Provisions in the coalition government’s Racing Industry Bill, about to be reported on by the Transport and Infrastructure Select Committee, would authorise the dissolution of racing clubs and the taking of club property without compensation. Those provisions record the aims of the Deputy Prime Minister and Racing Minister. And in turn, these expropriation powers appear to be the preferred future political outcome for the various horse breeder interests that are known to have had political donations pass to the New Zealand First Foundation.
The New Zealand First party’s policy regarding New Zealand racing is the sum total of the government’s policy on racing [Coalition Agreement page 6], so does our coalition government feel stuck with the proposed legislation despite the fact it will mean they flagrantly disregard a major convention under the Westminster systems of government?
Constitutional conventions may be defined as those rules followed by political institutions in countries using the Westminster system of government that are neither codified in legislation nor formalised by judicial decisions. They can be thought of as rules of political morality. The convention in issue is based on ethical principles that would give rise to a sense of constitutionalism if followed, and the reverse if not:
The law actively protects property rights through the criminalisation of theft and fraud and through laws dealing with trespass, and other property rights. The Government should not take a person’s property without good justification…and compensation should generally be paid. If compensation is not paid, there must be cogent policy justification (such as where the proceeds of crime or illegal goods are confiscated).
Attempts have been made to alert the government to this convention and any number of submitters on the Racing Industry Bill have asked the Select Committee to recognise the significance of the New Zealand First party’s wish to avoid accountability and slip through a law that will breach the doctrine of responsible government. Indeed, a written submission to the Department of Internal Affairs in October 2018 by a pre-eminent Queen’s Counsel, involved in the racing industry for over 40 years, Alan Galbraith QC, made it clear to the government that the Messara Report’s recommendation for the vesting of ownership of the net assets (including freehold racecourse land) in NZTR, offends fundamental legal principles.
At hearings of the Transport and Infrastructure Select Committee on the Bill the opinion of arguably New Zealand’s top commercial barrister was discussed and Alan Galbraith QC’s submission was made available. It is understood the opinion was referred on to Crown Law, who dismissed the matter of an important constitutional convention getting in the way of the government’s racing agenda for 2020. In some racing circles the AG’s Office/Crown Law is now referred to as the ‘William Barr Office Of Clown Law’.
On 26 May in an address to a group of Avondale Jockey Club members the club President, Allan Boyle, made the following statement:
“As you know, the Racing Industry Bill is the second major step in the coalition government’s plans for reforming the racing industry. One of the most controversial reforms in the Bill is the government’s decision to give significant powers to racing codes to dissolve clubs and take over club property to use for the benefit of the industry as a whole. Specifically, the Bill would empower codes to:
• Make determinations that racing clubs are “no longer racing” and are able to be dissolved (a matter codes can already effectively control through the allocation of licences) with their assets vesting in the codes;
• Designate racing venues as “surplus venues”; and
• Liaise with the Minister for Racing to approve and implement “transfer proposals” under which “surplus venues” could be forcibly transferred from clubs to codes.
The Bill would not make it mandatory for a code to offer compensation to a club which has been dissolved or had its venue transferred under a transfer proposal. The most that codes would be required to do would be to consider providing for compensation. Much would be left to the discretion of codes and the Minister.
How does this proposal sit from a constitutional perspective? It is sometimes said that New Zealand does not have a constitution. Don’t be fooled: this is not the case at all.
Our “constitution” is not necessarily a single document. Rather, the term refers to all of the rules which establish the different branches of government in a country and provide what they can and cannot do, wherever they are found. Sometimes those rules will be found in one document which has a special higher status and takes priority over other laws (like in the United States). But this is not always the case.
In New Zealand, our constitutional rules are found in a number of different sources. Some of these sources are legally binding, such as Acts of Parliament and decisions of the courts which set out the powers of the Queen, the executive, Parliament and the courts. Others are informal practices or “conventions”. A convention is a practice which has been followed over time to the point where it can be described as a rule, even though it may not be legally binding. In New Zealand, some of our most important constitutional rules are conventions.
What do our particular constitutional rules have to say the taking of private property without providing for compensation? As it turns out, there is a difference between the relevant legal rules and conventions.
At law, strictly speaking, there is no prohibition on Parliament passing legislation expropriating property without providing for compensation. Under the Constitution Act 1986, Parliament has full power to make laws. This includes laws authorising expropriation. Parliament’s full power to make laws is sometimes referred to as “Parliamentary sovereignty.”
Despite these powers, there is a well-establish convention that Parliament will not authorise expropriation without compensation unless there is a very good reason to do so. This has been the consistent practice of the Parliament of New Zealand, and the various English and United Kingdom Parliaments before it, going back to the fifteenth century. Put simply: where Parliament has authorised the expropriation of property it has generally required the provision of compensation.
This important convention is reflected in Legislation Guidelines prepared by the Legislation Design and Advisory Committee (LDAC): a specialist committee appointed by the Attorney-General which considers legislative proposals and provides advice to government agencies developing policy and legislation. Guideline 4.4 provides:
People are entitled to the peaceful enjoyment of their property (which includes intellectual property and other intangible property). The law actively protects property rights through the criminalisation of theft and fraud and through laws dealing with trespass, and other property rights. The Government should not take a person’s property without good justification. A rigorously fair procedure is required and compensation should generally be paid. If compensation is not paid, there must be cogent policy justification (such as where the proceeds of crime or illegal goods are confiscated).
Provisions in the Bill clearly engage the convention. They authorise the taking of property without making compensation mandatory. So the next question is whether they breach the convention because there is no “cogent policy justification” for the absence of compensation.
Based on the material provided in support of the Bill so far, no such justification appears to exist. This is not a situation where expropriation without compensation is being used as a penalty or punishment for unlawful conduct. Nor is there any suggestion the provisions should be limited to clubs which are under-performing commercially. The explanatory note to the Bill simply states that the provisions were intended to address “the decline of the industry” while keeping property “retained in the industry” and used for “maximum industry benefit”. It does not explain how a general power to dissolve clubs and take property without providing compensation will actually achieve this.
The note also does not explain how the government has reconciled the need to address the decline of the racing industry with the importance of protecting clubs’ property rights. At law, clubs are separate entities and their property is their own. Many clubs have constitutions which require them to use their property for the benefit of their local communities. The expropriation provisions in the Bill would prevent clubs from achieving their purposes without guaranteeing anything in return.
I conclude, therefore, that there is no justification for withholding compensation in this case, and that key provisions in the Bill referred to here are unconstitutional.
What does this mean? If the provisions could be enacted anyway because Parliament has full power to make laws, why should this matter? The answer is our constitutional conventions are based on respect for some of our most fundamental shared values. It is no exaggeration to say that these values are the bedrock of New Zealand society and naturally bear on public opinion and public confidence in politicians.
In the case of the particular provisions in the Racing Industry Bill referred to here, the key value in issue is respect for private property rights. These rights have been respected by successive generations of Parliamentary representatives. The Bill proposes to depart from this tradition. That is no small matter. The fact the Racing Industry Bill is unconstitutional should cause Parliament to re-think the offending provisions, and consider whether to remove them completely or amend them to make compensation mandatory. Failure to do so should have significant political (if not legal) consequences. There are naysayers and dissidents around the country, including the burbs of Pt Chevalier, Avondale, New Lynn and Mt Albert. Avondale Jockey Club’s grass roots petition is testament to that.
However, ultimately an attempt of this kind to avoid the accountability that constitutionalism brings should be about the leadership in the government, not the protagonist, the Rt Hon W Peters. Could the underbelly of a certain Westminster convention of government blight the future global career of the Prime Minister?”