Victoria v Commonwealth

[1971] HCA 16
(1971) 122 CLR 353
(1971) 45 ALJR 251
[1971] ALR 449
(1971) 2 ATR 249

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(Decision by: Barwick CJ)

Victoria
v Commonwealth

Court:

Judges:
Barwick CJMcTiernan J
Menzies J
Windeyer J
Owen J
Walsh J
Gibbs J

Hearing date: 26, 27 and 30 November; 14 December 1970; 1-3 May 1971
Judgment date: 14 May 1971

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Decision by:
Barwick CJ

The Pay-roll Tax Act 1941 (Cth) (the tax Act) and the Pay-roll Tax Assessment Act 1941 (Cth) (the Act) were passed by the Parliament as a means of providing revenue to finance the provision of child endowment under the Child Endowment Act 1941 (Cth). Though the child endowment under the latter Act was to be universal, it was conceived primarily as a supplement to the salary or wages of persons in employment. Consequently, the burden of the endowment was cast on employers, the taxing Act imposing a tax upon all wages paid by an employer. The Crown in right of a State was in each State a considerable employer of labour and at least in some States of industrial labour. All its employees had the benefit of the child endowment along with employees generally. Consequently the Crown in right of a State was included in the definition of "employer" for the purposes of the Act. See.s 3 of the Act.

In the intervening years considerable modifications have been made to the Act principally by way of increasing the ambit and extent of exemption from the operation of its provisions. These changes no doubt have been dictated by policies unconnected with the basic policy prompting the passing of the tax Act and the Act in 1941. Notable in this connexion is the use of the Act as an instrument of policy in the promotion of the export trade of the country. See Div 2 of Pt III of the Act as inserted by the Pay-roll Tax Assessment Act 1968 (Cth).

But though I have thus briefly stated the origin and history of the Act in point of policy as known in historical fact, these circumstances, though illustrative of a situation in which the Crown in right of a State may stand in a like situation to the citizen vis-a-vis the Parliament, are in truth irrelevant to the resolution of the question raised in the proceeding now before the Court. That question is whether the Parliament has under the Constitution legislative power to include the Crown in right of a State in the operation of an Act which imposes a tax or provides for the assessment of a tax. Expressed in its narrowest form, the question is whether the inclusion of the Crown in right of a State in the definition of "employer" in s 3(1) of the Act is a valid exercise of legislative power of the Commonwealth under s 51(ii) of the Constitution: stated in its broadest form it is whether the Commonwealth may by a law of taxation not confined in its operation to States, impose a tax upon a State. The question is a legal question. It is to be resolved by legal considerations alone, that is to say, by the construction of the Constitution according to legal principle. The principles of legal construction applicable to the Constitution will exclusively provide the answer to the problem posed by this suit.

The State of Victoria has commenced a suit in this Court against the Commonwealth in which its statement of claim as amended seeks:

A

A declaration that it is beyond the power of the parliament of the Commonwealth of Australia to enact that the tax imposed by the Pay-roll Tax Act 1941 shall be levied on any of the wages referred to in paragraph 4 of the statement of claim paid or payable by the Crown in the right of the State of Victoria or that the Crown in the right of the State of Victoria shall pay the said tax to the Commonwealth in respect of any such wages.

B

A declaration that in so far as the Pay-roll Tax Assessment Act 1941-1969 purports to enact that the tax imposed by the Pay-roll Tax Act 1941 shall be levied on any of the wages referred to in paragraph 4 of the statement of claim paid or payable by the Crown in the right of the State of Victoria and that the Crown in the right of the State of Victoria shall pay the said tax to the Commonwealth in respect of any such wages it is invalid and of no effect.

The wages referred to in para 4 of the statement of claim are wages paid to officers and employees in the Premier's Department, the Audit Office, the Chief Secretary's Department, the Office of the Government Statist, the Social Welfare Department, the Victoria Police, the State Library of Victoria, the National Gallery of Victoria, the Department of Labour and Industry, the Education Department, the Crown Law Department, the Treasury, the Ministry of Transport, the State Taxation Office, the Stamps Office, the Government Printer, the Department of Crown Lands and Survey, the Public Works Department, the Mines Department, the Agriculture Department, the Department of Health, the Local Government Department, the Hospitals and Charities Commission, the Liquor Control Commission, the Workers' Compensation Board and the Council of Adult Education.

The Commonwealth has demurred to the statement of claim generally as disclosing no cause of action. This raises for decision the constitutional validity of the Act in so far as it purports to impose upon the State of Victoria an obligation to pay "pay-roll tax" rated to the amount of salaries and wages paid to its public servants employed in the departments of State nominated in the statement of claim as amended.

The basic principles of construction of the Constitution were definitively enunciated by the Court in Amalgamated Society of Engineers v Adelaide Steamship Co Ltd (1920) 28 CLR 129 (the Engineers' Case). Lord Selborne's language in R v Burah (1878) 3 App Cas 378, at pp 904-905 was accepted and applied as was that of Earl Loreburn in Attorney-General (Ontario) v Attorney-General (Canada) (1912) AC 571, at p 583. The former said: "The established courts of justice, when a question arises whether the prescribed limits have been exceeded, must of necessity determine that question; and the only way in which they can properly do so, is by looking to the terms of the instrument by which, affirmatively, the legislative powers were created, and by which, negatively, they are restricted. If what has been done is legislation, within the general scope of the affirmative words which give the power, and if it violates no express condition or restriction by which that power is limited (in which category would, of course, be included any Act of the Imperial Parliament at variance with it), it is not for any court of justice to inquire further, or to enlarge constructively those conditions and restrictions."

And the latter: "In the interpretation of a completely self-governing Constitution founded upon a written organic instrument, such as the British North America Act, 1867, if the text is explicit the text is conclusive, alike in what it directs and what it forbids. When the text is ambiguous, as, for example, when the words establishing two mutually exclusive jurisdictions are wide enough to bring a particular power within either, recourse must be had to the context and scheme of the Act."

The Court unequivocally rejected the doctrine that there was an "implied prohibition" in the Constitution against the exercise in relation to a State of a legislative power of the Commonwealth once ascertained in accordance with the ordinary rules of construction, a doctrine which had theretofore been entertained and sought to be founded upon some supposed necessity of "protection", as it were, "against the aggression of some outside and possibly hostile body". The Court emphasized that if protection against an abuse of power were needed, it must be provided by the electorate and not by the judiciary. "The one clear line of judicial inquiry as to the meaning of the Constitution must be to read it naturally in the light of the circumstances in which it was made, with knowledge of the combined fabric of the common law, and the statute law which preceeded it, and then lucet ipsa per se ": (1920) 28 CLR, at p 152.

The Act is referable to s 51(ii) of the Constitution as its source of legislative power. The question therefore is whether the Act is a law within the ambit of the power given by that paragraph, that is to say, is it a law on the topic of taxation within the meaning of the Constitution. Consequently it becomes necessary to construe that paragraph of s 51 in accordance with the principles to which I have referred. Clearly the Act is an Act with respect to taxation. It does not offend any limitation upon the legislative power expressed in the Constitution unless it is a tax upon the property of a State within the meaning and operation of s 114, a matter to which I will advert a little later.

The plaintiff State however asserts that s 3(1) of the Act is outside the ambit of the Commonwealth legislative power in so far as it purports to include the Crown in right of a State in the category of employers liable to assessment for pay-roll tax. The principal ground taken by the plaintiff is that the granted power, "Taxation: but so as not to discriminate between States or parts of States", does not authorize the imposition of any tax upon the Crown in right of a State, because there is an implied constitutional limitation upon that Commonwealth power operating universally, that is to say, as to all activities of a State. Therefore it is said the Act may not validly operate with respect to the Crown in right of the State, no matter what the nature of the relevant activity of the State in which it has employees to whom it pays wages or salaries. A secondary ground, but the ground mostly pressed by the plaintiff, is that the legislative power with respect to taxation does not extend to authorize the imposition of any tax upon any essentially " governmental" activity of a State. Therefore at the least, the power granted by s 51(ii) does not authorize the imposition of a tax upon the Crown in right of a State in respect of the wages paid to its civil servants and that s 3(1) is pro tanto invalid. Though the legal propositions submitted by the plaintiff would extend beyond these, the plaintiff in this suit limits its claim to invalidity of the Act in relation to wages paid by it to its employees in the named departments of government. The suggested limitation upon the legislative power of the Commonwealth, whether of universal or of limited operation, is said to be derived by implication from the "federal" nature of the Constitution. In this connexion it is said that to levy a tax upon a State at all, but in any case to levy a tax rated to the wages paid to its servants employed in departments of government, so trenches upon the governmental functions of the State as to burden, impair and threaten the independent exercise of those functions. It is also sought to reach the same result by construction of the legislative power itself. It is said that because of its particular, indeed unique nature, the legislative power with respect to taxation does not extend to authorize the levy of a tax upon a State; and again, either at all, or at any rate, with respect to its "governmental" activities.

It is as well that I should first express my view of the decision of the Court in the Engineers' Case (1920) 28 CLR 129. The precise question there decided was that the Parliament of the Commonwealth has power to make laws binding on a State with respect to conciliation and arbitration for the prevention and settlement of industrial disputes extending beyond the limits of one State. This meant that the definitions of "employer" and of "industrial dispute" in s 4 of the Conciliation and Arbitration Act 1904-1918 (Cth) were valid as enacted and not subject to an exception in favour of a State.

The Court reached this conclusion by applying the ordinary rules of statutory construction as appropriate to an organic instrument to which the Crown was a party. "The first step in the examination of the Constitution is to emphasize the primary legal axiom that the Crown is ubiquitous and indivisible in the King's dominions. Though the Crown is one and indivisible throughout the Empire, its legislative, executive and judicial power is exercisable by different agents in different localities, or in respect of different purposes in the same locality, in accordance with the common law, or the statute law there binding the Crown (Williams v Howarth (1905) AC 551; Municipalities' Case (1919) 26 CLR 508, at p 533; Theodore v Duncan (1919) AC 696, at p 706; 26 CLR 276, at p 282; The Commonwealth v Zachariassen and Blom (1920) 27 CLR 552. The Act 63 & 64 Vic c. 12, establishing the Federal Constitution of Australia, being passed by the Imperial Parliament for the express purpose of regulating the royal exercise of legislative, executive and judicial power throughout Australia, is by its own inherent force binding on the Crown to the extent of its operation. It may be that even if s v of the Act 63 & 64 Vic c. 12 had not been enacted, the force of s 51 of the Constitution itself would have bound the Crown in right of a State so far as any law validly made under it purported to affect the Crown in that right; but, however that may be, it is clear to us that in presence of both s v of the Act and s 51 of the Constitution that result must follow. The Commonwealth Constitution as it exists for the time being, dealing expressly with sovereign functions of the Crown in its relation to Commonwealth and to States, necessarily so far binds the Crown, and laws validly made by authority of the Constitution, bind, so far as they purport to do so, the people of every State considered as individuals or as political organisms called States -- in other words, bind both Crown and subjects." (1920) 28 CLR, at pp 152, 153

In answer to the suggestion that there was an implied limitation upon Commonwealth legislative power excepting the Crown in right of a State from its control, the Court said: "The nature and principles of legislation (to employ the words of Lord Selborne in Burah's Case (1878) 3 App Cas 378, at p 904), the nature of dominion self-government and the decisions just cited entirely preclude, in our opinion, an a priori contention that the grant of legislative power to the Commonwealth Parliament as representing the will of the whole of the people of all the States of Australia should not bind within the geographical area of the Commonwealth and within the limits of the enumerated powers, ascertained by the ordinary process of construction, the States and their agencies as representing separate sections of the territory. These considerations establish that the extent to which the Crown, considered in relation to the Empire or to the Commonwealth or to the States, is bound by any law within the granted authority of the Parliament, depends on the indication which the law gives of intention to bind the Crown." (1920) 28 CLR, at pp 153, 154. These principles were not only stated in universal terms but, in my opinion, are by their very nature of universal validity. According to these principles, the grant to the Parliament of legislative power with respect to each subject matter enumerated in the Constitution enables laws to be made within the ambit of the subject matter which, if so intended, will bind the Crown in right of a State in like manner that they bind individuals and corporations.

It may be, of course, that the description of the subject matter properly construed excludes the Crown in right of a State either completely or to a defined extent from the ambit of the subject matter. S 51 (xiii) is an obvious example of such an express limitation of subject matter. But if there be no such express limitation, the legislative power to bind the Crown in right of a State by a valid law with respect to a subject matter within s 51(ii) is, in my opinion unqualified.

Sir Owen Dixon expressed his view of the principle of the Engineers' Case (1920) 28 CLR 129 in Australian Railways Union v Victorian Railways Commissioners (1930) 44 CLR 319, at p 390 and in West v Commissioner of Taxation (NSW) (1937) 56 CLR 657, at p 682. He said: ". . . the principle is that whenever the Constitution confers a power to make laws in respect of a specific subject matter prima facie it is to be understood as enabling the Parliament to make laws affecting the operations of the States and their agencies. The prima facie meaning may be displaced by considerations based on the nature or the subject matter of the power or the language in which it is conferred or on some other provision in the Constitution." I do not regard this expression of the principle of the Engineers' Case (1920) 28 CLR 129 as differing in substance from my own expression of it. The erection of a prima facie meaning of a constitutional provision with provision for displacing considerations, though not an approach to construction which I would myself prefer, is after all but a form of expression and, as I understand it, not intended to depart from ordinary methods of construing constitutional provisions. Once construed the power extends to authorize legislation binding the Crown in right of a State. His Honour in the passages to which I have referred made two reservations to his statement of the basic principle of constitutional construction. To these I shall make reference later. However, I should mention at this point that Attorney-General (NSW) v Collector of Customs (NSW) (the Steel Rails Case) (1908) 5 CLR 818 was upheld by the Court in the Engineers' Case (1920) 28 CLR 129 "upon the principles we have enunciated". In my opinion, though the exclusive nature of the power to impose duties of customs and excise is derived from s 90 and the duty to impose uniform duties of customs and excise is derived from s 88, the power which supported the exaction of the tax, the customs duty, in the Steel Rails Case, was s 51(ii). "The principles we have enunciated" were that the Crown in right of a State was within the ambit of a law of the Commonwealth passed in pursuance of the power granted by s 51(ii). The Steel Rails Case as so approved, in my opinion, is certainly fatal to the plaintiff's larger proposition; and, depending on what precision can be given to the definition of "governmental" functions, also to its lesser submission.

I find no need to refer to other cases decided before the Engineers' Case (1920) 28 CLR 129. They are sufficiently discussed for present purposes in that case and in West v Commissioner of Taxation (NSW) (1937) 56 CLR 657.

S 114 of the Constitution is in the following terms: 114. A State shall not, without the consent of the Parliament of the Commonwealth, raise or maintain any naval or military force, or impose any tax on property of any kind belonging to the Commonwealth, nor shall the Commonwealth impose any tax on property of any kind belonging to a State."

Its very presence in the Constitution or at any rate the inclusion in it of the provision as to the property of a State might well be thought to militate against the plaintiff's submissions. But though weighty, for my part, I find no need to rely on any such consideration. It seems to me quite clear that a law requiring the payment of a tax rated to the amount of wages paid is not a tax upon property. It is neither a tax upon any property of the employers nor upon any property of a State. It is not, as submitted, a tax upon those "revenues" of the State out of which the State may choose to pay the amount of the tax any more than it is a tax upon that income or capital of an employer out of which he may pay the tax. In my opinion, s 114 is not infringed by the imposition upon the State of the pay-roll tax. The Act therefore is not in breach of any express provision of the Constitution: to use Lord Selborne's words "it violates no express condition or restriction by which" the legislative power is limited. The Act is "within the general scope of the affirmative words which give the power", unless the plaintiff's submissions, directed to the construction of those words, are acceptable.

It is necessary now to discuss the basis on which the plaintiff State sought to limit the scope of the legislative power granted by s 51(ii). The plaintiff was bound to concede that the legislative power granted by some other paragraphs of s 51 could extend to the making of laws binding upon the Crown in right of a State. But the plaintiff sought to distinguish the power granted by s 51(ii).

The ground of distinction was sought to be found in what was said to be the unique character of a power to tax and the supposed incongruity of one government being able by means of taxation to determine the use to be made by another government of its revenues. It was further said and as an independent point, though at times used cumulatively with the submission as to the unique nature of the power of taxation, that the federal structure of the Constitution required an implication that Commonwealth legislative power whatever its constitutional source might not be exerted so as to threaten the continued existence of a State as an independent element in the federation. The tax in the present case was said to constitute such a threat.

In aid of its submission distinguishing the power to make laws with respect to taxation from the power to make laws on the other topics enumerated in s 51 the plaintiff called attention to a passage in the judgment of four justices in the Engineers' Case (1920) 28 CLR 129 and to certain observations of Sir Owen Dixon in subsequent cases, namely in Australian Railways Union v Victorian Railways Commissioner (1930) 44 CLR 319 and in West v Commissioner of Taxation (NSW) (1937) 56 CLR 657. I shall need later on to set out this passage and these observations to facilitate my discussion of them. But meantime, I address myself to the submission that a limitation upon the power of legislation granted to the Parliament by s 51 is to be derived from the "federal" nature of the Constitution. In this connexion I shall need to make particular reference to the decision of the Court in Melbourne Corporation v The Commonwealth (1947) 74 CLR 31.

I have observed elsewhere that the Constitution does not represent a treaty or union between sovereign and independent States. It was the result of the will and desire of the people of all the colonies expressed both through their representative institutions and directly through referenda to be united in one Commonwealth with an agreed distribution of governmental power. The whole "agreement" or as it is sometimes called "the compact" of the people of the colonies was to be and was expressed in an Act of the Imperial Parliament not in any sense as a treaty or an agreement of union, or as a confederation of States but as a statutory Constitution under the Crown.

"The Constitution was established by the Imperial Act 63 & 64 Vic c. 12. The Act recited the agreement of the people of the various colonies, as they then were, 'to unite in one indissoluble Federal Commonwealth under the Crown of the United Kingdom of Great Britain and Ireland, and under the Constitution hereby established'. 'The Crown', as that recital recognizes, is one and indivisible throughout the Empire. Elementary as that statement appears, it is essential to recall it, because its truth and its force have been overlooked, not merely during the argument of this case, but also on previous occasions." (1920) 28 CLR, at p 152

The Constitution granted by the Imperial Act was "federal", not in the sense of a union of previously existing States surrendering powers to that union but in the sense that the powers of government were distributed, some by nomination of subject matter and others as residues. Therefore analogies drawn from situations in the United States of America and from judicial conclusions and observations upon the Constitution of that country must, in my opinion, be used, if at all, only with a clear realization of the basic distinction between the constitutional position of the two countries. Thus, though by their union in one Commonwealth, the colonists became Australians, the territorial boundaries of the former colonies were retained for purposes of the distribution of governmental power and function. The constitutional arrangements of the colonies were retained by, and subject to, the Constitution as the constitutional arrangements for the government of those portions of the Commonwealth to be known as States. These, though coterminous in geographical area with the former colonies, derived their existence as States from the Constitution itself: and being parts of the Commonwealth became constituent States. This background must be in mind in considering whether any implication of a limitation upon Commonwealth power may be drawn from the terms of the Constitution itself. Whatever the antecedent history of the passing by the Imperial Parliament of the Constitution Act (63 & 64 Vic c. 12) it and it alone expresses the will of the Imperial Parliament which alone had legislative power to alter the colonial status. Of course, that Act must be construed in the light of its antecedent history or as it was said in the Engineers' Case (1920) 28 CLR 129, at p 152, "it must be read naturally in the light of the circumstances in which it was made. . .". But the outstanding fact that the Act created the Commonwealth as the embodiment of the people of Australia and gave it, amongst other things, legislative power over the enumerated subject matters cannot be gainsaid. The extent to which the former colonial constitutions and powers of government were transmuted into and continued by the Constitution as the constitutional and governmental powers of the States is fully expressed in s 106 and s 107 which are both subject to the Constitution. There is no room, in my opinion, for an implication of a kind which might be appropriate in the construction of a treaty of union between States, some unexpressed contractual term of a fundamental nature. Indeed, in my opinion, the approach of the Court in the Engineers' Case (1920) 28 CLR 129 to the construction of the Constitution as an Act of the Imperial legislature in reality denies the possibility of any such implication.

However, it is to my mind clear that the Constitution in providing for the States did not give the Commonwealth legislative power over them, or their powers and functions of government, as subject matters of legislation. That the Government cannot "aim" its legislation against a State, its powers or functions of government is both true and fundamental to our constitutional arrangements. But, in my opinion, this does not derive from any implied limitation upon any legislative power granted to the Commonwealth. It is true simply because the topics of legislation allotted to the Commonwealth by the Constitution do not include the States themselves nor their governmental powers or functions as a subject matter of legislative power. As will appear from my understanding of the judgments in Melbourne Corporation v The Commonwealth (2), a law of the Commonwealth which in substance takes a State or its powers or functions of government as its subject matter is invalid because it cannot be supported upon any granted legislative power. If the subject matter of the law is in substance the States or their powers or functions of government, there is no room, in my opinion, for holding it to be at the same time and in the same respects a law upon one of the enumerated topics in s 51. Sir Owen Dixon in Melbourne Corporation v The Commonwealth (1947) 74 CLR 31, having concluded that s 48 of the Banking Act "singled out and taxed the States in respect of some exercise of their functions", and that it was "effective to deny to the States the use of the banks", said that "this. . . is not justified by the power to make laws with respect to banking". That followed, in my opinion, because such a law was not in substance a law with respect to banking: but on the contrary, had the States and the banking of their funds as its subject. Of course, a law may be at the same time thought to be a law with respect to either of two of the topics enumerated in s 51 and it may be satisfactory in such a case not to trouble to say with respect to which of the two subject matters the law should preferably be referred. But when a law may possibly be regarded as having either of two subjects as its substance, one of which is within Commonwealth power and the other is not, a decision must be made as to that which is in truth the subject matter of the law. Although usually not an appropriate course in determining whether a law is a law on an enumerated topic, in such a case, the decision of what is the subject matter of the law may be approached somewhat in the manner the validity of a law claimed to be within one of the two mutually exclusive lists in the Canadian Constitution is determined. The law must be upon one or other of the subjects. It cannot be on both. Thus, in my opinion, to decide that the law in question is a law having the States or their powers or functions of government for its subject matter, is to decide that it cannot be a law "justified by the power to make laws with respect to" one of the topics enumerated in s 51. In other words, it seems to me to follow necessarily from the decision of the Court in the Engineers' Case (1920) 28 CLR 129, and from the reasons given for that decision, that the validity of a Commonwealth law will be determined by its relation to a granted subject matter of legislative power construed as a provision of an act of the Imperial Parliament, "read naturally in the light of the circumstances in which it was made". By that direct approach no warrant will, in my opinion, be found in the Constitution for a law of which the powers or functions of a State is or are in truth the subject matter. It is for lack of an appropriate subject matter rather than the presence of an implied limitation upon some granted power that such a law, in my opinion, would fail. That, in my opinion, is the real ground of and, in any case, the only acceptable ground for, the decision in Melbourne Corporation v The Commonwealth (1947) 74 CLR 31.

The reason for the inability of a State to make a law binding on the Commonwealth is a completely unrelated circumstance. It derives from the fact that the Crown has not by the Constitution submitted itself to the legislatures of the States. The endeavour to found the inability of a State to bind the Commonwealth upon a doctrine of mutual immunity derived from necessity was clearly and convincingly exploded by the Court in the Engineers' Case (1).

But though the powers and functions of a State may not be the subject matter of a Commonwealth law yet because laws of the Commonwealth, if so intended, bind the Crown in right of a State, the exercise of those powers and functions may be affected and indeed controlled by a valid Commonwealth law, the validity of the law depending solely upon its relationship to a granted topic of legislation. This is not to deny that the extent of the impact upon, or control of, a State or the exercise of its powers and functions by the Commonwealth Act may not induce the conclusion that that Act is in substance a law with respect to the State, its powers or functions and so invalid for want of a granted subject matter.

The plaintiff's submissions did not in terms go so far as to say that the inroad made by the Act upon the governmental functions of the State was so great that the State and those functions became in substance the subject matter of the Act, that it became an Act with respect to the State rather than an Act with respect to taxation. The submission was that, though an Act with respect to taxation, it transgressed a limitation upon the legislative power because by imposing the tax upon the State it impaired the exercise by the State of its governmental functions and thus impinged upon its independence as a State.

In the first place I am unable to see how this submission can be accepted consistently with the decision of this Court in the Steel Rails Case (1908) 5 CLR 818, bearing in mind that it was accepted in the Engineers' Case (1920) 28 CLR 129 upon the basis of the principles there laid down. But in any case, in my opinion, the statement that the imposition of this tax threatens or impairs the independence of the State is, as a statement of a legal conclusion, unwarranted. In some ways, though of course significantly different, it is reminiscent of the earlier view that the taxation of the personal income of a public servant, albeit, including his salary as such, compromised the independence of the government which employed him. No doubt to the extent that the State pays the amount of the tax, it may have less money at its disposal for the pursuit of its own policies. But that, in my opinion, does not mean either that the law is a law with respect to a State or its functions, or that its independence as a State is threatened. So far as the submission depends on the alleged distinction between governmental and other functions of a State, as I point out later, in my opinion, this supposed distinction cannot afford any criterion of validity.

It will be convenient at this point to notice an argument founded on the statement to be found in the reported cases that the Commonwealth may not by its law "discriminate" against a State. In the case of a law made under s 51(ii) there may be no discrimination between States or parts of States. No case for invalidity based on this express provision was sought to be made. Nor could it be said that the Act "singled out" the State for special or separate treatment. But it was said that the Act did "discriminate" against the State in so far as it excluded the wages paid by a State to teachers and staff employed in a school conducted by or on behalf of a State from the exempting provisions of s 15 of the Act. That the Act treats such wages differently from the way it treats wages paid by a denominational or independent school and in that sense discriminates may be accepted. But it is almost of the nature of a law of taxation that it selects those who are to be subject to the tax it imposes. Frequently there are exemptions of which only some may have the advantage. In this case, a State is not given the benefit of an exemption. But does the presence in the statute of such "discrimination" render the statute even pro tanto invalid?

Although, as a convenient, though perhaps with great respect not always an exact form of expression, it is said in various judgments of Justices of this Court that a law "discriminating" against a State would be invalid, in my opinion, the discriminating nature of a legislative provision will not itself be definitive of invalidity. If I might borrow what, with respect, seems to me, an apt expression from the argument of Fullagar K C, as Mr Justice Fullagar then was, in Riverina Transport Pty Ltd v Victoria (1937) 57 CLR 327, at p 337 "discrimination is merely a means to a conclusion", the conclusion being that the legislation is not upon the granted subject matter but upon some other subject matter not within legislative competence. Sir John Latham, who discussed discrimination as a basis of invalidity in Riverina Transport Pty Ltd v Victoria (1937) 57 CLR 327 and in West v Commissioner of Taxation (NSW) (1937) 56 CLR 657, said in Melbourne Corporation v The Commonwealth (1947) 74 CLR 31 as to legislation discriminating against a State: "In my opinion, the reason why such legislation is invalid is that what is called 'discrimination' shows that the legislation is really legislation by the Commonwealth with respect to a State or State function as such and not with respect to the subject in respect of which it is sought to bind the State. . . ". With due respect I agree with this analysis. To be definitive of validity the "discrimination" must be of that kind which leads to a relevant conclusion as to the substantial subject matter of the law.

In the present case even if it be supposed that the provisions to which I have called attention are truly discriminating, their presence in the legislation, in my opinion, does not afford any reason to conclude that the Act is not upon a granted subject matter. The mere existence of the different provisions in the Act affecting the State does not, in my opinion, invalidate the Act or any part of it.

I should now deal with the submission that the subject matter of taxation, because of the extensive effect a law on that topic may have, has an inherent limitation which excludes a State from its ambit. I am unable to accept such a submission. The argument offered in support of it seems to me little, if anything, more than an attempt to construct a legal safeguard against an apprehended abuse of a power to make a law of taxation binding the Crown in right of a State. But the fallacy of attempting to erect such a limitation is clearly disposed of by the Court in the Engineers' Case (1920) 28 CLR, at p 151. The language of s 51(ii) and its ascertained meaning by construction, in my opinion, gives no warrant for any limitation upon the legislative topic of taxation beyond those expressly made in s 51(ii) itself and by s 114 of the Constitution.

From a passage in the judgment of the majority justices in the Engineers' Case (1920) 28 CLR 129 the plaintiff sought to get some support for the proposition that there was something so special about the power to tax that of necessity there was within the grant of the legislative power a limitation excepting the Crown in right of the State from the ambit of the power. So much weight was put upon this passage and such comments have been made upon it in subsequent dicta that I think it worthwhile to set out the passage in full: "It is proper, at the outset, to observe that this case does not involve any prerogative 'in the sense of the word', to use the phrase employed by the Privy Council in Theodore v Duncan (1919) AC 696, at p 706, 'in which it signifies the power of the Crown apart from statutory authority'. Though much of the argument addressed to us on behalf of the States rested on the prerogative, this distinction was not observed, but it exists, and, so far as concerns prerogative in the sense indicated, it is unnecessary to consider it. In several recent cases the Judicial Committee has had the broader question under consideration, as in Canadian Pacific Railway Co v Toronto Corporation (1911) AC 461 and Bonanza Creek Gold Mining Co v R (1916) 1 AC 566, but in none of these was it found necessary to determine it. It is manifest that when such a question is involved in a decision, the nature of the prerogative, its relation to the Government concerned, and its connection with the power under which it is sought to be affected, may all have to be considered. In the Bonanza Creek Case (1916) 1 AC, at p 587 Lord Haldane, speaking for the Privy Council, after favouring an interpretation of the British North America Act by which certain rights and privileges of the Crown would be reserved from Canadian legislative power, proceeded to say -- 'It is quite consistent with it' (that interpretation) 'to hold that executive power is in many situations which arise under the statutory Constitution of Canada conferred by implication in the grant of legislative power, so that where such situations arise the two kinds of authority are correlative. It follows that to this extent the Crown is bound and the prerogative affected.' In this case we have to consider the effect of certain statutory authority of the States, but in relation to pl. xxxv only, and it is necessary to insert a word of caution. If in any future case concerning the prerogative in the broader sense, or arising under some other Commonwealth power -- for instance, taxation, -- the extent of that power should come under consideration so as to involve the effect of the principle stated in the passage just quoted from the Bonanza Creek Case, and its application to the prerogative or to the legislative or executive power of the States in relation to the specific Commonwealth power concerned, the special nature of the power may have to be taken into account. That this must be so is patent from the circumstance that the legislative powers given to the Commonwealth Parliament are all prefaced with one general express limitation, namely, 'subject to this Constitution', and consequently those words, which have to be applied seriatim to each placitum, require the Court to consider with respect to each separate placitum, over and beyond the general fundamental considerations applying to all the placita, whether there is anything in the Constitution which falls within the express limitation referred to in the governing words of s 51. That inquiry, however, must proceed consistently with the principles upon which we determine this case, for they apply generally to all powers contained in that section." (1920) 28 CLR, at pp 143, 144.

Two dicta of Sir Owen Dixon ought also to be quoted. In Australian Railways Union v Victorian Railways Commissioners1, Sir Owen said:

"We ought not to examine the correctness of the rule adopted by the majority of the Court in the Engineers' Case, for the interpretation of the legislative powers of the Parliament. This rule I understand to be that, unless, and save in so far as, the contrary appears from some other provision of the Constitution or from the nature or the subject matter of the power or from the terms in which it is conferred, every grant of legislative power to the Commonwealth should be interpreted as authorizing the Parliament to make laws affecting the operations of the States and their agencies, at any rate if the State is not acting in the exercise of the Crown's prerogative and if the Parliament confines itself to laws which do not discriminate against the States or their agencies."

In West v Commissioner of Taxation (NSW) (1937) 56 CLR, at p 682, Sir Owen said:

"The principle" ie established by the Engineers' Case (1920) 28 CLR 129 "is that whenever the Constitution confers a power to make laws in respect of a specific subject matter, prima facie it is to be understood as enabling the Parliament to make laws affecting the operations of the States and their agencies. The prima facie meaning may be displaced by considerations based on the nature or the subject matter of the power or the language in which it is conferred or on some other provision in the Constitution. But, unless the contrary thus appears, then, subject to two reservations, the power must be construed as extending to the States. The first reservation is that in the Engineers' Case the question was left open whether the principle would warrant legislation affecting the exercise of a prerogative of the Crown in right of the States. The second is that the decision does not appear to deal with or affect the question whether the Parliament is authorized to enact legislation discriminating against the States or their agencies."

What is sought to be said by the plaintiff is that the Court in the passage quoted from the Engineers' Case (1920) 28 CLR 129 excepted the legislative power with respect to taxation from the generality of its judgment as expressed in the other passages which I have already quoted from that case. But, in my opinion, the submission is founded on a misconception of what the Court there said.

Perhaps in this connexion it is well to remind ourselves that we are not construing judgments. Our task is to construe the Constitution which is always the text. However in so far as it is said that the Court has established by decision a constitutional doctrine it is proper to examine closely the decisions both to ascertain precisely what was decided and on appropriate occasions to determine whether what was decided is currently acceptable. It is of course what the court as a court says and not the opinion of single justices unless adopted by a majority of the justices of the court, which establishes doctrine. Further, what Isaacs J said in Australian Agricultural Company v Federated Engine Drivers and Firemen's Association (1913) 17 CLR 261, AT P 278 is, in my respectful opinion, pre-eminently true in relation to the construction of the Constitution.

In considering the passage from the Engineers' Case (1920) 28 CLR, at pp 143, 144 which I have set out, the first observation that should be made is that in truth the justices did not single out the power with respect to taxation as an exception but merely used it as an instance of those legislative powers whose exercise might be thought likely to give rise to a conflict between the prerogative of the Crown and legislation based on a granted power. Secondly, it is of paramount importance to understand what was the reservation which their Honours were minded to make. This is best understood, it seems to me, by examining the two cases to which reference is made in the judgment from which I have quoted, namely Canadian Pacific Railway Co v Toronto Corporation (1911) AC 461 and Bonanza Creek Gold Mining Co v R (1916) 1 AC 566. These cases arose under the Canadian Constitution. In the case of Canada, Lieutenant Governors of the Provinces as well as the Governor-General are viceroys of the Crown through whom the prerogatives of the Crown in general may be exercised; they are not as are the Governors of the Australian States merely exercising local functions for the Crown including the prerogative in relation to local matters. In the case of a Constitution such as that of Canada with a distribution of legislative power between legislatures and the maintenance of the Crown's prerogative in more than one representative, a question might arise whether a law made by the Canadian House of Representatives is in conflict with an exercise of the prerogative of the Crown through the viceroy Lieutenant Governor of the Province. However, Lord Haldane in the Bonanza Creek Gold Mining Co v R (1916) 1 AC 566 was at pains to point to the radical distinction in relation to the prerogative of the Crown between the situation under the Canadian Constitution and that which arises under the Australian Constitution. He said: "There is no provision in the British North America Act corresponding even to s 61 of the Australian Commonwealth Act, which, subject to the declaration of the discretionary right of delegation by the Sovereign in Ch. 1, s 2, provides that the executive power, though declared to be in the Sovereign, is yet to be exercisable by the Governor-General." (1916) 1 AC, at pp 586, 587.

This observation of his Lordship is very much in line with what I have called the basic reason for the Court's decision in the Engineers' Case (1920) 28 CLR 129. which was that the Crown had submitted itself to the legislative powers of the Commonwealth to the full extent of each granted power and that therefore the extent to which the Crown in right of the Commonwealth or in right of a State is bound by any law within the granted authority of the Parliament depends solely on the indication which the law itself gives of an intention to bind the Crown. The only question is one of statutory construction, the Crown being a party to the Commonwealth law.

In any case it is clear that their Honours did not examine in any depth the question of any possible collision between Commonwealth law and an exercise of the Crown's prerogative because as they said the case before them did not involve any question as to the prerogative. Having closely studied the two cases on appeal from Canada the most it seems to me that can be taken from their Honours' reservation is that the question whether a Commonwealth law made under a granted power can affect an exercise of the Crown's prerogative might need some time to be examined. In my opinion, however, on such examination it will be found that the possibility against which their Honours thought fit to enter a caveat is really not one that can occur under the Australian Constitution. That their Honours did not intend in the Engineers' Case (1920) 28 CLR 129 to depart from the generality of their decision can be seen in the last sentence of the passage which I have quoted. They were at pains to point out that the inquiry as to whether there was any limitation as to the prerogative "must be ascertained consistently with the principles upon which we determine this case for they apply generally to all the powers contained in that section, that is to say, s 51".

I have already touched upon portion of the quotations from the judgment of Sir Owen Dixon in Australian Railways Union v Victorian Railways Commissioners (1930) 44 CLR 319 and in West v Commissioner of Taxation (NSW) (1937) 56 CLR 657. I have also indicated my view as to the concept of a prima facie nature of the meaning of a granted legislative power. I should now wish to observe that whereas in the passage firstly quoted by me, Sir Owen referred to the "Crown's prerogative", in the passage quoted from West's Case (3) he refers to "the exercise of a prerogative of the Crown in right of the States". In my most respectful opinion this is an unwarranted extension of what was the subject of reservation in the Engineers' Case (1). Indeed, it was the distinction between the prerogative of the Crown regarded as an indivisible entity and the exercise of local functions by an agency of the Crown which was fundamental to the decision of the Engineers' Case (1). I have already sufficiently expressed myself with respect to the "reservation" in the Engineers' Case (1) to indicate why I am respectfully unable to accept the latter statement of Sir Owen as to the extent of that reservation.

I ought at this point to notice a submission that in some way the opening words of s 51 "subject to this Constitution" opened the way for an implication limiting the granted powers of the Parliament. With every respect to the judicial source of this submission, I am unable to accept it. See West v Commissioner of Taxation (NSW) (1937) 56 CLR 657. It may be granted that the quoted words import limitations upon the legislative power given by s 51. For example, they introduce the prohibition of s 92 and s 99 of the Constitution. But for reasons I have already expressed, I find no warrant in the Constitution for an implication of the kind submitted by the plaintiff. It would indeed be strange in my opinion that in so fundamental a matter as that to which this case relates, a limitation upon Commonwealth power was to be extracted from such prefatory words: or for that matter by implication at all.

To restate my conclusions, the principle to be derived from the Engineers' Case (1920) 28 CLR 129 is that the Commonwealth Parliament in exercising its legislative power as to any of the enumerated topics is able by its law to bind the Crown in right of a State except in relation to those topics which contain and express exception or limitation in that respect and except in so far as s 114 extends. Instances of subject matter with respect to which there could be no occasion to bind the Crown in right of a State are obvious and do not need to be mentioned. Whether or not a Commonwealth law purporting to bind the Crown in right of the State is a valid law depends, in my opinion, entirely upon whether or not it is a law on a stated subject matter. If it singles out a State for particular treatment (and such singling out is the form of discrimination which in my opinion may be relevant), it may be concluded that the law is not a law on a stated subject matter but is a law the subject matter of which is the State or a power or function of the State. Again the nature of the provisions of the Act may lead to the conclusion that it is in substance a law with respect to a State or its powers or functions. That subject matter is not vouchsafed to the Commonwealth.

I turn now to Melbourne Corporation v The Commonwealth (1947) 74 CLR 31. Reliance was placed by the Solicitor-General for Victoria upon some of the opinions expressed by the justices in that case. The section of the Commonwealth law there in question, namely s 48 of the Banking Act 1945 (Cth) though cast in the form of a direction to banks was in reality an endeavour to compel the States and its authorities including their local government authorities to bank with the Commonwealth Bank. Rich J says: "In my opinion, the pith and substance of s 48, however ingeniously expressed, is that a State or an authority of a State, including a local governing authority, must have the consent of the Treasurer in order to become the customer of a bank." (1947) 74 CLR, at p 67.

The section only applied to States and their authorities. They were thus singled out and a legislative provision made as to them and them alone. The legislative provision was as to the manner in which they might hold their funds. That the subject matter of the section was the State in relation to the custody of the funds could plainly be seen. That that subject matter was not granted to the Commonwealth was plain enough. Of course, a reason why such a subject matter was not available to the Commonwealth was that the continued integrity of the States was just not possible if laws could be validly made by the Commonwealth on that subject matter. Consequently frequent reference is to be found in the reasons of the participating justices to the undoubted truth that the Constitution contemplates the continued existence of the States. This is expressed by saying that the Commonwealth may not "aim" its legislation against the States; or, that the States cannot be singled out and taxed as States in respect of some exercise of their functions. But these in my respectful opinion are merely forms of expressing the legal principle that legislation of the kind described is in substance legislation upon or with respect to the States themselves and their functions as such. Such a law is "not justified by the power to make laws with respect to banking". There is however no ratio decidendi common to those justices who formed the majority of the participating justices in Melbourne Corporation v The Commonwealth (1947) 74 CLR 31. It is not permissible to construct such a ratio by the aggregation of various elements from separate reasons given by their Honours (see Great Western Railway Company v Owners of SS Mostyn per Viscount Dunedin (1928) AC 57, at pp 73, 74). But, in my opinion, the real ground of the decision and, in any case, the only acceptable ground, is that s 48 of the Banking Act lacked an appropriate subject matter.

Any other view must, in my respectful opinion, involve concepts incapable of exact expression and certainly of practical application. For example, the concept of an "undue" interference with State functions attracting invalidity provides but a question begging formula. And to attempt to use a distinction between governmental and other functions of a State in the modern world as a legal criterion of validity is, in my opinion, without promise. New York v United States (1946) 326 US 572 (90 Law Ed 326), to my mind, illustrates the difficulties without affording any sure guide to their resolution. In my opinion, the only satisfactory principle is that which the Engineers' Case (1920) 28 CLR 129 adopts, namely, that to be valid the Commonwealth law must be on a granted subject matter. Being in substance on such a matter, it may bind the Crown in right of a State. But States and their functions are not matters committed to the Parliament. In my opinion, application of these principles, and the determination of the subject matter of a law, as with all its difficulties, we are accustomed to do, will ensure the continuance of States as such, according to the Constitution. I respectfully agree with Sir John Latham when he says in Melbourne Corporation v The Commonwealth (1947) 74 CLR, at p 61 that "the Commonwealth Parliament has no power to make laws with respect to State governmental functions as such. . . . It is upon this ground, in my opinion, that what is called 'discriminatory' legislation may properly be held to be invalid". On the other hand, I am unable to agree that there is a separate ground of invalidity namely "undue interference with the performance of what are clearly functions of government". If, as I have already said, the provisions of an Act because of the nature and extent of their application to the State or its functions can be said to be in substance a law with respect to the State or its functions, the provisions will be beyond the competence of the Parliament. But such "interference" with the exercise of the powers or functions by a Commonwealth Act which otherwise would be within power will not invalidate that Act unless the nature and extent of such interference requires the conclusion that those powers or functions are in reality the subject matter of the Act.

In my opinion, the power of the Parliament with respect to taxation is not in any wise excepted from the basic principle that a valid law made by the Parliament may bind the Crown in right of a State according to its terms

Therefore, the accepted principles of construction of the Constitution as expounded in Amalgamated Society of Engineers v Adelaide Steamship Co Ltd (1920) 28 CLR 129; 26 ALR 337; clearly, in my opinion, require the allowance of the demurrer to the statement of claim.