Victoria v Commonwealth
[1971] HCA 16(1971) 122 CLR 353
(1971) 45 ALJR 251
[1971] ALR 449
(1971) 2 ATR 249
(Judgment by: Walsh J)
Victoria
v Commonwealth
Judges:
Barwick CJ
McTiernan J
Menzies J
Windeyer J
Owen J
Walsh JGibbs J
Judgment date: 14 May 1971
Judgment by:
Walsh J
The State of Victoria has challenged the validity of the imposition upon it of a liability to pay pay-roll tax on wages paid by it to certain officers and employees. The statement of claim, as amended, has confined the claim to the seeking of declarations to the effect that it is beyond the power of the Commonwealth Parliament to render the plaintiff liable to pay the tax in respect of the wages paid by it to those of its officers and servants who are employed in certain specified departments of government. But the submissions made on its behalf include submissions which, if accepted, would deny validity to legislation imposing any tax on the plaintiff in respect of wages paid to any of its employees in any of its activities.
I think it is clear that the laws which are challenged can be properly described as laws with respect to taxation. If the argument for the plaintiff is to be upheld, either in its broader aspect or in its more limited aspect, it must be upheld, in my opinion, upon the ground that although the legislation is concerned with a subject matter which is within Commonwealth power, that power is limited, by means of an implication derived from the nature and the structure of the federal system embodied in the Constitution, in such a way that it does not authorize the imposition of a tax upon the wages paid by a State to its employees or at any rate upon the wages paid to some of its employees. It would not be possible, in my opinion, to support a conclusion that the legislation in so far as it is expressed to bind the Crown in the right of a State, is not a law with respect to taxation and is for that reason beyond power. The defendant contends that once it appears that a law can be properly described as a law with respect to taxation, it follows that it is within power, notwithstanding that the Crown in right of a State is subjected to it, unless it can be shown that the law contravenes some specific provision of the Constitution, such as s 114, and this cannot be shown. It was said that the principles laid down in Amalgamated Society of Engineers v Adelaide Steamship Co Ltd (1920) 28 CLR 129 require that those contentions be accepted. It was submitted that it is inconsistent with those principles that the ambit of the power to legislate with respect to an enumerated subject matter should be restricted in any way otherwise than by an express provision specifically imposing some defined limitation upon it.
The plaintiff contends however that the foregoing submissions on behalf of the defendant are not in accordance either with the principal judgment in the Engineers' Case (1920) 28 CLR 129 itself or with the interpretations given to that judgment in subsequent cases. It is clear that the general rule of interpretation adopted in the Engineers' Case (1920) 28 CLR 129 has been declared repeatedly to be subject to reservations or qualifications, additional to those which are imposed expressly in relation to particular powers by provisions of the Constitution other than s 51 or are imposed specifically by the terms of a paragraph in s 51, for example, the words in s 51(ii) itself -- "but so as not to discriminate between States or parts of States". It has been argued in the present case that in some respects those judicial declarations go beyond what was said in the Engineers' Case (1920) 28 CLR 129 and beyond what is consistent with its basic principles. But whether that be so or not, there is a substantial body of authority for the proposition that the federal nature of the Constitution does give rise to implications by which some limitations are imposed upon the extent of the power of the Commonwealth Parliament to subject the States to its legislation. That proposition has not been regarded as inconsistent with the principles enunciated in the Engineers' Case (1920) 28 CLR 129. It has been affirmed by members of this Court who were authors of the leading judgment in that case as well as by others who were not. It is supported not only by dicta but also by the decision in Melbourne Corporation v The Commonwealth (1947) 74 CLR 31, unless that case should be regarded as having been decided upon the ground that the law which was declared to be invalid was not a law "with respect to" banking, within the meaning of s 51(xiii). But, in my opinion, the majority of those members of the Court who held the law to be invalid decided that it was invalid because the effect of the law upon the States was such that, although it might be a law with respect to banking, it was beyond the power of the Commonwealth Parliament to enact it. The judgments in the Melbourne Corporation Case (1947) 74 CLR 31 have been discussed by Menzies J in his judgment in the present case, and I agree, with respect, with what his Honour has written about it. Therefore, my further references to it will be less extensive than otherwise they would have been. But in relation to the question whether the decision was based upon the view that the law was outside the subject matter described in s 51(xiii), I refer to what was said in another case in which argument was heard almost immediately after judgment was given in the Melbourne Corporation Case. In Re Richard Foreman & Sons Pty Ltd; Uther v Federal Commissioner of Taxation (1947) 74 CLR 508, at p 519 Latham CJ said: "In the recent case of Melbourne Corporation v The Commonwealth (1947) 74 CLR 31 it was held by this Court that the Commonwealth Parliament had no power to make laws which were directed against and impaired the exercise of an essential governmental function of the State." I refer also to the observations of Starke J (1947) 74 CLR, at p 525 and of Williams J (1947) 74 CLR, at p 539. The decision was afterwards held in The Commonwealth v Cigamatic Pty Ltd (in liq.) (1962) 108 CLR 372 to have been in part erroneous. My purpose here is not to support the correctness of the statements to which I have referred but merely to show what was the effect of the decision in the Melbourne Corporation Case (1947) 74 CLR 31 in the opinion of Justices who had taken part in it.
On several occasions, both before and after the Melbourne Corporation Case (1947) 74 CLR 31 was decided and in that case itself, Sir Owen Dixon formulated what was in his opinion the basic principle laid down in the Engineers' Case (1920) 28 CLR 129 and he made observations relating to reservations or qualifications which he thought had been made, concerning the prima facie rule of interpretation which it established. On the first and second of those occasions, that is to say, in Australian Railways Union v Victorian Railways Commissioners (1930) 44 CLR 319, at p 390 and in West v The Commissioner of Taxation (NSW) (1937) 56 CLR 657, at pp 682, 683, his Honour did not refer specifically to the taxation power. But in Federal Commissioner of Taxation v Official Liquidator of E OFarley Ltd (1940) 63 CLR 278, at p 316, his Honour said, in the course of discussing a question as to what could be regarded as incidental to the taxation power, that in the Engineers' Case (1920) 28 CLR 129 "the taxation power was singled out as an instance of a legislative power the extent of which in relation to the States might in the future come up for special consideration". Again in Essendon Corporation v Criterion Theatres Ltd (1947) 74 CLR 1, at p 19. Dixon J said that in the Engineers' Case (1920) 28 CLR 129 an express reservation had been made covering the power of taxation. He added: "The reservation is expressed in a somewhat indefinite manner." In the Melbourne Corporation Case (1947) 74 CLR 31, Dixon J made observations relating to the taxation power, which have been quoted in part by Menzies J, and to which I shall make some further reference later. In Ex parte Professional Engineers' Association (1959) 107 CLR 208, at p 239 Dixon CJ again adverted to the Engineers' Case (1920) 28 CLR 129 and suggested that perhaps "the reservations and qualifications therein expressed concerning the federal power of taxation and laws directed specially to the States and also perhaps the prerogative of the Crown received too little attention".
The plaintiff sought to rely on the foregoing statements as warnings against a ready acceptance of the view that once it is seen that a law may be described as a law with respect to taxation, no further question can arise concerning its validity in so far as it affects the States, other than a question relating to some specific provision, such as s 114. But it is not enough for the plaintiff to assert that a further question may arise for consideration. Nor is it enough for it to maintain that some taxation laws could have such an effect upon the independence or upon the functions of the States that their enactment would be beyond power. In order to succeed, the plaintiff must establish that in the enactment of the laws which have been challenged the legislative power of the Parliament to bind the States has been exceeded. It must obtain the acceptance by the Court of a principle by which a limitation upon power is imposed by reference to some criterion or test which is seen to be satisfied when it is applied to the particular laws with which the case is concerned.
It could not be and it was not maintained that every Commonwealth law which purports to bind the States is to that extent invalid. It was contended, however, that every law which purports to impose any tax (other than customs duties) upon a State is beyond power. The exception of customs duties was made because of the decision in Attorney-General (NSW) v Collector of Customs (NSW) (Steel Rails Case) (1908) 5 CLR 818. But once an exception is made of any tax, it must be difficult to maintain that, subject to that exception, all taxation laws binding a State are beyond power. Counsel for the plaintiff advanced reasons for maintaining the general proposition whilst admitting an exception to it. But I have not found them convincing. It is true that, as counsel pointed out, some attention was given in the Steel Rails Case to the exclusive nature of the customs power and of other Commonwealth powers which were thought to be relevant. But it is not acceptable, in my opinion, to regard either the exclusive nature of those powers or the supposed necessity of treating the States as bound in order that the customs power might be effectively exercised, as a sufficient reason for regarding the levy of customs duties on the States as being compatible with their continued existence and independence preserved to them by the Constitution with which, according to the argument, the imposition of any other tax would be incompatible. The States would be affected no more and no less by a law made under, or connected with, an exclusive power, than by a law made under a concurrent power. In the Engineers' Case (1920) 28 CLR, at p 159 it was said of the distinction between exclusive and concurrent powers: "That distinction affects the legislative power of the States, but not the effect of Commonwealth Acts once made." The distinction was there regarded as not one on which the validity of the Commonwealth law depended.
In my opinion, the general proposition that (leaving aside customs duties) the States have a constitutional protection against the exercise by the Commonwealth Parliament of the taxation power cannot be accepted. It has never been decided that they have nor has this been definitely affirmed in any of the dicta referring to the taxation power as a power which requires, or may require, special consideration. An assertion that a question may require examination is not tantamount to an assertion that the question ought to be answered in a particular way. If it be accepted that in the Engineers' Case (1920) 28 CLR 129 the question of the scope of the taxation power in relation to the States was the subject of a "reservation", that case still does not provide support for the proposition that no tax (apart from customs duties) can be lawfully levied on a State. Nor is that general proposition supported by the Melbourne Corporation Case (1947) 74 CLR 31. In that case when Rich J referred (1947) 74 CLR, at p 66 to taxation by way of illustration of actions on the part of the Commonwealth which would be, in his opinion, invalid, his reference was not to all taxes imposed by a Commonwealth law on the States but to a particular taxing Act of the kind which he specified. Starke J, in his discussion of the matter in the same case (1947) 74 CLR, at pp 70-72, did not assert that there was a general rule by which the States were protected against taxation laws, nor was that asserted by Dixon J in any of the cases to which I have referred above.
When it has been stated that there are limitations derived from the structure of the federal system upon the legislative power of the Commonwealth Parliament to enact laws which affect the States, the limitations have been described in various ways, but have not been completely and precisely formulated. Taxation laws have been mentioned as illustrations of laws which might be, in their effect upon the States, laws of a kind the enactment of which would be beyond power. If a general rule were adopted that a law imposing a tax upon States is invalid for the reason that the taxation power is, because of its special nature, a power which cannot be exercised so as to bind the States, there could not be any need or any justification for saying that such a law may sometimes be invalid for the reason that it falls within a wider class of laws which affect the independence of the States in a manner regarded as being beyond power. The distinction, to which I am seeking to draw attention, between a limitation said to be based on the nature of the taxation power and a constitutional limitation said to be derived from broader and more far-reaching principles which may be applicable to some taxation laws, was made by Dixon J in the Melbourne Corporation Case (1947) 74 CLR, at p 81 where his Honour said: "The objection to the use of federal power to single out States and place upon them special burdens or disabilities does not spring from the nature of the power of taxation. The character of the power lends point to the objection but it does not give rise to it. The federal system itself is the foundation of the restraint upon the use of the power to control the States. The same constitutional objection applies to other powers, if under them the States are made the objects of´ special burdens or disabilities."
The restraint upon the use of power to which his Honour there referred is not an absolute restraint. It is not of the same character or extent and it has not the same basis as the inability of a State to make laws binding upon the Commonwealth. It is a limited restraint. I have said above that the limitations have been described in various ways. Some of these descriptions have been in terms which, in my opinion, do not provide satisfactory tests for determining whether or not a law is valid. For example, a statement that a law is invalid if it subjects the governmental functions of a State to "undue interference" provides no satisfactory means for determining what is "undue". Again there are difficulties in a test which makes the decision of a legal question depend upon a distinction made by the Court between functions of governments which are "normal" or are "essential" and those which are not. A recognition that there are difficulties in formulating a single test in precise and comprehensive terms does not provide, in my opinion, a reason for denying that there can be any limitation by implication upon the power to affect the States. But if it be accepted that such a limitation exists, what must be decided is whether the laws which are here under challenge are of such a kind or operate in such a way in relation to the States that they are thereby invalidated. At this point I think it is necessary to refer to the question whether any such limitation can be applicable only to laws which "single out" the States or may be applicable also to some general laws.
The statement of principle by Dixon J in the Melbourne Corporation Case (1947) 74 CLR, at p 81 which refers to the use of federal power "to single out States and place upon them special burdens or disabilities" was not intended, in my opinion, to be an exhaustive statement. It is not necessarily in conflict with the statement by Rich J (1947) 74 CLR, at p 66 to the effect that in addition to cases where the law singles out the States there may be invalidity in a law by which the States are subjected to some provision of general application which in its application to them would prevent them from performing their essential functions or would impede them in so doing. Dixon J, himself, said in Bank of NSW v The Commonwealth (1948) 76 CLR 1, at p 338: "No doubt without discrimination laws applying to States may operate against them in such a way that it must be beyond Federal power to enact them."
Nevertheless, although it may be that some laws of general application may be invalid in so far as they apply to the States, I am of opinion that the laws which are here challenged, and which in my opinion are general laws, cannot be brought within the principle stated by Rich J concerning the invalidity of general laws. Clearly the laws do not prevent the States from performing their functions and, in my opinion, they do not, in any relevant sense, impede them in doing so. There is not, in my opinion, any ground upon which it could be asserted that the challenged laws in so far as they bind the States bring about any such destruction or curtailment of the right of the States to continue in existence or to exercise their functions, as could require the power of the Parliament to enact them to be denied. Since the challenged laws are, in my opinion, laws of general application and are not laws which "single out" the States or place "special burdens or disabilities" upon them then the plaintiff cannot rely on any restraint to which the power to enact laws of the latter description may be subject. In my opinion they are not laws which in any relevant sense discriminate against the States or single them out.
S 15 (bb) of the Pay-roll Tax Assessment Act provides for exemptions from tax and these include an exemption in respect of wages paid by a school or college which is carried on by a body corporate, society or association otherwise than for the purpose of profit or gain to the individual members of the body corporate, society or association and which is not carried on by or on behalf of a State. In my opinion the exclusion of the States from the benefit of the exemption which is allowed to the schools or colleges described in s 15 (bb) does not have the effect that the Act should be regarded as singling out the States and placing a special burden upon them. The laws remain general laws, notwithstanding that there are specified exceptions from their operation. The Acts cannot be regarded as if they enacted or included the enactment of a separate and distinct law which imposed a special discriminatory tax upon the employment by States of teachers.
In support of the submissions that the laws are beyond power in so far as they apply to the wages paid to the civil servants specified in the statement of claim two propositions were advanced which were said to be overlapping but distinct. One was that the tax was invalid because it selects a criterion of a kind which impinges directly upon the States in that the employment of civil servants is something without which a State cannot continue to exist as a unit of government. The second proposition was that the tax was invalid because it is beyond power to tax the States in respect of functions which are unique to government in the sense that they can be performed only by governments. Assuming that it would be beyond power for the Commonwealth Parliament to make a law which would prevent the States from continuing to exist as independent units of government and from continuing to exercise those functions which governments alone can perform or which are necessary for the continued existence of the States the propositions which I have set out cannot be sustained except upon the assumption that any law by which a tax is imposed directly upon the States in consequence of acts done by them in the exercise of those functions is a law which prevents or controls the exercise of those functions. In my opinion that assumption is not a valid one. The plaintiff must assert that a tax law which affects the States either in relation to the exercise by it of activities in which it is necessarily engaged or in relation to activities of a kind in which no one else engages is beyond power. But unless the reason for the invalidity lies in the nature of the power, the submissions under consideration if accepted ought to lead to the conclusion that other laws which impinge directly upon the carrying out by the State of such activities must likewise be invalid. I have already stated reasons for rejecting the view that a taxation law affecting the States is invalidated simply on the ground that the taxation power is of a special nature which cannot be used so as to bind the States. Once that is rejected, the argument for the plaintiff must be that the placing of any obligation upon it, by a Commonwealth law, in relation to the exercise of functions of the kind under consideration, must be beyond power.
It may be that a taxation law affecting the States would be beyond power if it were of the kind indicated by Dixon J in the Melbourne Corporation Case (1947) 74 CLR 31 in the passage to which I have already referred, or of the kind to which Rich J referred. These are questions which do not arise and need not be decided in this case, since the laws which are challenged are not, in my opinion, laws of the kind to which their Honours referred. In my opinion the submissions that the continued existence or the independence of the States or their capacity to carry out their functions are destroyed or threatened in a way which is beyond power by any tax law which applies to a State in relation to the carrying out by it of its functions, or of particular functions of the kind to which the submissions for the plaintiff in their more limited form referred, cannot be accepted.
It was put on behalf of the plaintiff in a subsidiary argument that as a matter of construction of s 51(ii) the word "Taxation" should be taken to refer only to the taxing of those who are subjects and not to extend to States or their governments. In my opinion, there is no basis for that construction either in the language of the Constitution or in authority and it should not be accepted. It may be that the word is commonly used to indicate the obtaining of revenue from citizens but there is no sound reason, in my opinion, to confine its meaning in that way and it has not been regarded in any of the authorities as being so confined.
In my opinion, s 114 of the Constitution has no application to the pay-roll tax. It is not a tax on property of any kind belonging to a State.
In my opinion the demurrer should be allowed.