exercise those powers.
With this in mind, Ministers must be impartial, and cannot be seen to be biased. In addition, they can’t make decisions simply so that they would receive a personal or financial benefit. A classic example of the law’s emphasis on impartiality was seen in Re Macquarie University; ex parte Ong (1989), where the Vice-Chancellor was biased against the Head of the Law School, and then used their position of power to have the professor dismissed, effectively acting as judge and prosecutor.
There are two types of bias. The first, and most obvious, is actual bias. This is where there is concrete proof of bias, as was the case in Re Macquarie University. According to Minister for Immigration and Multicultural Affairs v Jia Legeng (2001), this means that the decision-maker’s mind is already made up; no amount of evidence will change it.
The second, and more common, type of bias is ‘apprehended bias.’ The test for it comes from Ebner v Official Trustee in Bankruptcy (2000), at , and says “a judge [or another decision-maker] is disqualified if a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial mind to the resolution of the question the judge is required to decide.” McHugh J said in Hot Holdings v Creasy (2002), at , that “a court can only infer bias or the reasonable apprehension of bias after examining the nature of the pecuniary [financial] interest that the judge has and how the outcome of that might affect that interest.”
In plain English, it is necessary to identify what the alleged interest is, and then demonstrate that there is a sufficient connection between that interest and the possibility of a biased decision. The standard for this is whether it is ‘reasonably possible’ that the decision-maker will be biased. Effectively, this means that it must be possible to connect the dots without seeming like a conspiracy theorist.
PICTURED: An unsuccessful attempt at proving ministerial bias
Of course, the problem is that it’s quite hard to prove the connection. However, its made easier by the objective standard of ‘reasonably possible’ from the perspective of a ‘reasonable person,’ which is lower than the ‘beyond all reasonable doubt’ standard in criminal matters. As Deane J put it in Papatonakis v ATC (1985), it is decided from the perspective of the ‘person on a Bondi tram,’ not a judge.
PICTURED: A rare picture of reasonable people from Bondi not on trams
Hot Holdings demonstrates the difficulty of proving an apprehension of bias. As several mining lease applications were lodged with the WA government at about the same time, a ballot was held to determine the order in which the government should consider the applications. Hot Holdings was drawn first, Mark Creasy was drawn second. The Mining Warden, therefore, recommended that the Minister for Minerals and Energy give priority to Hot Holdings. At the same time, the Minister sought advice from his departmental staff, who said that there was no reason to act contrary to the Warden’s recommendation.
A senior staff member, Mr Miasi, had shares that would benefit from Hot Holdings being successful. Once the relevant departmental staff had met and made their decision, Mr Miasi made a draft minute of the meeting’s outcome, which was finalised by another official. The Minister was not aware of his shares.
The High Court decided 6:1 that there was no reasonable apprehension of bias. Gleeson CJ, at , pointed out that the Minister did not know of Mr Miasi’s interests, so could not have been “influenced by a desire to” advance Mr Miasi’s interests. All 6 judges agreed that Mr Miasi’s minimal role in the process, and the fact that he wasn’t involved in making the decision, meant that there wasn’t a sufficient connection between his interest and the possibility of a biased decision.
Mr Phillips was another senior official, who was also alleged to have “strengthen[ed] the suspicion” of bias because he was involved in making the decision and his son had shares in a company that would benefit from the decision to favour Hot Holdings. However, as Gleeson CJ observed, at , to claim that this meant Mr Phillips had financial interests was “not reasonable.”
Only Kirby J disagreed, as he often does, and at  said that the other judges were wrong, because “the appearance of integrity has been undermined, whatever may have been the actuality, … [due to] the participation of officials who had known but undeclared personal interests.”
It appeared that the test from Hot Holdings was that the determining factor was the degree of involvement of the staffer. This was tested in Wilderness Society of WA (Inc) v Minister for Environment (2013). Here, the Western Australian Supreme Court invalidated biased decisions arising from pecuniary interest. The Minister for State Development wanted to establish a natural gas processing plant in the Browse Basin. Members of the Environmental Protection Authority carried out an investigation and gave their recommendation to the Minister for Environment that it be carried out. After reading the report, the Minister agreed, and so the project was approved.
However, two EPA members had shares that would benefit from green-lighting the project, and so the court invalidated the recommendations and the ministerial green-light, as the connection was sufficient to prove an apprehension of bias. Unlike in Hot Holdings, the staff members played a much more influential role in the decision-making process. As the later decisions were based on their recommendations, they were also tainted by this bias.
Although it’s not always possible to prove bias, some mechanisms allow people to bring their complaints against decision-makers for judicial review and seek justice. In addition to common law, the High Court has judicial review powers that are enshrined in Section 75(v) of the Australian Constitution. Furthermore, the Commonwealth Parliament has also passed the Administrative Decisions (Judicial Review) Act 1977 (Cth) and established the Administrative Appeals Tribunal. Each state has also established its own Tribunal. Queensland, Tasmania, the Australian Capital Territory, and Victoria have all passed judicial review legislation.
Where people have been wronged by decision-makers, the courts have the power to invalidate decisions and require them to be made again. And, hopefully, this time around they will be made correctly.
Stuart Jeffery is a freelance researcher & digital editor for 6 News. His views on personal social media pages are his & his only, and do not reflect the views of 6 News or our journalists. He abides by 6 News' editorial standards relating to fairness & accuracy.
Sign up to our new free newsletter to catch up on all our original reporting you may have missed & to read the latest from the editor - click here.
Help support unbiased journalism & keep us independent: donate just $4 a month on Patreon & receive exclusive benefits.
Want to inform others? Share the link to this story on social media & with your family & friends using the buttons below.
Re Macquarie University; ex parte Ong (1989) 17 NSWLR 113 (unfortunately not available to the public).