Parliamentary privilege vital against Hanover-style litigation

Labour Party finance spokesman David Parker is throwing his support behind legislation enshrining parliamentary privilege, saying he doesn't want government officials threatened with defamation suits from deep-pocketed people when offering advice to ministers.

Parliament's Privileges Committee last week tabled a report recommending "comprehensive legislative reform of parliamentary privilege to clarify for the courts the nature and scope of that privilege".

The report was in response to a Supreme Court ruling which effectively excluded officials' advice to ministers being covered by parliamentary privilege, which protects MPs from facing defamation proceedings.

In a speech to Parliament on the report, Mr Parker said there has been "very litigious behaviour in New Zealand" in the wake of the collapse of the finance company sector, including Hanover Finance principals Mark Hotchin and Eric Watson's defamation proceedings.

"We have seen Mr Hotchin and others – and I can say this in this Parliament, protected by absolute privilege – sue people in defamation, including (Milford Asset Management principal and New Zealand Herald commentator) Brian Gaynor, who wrote an article in the newspaper alleging that there was poor practice on the part of Mr Hotchin and others in Hanover Finance and that they have profited handsomely," Mr Parker said.

Last month, Justice Mark Cooper ordered former New Zealand Shareholders' Association chairman Bruce Sheppard to face trial by judge alone in the Hanover defamation case after an application by Messrs Hotchin and Watson. The judge today adjourned the trial to let Mr Sheppard prepare his defence, which will call 25 witnesses.

'Chilling effect on the media'

Mr Parker told Parliament those types of defamation proceedings would have "a chilling effect on the media" and he does not want government officials to face the same type of constraints.

"If those sorts of questions were being asked of ministers, I want officials within the ministries to actually make those sorts of statements to ministers if they believe them to be true," he said.

"I do not want them to have the risk of facing defamation proceedings by the likes of Mr Hotchin or others who have got very deep pockets and who are very keen to use their rights at law in order to try, on occasions, to gag criticisms."

In April, the Serious Fraud Office closed a 32-month investigation into Hanover, deciding nothing met its threshold to pursue a prosecution. The directors and promoters of Hanover, including Messrs Hotchin and Watson, still face a civil suit taken by the Financial Markets Authority over some $35 million in deposits taken in the period leading up to when the lender froze investor repayments.

Former Act Party MP and current president John Boscawen used parliamentary privilege in 2009 to claim failed lender Strategic Finance misled investors by characterising third-ranking mortgages as second-ranking in the lead up to a vote on placing the company in a moratorium.

'Slow erosion'

Speaking to the Privileges Committee report, NZ First leader Winston Peters said parliamentary privilege had faced a "slow erosion" over the years, with the media characterising it as a way for politicians to hide from defamation proceedings.

"An MP is frequently portrayed as hiding behind parliamentary protection, when everyone knows, particularly in the press gallery, that without that parliamentary protection not one media outlet would publish what that MP is saying," he said.

"Often a member of Parliament will say something in Parliament because that is the only way that the communication or media industry can actually broadcast without fear of a lawsuit what has been said."

Former Speaker of the House Sir Lockwood Smith referred the issue to the Privileges Committee after a 2011 Supreme Court ruling in a defamation case by former Ministry for the Environment staffer Erin Leigh, whose performance was criticised in 2007 by then-environment minister Trevor Mallard during Parliament's question time.

Ms Leigh issued proceedings against the ministry's deputy secretary Lindsay Gow, claiming he had defamed her in his oral and written briefings to the minister, which were then republished in the minister's answers to the House.

That claim was initially struck out in the High Court, though the decision was reversed in the Court of Appeal and later upheld by the Supreme Court.

Attorney-General and committee chairman Chris Finlayson told Parliament the judiciary "misinterpreted what parliamentary privilege is all about", which enables the House to function and is "vitally important for New Zealand's constitutional health".

The government will make a formal response to the report's findings by September.

(BusinessDesk)