Legal Beagle by Graeme Edgeler

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$420,259.33

On 9 May 2013, the Labour Party Secretary filed a donation return with the Electoral Commission, in respect of four payments it received via The Public Trust, from the Estate of Brian James Dalley:

$411,500.00 received on 23 April 2012,
$7,250.00 received on 2 May 2012,
$1,282.50 received on 24 July 2012, and
$226.83 received on 27 July 2012.

Section 210C of the Electoral Act 1993 requires a party secretary to file a donation return within 10 working days of receipt of a donation if that donation exceeds $30,000, or if that donation, together with any other donations (that haven't already been disclosed in this way) made by the same donor in the preceding 12 months, exceed $30,000.

If these count as donations (and both Labour, and the Electoral Commission appear to accept they do), then each of the sums above created a separate obligation of disclosure, with 10 working days allowed after each to declare it. The failure to do so within that time period, on each of the four occasions is (unless the Party Secretary has a "reasonable excuse") a separate offence, carrying a maximum fine of $40,000.

Tim Barnett, who took over as Labour Party General Secretary on 26 July 2012, is reported as having explained that Labour did not initially declare the bequest as a donation "because of confusion as to whether bequests count as donations," also saying that it was as an "honest mistake ... to not realise that a bequest was actually classified as a donation and therefore had to be immediately declared to the Commission."

But is a bequest actually a "donation" that the Electoral Act requires to be disclosed? The received wisdom is very much that it is. There seems to be very little doubt about that at all. I certainly think the law should require it to be disclosed, but I do think the law should say so more clearly, because I'm not certain it actually does.

The definition of donation in the Electoral Act is wholly unhelpful in this matter. When it comes down to it, donation is defined as being a donation. It effectively carries its ordinary definition, so we must ask whether a bequest falls within this.

Like I say, I think it should, especially in light of the purpose of the donation disclosure rules, but operating under the same principle, I think spending by parliamentary parties of parliamentary funds on advertising that is agreed by the party secretary should be declared as a donation. I don't see a major difference between a company or union, or wealthy individual seeking permission (as required by the law) from the Green Party to run and pay for "The Green Party will be great for the environment" ads and the Parliamentary Labour Party seeking permission from the Labour Party to run "Labour will be great for the Economy" ads, yet the Electoral Commission takes the position that the former is a donation to the Party involved, and the latter is not.

My view on that question not having been accepted by the experts, I am compelled to reconsider, and it seems to me that there are substantial similarities between bequests and parliamentary spending. In both instances, the person making that payment (the executor in the case of a bequest, and the Parliamentary Service in the case of parliamentary spending) is not making a voluntary payment, but one that is required by law, and compulsion seems contrary to the spirit of a donation. It is true that the person on whose wishes a bequest is made has made a voluntary choice, but that is also true of a Parliamentary Party which has directed the Parliamentary Service to make a payment.

Moreover, I don't think that when we think of bequests, we think of them as donations (or the converse); I think most people, would categorise both as forms of giving, but not one as a subset of the other. And in other places, the law provides for a distinction between the two: I understand (noting that I am not a tax lawyer) that a bequest made to a charity does not qualify for the charitable donations tax credit.

So I do not consider this is as clear as others believe. However, despite my doubts, I have no sympathy for the Labour Party.

I simply cannot accept "confusion" as an explanation. Being confused about this means you received the money and thought about it whether it had to be disclosed, and just couldn't make up your mind for certain either way. In a situation like this, if you think you may have a legal obligation to do something, and are confused, the thing you do is check. If the reason the two Labour Party Secretaries involved (Chris Flatt at the time of the first three payments, and Tim Barnett at the time of the last payment) didn't declare these payments as donations was because they were "confused" about whether it was required then what they've realised that what they're (not) doing may be an offence, but have chosen to run the risk.

I am not the Labour Party's electoral lawyer, but I know what my advice to them would have been if they called me up for a legal opinion on whether this bequest was a donation that was required to be disclosed:

I am happy to provide you with a legal opinion if you really want, but why do you care? Just file a disclosure anyway, and save yourself some money. At the very least, just call up the Electoral Commission and ask. If they say you a bequest doesn't count as a donation, then don't file a return, but otherwise, what's the harm? 

I simply cannot think why, upon first being advised by the Public Trust that they were going to get a large bequest, someone in the Labour Party didn't just send their point of contact at Electoral Commission an e-mail to ask what they should do. If they actually contacted the Commission, and someone told them they needn't bother, then they've got a reasonable excuse, and haven't broken the law, but short of that, I'm having difficulty seeing what rationale could be offered, that doesn't involve having flawed systems that don't properly alert the Party Secretary when sums of money arrive, and those sorts of flawed systems should not be an excuse. My diversion above is a "don't know" at best, and why would you run the risk?

Newstalk ZB's Felix Marwick apparently has confirmation that the Electoral Commission won't be referring these matters to the Police, which has disappointed a number of people. There is nothing to stop individuals laying complaints with the police, and I suspect a number will, although it seems unlikely police will pursue charges.

I don't know the reasons for the Commission's decision, but the view that it would be wrong to hold an individual responsible for whatever failure happened in this case (when it may have been someone else's fault) may factor. This possibility shows, I think, one of the flaws in our electoral law. For something like this, there will often be no reason to sheet responsibility to an individual for a failure like this. The law should allow political parties to be charged directly, not sheet home responsibility only to party secretaries. And for potential offending like this, I'm not sure the criminal law needs to be involved at all. A late donation return could be perfectly appropriately dealt with by an infringement offence: a fine (perhaps $5000 for parliamentary parties, $500 for non-parliamentary parties, and maybe with an additional fine per day late) could be imposed automatically, but could be challenged in court in the same way as parking tickets and speeding fines. Where there is an intention to deceive, the possibility of actual charges, or holding individuals liable could remain, but it shouldn't be difficult to craft a fair balance.

For completeness, I note two parties appear to have filed their 2012 annual returns of donations late (.xls) -United Future seven days late (even though it was a nil return), and the Conservative Party one day late.

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