INTRODUCTION

2.1 Government functions through a disparate network of separate agencies and departments. In the context of such complex bureaucracy, government agencies are required to apply and interpret the law and act in accordance with it. This is a simple and self-evident statement which should, theoretically, be easy to put into practice as there is, after all, only one body of law. A problem may arise, however, if different government agencies each seek their own legal advice and interpret the law differently from each other. It is also easy to imagine two government agencies grappling with the same or a similar legal question. One agency may have the benefit of access to legal advice, while the other agency may not have obtained such advice and, not having access to the advice obtained by the first agency, may act unlawfully. An example of what may occur when advice obtained by one government agency is not circulated to another, can be found in the Independent Commission Against Corruption (ICAC) inquiry into the case of Mr Smiles.¹ The following detail is provided to outline the circumstances from which the Commission’s reference arose.

THE SMILES CASE

Background to the reference

2.2 This Reference is the direct result of a recommendation of ICAC, arising from its consideration of the case of Mr Smiles. In 1994, ICAC was asked by the Auditor-General of New South Wales to investigate the circumstances surrounding the payment of parliamentary pension benefits to Mr Smiles, who was the Member of the Legislative Assembly for the seat of North Shore until December 1993. ICAC was also asked to look at the conduct and functions of the Trustees of the Parliamentary Contributory Superannuation Fund (“the Fund”), who were responsible for paying Mr Smiles his pension. Also under review by ICAC were the relevant laws, practices or conventions, if any, which govern the relationship between the New South Wales Cabinet, its members, and the Trustees of the Fund. In delivering its report to Parliament, ICAC declined to consider the broader issue of whether, and in what circumstances, legal advice provided to agencies representing the Crown should be circulated to other agencies. It recommended, and the government agreed, that this question should be referred to the New South Wales Law Reform Commission. The Terms of Reference for this inquiry are set out at the beginning of this Report.

Facts of the Smiles case

2.3 The Commission is not concerned in this Report with the merits or otherwise of Mr Smiles’s particular case, but rather with the more general principles pertaining to the circulation of legal advice. The facts of the case do, however, provide the necessary context for this Report. Mr Smiles’ case began in 1992, when he was charged with certain offences under the Taxation Administration Act 1953 (Cth) and the Crimes Act 1914 (Cth).² The Constitution Act 1902 (NSW) (“the Constitution Act”) provides that:

[i]f a Member of either House of Parliament … is attainted of treason or convicted of felony or any infamous crime, his seat as a Member of that House shall thereby become vacant.³

• the offences under the Taxation Administration Act 1953 (NSW) were “infamous crimes” within the meaning of s 13A(e) of the Constitution Act;
• if Mr Smiles were convicted, the seat would be vacated;
• if convicted, Mr Smiles would lose his entitlement to a parliamentary pension; and
• various consequences would arise if Mr Smiles, having been convicted, appealed successfully against the conviction.

2.5 That advice was forwarded to the Speaker on 8 February 1993 and to the Table Officers of the House on 9 February 1993, with a note to them requesting that the advice be kept confidential. This request was complied with. ICAC noted that:

[t]he Clerk was advised that … it [the advice] was provided for the benefit of the Clerk and should not be relied upon by any other person, although the possibility of its release to Members of the House was recognised. This is not unusual. Legal advice is usually prepared for the specific purpose of the particular client. That is one reason why such statements, as well as disclaimers, are commonplace in legal advice.⁴

2.6 Mr Smiles was convicted of the offences on 21 December 1993. Later that day he wrote to the Speaker tendering his resignation, at the same time maintaining his innocence and stating his intention to appeal. The Speaker received the letter the same day. The next day, 22 December, Mr Smiles applied for a pension under the Parliamentary Contributory Superannuation Act 1971 (NSW). Normally such applications are handled by the NSW Superannuation Office under a delegation from the Trustees of the Fund established under that Act. In this case the Superannuation Office decided, because of the public interest, to refer the matter to the Trustees for decision. On 25 January 1994, the Trustees (all of whom were Members of Parliament) resolved unanimously to approve payment of a pension to Mr Smiles. The Parliamentary Contributory Superannuation Act 1971 (NSW) gives the Trustees a discretion to approve the payment of some pensions in a lump sum. In April 1994, they agreed, unanimously, to exercise this discretion and give approval to Mr Smiles being paid a lump sum.

2.7 In a covering letter to his application, Mr Smiles advised the Chairman of the Trustees that he had tendered his resignation to the Speaker. He did not mention his conviction, although this was widely publicised at the time. If Mr Smiles had ceased to be a Member of Parliament by virtue of his letter of resignation, he would have been entitled to payment of a parliamentary pension. If, however, he had ceased to be a Member on his conviction by operation of s 13A of the Constitution Act, he would have been entitled only to the contributions he had made to the superannuation fund.

2.8 The Trustees did not ask the Speaker or the Clerk if they had any advice concerning the situation of Mr Smiles and his entitlement to a pension. Neither the Speaker nor the Clerk volunteered that they had such advice, nor did they seek to make this advice available to the Trustees. The Trustees sought the advice of the Crown Solicitor regarding Mr Smiles’ entitlements on 22 December 1993. The Crown Solicitor declined to advise (presumably because he had provided earlier advice to another client on the same issue) and suggested that advice be sought from an appropriate Queen’s Counsel. ICAC found that the Trustees might have sought independent legal advice but decided not to do so, due to the expense involved.⁵

2.9 The situation was further complicated by the fact that other public officials and bodies had received legal advice concerning the effects and consequences of Mr Smiles’ conviction. The Solicitor General had provided a number of opinions to the Director General of the Attorney General’s Department and the Director General of the Cabinet Office, both before and after the advice provided by the Crown Solicitor to the Clerk of the Legislative Assembly, in which loss of entitlement to a parliamentary pension was clearly stated as a possible consequence of conviction for an “infamous crime”. ICAC found that both the Premier and the Chairman of the Trustees of the superannuation fund (who was a Cabinet Minister at all relevant times) were aware, at least, of the existence of these advisings, if not of the detail of their contents, at the time the Trustees considered Mr Smiles’ application, because the general questions had been the subject of Cabinet briefing papers. However, it was accepted by ICAC that the Chairman took seriously the need to distinguish his functions as a Cabinet Minister from those as a Trustee, and that there was no dishonesty or corrupt conduct in the way he acted.⁶

IMPLICATIONS OF THE SMILES CASE FOR OTHER GOVERNMENT LEGAL ADVICE

2.10 On one interpretation, wider circulation of the legal advice given to the Clerk of the Legislative Assembly may have influenced the course of events in the Smiles case. If the Trustees of the Superannuation Fund had access to that advice it may, for example, have alerted them to the possible need to enquire further into the issue of whether Mr Smiles ceased to be a Member of Parliament because of his resignation or because of the conviction, and the impact of the manner in which the seat was vacated on Mr Smiles’s pension entitlements.

2.11 There are some distinguishing factors concerning the Smiles case, however, that should be highlighted when considering whether or not the case should be used as an argument for imposing on government agencies an obligation to circulate more broadly the legal advice which they receive. First, the special constitutional position held by Parliament and its officers differentiates it, and them, from other government agencies. Secondly, the Chairman of Trustees had the opportunity to disseminate the advice, since he had learned of its existence in the role of Cabinet Minister, but considered that such action would be improper.⁷

FOOTNOTES

1. The Commission acknowledges, however, that the failure to circulate legal advice may not have been the major factor contributing to the error made by the Trustees in the Smiles case: see para 1.11.

2. The following account is a summary of the facts as set out in New South Wales, Independent Commission Against Corruption, Report on Investigation into Circumstances Surrounding the Payment of a Parliamentary Pension to Mr P M Smiles (February 1995) (“ICAC Report”) at 1-10.

3. Constitution Act 1902 (NSW) s 13A(e).

4. ICAC Report at 4 (emphasis added).

5. ICAC Report at 34-35.

6. ICAC Report at 8.

7. See also para 1.11.