13 August 2008

Nine to Noon: Winston Peters and the alleged improper gifts or donations

> RadioNZNat: "NineToNoon: Legal" A little belatedly, below is a post setting out some the background information to my discussion with Kathryn Ryan - along with some relevant references. Background The big political and public law issue of the last month has been the allegations against Winston Peters in relation to the allegations about non-declaration of donations or interests in trusts, potential conflicts of interest, and so forth. While the nature of the allegation themselves are interesting, whether there has been any impropriety will depend on facts that have not yet been ascertained or established: - complaints from Copeland and Hide have been referred by the Speaker to the Privileges Committee; - the Serious Fraud Office is considering investigating a complaint made to it. Of course, we'll need to await the outcome of various enquires before we pass judgement on merits of those allegations, ie who is right or wrong. There's two point I want to focus on arising from the broader context of this saga, particularly in relation to the Owen Glenn donation: - first, the nature of the ministerial office and the principles that regulate ministers in relation to such matters – we've heard some allegations that Peters may have breached the Cabinet Manual; - secondly, the role of the Privileges Committee in investigating an MP about such allegations. Where do we start? What's this Cabinet Manual and what's its relationship to Ministers. There are a couple of hurdles to jump through before we get to the Cabinet Manual. The starting point is the special role that Ministers of the Crown occupy. The position is recognised in section 6 of the Constitution Act: "Ministers of Crown to be members of Parliament (1) A person may be appointed and may hold office as a member of the Executive Council or as a Minister of the Crown only if that person is a member of Parliament." That is, what we have is called a parliamentary ministry where our ministers are drawn from our Parliament. When we speak of the collective of ministers, we have two groupings, one formal, one informal. The Executive Council is the formal body charged with advising the Sovereign or Governor-General about how their power should be exercised. This Executive Council is formally constituted under Letters Patent (instruments of the Crown). It's a different body to Cabinet, although most of the members are common to both. All ministers are members of the Executive Council but not all ministers are members of Cabinet. Cabinet is actually the engine-room of government where crucial decision are actually made, but in some cases where those decisions need to be given effect to by the Sovereign, the advice is transmitted to the Sovereign via the Executive Council. Rather oddly, Cabinet is a creation of convention and not recognised in any legal instruments. Ministers are appointed by the Sovereign / Governor-General on the advice of the Prime Minister. (I'm avoiding the significant constitutional question and conventions about who is entitled to appointed Prime Minister! I'll post on that closer to the election.) As we know, Winston Peters is in the unusual class of ministers who is a minister outside Cabinet. That is, a member of the Executive Council but not Cabinet. Importantly, Ministers outside Cabinet have the same role, duties, and responsibilities as Ministers inside Cabinet. For example, they're bound by the principle of bound by the principle of collective responsibility that applies to Cabinet, even if they aren't formally part of Cabinet. They do not attend Cabinet, but – with the agreement of the Prime Minister – may attend for particular items relating to their portfolio interests. What are the rules and principles that govern Ministers and Cabinet? The rules and principles are contained in a really important document that has been mentioned quite a bit over the last few weeks: The Cabinet Manual. The Cabinet Manual sets out some of the key constitutional and administration principles and procedures of Cabinet government. It an important source of our constitutional authority and forms part of our (unwritten or customary) constitution. It covers a wide range of topics, such as: - the role of the Governor-General; - Ministers of the Crown and their role and responsibility – something I want to touch on today; - Cabinet processes; - elections and government formation, along with things like the caretaker principle. It's available online at: http://www.cabinetmanual.cabinetoffice.govt.nz/ But its not set in stone. The Cabinet Manual is adopted by each new administration once they take office. As the former Secretary of the Cabinet, Marie Schoff once said: "The Cabinet Manual doe not rule Cabinet; rather, its authority derives from Cabinet…". Even once adopted, the guidance in the Manual does not affect Cabinet's ability to regulate or vary its own procedure or for the Prime Minister to be the ultimate arbiter of the procedure. The Cabinet Manual provides a "convenient, transparent, and proven basis" on which successive governments have chosen to operate. There's no need to reinvent the wheel. Also, although the Cabinet Manual captures some of the important constitutional conventions that exist in our system of government – like individual ministerial responsibility, the Manual does not codify or fix those conventions. There conventions exist independently and may change over time. Again as Marie Shroff says, amendments to the Cabinet Manual may "reflect and promulgate change, but cannot, in themselves, effect change". We're seem some significant changes over time to the Cabinet Manual to reflect some of the changes in practice bought about by MMP and coalition politics. For example, the Cabinet Manual now expressly refers to the "agree to disagree" provisions within coalition agreements that are now common-place that once were unheard of. Our living constitution. That allowed Winston Peters to speak out against the free-trade deal with China, even though he was otherwise bound by Cabinet collective responsibility to present a unanimous government position on matters agreed at Cabinet. And there's been a pretty major recent review of the Cabinet Manual, with a new version released earlier this year in April 2008 to replace the previous 2001 one. That might be important in the course of the Peters saga, as one of the sections that was amended was the one dealing with conflicts of interest and gifts. So what does the Cabinet Manual rules say gifts and donations? Well, the most recent version of the Cabinet Manual basically has two different set of principles governing gifts and the like. First, the Manual says that all Ministers must comply with the requirements of the Register of Pecuniary Interests of Members of Parliament as set out in the Standing Orders. These requirements apply to all MPs and are largely based on a similar register of assets and interests that applied just to Minister prior to 2005. It's the wording of this Register of Pecuniary Interests that much of the debate has been about. Whether Peters has complied with the following disclosure requirements: - a "gift (including … donations in cash or kind but excluding any donation made to cover expenses in an electoral campaign) … of more than $500 and the name of the donor of each of those gifts (if known or reasonably ascertainable by the member)"; - "debts of more than $500 that were owing … that were discharged or paid … by any other person and the names of each of those persons"; - "the name of each trust in which the member has a beneficial interest". I don't want to get into the merits of these allegations themselves. The Privileges Committee will deal with that. But he "electoral campaign" proviso to the gift clause is important, as is the question of whether a debtor-creditor relationship existed at the time the legal expenses were paid. But the speaker has highlighted these issues may affect other members. Secondly, the Manual also addresses the additional requirements that are particular to ministers' interests, particularly how any conflicts of interest are to be managed. We see mention in the current Cabinet Manual of the different hats ministers wear: as Minister, as an MP, along with their personal capacity. Some of the relevant guidelines in the Manual are as follows: - The Manual records that "a pecuniary conflict of interest may arise if a Minister could reasonably be perceived as standing to gain or lose financially from decisions or acts for which he or she is responsible…". - Some people have raised the question of whether the donation from possible appointment of Owen Glenn as Honorary Counsel of Monaco might have fallen within this class. - Now, the existence of a conflict is not the end of the matter. The Cabinet Manual requires it be "promptly addressed". There's many ways this can happen, depending on the circumstances (declaration of interest, not receiving papers, transferring responsibility to another minister, etc). ‑ Interestingly, one of the mandated ways of addressing a potential conflicts of interest is the adoption of "blind trusts". That is, usually, where investments are managed by a trustee where the Minister is not aware of where the investments are made. - There's an argument here that the purported arrangements between Peters and his lawyer are consistent with this blind trust approach – but again something that may only become clear once the dust settles on the allegations. So what happens if Peters has breached the principles in the Cabinet Manual? What's the constitutional position about whether he can continue as a Minister? I'll come back to the question of what happens to Peters, as an MP, if he's made an incorrect declaration in the Register of Pecuniary Interests, which is subject to the Privileges Committee Investigation. But Peters' tenure as a Minister is ultimately one for the Prime Minister under the principle on individual ministerial responsibility. Although his opponents have called for his resignation or dismissal, some of that is political game-playing rather than the application of constitutional principle. If we look at the principle of ministerial responsibility, it's generally regarded to have three elements: - an explanatory element: a Minister is responsible for explaining their own actions and the activities of others in their portfolio; - an amendatory element: a Minister is responsible for fixing things and putting things right; - a culpability element: a Minister may be required to accept the blame, usually resignation or dismissal, for something that gone wrong. People tend to focus on the latter, but the former two elements are probably the more powerful principles of the constitutional convention. The Minister being required to account to his or her colleagues and the Parliament for things that have gone on. In some respects, we've seen some element of this, with Peters explaining his position to the Prime Minister and, where relevant to his portfolio responsibilities, in the House. Some might quibble with how frank he has been though. The culpability question is a little more complicated and usually arises where we seek to hold a minister vicariously liable for errors made by their department. Leading scholars argue that there is no pre-ordained set of circumstances in which a Minister is required to resign or be dismissed. Most suggest personal impropriety of a Minister in relation their portfolio might create an expectation of resignation, although increasingly we see an expectation of resignation in circumstances that are unconnected to a minister's official duties (eg Dyson, Samuels, Parker, etc). We've perhaps seen a higher standard under MMP. More accurately, though, scholars such as Dr Matthew Palmer argue that the better way to speak about the culpable element is in this way: "A Minister must resign when he or she loses the confidence of the Cabinet as expressed by the Prime Minister." That tends to mark out the principle in terms of the political, not constitutional, judgement. As with appointment, the constitutional position is that the Governor-General accepts the advice of the Prime Minister in dismissing or accepting the resignation of ministers. What about the investigation of the Privileges Committee? What powers do they have? Let's be clear about what's been referred to them. Standing Order 400(h) says that its contempt for an MP, in their capacity as a member to "knowingly provide false or misleading information in a return of pecuniary interests" (or 400(g) for failing to make a declaration by the required date). We've discussed some of the issues about the rules governing what must be declared. But the contempt rules also add in the knowledge requirement as well in order for it to be a contempt. It's two complaints about this that the Speaker has referred to the Committee. Interestingly, once seized of a complaint, the Committee has a discretion about how deeply to investigate the matter and is not confined merely to the scope of the question referred to it by the Speaker. The Privileges Committee is one of the most powerful committees. It has 13 members (Peters and Hide,who are usually members, will be replaced) and is chaired by an opposition MP, Simon Power (although the Labour-led government still has a majority on the committee). It meets next Monday at 7pm and has indicated that initially it intends to hear from Peters and his lawyer. The Committee has the same powers as other Select Committees, along with an inherent power to send for person, papers, and records (meaning it does not have to gain the agreement of the Speaker to exercise such investigative powers). However, McGee suggests people outside New Zealand cannot be summonsed. In due course, the Committee will issue a report, which may or may not include finding of contempt or breach of privilege. The report of the Committee will be set down for debate for the House and the House will decide whether to adopt it What can the House do if contempt is established? If a contempt has been established, the House must decide on any punishment to be applied. There's some still debate about the extent of the punishment powers possessed by the House (partly because its powers arise from the privileges possessed by the House of Commons in the United Kingdom in 1865). However, it can include: - imprisonment (but rarely exercised – not used in NZ but such requests to do so were debated in 1880 and 1896.); - fine (doubtful whether still exists, although the Committee recently fined TVNZ after it improperly took action against one of its folk after they gave evidence at a select committee); - censure (one of the likely sanctions; and has been used in other circumstances); - suspension from the House for a period; - expulsion (again, very doubtful about whether power still exists according to McGee); - requiring an apology. Ultimately, though, if the allegations are proven, the consequences for Peters will be political. REFERENCES: - Geoffrey Palmer and Matthew Palmer Bridled Power: New Zealand's Constitution and Government (4th ed, OUP, Oxford, 2004) - Philip A Joseph, Constitutional and Administrative Law in New Zealand (3 ed Brookers, Wellington, 2007) - Marie Shroff, "The Role of the Secretary of the Cabinet – The View from the Beehive" (New Zealand Centre for Public Law, Occasional Paper No 5, July 2001) - Dr Matthew Palmer, "Ministerial Responsibility versus Chief Executive Accountability: Conflict or Complement?" (Paper presented at the Institute for International Research conference on "Analysing and Understanding Crucial Developments in Public Law", Wellington, April 2001) - David McGee, Parliamentary Practice in New Zealand (3ed, Dunmore Press, Wellington, 2005)

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Course Outline

Lord Justice Lawton in Maxwell v Department of Trade and Industry [1974] 2 All ER 122 said:

"From time to time ... lawyers and judges have tried to define what constitutes fairness. Like defining an elephant, it is not easy to do, although fairness in practice has the elephantine quality of being easy to recognise. As a result of these efforts a word in common usage has acquired the trappings of legalism: 'acting fairly' has become 'acting in accordance with the rules of natural justice', and on occasion has been dressed up with Latin tags. This phrase in my opinion serves no useful purpose and in recent years it has encouraged lawyers to try to put those who hold inquiries into legal straitjackets.... For the purposes of my judgment I intend to ask myself this simple question: did the [decision-maker] act fairly towards the plaintiff?"

This course examines the elephantine concept of fairness in the law, along with other contemporary legal issues.

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