Judicial Independence Vital

Monday 1 Nov 2004

Richard Prebble, Hon Speeches - Governance & Constitution

Extract from the speech to Canterbury Law Society dinner

The statement by the Chief Justice Sian Elias, that judicial independence is under threat and the Prime Minister has no understanding of the importance of judicial independence, needs to be taken very seriously.

Our system of Westminster government depends on an independent judiciary. We have no written constitution. It is the independence and integrity of our judges that are needed to preserve the rule of law and our liberties.

One can only imagine the level of frustration that must exist within the judiciary for the Chief Justice to have spoken out so strongly.

The issue that the Chief Justice has chosen to speak about, superannuation, is an issue economists have been warning us about for decades. In one sense judges are just the first of what will be a number of groups complaining about their income in retirement.

Nearly 20 years ago, the government realised that what is known as defined benefit retirement schemes were an actuarial time bomb. Successive governments had been promising judges, the Armed Forces, police, civil servants and Members of Parliament that they would receive, on retirement for the rest of their lives, an income based on their final years of work. It was also promised that this superannuation would be automatically indexed so that the retirees would receive the pay rises of new generations of government employees.

In return the government employees paid in a proportion of their salaries.

The government as the employer also agreed to put in matching amounts, or in the case of the Armed Forces a higher amount, and in the case of MPs an even greater amount and for judges, a much greater government contribution.

Unfortunately successive governments failed to put in the government's proportion.

Even more unfortunately, even if government had put in its proportion, the schemes were actuarially unsound.

The schemes relied upon a process that is similar to a pyramid scheme. The population and the tax base had to continue to grow much faster than the number of retirees.

As we all know, in just five years the baby boomers start to retire and the number of retirees begins to rise rapidly.

20 years ago in the government concluded that the defined benefit schemes could not continue. Everyone, judges, the Armed Forces, civil servants and Members of Parliament have been switched over to fully funded superannuation schemes. The employee had the right to select the scheme they wished to be in.

I have no doubt that some judges have joined schemes whose outcomes have been disappointing.

I understand that judges have set up their own superannuation schemes in greater proportion than any other group. This is including the private sector. You can set up your own scheme and be both trustee and beneficiary. No doubt some of these schemes have failed. I am not criticising the fact that judges have set up th eir own scheme, I myself have done the same.

I have personal sympathy and considerable empathy for the position that judges find themselves in. As a Member of Parliament with a broken career (a polite way of saying that I lost an election) I have been in both a defined scheme and the present new scheme. There is no comparison. There are now two classes of MPs, those on the defined superannuation scheme, who do have a gold plated scheme, and the vast majority of MPs have a super scheme that is not enough by itself to give a reasonable income in retirement.

I put emphasis on, by itself. If the Member of Parliament has been saving throughout their working life, then the present scheme is, by private sector standards, very good. The judges' scheme is even better. I am sympathetic to judges setting up their own schemes. The performance of many super schemes are poor and the fees charged excessive. But I am not sure if the taxpayer should be bailing out anyone for poor investment decisions.

Members of Parliament will not be changing their scheme. Nor will Parliament change back to a defined scheme for the civil service.

The Chief Justice is right to raise the issue.

She is also right to say that it is vital we attract to the courts the best lawyers. It is disturbing to hear of lawyers declining to go to the bench for economic reasons. This however is not new. The pay of judges has never matched that of top lawyers and never will. Public service has always involved an element of sacrifice.

I hope that these remarks are not misinterpreted. We take for granted that the judges in New Zealand do not take bribes. Just as we take for granted that our police force does not take bribes. Most people assume that this is because we, as New Zealanders, have higher integrity than other nationalities. I doubt it.

We have a police force and judiciary that don't take bribes because we pay them not to. A defined benefit pension for a police sergeant will be worth more than $1 million, as he quickly finds out if he intends getting divorced. A defined benefit pension for a judge is worth millions of dollars. This is a huge disincentive to taking bribes.

Let me put this a different way. In Latin America, where corruption in the police force and judiciary is rife, they have never paid the police or the judges enough.

One often reads statements like, why is a constable with just six months training earning more money than a nurse. The real answer is to make sure that the constable won't be bribed not to give you a speeding ticket.

So I do think that the Chief Justice's remarks need to be discussed.

There are a number of ways of resolving the issue. The Chief Justice points out we have a very low retiring age for judges of just 68. When I was admitted to the bar, the retiring age for Supreme Court judges was 72. Before that, for most of New Zealand's history, there was no retiring age. The highest common law judge in the world, the Chief Justice of the United States Supreme Court, is 80. There is no retiring age for US Supreme Court judges.

I'm not suggesting that we have no retirement age, but I can see no good reason why the retiring age for judges should not be lifted to 72 and for Supreme Court judges 75.

A lifting of the retirement age would make a very substantial difference. So much so, Parliament could consider reintroducing a defined retirement scheme.

I must make comment about another remark of the Chief Justice that I thought was even more disturbing. She suggested that judges who had retired were dependent on their income on political appointments by the government of the day.

Let me quote her directly: "I'm alarmed about the implications for judicial independence if judges have such incentives to stay on the right side of government or to keep in with influential members of the (legal) profession who might be expected to provide them with work after retirement."

If this is so, it is a major attack on the independence of the judiciary. As the Chief Justice has said it, then clearly this is the perception of the judges, and independence is compromised.

I am disturbed and surprised by this development. I am surprised because retired judges who I know, have all told me that and they are extremely busy in retirement. Busier than they wanted to be. They tell me of commercial arbitration work that is available and apparently pays well. They have also told me of pressure from the government to serve on commissions of inquiry and the like. There have also been approaches from Pacific Island governments to serve on appeal courts.

So I suspect that the Chief Justice is talking about the position of District Court judges. Our District Court is the workhorse of the courts and the court that has most contact with citizens.

In my own view judges are being recruited too young to that court. Judges who are too young to have accumulated a reasonable amount of assets and so must be completely dependent on the judicial pension. I believe the answer is to recruit older people to the bench and then allow them to serve for a longer time.

What is not acceptable is the present situation. We cannot have judges serving on the bench who know that they do not have a superannuation scheme, which will enable them to retire on a reasonable income.

When I wasn't in Parliament I was asked by the World Bank to act as a consultant in a number of countries. The World Bank hoped that my advice on corporatisation could enable a number of other countries to improve their economic performance. I quickly realised that the New Zealand experience could not be exported to countries like Argentina. Our government, the way we do business, our social organisation, indeed our whole society, depends upon an independent judiciary.

My advice to the Argentineans was to clean up the judiciary and the police force. Fire the corrupt, appoint fewer judges, less police, pay them much better and give them a good superannuation scheme. A super scheme worth more than any bribe.

My advice to my fellow New Zealanders: we need to pay the judges well and make sure that they have a gold plated superannuation scheme. In return we will receive an independent judiciary - judges of the highest integrity.

We need to look upon our courts as a national treasure and do whatever we have to do to preserve the independence of the judiciary.

ENDS

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