Gazzo v. Comptroller of Stamps, ex parte Attorney-General (Vic).
Judges: Gibbs CJStephen J
Mason J
Murphy J
Aickin J
Court:
High Court of Australia
Murphy J.
The marriage of Mr. and Mrs. Gazzo was dissolved on 26 May 1977 under the Family Law Act 1975, by the Supreme Court of Victoria which ordered Mr. Gazzo to transfer his interest in the former matrimonial home to Mrs. Gazzo as trustee for the three children of the marriage. Mr. Gazzo was also ordered to pay all legal costs and registration fees in respect of the transfer.
Mr. Gazzo executed a transfer to Mrs. Gazzo which was presented for registration. The Victorian Commissioner for Stamp Duties claimed payment of $616 (stamp duty, penalty and interest) from Mrs. Gazzo on the ground that the transfer document is liable to duty as an -
``instrument... whether voluntary or upon any good or valuable consideration other than a bona fide adequate pecuniary consideration... whereby any property is settled... in any manner whatsoever... ( Stamps Act 1958 (Vic.), Third Schedule, para. IX)''
However the Family Law Act sec. 90 states:
``A maintenance agreement, or a deed or other instrument executed by a person for the purposes of such an agreement or for the purposes of, or in accordance with an order under, this Part, is not subject to any duty or charge under any law of a State or Territory or any law of the
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Commonwealth that applies only to or in relation to a Territory.''
Proceedings in the Supreme Court of Victoria to determine whether the duty is payable have resulted in the question referred to this Court whether sec. 90 of the Act is valid.
The case concerns only an instrument executed in accordance with an order under Pt. VIII of the Act. Therefore, it is enough to decide whether sec. 90 is valid in its application to an instrument executed in accordance with such an order.
Presumption of Validity
Acts are presumed to be valid, at least where the challenge is not based on a claimed infringement of a constitutional guarantee or prohibition. The presumption of validity holds until it is demonstrated beyond reasonable doubt that the legislation exceeds the limit set by the Constitution. This presumption is applied in other common law countries and in most other systems of law. I have several times referred to its applicability in Australia (sec
State of Queensland
v.
Commonwealth of Australia
(1978) 52 A.L.J.R. 100
at p. 109
;
Minister for Justice (W.A.) (At the Relation of Ansett Transport Industries (Operations) Pty. Ltd.)
v.
Australian National Airlines Commission
&
Anor.
(1976) 51 A.L.J.R. 299
at p. 313
).
In
F.C. of T.
v.
Munro
(1926) 38 C.L.R. 153
at p. 180
, Mr. Justice
Isaacs
stated:
``It is always a serious and responsible duty to declare invalid, regardless of consequences, what the national Parliament, representing the whole people of Australia, has considered necessary or desirable for the public welfare. The Court charged with the guardianship of the fundamental law of the Constitution may find that duty inescapable. Approaching the challenged legislation with a mind judicially clear of any doubt as to its propriety or expediency - as we must, in order that we may not ourselves transgress the Constitution or obscure the issue before us - the question is: Has Parliament, on the true construction of the enactment, misunderstood and gone beyond its constitutional powers?... Nullification of enactments and confusion of public business are not lightly to be introduced. Unless, therefore, it becomes clear beyond reasonable doubt that the legislation in question transgresses the limits laid down by the organic law of the Constitution, it must be allowed to stand as the true expression of the national will.''
On appeal the Privy Council specifically expressed its agreement with Mr. Justice
Isaacs
that unless it is clear beyond reasonable doubt that challenged legislation transgresses the limits in the Constitution, it must be allowed to stand (
The Shell Company of Australia Limited
v.
F.C. of T.
(1930) 44 C.L.R. 530
at p. 545
).
In
Attorney-General for Victoria (At the Relation of Dale
&
Ors.)
v.
The Commonwealth
&
Ors.
(1945) 71 C.L.R. 237
at p. 267
Mr. Justice
Dixon
said:
``In discharging our duty of passing upon the validity of an enactment, we should make every reasonable intendment in its favour. We should give to the powers conferred upon the Parliament as ample an application as the expressed intention and the recognized implications of the Constitution will allow.''
It seems to me that, recently, the presumption of validity has been ignored, and, particularly in family law cases, replaced in practice by a presumption of invalidity. The history of judicial hostility to remedial social legislation is well documented. (See Robert Stevens, Law and Politics. The House of Lords as a Judicial Body, 1800-1976, London, 1979; Robert H. Jackson, The Struggle for Judicial Supremacy, a Study of a Crisis in American Power Politics, New York, 1979; G. Edward White, The American Judicial Tradition, Profiles of Leading American Judges. New York, 1976, esp. Ch. 9.) The word hostility may appear over-strong, but history here and overseas shows that it is not. Legislative policies are often defeated by judicial policies which are rationalised as Constitutional requirements. In his work Robert H. Jackson (former U.S. Solicitor-General and later U.S. Supreme Court Justice) wrote of the Supreme Court:
``This conservative institution is under every pressure and temptation to throw its weight against novel programs and untried policies which win popular elections. Its plain duty to enforce explicit constitutional provisions even in opposition to the majority is easily rationalized into enforcing its own views of good policy. To the extent that
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it does so, it defeats government by representative democracy.''(pp. 315-316)
As the U.S. experience shows, the cure will come when the other branches of government and the public understand the real, as distinct from the apparent, role of the judiciary.
Relevance of Challenged Law to Legislative Power
Parliament is authorised by sec. 51 of the Constitution to make laws for the peace, order and good government of the Commonwealth ``with respect to'' specified subjects including marriage and divorce. The legislative powers of the Parliament are stated in broad and liberal terms. They are plenary, to be construed with all the generality allowed by the words used. The broad nature of the laws authorised by sec. 51 is extended by the opening words of the section. The phrase ``with respect to'' requires only ``a relevance to or connection with the subject assigned to the Commonwealth Parliament'' (
Grannall
v.
Marrickville Margarine Pty. Ltd.
(1955) 93 C.L.R. 55
at p. 77
; see also Mr. Justice Kitto in
Herald and Weekly Times Ltd.
v.
The Commonwealth
(1966) 115 C.L.R. 418
at p. 436
). In
Bank of New South Wales
v.
The Commonwealth
(1948) 76 C.L.R. 1
at p. 146
Mr. Justice
Dixon
stated ``No form of words has been suggested which would give a wider power than the form `with respect to'''.
From time to time, observations have been made which would in effect remove the words ``with respect to'' from the Constitution and replace them with words significantly different which would severely restrict the Parliament's legislative powers. Thus in
Worthing
v.
Rowell and Muston Pty. Ltd.
(1970) 123 C.L.R. 89
at p. 136
, Mr. Justice
Walsh
referred to ``a direct and substantial connexion''. In
R.
v.
Lambert
;
Ex parte Plummer
(1980) FLC
¶
90-904
at p. 75, 691;
(1981) 55 A.L.J.R. 71
at p. 74
Mr. Justice
Gibbs
stated that a ``close connexion'' must be shown between a challenged law and the legislative power. In my opinion, a ``close connexion'' is not required by the Constitution. A recent example where no close connexion was required between the challenged law and the legislative power is
R.
v.
Bowen
;
Ex parte Amalgamated Metal Workers' and Shipwrights' Union
(1980) 54 A.L.J.R. 557
where provisions which were incidental to what was itself incidental to the legislative power were held valid. Another is
Storey
v.
Lane
(1981) 55 A.L.J.R. 608
. A classic older example is
The Jumbunna Coal Mine, No Liability
&
Anor,
v.
The Victorian Coal Miners' Association
(1908) 6 C.L.R. 309
. See also
O'Sullivan
v.
Noarlunga Meat Ltd.
(1954) 92 C.L.R. 565
;
(1956) 95 C.L.R. 177
.
The phrase ``with respect to'' not only applies to marriage and divorce but to all the other powers in sec. 51. There is no justification for singling out marriage and divorce for special adverse treatment. But if the requirement of a close connexion is applied to all, this will mean a cutting back of what until recently have been understood to be the powers of the national Parliament.
Reserved Powers of States
The once-discredited doctrine of reserved powers of the States, is having a triumphant, if unacknowledged, resurgence, at least in the areas of marriage and divorce (see Plummer's case ), and emerged in this case.
Every federal law requiring or authorizing acts or transactions in Australia outside Commonwealth places and territories enters areas of State law. The Constitution sec. 109 provides for resolution of any conflict. The notion that federal law must end where State law beings or that some areas of law are reserved to the States is erroneous. That notion was advanced early this century and decisively rejected in
The Amalgamated Society of Engineers
v.
The Adelaide Steamship Company Limited
&
Ors.
(1920) 28 C.L.R. 129
. However it persists. I leave aside the special case where the claim is that the federal law if valid would undermine the existence of a State; it is of no relevance here. It would be absurd to suggest that a federal Act exempting from State tax transfer of property interests on divorce threatened the existence of the State.
The only question is whether the challenged law is one with respect to the subject of federal power. Victoria contends that simply because a law applies to married persons or bankrupts, that does not make it in the constitutional sense a law with respect to marriage or bankruptcy. That is correct. The familiar and acceptable example is of a federal law which exempted all married persons or all bankrupts from the observance of the State traffic laws. Such a law would have no real connexion with marriage or bankruptcy and would be beyond power. However the national Parliament may for federal purposes exempt persons or
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transactions from the operation of State laws (R. v. The Licensing Court of Brisbane & Ors. ; Ex parte Daniell (1920) 28 C.L.R. 23 ;
The Commonwealth and the Attorney-General for the Commonwealth v. The State of Queensland and the Commr. of Income Tax (Qld.) (1920) 29 C.L.R. 1 ;
Pirrie v. McFarlane (1925) 36 C.L.R. 170
West v. C. of T. (N.S.W.) (1937) 56 C.L.R. 657 at p. 670 ;
Australian Coastal Shipping Commission v. O'Reilly (1962) 107 C.L.R. 46 ). A federal Act to exempt members of the defence forces or federal police from traffic laws where necessary or desirable for the carrying out of their duties would be valid. In Pirrie v. McFarlane an army driver was held subject to State traffic laws, there being no federal law exempting him. In that case, Chief Justice Knox said:
``The Commonwealth Parliament has, in my opinion, undoubted power, by legislation with respect to a subject which is within the ambit of its legislative powers, to override the provisions of any State law, but in the absence of any such enactment the State law must be given its full effect.''
(p. 183)
The Bankruptcy Act 1966 sec. 60 validly provides for setting aside of orders for imprisonment of debtors under State law (see Storey v. Lane). Ambassadors and officers of the United Nations Organisation may be exempted from criminal proceedings and taxes (see Diplomatic Privileges and Immunities Act 1967 particularly sec. 6 and 7 and Art. 34 of the Schedule).
The argument that a federal law protecting a transaction arising under federal law (or particularly under a federal judicial order) may prevail against a State law directed specifically to transactions under the federal law, but not against a State law of general application which ``randomly'' affects the transaction, is fallacious. It is the approach condemned in the Engineers' case. If laws of two States impose a tax on such transfers pursuant to Family Courts' orders, how can the validity of the federal law depend on the fact that the law of one State does, but the other does not, affect other transactions unrelated to federal law? The State traffic laws in Pirrie v. McFarlane, and the State laws in Storey v. Lane were of general application. It would rarely be otherwise. The focus must be on the federal law, not on the State law, if the reserved powers trap is to be avoided.
In
The Commonwealth of Australia
v.
The State of New South Wales
&
Anor.
(1923) 33 C.L.R. 1
(``the
Royal Metals case
'') the Court held that the land transfer laws of the States are immune from interference by federal law. In my opinion that is incorrect. The
Family Law Act
sec. 84 interferes with and overrides the State Acts in an important respect. Under it, the Family Court may appoint an officer or other person to execute a deed or other instrument in the name of a person who has neglected or refused the Court's direction to execute it, and that execution has the same force and validity as if it had been executed by the person directed to execute it. This section interferes with the operation of State Acts including the land transfer and registration Acts. Yet it is clearly valid, as a law with respect to marriage, and in its application to divorce, as a law with respect to divorce.
The Property Aspects of the Marriage and Divorce Powers
It is elementary that marriage is an economic as well as a social institution (sec for example. Westermarck. The History of Human Marriage pp. 26-27; Lucy Mair, Marriage, N.Y., 1971; Bohannan, Social Anthropology, N.Y., 1970. Ch. 5 and 6; Krupinski and Stoller, eds., The Family in Australia. Sydney, 1974; I.W.P. McCall, Dissolving the Economic Partnership of Marriage. Paper delivered to Queensland Family Law Practitioners Association Conference on Family Law. Queenstown, New Zealand, July 1980; A. Kiralfy, ed., Comparative Law of Matrimonial Property. Leiden. 1972). There is a wealth of anthropological and legal material establishing that in virtually every society, ancient or modern, primitive or civilized, law on property of the parties is an integral part of the law of marriage.
Australian marriage and divorce laws were, until recently, closely based on English law. The common law (as well as the civil law) system made extensive provision for bringing together of real and personal property at the commencement of the marriage; the administration of property during the marriage; a division or allocation of property at the end of marriage; and generally, the financial obligations of each party towards the other during and after the termination of the marriage. In general, the common law provided that a husband has the ownership and control of his wife's property
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(as well as his own) during marriage. This was qualified by emergence of legal and equitable doctrines of ante-nuptial and post-nuptial settlements and restraints upon anticipation. The statutory modifications of the common law have been directed towards ameliorating the subordinate position of the wife. These included abolition of the Law of Dower (finally abolished in the U.K. in 1925); The Married Women's Property Acts; Testators Family Maintenance and Guardianship of Infants Act. The fact that in modern times the law has developed in the direction of separate property of the spouses controlled separately, does not mean that laws about property are not central to marriage.Whatever the merits, the establishment of a community property law or other regime for the administration of property of spouses during marriage and for distribution on termination of marriage by death or dissolution would be a law with respect to marriage. Equally, a law for distribution of the property of the spouses on or in anticipation of divorce, would be a law with respect to ``divorce'' in the Constitution sec. 51 para. 21(xxi). If the law provided for such distribution by judicial process, it would also be a law with respect to ``matrimonial causes'' in the same paragraph of sec. 51. An example from the previous law is the Court's power to order settlements of property including property dealt with by ante-nuptial or post-nuptial settlements and to make orders to apply the property for the benefit of parties to the marriage or either of them or the children ( Matrimonial Causes Act 1959 sec. 86).
The development of Australian and English law relating to the settlement and transfer of property on divorce recognises that when the economic unit formed by the marriage partners and children (if any) is broken, the property may and often does, need to be redistributed. Parliament is entitled to act on the view that marriage and divorce law cannot be neutral in the break-up of marriage. Because divorce converts one economic unit into two economic units, such a redistribution is almost invariably a necessary consequence of divorce, whether by direct legislative provision, judicial order, or agreement. Changes in legal title and equitable interests in property are part of the process of divorce (see
Lansell
v.
Lansell
(1964) 110 C.L.R. 353
). The power to regulate the ownership or division of matrimonial property on divorce or during marriage is thus at the heart of the legislative powers to make laws with relation to marriage, divorce and matrimonial causes. Parliament may authorise judicial orders for maintenance and transfer of property interests and as part of this prevent extraneous financial impediments such as State taxes on the implementation of the orders. Section 90 of the Act is thus relevant to the marriage and divorce powers; the connection is real not fanciful. Parliament, in passing the proposed law without dissent, on this aspect, considered that the provision was desirable, if not necessary, for the carrying out of the legislative policies in relation to marriage and divorce.
The high cost of divorce was one of the mischiefs at which the Family Law Act 1975 was aimed. Section 90 tends to promote the legislative policy directly. It also facilitates the exercise of the Family Court's powers, by enabling the Family Court to make orders free of concern about the impact of duties or taxes on the conveyances or other instruments which may be necessary or desirable for implementing the Court's order in respect of property or maintenance. It also facilitates the operation of sec. 81 of the Act which imposes a duty on the Court as far as is practicable to make ``such orders as will finally determine the financial relationships between the parties to the marriage and avoid further proceedings between them''.
Imposition of State taxes upon real estate (which amount now to about 2% of the value of property affected) may present a heavy burden. For many families the only property of substance is the matrimonial home. In Sydney, for example, transfer of a typical suburban home from one spouse to the or other, may unless exempt, attract State stamp duty of $1,000 or more. This would be equivalent to more than one month's after-tax earnings for many wage earners. It would be equivalent to more than six months maintenance for one child under a typical order. If such sums had to be paid to implement a judicial order it would often be a severe burden on the resources already strained to meet the needs of two economic units instead of one. The hardship which might be caused by payment of such sums is demonstrated by the fact that numerous applicants for relief under the Act each year seek and are granted exemption from paying the filing fee of $100 on the grounds of substantial hardship and many more seek
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and are granted legal assistance although the conditions are stringent (see reg. 34A; Family Law Council, Third Annual Report 1979, pp. 38-40; Fourth Annual Report 1980, pp. 29-31).If Family Courts, faced with often critical financial problems of the parties, see that implementation of their proposed orders will attract burdensome State taxes, it is likely and almost inevitable that they will be under pressure to devise arrangements which may be less convenient or less suitable to the circumstances than those which they would order if there were no incidence of State or other taxes. This will tend to frustrate the implementation of federal policies reflected in the Act.
This case illustrates the problems facing courts administering the Act. Apparently if the judicial order had been simply to transfer the property, no stamp duty would have been imposed even if sec. 90 were invalid (see Family Law Council, Third Annual Report 1979, pp. 28-32; Nygh and Turner's Family Law Service , p. 2246; Victorian Stamp Duty and the Family Law Act , I.C. Kennedy, 1977, Vol. 51, Law Institute Journal pp. 578-587). The practice has been to treat simple transfers pursuant to any judicial orders as outside the net of the Stamps Act. But because the Court ordered the transfer to the wife in trust for the children, the Commissioner considered that it was an instrument whereby property is settled (and liable to duty under para. 1 of Heading IX of the Third Schedule to the Stamps Act ).
It seems to be accepted that the Parliament could prevent imposition of heavy State taxes approaching the value of the property ordered to be transferred. If Parliament can do that, it is difficult to see why it cannot prevent the imposition of lesser taxes, in the same circumstances. The argument for invalidity asserted that the imposition of the State taxes would not impair the operation of the federal policies intended to be promoted by the Act. Obviously the Family Law Council (see Fourth Annual Report 1980, p. 21) and the national Parliament think otherwise. At most, the question of the effect of State taxes upon Family Court orders and upon the implementation of legitimate federal policy is debatable, and therefore one on which the Parliament is entitled to form a legislative judgment.
``Where the constitutional validity of a statute depends upon the existence of facts, courts must be cautions about reaching a conclusion respecting them contrary to that reached by the legislature; and if the question of what the facts establish be a fairly debatable one, it is not permissible for the judge to set up his opinion in respect of it against the opinion of the lawmarker.''
(
Radice v. New York (1923) 264 U.S. 292 at p. 294 ).
Denial of federal power to exclude State taxes in respect of transactions relating to marriage or divorce may have curious consequences. It would be within the Commonwealth Parliament's power over marriage, to introduce a community property regime which would on marriage require transfer into joint names of certain property of the parties. If a State could impose a tax on such transfer (despite a federal Act prohibiting it) it would mean that immediately on marriage the parties would face a bill for State tax. If the marriage certificate were the instrument evidencing the entitlement, a State tax on instruments would be a tax upon the marriage certificate itself. In my opinion. Parliament can prevent such a financial Parliament on or interference with the carrying out of its policies.
Victoria contended that in respect of carrying out of agreements in relation to maintenance sec. 90 could be misused to provide exemption for transactions which were related only indirectly or slightly to the marriage relationship. Of course, there must be a rational connexion between the law and the subject matter of legislative power; provided this exists the validity of the law is not affected by an indirect operation. If the connexion between the law and the legislative power is extremely slight and indirect the law will fall outside the scope of the power and be invalid. Also if the connexion between a particular transaction and the legislative power is only slight and indirect, that transaction will fall outside the scope of the law. These problems do not affect the present case.
When sec. 90 in its application to judicial orders only is considered, its validity may be sustained on a narrow basis. The Parliament is entitled to protect from State taxation the implementation of valid orders made in the exercise of the judicial power of the Commonwealth.
Further, although the question was not argued, in my opinion, sec. 90 comes within the power in sec. 51 para. (ii) to
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make laws with respect to taxation. In the circumstances, it is inappropriate to develop this.This Court's decision to invalidate sec. 90 is attributable to what can fairly be described as a revival of the States' reserved powers doctrine. I believe that the revival will be transient and that the doctrine will be reinterred. Regrettably, in the meantime there will be hardship to many thousands of Australians, including children, involved in the breakup of marriage. Against the national will, as enacted by the national Parliament without a single dissentient on this provision, they will be exposed to substantial State taxes during a critical period of their lives.
The answer should be Yes, sec. 90 of the Family Law Act in its application to stamp duties imposed under the Stamps Act 1958 (Vic.) on transfers of land executed by a person in accordance with an order under Pt. VIII of the Family Law Act is a valid law of the Commonwealth.
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