Posted on October 8, 2015 by Megan Hawley

High Court upholds the validity of NSW laws prohibiting developers from making political donations

On 7 October 2015, a majority High Court bench dismissed the challenge to NSW electoral laws which impose caps on, and prohibit property developers from making, political donations.

Background to the Proceedings – “Operation Spicer”

The challenge was brought by developer and former Newcastle Lord Mayor Jeff McCloy (Mr McCloy) in the context of the ongoing investigation of the Independent Commission Against Corruption (ICAC), “Operation Spicer”.

As part of Operation Spicer, the ICAC  investigated an allegation that during the 2011 NSW State election campaign for the seat of Newcastle, certain members of parliament solicited and failed to disclose political donations from “prohibited donors”.

Mr McCloy was named by ICAC as one such “prohibited donor”, and admitted before the ICAC that he had made political donations exceeding $30,000.

Mr McCloy’s Challenge in the High Court

Mr McCloy challenged the constitutionality of the following provisions of the Election Funding, Expenditure and Disclosures Act 1981 (NSW) (Act):

  1. the caps on the quantum of donations that can be made by a person to an individual candidate or a political party, respectively set at $2000 and $5000; and
  2. the prohibition in the Act on property developers (along with tobacco, liquor and gambling companies) making political donations.

His argument was that those provisions “impermissibly burden” the implied constitutional freedom of communication on political matters.

Decision of the High Court

By a 6:1 majority, the High Court upheld the constitutional validity of the challenged provisions.

To be successful, Mr McCloy had to establish two matters (as set out in Lange v Australian Broadcasting Corporation (1997) 145 ALR 96 at 113) as follows:

  1. First, that the challenged provisions effectively burden freedom of communication about government or political matters either in their terms, operation or effect; and
  2. If so, that the challenged provisions are not reasonably appropriate and adapted to serve a legitimate end, the fulfilment of which is compatible with the maintenance of the constitutionally prescribed system of representative and responsible government.

The Court was satisfied that the first matter was established by Mr McCloy. That is, the Court agreed that the effect of the challenged provisions was to burden the freedom of communication about political or government matters by  restricting the funding available to political candidates and parties.

However the Court held that the challenged provisions were enacted for a legitimate purpose as they operate to preserve, and even enhance, the system of popular sovereignty as the challenged provisions were aimed at addressing the “risk to equal participation posed by the uncontrolled use of wealth” (see paragraph 45).

Particular reference was made in the majority judgment of French CJ, Kiefel, Bell and Keane JJ to the eight adverse reports that have, since 1990, been published by the ICAC and other investigatory bodies in respect to land development applications.  This provided further support for the finding that the prohibition on donations by property developers is justified. The Court, in its joint majority judgment stated:

“Given the difficulties associated with uncovering and prosecuting corruption of this kind, the production of eight adverse reports in this time brings to light the reality of the risk of corruption and the loss of public confidence which accompanies the exposure of acts of corruption.” (see paragraph 53).

The Court accordingly acknowledged that the risk of “undue or corrupt influence” in respect of planning decisions may in fact “be greater” when compared with other areas of government decision-making.

The decision may be read  here.


Mr McCloy’s failed challenge in the High Court does not close the chapter on court challenges in respect of Operation Spicer.

On 16 November Mr McCloy is set to  appear in the Supreme Court of New South Wales. He will be seeking orders to prohibit the publication of ICAC’s findings in relation to Operation Spicer on the basis of the alleged apprehended bias on the part of ICAC Commissioner, Margaret Latham.

Prepared by Angelique Williams and Megan Hawley.