Sydney Municipal Council v Commonwealth

[1904] HCA 50
(1904) 1 CLR 208
10 ALR (CN) 29

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(Judgment by: O'Connor J)

Sydney Municipal Council
vCommonwealth

Court:

Judges: Griffith CJ
Barton J

O'Connor J

Legislative References:
Sydney Corporation Act 1879 - The Act
Sydney Corporation Act 1902 - s 110

Hearing date:
Judgment date: 26 April 1904

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Judgment by:
O'Connor J

The judgments delivered, in which I entirely concur, have dealt so fully with the various contentions raised in the argument that I do not think it necessary to add anything except in reference to sec. 114 of the Constitution , upon the true interpretation of which the whole case in my opinion turns. The question for our determination may be very shortly stated.

Upon the establishment of the Commonwealth the Customs Houses in New South Wales as in other States became vested in the Commonwealth. Subsequently the Posts and Telegraph Department and the Department of Defence became transferred by proclamation under sec. 69 of the Constitution , and thereupon the lands and buildings used in connection with these departments became vested in the Commonwealth under sec. 85 of the Constitution .

Before the establishment of the Commonwealth such of these lands and buildings as were within the boundaries of the City of Sydney were liable to be rated, and were rated by the Municipal Council of Sydney under sec. 103 of the Sydney Corporation Act of 1879 , and sec. 110 of the Sydney Corporation Act of 1902 , which repealed that Act and took its place.

It was contended by the plaintiffs that, notwithstanding the establishment of the Commonwealth, and the vesting of these lands and buildings in the Commonwealth, the liability to be rated and to pay rates to the Municipal Council continued as before. The defendant on the other hand contended that, when the lands and buildings were vested in the Commonwealth, the liability to be rated by the Sydney Municipal Council came to an end. The question now submitted for our determination is, which contention is correct?

The defendants' case rests mainly upon sec. 114 of the Constitution , which they ask the Court to interpret broadly as a direct prohibition against the levying of any tax or rate upon Commonwealth property by a State, or by any authority constituted or authorized by the Statutes of a State. The plaintiff, on the other hand, urges that a much more restricted interpretation should be placed upon the section, that the prohibition is only against any action of the State itself or the Parliament of the State, in imposing taxation for the purposes of Government. The section may in strictness bear either interpretation, if we look merely at the words. But to get at the real meaning we must go beyond that, we must examine the context, consider the Constitution as a whole, and its underlying principles and any circumstances which may throw light upon the object which the Convention had in view, when they embodied it in the Constitution. This is a sound rule in the interpretation of Statutes, and is well explained by Lord Blackburn in the River Wear Commissioners v. Adamson , 2 App. Cas., at p. 763, as follows:?"In all cases the object is to see what is the intention expressed by the words used. But, from the imperfection of language, it is impossible to know what that intention is without inquiring further and seeing what the circumstances were with reference to which the words were used, and what was the object, appearing from those circumstances, which the person using them had in view; for the meaning of words varies according to the circumstances with respect to which they are used." Before examining the words of the section, it will be useful to advert to the circumstances which the Convention had in view in framing this section, and their purpose and object in relation to those circumstances.

From the very nature of the Constitution, and the relation of States and Commonwealth, in the distribution of powers, it became necessary to provide that the sovereignty of each within its sphere should be absolute, and that no conflict of authority within the same sphere should be possible. The principles laid down by Marshall , C.J., in his historic judgment in McCulloch v. Maryland (4 Wheat., (U.S.), p. 316), are as applicable to the Australian Commonwealth Constitution as to the United States Constitution, and it must be taken that those principles and the controversies which had arisen in the United States in reference to their application, were within the knowledge of the Convention. In laying down these principles the Courts of the United States, in the absence of express provision, rested their reasoning upon the underlying principles of the Constitution, and on what was necessarily involved in the grant of sovereign powers. What could be more natural than that the Convention should, while it had the opportunity place the application of these principles to the property of the Commonwealth, at all events, as far as possible, beyond controversy by embodying them directly in the face of the Constitution.

The material words of the section are as follows:?"A State shall not without the consent of the Parliament of the Commonwealth ... impose any tax on property of any kind belonging to the Commonwealth..."

It has been urged that, because the prohibition is against a State, and the word "tax" only is used, the section cannot apply to a rate levied by a municipality. The section would, indeed, fall short of its object if it prohibited only taxation directly imposed by a State Act of Parliament, and left Commonwealth property open to taxation by a municipality or any other agency which the State Parliament might choose to invest with powers of taxation. But no such restricted interpretation is necessary or reasonable. The State, being the repository of the whole executive and legislative powers of the community, may create subordinate bodies, such as municipalities, hand over to them the care of local interest, and give them such powers of raising money by rates or taxes as may be necessary for the proper care of these interests. But in all such cases these powers are exercised by the subordinate body as agent of the power that created it. Field , J., in his judgment in Meriwether v. Garrett , 102, U.S.R., at p. 511, says:?"Municipal corporations are mere instrumentalities of the State for the more convenient administration of local government. Their powers are such as the legislature may confer, and these may be enlarged, abridged, or entirely withdrawn, at its pleasure. This is common learning found in all adjudications on the subject of municipal bodies, and repeated by text writers."

The prohibition against the State imposing taxation on Commonwealth property is the most comprehensive form of prohibition that can be used, and, if we are to have regard to the circumstances within the knowledge of the Convention, and the evident object and purpose of the section to which I have referred, it must be taken that the prohibition extends not only to taxation by a State for the purposes of general government, but also to taxation by an agency under the authority of the State, and deriving its power to levy taxation from the Parliament of the State. To hold otherwise would be to declare that the State might do indirectly what it cannot do directly. It seems to be clear, therefore, that a State has no more right to give legislative authority to a municipality to impose the tax, than it has to impose the tax itself, and that any provision in a State Act purporting to give such authority would be null and void. But it is urged on the part of the plaintiff that the section is prospective in its operation, and that it does nothing more than prohibit the passing of legislation by the State authorizing either State authority or municipal authority to levy the tax, and that a portion of the rates claimed were levied under the Sydney Corporation Act of 1879 , a Statute which was in operation at the establishment of the Commonwealth, and which, it is contended, is kept alive by the operation of sec. 108 of the Constitution .

It is true that the section has only a prospective application, that is to say, it prohibits the imposing of any tax after the establishment of the Commonwealth, but I cannot assent to the restricted interpretation which it is sought to place on the word "impose." "Impose," no doubt, includes the giving of legislative authority to levy the tax, but it includes more, it includes the executive act of levying or collecting the tax. Its dictionary meaning is "to levy or exact as by authority." Having regard to the scope and purport of the section, effect must be given to that plain grammatical meaning of the word. It is unnecessary for me, in this aspect of the case, to consider whether the Act under which the tax is sought to be levied has, or has not, been kept alive by sec. 108. Existing Statutes are mentioned under that section, subject to the Constitution, and, in my view, sec. 114 expressly prohibits the imposing, that is to say, levying, exacting or collecting of the tax after the establishment of the Commonwealth. The section can be made fully effective, having regard to its scope and purpose, as already explained, only by giving a broad and reasonable interpretation to its language, including in the expression "State," all the agencies and instrumentalities by which a State can exercise its power of taxation, including in the word "impose" both meanings already alluded to, according as the thing to be prohibited is the legislative authority or the administrative Act, and giving to the word "tax" its ordinary grammatical meaning, which is wide enough to cover the general rates of a municipality. So interpreting the section, I am of opinion that the Constitution prohibits the levying of these rates, and that the Commonwealth is not liable in respect of the claim of the Municipal Council of Sydney.