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The government may have thought Kenneth Hayne would run an easygoing royal commission. But his exposure of corruption and exploitation among the big banks sees him join a tradition of commissioners delivering more than their masters bargained for. By Richard Ackland.

The arch royal commissioner, Kenneth Hayne

Commissioner Kenneth Hayne during the royal commission’s initial public hearing.
Credit: AAP Image / Fairfax media, Eddie Jim

Who would have thought that Kenneth Madison Hayne would be the star of the biggest show in town? 

A crusty, stringy man, with an abrupt and arch manner, as head of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, Hayne is now the darling of the customers who for years have been ground under the heel of the bloated banks and other money managers with the blessing of a flaccid regulator.

It’s an unexpected journey for a lawyer who was nurtured on the generous bosom of commercial disputes. Maybe the government mistakenly thought his silver-plated pedigree would ensure he “did the right thing” and not run an overly inquisitorial commission. After all, everyone knew what was going on – the gouging, the exploitation, the cheating and rorting – but the government pretended it all smelled like roses. 

Now we have a royal commission that follows in the fine tradition of biting the backside of the regime that created it. 

Prime Minister Malcolm Turnbull already has conceded that the sunlight being shone by the Hayne commission in hitherto dark places is hurting the Coalition, partly because it is clear that the government in its blithering way had opposed something that was palpably in the public interest. 

Malcolm Fraser was also dealt a nasty blow in the 1980s by the Costigan royal commission into the Federated Ship Painters and Dockers Union. In that case, the government thought it was on a winner with yet another investigation into union criminal activities. Instead, it turned into a rout for tax-avoiding corporates, their accountants and lawyers and the unravelling of bottom-of-the-harbour tax schemes, known in the trade as “wet Slutzkins”. 

The tax office said that 6688 companies had been involved to the extent that the revenue that had been defrauded was between $500 million and $1 billion. Voters were decidedly unhappy and it was one of the reasons they took their revenge on the government at the 1983 election. 

You just can’t tell with judges, or even former judges, and hence the well-worn political theorem that governments should never call for royal commissions where they don’t know the outcome in advance. 

Hayne has the added luxury of being able to plough ahead without annoying arguments about the rules of evidence or procedure. He is in charge and this, in all likelihood, is the crowning glory of his professional life. Forget the years at the commercial bar, the Victorian Supreme Court, the Court of Appeal and the High Court; for now at least, he is the master of an enthralling universe. 

It is quaint that relatively little is known about a man who has been a public figure as a judge for over a quarter of a century. Unlike other democracies, Australia allows its judges to be wrapped in mystery. 

There is a sketchy amount of personal stuff: he and his wife enjoy cooking and like shopping at Melbourne’s Queen Victoria Market; he is prodigiously bright and was selected as a Rhodes Scholar in 1969; he doesn’t grant interviews with the media; his current wife, Michelle Gordon, was his instructing solicitor in a Bank of Melbourne life insurance fraud case; his father was a bank official in Gympie; George Brandis filled Hayne’s High Court vacancy with Ms Gordon, leading to the jest that we had a new Family Court of Australia. 

The material on the public record is mostly about his judicial output: ordering a new Senate election for Western Australia in 2014; being part of a four–three majority that found the government acted illegally when it held 157 Tamil asylum seekers at sea; joining a High Court decision that gave a novel twist to qualified privilege and held it was defamatory of Westpac to mistakenly bounce the rent cheques of a Century 21 real estate agent; and contributing to various landmark commercial law rulings, including allowing third parties to fund class actions. 

In 1995, as a new judge of the Victorian Court of Appeal, he found with his colleagues that the notorious criminal Carl Williams had excellent prospects of rehabilitation and upheld his appeal on a charge relating to methamphetamine trafficking. 

Williams went on to murder three people and become a Melbourne drug lord of great notoriety. He was eventually beaten to death in jail by another inmate. 

At a Victorian Bar dinner in 2014, Hayne dryly said: “I am not altogether certain that these events completely fulfilled the excellent prospects for rehabilitation which we had so confidently predicted 12 years earlier.” 

But the albatross around Hayne’s neck is the notorious 2004 High Court case of Al-Kateb v Godwin. Hayne delivered the leading judgement for the majority where it was held that the indefinite detention of a stateless person who had not been charged with any crime was lawful. 

Being stateless, there was no country to which Al-Kateb could be removed. 

There were two limbs to the judge’s thinking. He decided the provisions of the Migration Act do not assume that removal from Australia is always possible so, accordingly, “that does not mean that continued detention is not for the purpose of subsequent removal”. 

Secondly, did the executive, contrary to the Constitution, have the power to exercise a judicial function of punitive detention? Essentially, he was saying that where there has been no criminal conviction, the detention cannot be categorised as punitive because no crime is being punished, so there is no trespass on the judicial function. 

Not even William Gummow, who usually sat in the same judicial corner as Hayne, could swallow that one, and nor could chief justice Murray Gleeson or Justice Michael Kirby.  

Al-Kateb was decided alongside the case of Behrooz, which Julian Burnside, QC, argued for the applicant. The Behrooz case was more concerned with whether the conditions of detention affected its legality. Again, there was no headway on that front.

Two depressing decisions, from which the High Court has since, differently constituted, tried to nibble its way out. The Commonwealth is keen not to have the Al-Kateb flame extinguished, so whenever a refugee or asylum seeker in similar circumstances brings proceedings in the court that confronts the 2004 decision, the government smartly steps in and issues a visa. Case over. 

In 2015 and 2016, in the notorious M68 case, the issue of the detention of an asylum seeker was back before the High Court. Hayne by then had been replaced by Michelle Gordon, who headed in a starkly different direction from her husband. 

After the case challenging the legality of offshore detention in Nauru was commenced in the High Court, the government, with the support of Labor, got an amendment to the Migration Act passed by parliament. It validated any prior illegalities and gave the Department of Immigration and Border Protection the power to take “any action” in relation to regional processing functions. 

With the exception of Michelle Gordon, the High Court went along with this. The validating amendment was unconstitutional, she said, because “aliens” can only be detained as a condition of their deportation. In other words, executive detention could only be for limited purposes and where there was no deportation, or the “processing” open-ended, detention was illegal. 

That must have provoked some interesting discussion at the Hayne–Gordon breakfast table.  

Years back, one lonely weekend in Canberra, Justice Hayne, then of the High Court, was spotted on a tour of Old Parliament House, where an elderly guide carefully explained to visitors how our democracy works, the separation of powers, the role of the House and the Senate and all the constitutional trimmings.

His Honour was seen to be paying close attention.

As a barrister, he shared chambers in Owen Dixon West with the now deceased Peter Hayes, QC, known as “Crazy Haysee”. The story goes that they had a falling out and Haysee got so agitated he threw his computer out of his chambers. Thereafter the two did not speak.

As a judge in Victoria, there were some rocky moments. Hayne was thought by commercial barristers who appeared before him to be unnecessarily rude and overbearing. There are stories that papers and folders were sometimes flung from the bench and on at least one occasion his court had to be adjourned to allow things to calm down.

He was brilliant and everyone knew that, yet commercial barristers report that for a time it was a tense and difficult experience to appear before him. When he was elevated to the Court of Appeal, the commercial bar sighed with relief that he would no longer hear their cases at first instance.

As an appeal judge, he was superb and it was only a matter of time before he would head to Canberra, whereupon all the appellate barristers then breathed freely because his super legal mind had moved to cooler climes and things were back to normal in the state of Victoria.

And now, he is the unexpected commissioner of an unpredictable royal commission. This cannot be what the treasurer or Turnbull had hoped.

This article was first published in the print edition of The Saturday Paper on Apr 28, 2018 as "Hayne and able". Subscribe here.

Richard Ackland
is the publisher of Justinian. He is The Saturday Paper’s diarist-at-large and legal affairs editor.