FORTESCUE METALS GROUP LTD & ORS v THE COMMONWEALTH OF AUSTRALIA

Judges: French CJ

Hayne J
Crennan J
Kiefel J
Bell J
Keane J
French CJ [2nd]

Court:
Full High Court

MEDIA NEUTRAL CITATION: [2013] HCA 34

Judgment date: 7 August 2013

Hayne, Bell and Keane JJ.

52. The minerals resource rent tax ( " MRRT " ) is imposed by the Minerals Resource Rent Tax (Imposition - Customs) Act 2012 (Cth), the Minerals Resource Rent Tax (Imposition - Excise) Act 2012 (Cth) and the Minerals Resource Rent Tax (Imposition - General) Act 2012 (Cth) (together " the Imposition Acts " ). The assessment of the MRRT is provided for by the Minerals Resource Rent Tax Act 2012 (Cth) ( " the MRRT Act " ).

53. In conformity with the intention declared in s 1-10 of the MRRT Act to tax " above normal profits " from certain mining operations, MRRT is not exigible until a miner ' s group mining profit exceeds a prescribed threshold. Under the MRRT Act, a liability to pay MRRT arises only when a miner derives an annual profit of a given amount after taking into account all deductions for expenditure (including of capital), all allowances (including those carried forward at uplifted rates) and any applicable tax offsets. Once MRRT is payable, however, the formula by which its amount is calculated operates so that a reduction in the mining royalty payable to a State government would, other things being equal, result in an equivalent increase in the amount of the MRRT liability, and an increase in the royalty would, other things being equal, result in an equivalent decrease in the miner ' s MRRT liability. As it happens, State mining royalties differ between the States within the federation.

54. The plaintiffs, who are members of a group of companies which mine iron ore in Western Australia, brought proceedings in the original jurisdiction of this Court challenging the validity of the MRRT Act and of those provisions of the Imposition Acts which impose the tax. Pursuant to s 18 of the Judiciary Act 1903 (Cth), questions were reserved for determination by the Full Court on the basis of the parties ' pleadings and documents referred to in the pleadings.

The issues

55. The plaintiffs founded their challenge to the validity of the MRRT Act and s 3 of each of the Imposition Acts (together " the MRRT Legislation " ) principally on the ground that s 51(ii) of the Constitution expressly precludes the imposition by the Commonwealth of a tax which would exact a greater amount of tax from a taxpayer whose mining operations are conducted in a State with a lower mining royalty rate than would be exacted from the same miner if the same mining operations were conducted by it in a State with a higher State royalty rate. The plaintiffs also contended for the same result by invoking the constitutional implication associated with this Court ' s decision in
Melbourne Corporation v The Commonwealth [136] (1947) 74 CLR 31 ; [ 1947 ] HCA 26 . and by reference to s 99 of the Constitution and its prohibition against the Commonwealth, by any law or regulation of trade, commerce or revenue, giving

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" preference to one State or any part thereof over another State or any part thereof " . Finally, the plaintiffs argued that the MRRT Legislation is invalid because it is inconsistent with s 91 of the Constitution. The Attorneys-General for the States of Queensland and Western Australia intervened to support the plaintiffs ' challenge.

56. These reasons will demonstrate that the plaintiffs ' challenge fails and the questions reserved should be answered accordingly. The reasons will first provide a summary of the relevant legislative provisions and then deal, in turn, with s 51(ii), s 99, the Melbourne Corporation principle and s 91.

The MRRT Legislation

57. Each of the Imposition Acts provided in s 3(1) that MRRT payable under the MRRT Act " is imposed " . Section 4 of each of the Imposition Acts provided for an " MRRT rate " of 22.5 per cent. The Imposition Acts operated in the alternative to each other: see s 3(2). It was not disputed that the Minerals Resource Rent Tax (Imposition - General) Act 2012 was the relevant Imposition Act for present purposes.

58. The Revised Explanatory Memorandum to the Bills for the MRRT Legislation explained [137] Australia, Senate, Minerals Resource Rent Tax Bill 2011, Minerals Resource Rent Tax (Consequential Amendments and Transitional Provisions) Bill 2011, Minerals Resource Rent Tax (Imposition — Customs) Bill 2011, Minerals Resource Rent Tax (Imposition — Excise) Bill 2011, Minerals Resource Rent Tax (Imposition — General) Bill 2011, Revised Explanatory Memorandum at 3. that the MRRT is a tax on " economic rents " , which constitute " the return in excess of what is needed [ by miners engaged in extracting iron ore, coal and some gases from the ground ] to attract and retain factors of production in the production process " . It went on to explain [138] Australia, Senate, Minerals Resource Rent Tax Bill 2011, Minerals Resource Rent Tax (Consequential Amendments and Transitional Provisions) Bill 2011, Minerals Resource Rent Tax (Imposition — Customs) Bill 2011, Minerals Resource Rent Tax (Imposition — Excise) Bill 2011, Minerals Resource Rent Tax (Imposition — General) Bill 2011, Revised Explanatory Memorandum at 8 [ 1.25 ] . that " [ a ] s the MRRT taxes profits from minerals that are commonly subject to State and Territory royalties, it provides a credit for royalties " .

59. The MRRT Legislation is complex; and it is unnecessary to grapple with all of its complexities. It is sufficient for the purposes of this case to refer only to the central provisions that bear upon the calculation of the MRRT.

Calculating MRRT

60. Section 1-10 of the MRRT Act provides that:

" The object of this Act is to ensure that the Australian community receives an adequate return for its taxable resources, having regard to:

  • (a) the inherent value of the resources; and
  • (b) the non-renewable nature of the resources; and
  • (c) the extent to which the resources are subject to Commonwealth, State and Territory royalties.

This Act does this by taxing above normal profits made by miners (also known as economic rents) that are reasonably attributable to the resources in the form and place they were in when extracted. "

61. MRRT is payable for an " MRRT year " [139] Each MRRT year is a financial year and commences on 1 July: s 10-25. by a miner in an amount equal to the sum of its MRRT liabilities for each of its " mining project interests " [140] This and other terms used in the MRRT Act are defined in the Dictionary set out in s 300-1. For the most part, it is sufficient to indicate, by the use of quotation marks, that a term is defined in s 300-1 without setting out the content of its definition. for that year. Section 10-1 of the MRRT Act provides that:

" A miner is liable to pay MRRT, for an MRRT year, equal to the sum of its MRRT liabilities for each of its mining project interests for that year. "

Mining project interests are associated with " production rights " and, for present purposes, it is enough to notice that " production rights " include [141] See ss 15-5(2) and 15-15 together with the definition of “ Australian law ” in s 300-1 of the MRRT Act, which refers to the definition of that term in s 995-1(1) of the Income Tax Assessment Act 1997 (Cth). extraction rights conferred by a State government in respect of a particular geographical part of the State. The mining project interests to which the MRRT Act applies are interests in relation to iron ore and coal (and some related substances), located in areas covered by a production right, which together are called " taxable resources " [142] ss 15-5(4) and 20-5. .

62. Section 10-5 of the MRRT Act provides that a miner ' s MRRT liability for a mining project interest for an MRRT year is to be worked out as follows: " MRRT liability = MRRT rate × (Mining profit - MRRT allowances) " . Thus the amount of the MRRT liability for each mining project interest is calculated by subtracting from the " mining profit " certain " MRRT allowances " . The sum so arrived at is then multiplied by the MRRT rate to establish the MRRT liability for each mining project interest.

63. A miner ' s " mining profit " is calculated [143] s 25-5. by deducting the miner ' s " mining expenditure " from its " mining revenue " . The " mining revenue " for each mining project interest is determined in accordance with the provisions of Div 30 of the MRRT Act. The " mining expenditure " for each mining project interest is determined in accordance with Div 35 of the MRRT Act. The amounts to be

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deducted from mining revenue as mining expenditure do not include [144] s 35-5(2). See also subdiv 35-B. " excluded expenditure " . Mining royalties payable to a State are one form of " excluded expenditure " [145] s 35-40(1)(a). .

64. If a miner ' s " group mining profit " for an MRRT year is less than $ 125 million, the miner is entitled [146] ss 10-15 and 45-10. to an " offset " for that year. If the group mining profit is less than or equal to $ 75 million, the amount of the offset is the sum of the miner ' s MRRT liabilities for each mining project interest, with the consequence that no MRRT is payable [147] ss 10-15 and 45-5. . If a miner ' s group mining profit is greater than $ 75 million, but less than $ 125 million, the amount of the offset is to be calculated in accordance with s 45-10 and the miner will be liable to pay less than the amount that would be payable if MRRT at the rate of 22.5 per cent were to be applied to the full amount of the profit.

Taking account of royalties

65. For the purposes of the MRRT Act, royalties payable under a State law by a miner in relation to a taxable resource extracted under authority of a production right are one form of " mining royalty " [148] s 35-45(1). . As already noted, amounts paid as a mining royalty are " excluded expenditure " [149] s 35-40(1)(a). and thus are not deductible from mining revenue as mining expenditure. Instead, amounts paid as a mining royalty are used to calculate [150] ss 60-20 and 60-25. the amount of a " royalty credit " , and the amount of " available royalty credits " which does not exceed the mining profit is a " royalty allowance " [151] ss 60-10 and 60-15. . A royalty allowance is one form of " MRRT allowance " [152] s 10-10. which is taken into account as part of the calculation [153] s 10-5. of the MRRT liability for each mining project interest.

66. The " royalty credit " attributable to payment of a mining royalty is arrived at by dividing [154] s 60-25(1). the liability for the mining royalty by the MRRT rate. If available royalty credits are not needed to offset the mining profit in any one year, they can be used [155] s 60-25(2). in subsequent years. When available in subsequent years, the amount of the royalty credits is uplifted (to take account of the time value of money) as provided by s 60-25(2).

67. The plaintiffs emphasised that the MRRT Act " is expressly designed so that, if more State royalties are payable, less MRRT is payable " and vice versa. As is later explained more fully, the plaintiffs submitted that two results followed. First, " a miner ' s actual liability to [ pay ] MRRT will vary from State to State, depending on the royalty rate applicable in that State " . Second, " a State cannot reduce the royalty payable in respect of mining for iron ore, nor can it give a concession in respect of its royalty rate, nor can it change, favourably to the miner, the basis of calculating royalty without the miner becoming liable to pay to the Commonwealth, as MRRT liability, the amount by which its liability to pay royalty to the State has been reduced " . It followed, so the argument continued, that the MRRT Legislation in effect imposed a uniform cumulative rate of mineral rent throughout the Commonwealth, which discriminates between the States, by equating the " sacrifice " of miners in low royalty States with that of those in high royalty States and " imposing MRRT at a different effective rate in different States " (emphasis added).

Section 51(ii)

68. Section 51(ii) provides that, " subject to this Constitution " , the Parliament may make laws with respect to " taxation; but so as not to discriminate between States or parts of States " .

69. In construing and applying s 51(ii), it is necessary to begin by identifying its place in the constitutional structure. It is a legislative power. The power is expressed very broadly, at least in the sense that " taxation " may take many forms. Apart from those forms of taxation dealt with in s 90 (duties of customs and of excise), the legislative power given by s 51(ii) is not exclusive to the federal Parliament. But the power is subject to some important limitations in addition to the express limiting clause contained within it: " but so as not to discriminate between States or parts of States " . First, there is the prohibition in s 114 against the Commonwealth imposing " any tax on property of any kind belonging to a State " . Second, s 99 provides that " [ t ] he Commonwealth shall not, by any law or regulation of trade, commerce, or revenue, give preference to one State or any part thereof over another State or any part thereof " . Third, s 92 prohibits taxing interstate trade, commerce and intercourse. And fourth, there is the implied

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limitation on legislative power recognised in Melbourne Corporation [156] (1947) 74 CLR 31 . and later considered and applied in
Austin v The Commonwealth [157] (2003) 215 CLR 185 ; [ 2003 ] HCA 3 . and
Clarke v Federal Commissioner of Taxation [158] (2009) 240 CLR 272 ; [ 2009 ] HCA 33 . .

70. Three textual points may then be made about the concluding words of s 51(ii). First, the reference to discriminating between " parts of States " suggests that the concluding words of s 51(ii) are to be read as directed against laws which discriminate between States, or parts of States, on the basis of geography or locality . " [ P ] arts of States " must be defined geographically. There is no textual foundation for reading the reference to " States " , as distinct from " parts of States " , in any different way. Second, the concluding words of s 51(ii) do not speak of a law that discriminates against States or parts of States. The expression used is " so as not to discriminate between States or parts of States " (emphasis added). Third, it is necessary to recognise that the words " but so as not to discriminate " qualify a power to make laws with respect to taxation. And as already explained, the Commonwealth ' s power to make laws with respect to taxation is also limited by the provisions of ss 92, 99 and 114, and by the principle in Melbourne Corporation.

71. The concluding words of s 51(ii) are a " positive prohibition or restriction " [159] New South Wales v The Commonwealth (Work Choices Case) (2006) 229 CLR 1 at 127 [ 219 ] ; [ 2006 ] HCA 52 . on the legislative power. Quick and Garran said [160] Quick and Garran, The Annotated Constitution of the Australian Commonwealth , (1901) at 550. of the limitation in s 51(ii) that:

" This is a limitation which has been provided for federal reasons, viz, for the protection of States which might not possess sufficient strength in the Federal Parliament to resist the imposition of a system of taxation designed to press more heavily on people or property in some States than on people or property in other States. "

72. How then should the prohibition or limitation, " so as not to discriminate between States or parts of States " , be understood?

73. The plaintiffs accepted that a federal income tax imposed at the rate of 45 per cent on iron ore companies throughout Australia would not discriminate within the meaning of s 51(ii) of the Constitution, even though it might operate differently in different States. They accepted that such a law would not discriminate between States by reason only of the circumstance that, because Western Australia has the largest deposits of iron ore, Western Australian iron ore companies would contribute the largest amount of tax. And it was common ground that a federal income tax imposed at different rates in different States (say 40 per cent in New South Wales, 45 per cent in Queensland and 50 per cent in Western Australia) would discriminate between States, no matter what may be the reason for seeking to apply different rates of tax in the different States. There was no dispute that a law of this latter kind would contravene the constitutional limitation on power in s 51(ii) because it would impose different rates of tax based on the location of the subject of taxation in one State or another.

The competing arguments about discrimination

74. The plaintiffs argued that the MRRT Legislation contravened the limitation on the legislative power conferred by s 51(ii) because " in terms " the MRRT Legislation imposed a tax calculated and payable at a different rate for each State by reference to the different royalty rates of the various States. The MRRT Legislation was structured, the plaintiffs argued, " so as to impose MRRT on miners in different States at different effective rates " . The MRRT Legislation was said to discriminate against the low royalty States by imposing an equalising burden of tax on mining operations in those States. There is considerable irony in the circumstance that the plaintiffs ' argument, that the allowance made for State royalties invalidates the MRRT Legislation, would be obviated if the Parliament had made no allowance for those outlays, when that is a course that might fairly be said to be unfair to taxpayers.

75. The plaintiffs argued that it is not correct to say that, because s 4 of each Imposition Act provided for an " MRRT rate " of 22.5 per cent, MRRT was imposed at a uniform rate throughout the Commonwealth. The plaintiffs submitted that the MRRT Legislation was enacted in the face of existing and different State royalty regimes. The MRRT liability is the product of the formula in s 10-5 of the MRRT Act, in which one element, the royalty allowance, varies from State to State. The

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consequence, the plaintiffs submitted, was that, as a matter of substance, the MRRT was imposed at different rates in different States and thus discriminated between States.

76. The plaintiffs and Queensland emphasised that it was the royalty credits comprising the royalty allowance, and not the actual amount of royalty paid by a miner to a State, which ss 10-5 and 60-25 of the MRRT Act required to be deducted from mining profit before applying the MRRT rate to determine the MRRT liability. Section 60-25 required that royalty payments made by a miner be " grossed-up " by dividing them by the MRRT rate to determine the amount of the royalty credit. Thus, a miner which paid to a State royalties of $ 22.5 million was entitled to a royalty credit of $ 100 million (being the royalty payment divided by the MRRT rate of 22.5 per cent).

77. Queensland submitted that the economic effect of ss 10-5 and 60-25 was the same as if the amounts paid for State royalty were deducted directly from the MRRT liability. Accordingly, so it was submitted, the effect of the MRRT Legislation was to impose on miners a uniform cumulative rate of what was described as " mineral rent " .

78. By contrast, the plaintiffs relied upon the same provisions to submit that mining profit was not taxed at a uniform MRRT rate. The plaintiffs sought to demonstrate this mathematically. If the only MRRT allowance a miner had was a royalty allowance, the equation stated in s 10-5 ( " MRRT liability = MRRT rate × (Mining profit - MRRT allowances) " ) could be rendered as " MRRT liability = (22.5 per cent × mining profit) - (22.5 per cent × royalty credit divided by 22.5 per cent) " . That is, the plaintiffs submitted, " MRRT liability = (22.5 per cent × mining profit) - royalty credit " . It followed, so the plaintiffs submitted, that in substance the MRRT liability was imposed on miners at different rates.

79. The plaintiffs further submitted that the equations described also revealed that the " effective rate " of MRRT liability varied from State to State depending upon the amount paid for State royalty. That " effective rate " was to be calculated, the plaintiffs argued, by expressing the amount of MRRT liability as a percentage of the mining profit.

80. The Commonwealth submitted that the MRRT Legislation did not prescribe or make any assumption about the amount or rate of royalty paid by a miner to a State and that any difference in State mining royalties is a consequence, not of the MRRT Legislation, but of the laws of the several States. Accordingly, so the Commonwealth submitted, the MRRT Legislation did not discriminate between States because it applied the same rules " throughout the Commonwealth even though, by reason of circumstances existing in one or other States , it may not operate uniformly " [161] Conroy v Carter (1968) 118 CLR 90 at 101 per Taylor J; [ 1968 ] HCA 39 . See also at 103 per Menzies J; Austin v The Commonwealth (2003) 215 CLR 185 at 247 [ 117 ] . (emphasis added).

81. The Commonwealth submitted, in effect, that to speak, as Queensland had in its submissions, of a single equalised " mineral rent " throughout the Commonwealth was to introduce irrelevant considerations into the debate about the validity of the MRRT Legislation. While economists might be disposed to speak of the taxes and royalties imposed by different polities as all being species of a genus identified as " economic rent " , it is critical to the debate about validity to observe not only that the charges are imposed by different polities but also that there are important differences between the two imposts. Royalties can be seen as [162] Stanton v Federal Commissioner of Taxation (1955) 92 CLR 630 at 639-642; [ 1955 ] HCA 56 . payments for the exercise of the right to exploit the property of another. Royalties are payable regardless of whether the exercise of those rights generates profit. But MRRT is payable only when a given level of profit is achieved after taking account of allowances and offsets.

82. As to the plaintiffs ' argument that the effective rate of the MRRT is not a uniform 22.5 per cent but is dependent upon the amount of royalty payments, the Commonwealth submitted that the assumption that royalty allowance would be the only MRRT allowance to be subtracted from mining profit is unrealistic. It is not necessary to explore that issue. More importantly, the Commonwealth submitted that the MRRT Act itself created no difference based on State locality.

Earlier decisions about s 51(ii)

83. There are relatively few decisions about the meaning and application of the limiting

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words of s 51(ii). The effect of those decisions may be described generally as being that discrimination has been found only when the relevant Act provided for the application of different rules according to locality and has not been established by showing only that application of the Act ' s provisions yields an assessment which would have been different if, by operating elsewhere, the taxpayer would have incurred different outgoings. It is, however, necessary to say something about the principal decisions. It is convenient to deal with them chronologically.

Colonial Sugar Refining Co Ltd v Irving

84. Section 4 of the Excise Tariff 1902 (Cth) provided that the time of the imposition of uniform duties of excise was 8 October 1901 at 4.00 pm " reckoned according to the standard time in force in the State of Victoria " , and that " this Act shall be deemed to have come into operation at that time " . The Act imposed a uniform excise duty on, among other products, manufactured sugar. Section 5 imposed duty on all dutiable goods which were manufactured or produced after the time when the duties were deemed to have been imposed, and also imposed duty on certain dutiable goods manufactured or produced before that time. The effect of the Excise Tariff 1902 was to exempt from duty goods on which excise duties had been paid under State legislation. The scale of State duties differed between the States. In Queensland, no excise duty was imposed on sugar.

85. The Colonial Sugar Refining Company Limited argued that the Excise Tariff 1902 was a law with respect to taxation which discriminated between States. The argument was rejected by the Full Court of the Supreme Court of Queensland [163] The Colonial Sugar Refining Co Ltd v Irving [ 1903 ] St R Qd 261 . and, on appeal, by the Privy Council [164] Colonial Sugar Refining Co Ltd v Irving [ 1906 ] AC 360 . . The proposition, central to the argument for invalidity, that discrimination was established by showing that the incidence of taxation varied from State to State was rejected in terms directly applicable to the present matter. The Privy Council said [165] [ 1906 ] AC 360 at 367. that " [ t ] he rule laid down by the Act is a general one, applicable to all the States alike, and the fact that it operates unequally in the several States arises not from anything done by the Parliament, but from the inequality of the duties imposed by the States themselves " (emphasis added). Likewise, in the Full Court, Griffith CJ had concluded [166] [ 1903 ] St R Qd 261 at 276. that the difference in the incidence of taxation was an inequality between individuals but not a discrimination between States. Griffith CJ said [167] [ 1903 ] St R Qd 261 at 277. that " I do not think that we can have regard to the fact that, owing to the operation of the laws of the States, the incidence of taxation may be unequal in different States " . It is important to recognise that Griffith CJ rested [168] [ 1903 ] St R Qd 261 at 277. this conclusion on the proposition that, were this not so, " the power of the Federal Parliament would be limited by the laws of the States, and by the mode in which the States had exercised their powers of legislation " .

R v Barger

86. In
R v Barger [169] (1908) 6 CLR 41 ; [ 1908 ] HCA 43 . , this Court was required to consider the validity of an excise duty, imposed by the Excise Tariff 1906 (Cth), under which goods manufactured by persons who observed federally prescribed award conditions were exempt. The award conditions differed from State to State according to local circumstances. Whether goods were dutiable therefore depended upon the person ' s compliance with the prescribed conditions of employment. The Act was held to be invalid.

87. Barger was decided in accordance with the then accepted doctrine of reserved State powers [170] (1908) 6 CLR 41 at 67. . The reasons given by the Court must be considered in that light. None the less, the principles relied on by Griffith CJ, Barton and O ' Connor JJ in concluding that the impugned law did discriminate between States may be understood as consistent with the views expressed by Griffith CJ in Colonial Sugar Refining and not affected by reserved powers reasoning.

88. Whether the application of those principles required the conclusion that the impugned legislation was invalid divided the Court in Barger . And in
Deputy Federal Commissioner of Taxation (NSW) v W R Moran Pty Ltd [171] (1939) 61 CLR 735 at 781; [ 1939 ] HCA 27 . , Evatt J expressed the view that the conclusion reached by the majority in Barger was wrong and inconsistent with the reasoning of the Court in
Cameron v Deputy Federal Commissioner of Taxation [172] (1923) 32 CLR 68 ; [ 1923 ] HCA 4 . . It is, however, not necessary to decide in this matter whether the actual conclusion reached in Barger was right.

89.

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Much emphasis was given in argument in this matter to a passage taken from the reasons of the majority in Barger which dealt with the advice of the Privy Council in Colonial Sugar Refining . Their Honours said [173] (1908) 6 CLR 41 at 70. that the Privy Council had held in Colonial Sugar Refining that " the discrimination, if any, was not effected by the Act imposing the Excise duty, but by the operation of the State laws previously existing " . Their Honours went on to say [174] (1908) 6 CLR 41 at 70-71. :

" E converso , if the Excise duty had been made to vary in inverse proportion to the Customs duties in the several States so as to make the actual incidence of the burden practically equal, that would have been a violation of the rule of uniformity. "

The plaintiffs and Queensland argued that the MRRT Legislation presents this converse case. They submitted that the amount payable as MRRT varied in inverse proportion to the royalties in the several States " so as to make the actual incidence of the burden [ of Commonwealth and State taxation on miners ] practically equal " .

90. The converse case postulated in Barger must be understood in light of all that was said in the reasons of Griffith CJ, Barton and O ' Connor JJ. Their Honours recognised the great differences that can be seen between different parts of Australia. They said [175] (1908) 6 CLR 41 at 69-70. that:

" The fact that taxation may produce indirect consequences was fully recognized by the framers of the Constitution. They recognized, moreover, that those consequences would not, in the nature of things, be uniform throughout the vast area of the Commonwealth, extending over 32 parallels of latitude and 40 degrees of longitude. The varying conditions of climate - tropical, sub-tropical and temperate - and of locality - near or at great distances from the seaboard - make an effectual discrimination for many purposes between the several portions of the Commonwealth. "

Yet, despite these differences, the Constitution provides legislative power with respect to taxation " but so as not to discriminate between States or parts of States " . As the majority said [176] (1908) 6 CLR 41 at 70. , those words " recognize the fact that nature has already discriminated, and prescribe that no attempt shall be made to alter the effect of that natural discrimination " . In particular, as their Honours recognised [177] (1908) 6 CLR 41 at 70. , those words prohibit the Parliament from seeking to " bring about equality in the incidence of the burden of taxation, or what has been called an equality of sacrifice " , by discriminating between the several portions of the Commonwealth.

91. The converse case which the majority postulated in Barger was a case of the kind just described. That is, their Honours were referring to a hypothetical case in which the Parliament, instead of enacting the Excise Tariff 1902 considered in Colonial Sugar Refining , had enacted a tariff which provided that the amount of duty payable to the Commonwealth should be so much as, when added to the State tax paid on that sugar, would make equal throughout the Commonwealth the actual amount of tax paid on sugar by every manufacturer of that commodity. But, as is explained later in these reasons, the converse case postulated by the majority in Barger is not this case. Any discrimination between miners is not effected by the MRRT Legislation but by the operation of State laws.

Cameron v Deputy Federal Commissioner of Taxation

92. The Income Tax Regulations 1917 (Cth) provided that the " fair average value " of certain livestock to be taken into account in assessing the amount of a taxpayer ' s assessable income should be the values set out in a table. The table provided different values for the same kind of livestock in different States and, in Western Australia, for the same kind of livestock in different parts of the State. In Cameron [178] (1923) 32 CLR 68 . , the Court held the provisions invalid as discriminating between States and parts of States. The provisions applied different legal standards " simply because the subject of taxation finds itself in one State or the other " [179] (1923) 32 CLR 68 at 77 per Isaacs J. .

Deputy Federal Commissioner of Taxation (NSW) v W R Moran Pty Ltd and W R Moran Pty Ltd v Deputy Federal Commissioner of Taxation (NSW)

93. Commonwealth Acts imposed taxes on flour and wheat and provided for grants to States to be used to assist wheat growers. Because very little wheat was grown in

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Tasmania, and Tasmanians would bear the excise duty on flour by paying higher prices for bread and similar products, special provision was made for Tasmania. Section 14 of the Wheat Industry Assistance Act 1938 (Cth) provided that the Minister might make an additional grant to Tasmania not greater than the amount by which the tax raised in Tasmania under the Flour Tax (Wheat Industry Assistance) Assessment Act 1938 (Cth) exceeded the total amount paid to the State under the Wheat Industry Assistance Act . It was alleged that the Act imposing the tax discriminated between States.

94. While a majority of this Court [180] Deputy Federal Commissioner of Taxation (NSW) v W R Moran Pty Ltd (1939) 61 CLR 735 . rejected the challenge, Evatt J would have held the Act imposing the tax invalid as discriminating in favour of Tasmania. Argument in the present matter directed attention to the dissenting reasons of Evatt J. His Honour concluded [181] (1939) 61 CLR 735 at 805. that the discrimination established was " not constituted by mere unequal operation in the States through casual or accidental features of the laws of those States " . Rather, Evatt J held [182] (1939) 61 CLR 735 at 805. that the case was one where discrimination was " aimed at and achieved by the Commonwealth Act, with the favoured State playing the subordinate role of executant of the Commonwealth ' s scheme for refunding the tax " .

95. An appeal to the Privy Council failed [183] W R Moran Pty Ltd v Deputy Federal Commissioner of Taxation (NSW) (1940) 63 CLR 338 ; [ 1940 ] AC 838 . . Viscount Maugham, delivering the advice of the Privy Council, said [184] (1940) 63 CLR 338 at 348; [ 1940 ] AC 838 at 856. that " it would be a mistake " to regard the restriction contained in s 51(ii) (or the requirement in s 51(iii) that bounties " be uniform throughout the Commonwealth " ) as " providing for equality of burden as regards taxation or equality of benefit as regards bounties " . Approving reference was made [185] (1940) 63 CLR 338 at 348; [ 1940 ] AC 838 at 856-857. to the statement by Isaacs J in Barger [186] (1908) 6 CLR 41 at 108. that " the pervading idea is the preference of locality merely because it is locality, and because it is a particular part of a particular State " (emphasis added). " It does not include a differentiation based on other considerations, which are dependent on natural or business circumstances, and may operate with more or less force in different localities " [187] (1908) 6 CLR 41 at 108. .

Conroy v Carter

96. Section 5 of the Poultry Industry Levy Collection Act 1965 (Cth) provided for the Commonwealth to make an arrangement with a State for the State Egg Board to collect the levy imposed by that Act on behalf of the Commonwealth. Section 6(1)(a) of the Act provided that, while an arrangement made under s 5 remained in force, payments of the levy were to be made to the State Egg Board. Section 6(1)(b) permitted the State Egg Board to retain, out of any moneys payable by the Board to any person, an amount not exceeding the amount of any levy that the person was liable to pay.

97. In
Conroy v Carter [188] (1968) 118 CLR 90 . , this Court considered whether s 6(1)(a) and s 6(1)(b) discriminated between States or parts of States. All members of this Court held that s 6(1)(a) did not so discriminate; the Court divided equally on whether s 6(1)(b) did so.

98. Barwick CJ, McTiernan and Menzies JJ were of the opinion that s 6(1)(b) discriminated between States. Menzies J described [189] (1968) 118 CLR 90 at 103-104. the provision as subjecting a person liable to pay the levy " to a particular disadvantage at law to which a person in respect of hens kept in a State which has made no arrangement with the Commonwealth under s 5, is not " . By contrast, Taylor J, with whom Kitto and Windeyer JJ agreed, concluded [190] (1968) 118 CLR 90 at 102. that neither s 6(1)(a) nor s 6(1)(b) discriminated between States. Having referred to the earlier decisions of this Court and to several decisions [191] United States v Snyder 149 US 210 (1893) ; Knowlton v Moore 178 US 41 (1900) ; Florida v Mellon 273 US 12 (1927) . of the United States Supreme Court about the application of Art I, s 8 of the United States Constitution [192] “ The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises … but all Duties, Imposts and Excises shall be uniform throughout the United States ” (emphasis added). , Taylor J concluded [193] (1968) 118 CLR 90 at 101. that neither of the impugned provisions discriminated between States or parts of States because there was no discrimination in the manner in which the impost was imposed or in the method of its collection. The impugned provisions were, in his Honour ' s opinion, not relevantly different from a law providing that, in calculating assessable income for income tax, sums paid as State land tax should be allowable as deductions. A provision of the kind just described was one " which operates generally throughout the Commonwealth and the fact that in some States there may be no legislation imposing land tax does not mean that it discriminates between States " [194] (1968) 118 CLR 90 at 101. .

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Different " effective " MRRT rates?

99. It is not right to say, as the plaintiffs did, that " in terms " the MRRT Legislation imposes a tax calculated at a rate that differs from State to State. The amounts on which MRRT is levied will differ between different miners. If one of those miners had conducted identical operations in a different State, the amount on which MRRT would be levied would be different. The miner would have different outgoings, including a different outgoing for State royalties. But the rate at which the tax would be levied would remain 22.5 per cent, regardless of the State in which the miner operated.

100. The plaintiffs submitted calculations directed to showing that the " effective " rate of MRRT imposed on a miner depended upon the amount of State royalty paid by that miner. The plaintiffs argued that, because the " effective " rate of MRRT depended upon the amount of State royalty paid, the MRRT Legislation discriminated between States by imposing different rates of tax according to locality.

101. The utility and relevance of the calculations and comparisons advanced by the plaintiffs depended upon the manner of their calculating the " effective " rate of MRRT. The central fallacy in the calculations was that each took as the base for the calculation of an effective rate of MRRT the amount of a miner ' s " mining profit " . It will be recalled that s 10-5 of the MRRT Act required calculation of a miner ' s mining profit as the first step along the way to determining the miner ' s MRRT liability. But from the miner ' s mining profit there must be deducted the miner ' s MRRT allowances (including royalty allowances) before arriving at the sum on which MRRT is payable. It is neither useful nor relevant to consider any comparison made between the proportion of two different miners ' mining profit which is payable as MRRT. That comparison is neither useful nor relevant because it does not take the amount on which MRRT is levied as the basis for comparison. Discrimination is not revealed by making the comparison advanced by the plaintiffs based on only one of the several integers used to calculate the amount on which MRRT is levied.

Discrimination

102. As five members of this Court pointed out in
Bayside City Council v Telstra Corporation Ltd [195] (2004) 216 CLR 595 at 629 [ 40 ] ; [ 2004 ] HCA 19 . , " [ d ] iscrimination is a concept that arises for consideration in a variety of constitutional and legislative contexts " . Thus, s 102 of the Constitution provides power for the Parliament " by any law with respect to trade or commerce [ to ] forbid, as to railways, any preference or discrimination by any State, or by any authority constituted under a State, if such preference or discrimination is undue and unreasonable, or unjust to any State " (emphasis added). Section 117 provides that " [ a ] subject of the Queen, resident in any State, shall not be subject in any other State to any disability or discrimination which would not be equally applicable to him if he were a subject of the Queen resident in such other State " (emphasis added). Section 99 does not use the word " discrimination " but does provide that " [ t ] he Commonwealth shall not, by any law or regulation of trade, commerce, or revenue, give preference to one State or any part thereof over another State or any part thereof " (emphasis added).

103. As the plurality also pointed out in Bayside City Council [196] (2004) 216 CLR 595 at 629 [ 40 ] , citing Street v Queensland Bar Association (1989) 168 CLR 461 at 506 per Brennan J; [ 1989 ] HCA 53 . , discrimination " involves a comparison " . Usually that comparison will be informed by notions of difference and equality. In at least some cases, the notions of difference and equality which underpin the comparison will be supplemented by consideration of why some distinction is discerned in the relevant treatment of, or outcome for, the subject of the alleged discrimination.

104. Whether, or to what extent, these notions may apply in connection with constitutional provisions other than s 51(ii) need not be, and is not, examined here. But it is necessary to exercise some care in determining whether, or to what extent, these are notions that can have a direct or immediate application in connection with s 51(ii). In that regard, it is relevant to notice that s 51(ii) " with its prohibition of discrimination may not be the same as art 1, s 8 of the Constitution of the United States requiring uniformity " [197] Deputy Federal Commissioner of Taxation v Brown (1958) 100 CLR 32 at 39 per Dixon CJ; [ 1958 ] HCA 2 ; cf Quick and Garran, The Annotated Constitution of the Australian Commonwealth , (1901) at 550. of taxation. Different outcomes may be sufficient

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to demonstrate lack of uniformity but may not suffice to show discrimination.

105. Quick and Garran said [198] Quick and Garran, The Annotated Constitution of the Australian Commonwealth, (1901) at 550. of the limiting clause in s 51(ii) that " [ t ] o discriminate obviously means to make differences in the nature, burden, incidence and enforcement of taxing law; to impose a high tax on commodities or persons in one State and a low tax on the same class of commodities or persons in another State, would be to discriminate " . This understanding of " discriminate " accords with its basic dictionary meaning: " [ t ] o make a distinction; to perceive or note the difference ( between things) " [199] The Oxford English Dictionary , 2nd ed (1989), vol IV at 758, “ discriminate ” , meaning 3a. (original emphasis). Thus, when s 51(ii) speaks of a law with respect to " taxation; but so as not to discriminate between States or parts of States " , it is speaking of a law with respect to taxation which does not, in its terms, draw any distinction between States or parts of States. Regardless of what differences can be perceived between States or parts of States, a law with respect to taxation may itself make no distinction between them, whether by reference to differences that have been or could be perceived, or otherwise. That is, adopting the words quoted earlier from Quick and Garran, the limiting clause of s 51(ii) prevents the enactment of laws which " make differences in the nature, burden, incidence and enforcement of taxing law " (emphasis added).

Discrimination in effect?

106. Many of the submissions made by the plaintiffs and Queensland took as their premise that the MRRT Legislation sought to make the tax burden on miners equal throughout the federation. That is, it was submitted that the MRRT Legislation imposed a uniform cumulative rate of " mineral rent " throughout the Commonwealth which discriminated between the States by equating the " sacrifice " of miners in low royalty States with that of miners in high royalty States.

107. The plaintiffs and Queensland thus submitted that, in effect if not in form, the MRRT Act was the converse case postulated by the majority in Barger because the royalty provisions of the MRRT Act sought to equalise the total tax " take " from miners by the federal and State governments. But unlike the converse case considered in Barger , the MRRT Act does not provide for any difference in MRRT liability according to where the miner operates. To the extent that the amount of MRRT paid varies from State to State because different rates of State royalty are charged, those variations are due to the different conditions that exist in the different States and, in particular, the different legislative regimes provided by the States.

108. Other submissions of the plaintiffs and Queensland took as their premise that the MRRT Legislation treated equals unequally and, on that account, was discriminatory. More particularly, those submissions proceeded from the premise that s 51(ii) should be read as preventing the enactment of a law with respect to taxation which has different economic or other consequences in different States. And the plaintiffs argued that the MRRT Legislation discriminates against those States which wished to consider lowering their State royalty rates.

109. None of these propositions is consistent with any of the cases that have been decided about s 51(ii), and that is reason enough to reject each of them. All of Colonial Sugar Refining , Barger , Cameron , Moran and Conroy require their rejection. It is, however, desirable to say more about why bare demonstration of different consequences in different States does not show that a law with respect to taxation discriminates between States or parts of States.

Different consequences in different States

110. As already noted, the limiting words of s 51(ii) do not speak of a law that discriminates against States or parts of States and should be read as referring to geographic differentiation, not to the effect of the relevant law on a State as a polity.

111. To discriminate against someone or something is " to make an adverse distinction with regard to; to distinguish unfavourably from others " [200] The Oxford English Dictionary , 2nd ed (1989), vol IV at 758, “ discriminate ” , meaning 3b. . And, of course, there has evolved a developed body of thinking about how the notions of " adverse " or " unfavourable " discrimination are to be understood and applied.

112. Discrimination connotes comparison [201] Street (1989) 168 CLR 461 at 506 per Brennan J. . It directs attention to whether like cases are treated alike and different cases differently. But there may be two distinct questions that must be answered. First, are the cases that are being compared alike or different? Second, are the two cases treated alike or differently? It is

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particularly in the context of questions of " adverse " or " unfavourable " discrimination (or their converse cases of " preference " or " advantage " ) that comparison is central to identifying discrimination. In undertaking the task of comparison, it is often necessary to exercise great care when identifying the relevant comparator [202] See, for example, Purvis v New South Wales (2003) 217 CLR 92 ; [ 2003 ] HCA 62 . ; for it is necessary to identify a comparator that will enable identification of some relevant difference in treatment of cases that are alike, or some relevant identity of treatment of cases that are different. And it is in that same kind of context that it may be necessary to examine " the relevance, appropriateness, or permissibility of some distinction by reference to which such treatment occurs, or by reference to which it is sought to be explained or justified " [203] Bayside City Council (2004) 216 CLR 595 at 629-630 [ 40 ] . .

113. In applying the limitation contained in s 51(ii), there is no question about selecting an appropriate comparator. Section 51(ii) expressly provides for the comparison that must be made. Does the impugned law discriminate between States or parts of States ? Section 51(ii) thus provides that, whatever differences may be observed between States or parts of States, a law of the Parliament with respect to taxation may itself neither create nor draw any distinction between States or parts of States.

114. In that sense, at least, the prohibition which the qualifying words of s 51(ii) provide is cast in absolute terms. The power to make a law with respect to taxation may not be exercised so as to discriminate. By contrast, as noted earlier, s 102 gives power to the Parliament, by any law with respect to trade or commerce, to forbid, as to railways, " any preference or discrimination by any State, or by any authority constituted under a State, if such preference or discrimination is undue and unreasonable, or unjust to any State " (emphasis added), when " due regard " is had to certain matters. Section 51(ii) uses no qualifying words like " undue " , " unreasonable " or " unjust " . It erects a rule expressed simply as " so as not to discriminate " (emphasis added).

115. In its terms, then, s 51(ii) may be read as assuming that there are no differences between States (or parts of States) which could warrant a law with respect to taxation distinguishing between them. An assumption of that kind would fit comfortably with the limiting words of s 51(ii) fulfilling a fundamental federal purpose: that laws with respect to taxation enacted by the federal Parliament treat all States and parts of States alike. If this is the assumption that underpins s 51(ii), it would follow that, if a law with respect to taxation does discriminate between States (or parts of States), no further question could arise about whether the distinction that the law created or drew might none the less be explained or justified in a way that would take the challenged law outside the qualifying words of the provision. And if no further question of that kind need be answered, there would be no occasion to identify or consider the relationship that the law may have with some object or end which is identified as " proper " or " legitimate " , because there could be no object or end that could constitute or reflect some difference between States (or parts of States) which would justify distinguishing between them. It is not necessary, however, to decide in this matter whether s 51(ii) should be understood as embodying or proceeding from an assumption of the kind described.

116. The Commonwealth submitted that if, contrary to its principal submission, the MRRT Legislation " somehow had a relevant differential treatment or unequal outcome, it does not follow that the legislation is discriminatory between States " . In support of that submission, the Commonwealth referred to the plurality ' s reasons in Austin , which noted [204] (2003) 215 CLR 185 at 247 [ 118 ] . that " [ t ] he essence of the notion of discrimination is said to lie in the unequal treatment of equals or the equal treatment of those who are not equals [205] Queensland Electricity Commission v The Commonwealth (1985) 159 CLR 192 at 240; [ 1985 ] HCA 56 ; Castlemaine Tooheys Ltd v South Australia (1990) 169 CLR 436 at 480; [ 1990 ] HCA 1 ; Cameron v The Queen (2002) 209 CLR 339 at 343-344 [ 15 ] ; [ 2002 ] HCA 6 . , where the differential treatment and unequal outcome is not the product of a distinction which is appropriate and adapted to the attainment of a proper objective [206] Street (1989) 168 CLR 461 at 510-511, 548, 571-573, 582; Cameron v The Queen (2002) 209 CLR 339 at 343-344 [ 15 ] . " (emphasis added). Whether, or how, this proposition was to be applied to a law with respect to taxation did not have to be, and was not, explored in Austin . And although the proposition was repeated in
Permanent Trustee Australia Ltd v Commissioner of State Revenue (Vict) [207] (2004) 220 CLR 388 at 424 [ 89 ] ; [ 2004 ] HCA 53 . , it was again unnecessary to explore its application to a law with respect to taxation. Nor is it necessary to undertake that task in this matter. The MRRT

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Legislation does not discriminate between States or parts of States. It has no different application between States. Observing that a miner would pay a different amount of MRRT if that miner conducted identical operations in a different State does not demonstrate discrimination.

117. It may be accepted that consideration of whether a law discriminates between States or parts of States is not to be resolved by consideration only of the form of the law. The legal and practical operation of the law will bear upon the question. It by no means follows, however, that the law is shown to discriminate by demonstrating only that the law will have different effects on different taxpayers according to the State in which the taxpayer conducts the relevant activity or receives the relevant income or profit. In particular, a law is not shown to discriminate between States by demonstrating only that it will have a different practical operation in different States because those States have created different circumstances to which the federal Act will apply by enacting different State legislation.

118. To the extent to which the plaintiffs ' arguments depended upon the proposition that the federal legislative power to enact the MRRT Legislation was restricted because State Parliaments had made legislative provision for mining royalties which differed from State to State, the arguments must be rejected. Those arguments run counter to fundamental constitutional considerations.

119. Central to the Australian federal system is " [ t ] he conception of independent governments existing in the one area and exercising powers in different fields of action carefully defined by law " [208] R v Kirby ; Ex parte Boilermakers ’ Society of Australia (1956) 94 CLR 254 at 267-268; [ 1956 ] HCA 10 . . " The position of the federal government is necessarily stronger than that of the States. The Commonwealth is a government to which enumerated powers have been affirmatively granted. " [209] Melbourne Corporation (1947) 74 CLR 31 at 82-83. And s 109 gives supremacy to the valid exercise of the federal Parliament ' s legislative powers. The plaintiffs ' arguments sought to invert that structure by asserting that the ambit of the Parliament ' s power under s 51(ii) to make a law with respect to taxation depends upon whether and how States have legislated for the different, if closely related, subject of mineral royalties. The inversion was effected by asserting that the practical effect of the MRRT Legislation is to discriminate between States. But the practical effect of the plaintiffs ' point was no more than that taxpayers pay different amounts of MRRT according to what outgoings each actually incurs and those outgoings differ in amount according to where the taxpayer has its mining operations.

120. Since
Amalgamated Society of Engineers v Adelaide Steamship Co Ltd ( " the Engineers ' Case " ) [210] (1920) 28 CLR 129 ; [ 1920 ] HCA 54 . , it has been securely established that the legitimate extent of the law-making power of the Commonwealth is not to be limited by first assuming the existence of State laws or law-making power, or by according precedence to State laws made in the exercise of State law-making power on those occasions when a State is the first to enter upon the legislative regulation of a particular activity. The plaintiffs ' arguments for invalidity cut directly across these basal principles.

121. The MRRT Legislation does not discriminate between States. If the States had enacted no provision for royalties or if all States had chosen to exact royalties at identical rates, the plaintiffs ' argument of discrimination would evidently be without foundation. The possibility that a law of the federal Parliament might become invalid upon, and by reason of, one State changing its royalty rate would not be consistent with the observations of Griffith CJ in Colonial Sugar Refining [211] [ 1903 ] St R Qd 261 at 276-277. , much less the decision in the Engineers ' Case [212] (1920) 28 CLR 129 at 144-145, 154. .

122. The plaintiffs and Queensland rightly accepted that a federal taxing Act permitting deduction from the amount on which the tax was to be levied of expenses actually and necessarily incurred in conducting a business was not shown to be discriminatory by showing only that one of those expenses was a compulsory State exaction, the amount of which varied between the States. The MRRT Act ' s provisions about State royalties are different in their form, and thus their application, from provisions for deduction from taxable income commonly found for many years in Commonwealth income tax Acts. Those differences in form and application are not constitutionally relevant. Neither income tax Act provisions permitting deduction of State

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taxes from taxable income nor the royalty provisions of the MRRT Act discriminate between States.

Section 99

123. The plaintiffs accepted that, if the MRRT Legislation did not discriminate between States, it was not a " law … of trade, commerce, or revenue " which gave " preference to one State or any part thereof over another State or any part thereof " .

124. In Permanent Trustee [213] (2004) 220 CLR 388 at 423 [ 86 ] . , the plurality said that it was not the occasion in that case " to seek to disentangle the reasoning in all the disparate authorities in the first fifty years of the Court which concern s 99 in its operation upon ' any law or regulation of trade, commerce … ' " . Nor, given the conclusions reached about s 51(ii) and the plaintiffs ' concession that s 99 is not then engaged, is this a case in which it is necessary or desirable to attempt that task. It is enough to repeat some points made [214] (2004) 220 CLR 388 at 423 [ 87 ] - [ 88 ] . by the plurality in Permanent Trustee by reference to
Elliott v The Commonwealth [215] (1936) 54 CLR 657 ; [ 1936 ] HCA 7 . . As Dixon J said [216] (1936) 54 CLR 657 at 682. in Elliott , the critical phrase in s 99, " give preference … over " , expresses " a conception necessarily indefinite " . Much therefore depends upon the level of abstraction at which debate enters upon the issue. Second, and of most immediate relevance in this case, " [ t ] o give preference to one State over another State discrimination or differentiation is necessary " [217] (1936) 54 CLR 657 at 683 per Dixon J; see also at 668 per Latham CJ. . But not every discrimination between States may amount to preference of one over another [218] (1936) 54 CLR 657 at 683 per Dixon J. .

125. Because the MRRT Legislation does not discriminate between States, there is no preference of one State over another.

The Melbourne Corporation principle

126. The plaintiffs submitted that the States own the minerals in their lands and have the ability to regulate extraction of those minerals on terms that the persons granted the right to take minerals pay in return royalties fixed by the States at whatever level the States choose. The plaintiffs submitted that the MRRT Legislation interfered with the States ' management of the mineral resources under their control. The colony ' s control over minerals was recognised in the pre-federation constitutions of Queensland and Western Australia [219] Constitution Act 1867 (Q), ss 30, 34 and 40; Western Australia Constitution Act 1890 (Imp), s 3; The Constitution Act 1889 (WA), s 64. See also New South Wales Constitution Act 1855 (Imp) (18 & 19 Vict c 54), Preamble, s 2, Sched 1, ss 43, 47 and 50; Victoria Constitution Act 1855 (Imp) (18 & 19 Vict c 55), Preamble, Sched 1, ss 44 and 54. . And upon federation, the States came to derive their existence from the Constitution itself, which, by s 106, continued the State constitutions in force (but subject to the Constitution) [220] Victoria v The Commonwealth ( “ the Pay-roll Tax Case ” ) (1971) 122 CLR 353 at 371 per Barwick CJ; [ 1971 ] HCA 16 ; New South Wales v The Commonwealth ( “ the Seas and Submerged Lands Case ” ) (1975) 135 CLR 337 at 372 per Barwick CJ; [ 1975 ] HCA 58 . . The plaintiffs and Western Australia argued that the MRRT Legislation was apt to neutralise the positive effect upon the level of mining activity in a State that might be expected to flow from the exercise of the State ' s ability to effect a reduction in the State ' s royalty rate.

127. The plaintiffs ' argument began with a passage from the judgment of Starke J in Melbourne Corporation [221] (1947) 74 CLR 31 at 75. :

" [ I ] n the end the question must be whether the legislation or the executive action curtails or interferes in a substantial manner with the exercise of constitutional power by the other. The management and control by the States and by local governing authorities of their revenues and funds is a constitutional power of vital importance to them. Their operations depend upon the control of those revenues and funds. And to curtail or interfere with the management of them interferes with their constitutional power. "

The plaintiffs submitted that the infirmity of the MRRT Legislation was revealed by substituting " natural resources " for " revenues and funds " in the passage just set out.

128. The plaintiffs further submitted that a State is necessarily both a territorial entity and a polity with responsibility for the management and control of the waste lands of the Crown and is expressly given the right to appropriate the proceeds of sale and revenues from such land, including royalties, mines and minerals in such lands [222] See, for example, New South Wales Constitution Act 1855 (Imp); Williams v Attorney-General for New South Wales (1913) 16 CLR 404 at 425-426; [ 1913 ] HCA 33 . .

129. The Commonwealth did not dispute that each State ' s ownership, management and control of its territory (including, particularly, the waste lands of the Crown within that territory) is a necessary attribute of statehood and that a State ' s ability by legislation to make laws to promote the development of its territory in the interests of, or to promote the welfare of the community of, the State is important. And the Commonwealth did not dispute that it is for the States to determine the level of royalty to be paid as the price for extracting minerals from their territories. But the Commonwealth

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submitted that the MRRT Legislation does not subject that ability to Commonwealth control and proceeded on the assumption that the States were free to fix royalties as they chose.

130. In Melbourne Corporation , Dixon J said [223] (1947) 74 CLR 31 at 82; See also Austin (2003) 215 CLR 185 at 245-246 [ 111 ] - [ 115 ] ; Work Choices Case (2006) 229 CLR 1 at 119-120 [ 194 ] . that:

" The foundation of the Constitution is the conception of a central government and a number of State governments separately organized. The Constitution predicates their continued existence as independent entities. "

And as was said in the Work Choices Case [224] (2006) 229 CLR 1 at 120 [ 194 ] . , the separate polities whose continued existence is predicated " are to continue as separate bodies politic each having legislative, executive and judicial functions " . Hence, as the decisions in Austin [225] (2003) 215 CLR 185 . and Clarke [226] (2009) 240 CLR 272 . each demonstrate, the Melbourne Corporation principle requires consideration of whether impugned legislation is directed at States, imposing some special disability or burden on the exercise of powers and fulfilment of functions of the States which curtails their capacity to function as governments.

131. The extent and importance of the States ' function of managing their lands and mineral resources must be acknowledged. But the plaintiffs ' submissions contended for a view of the Melbourne Corporation principle which, if accepted, would subvert not only the position established by the decision in the Engineers ' Case but also s 109 of the Constitution.

132. Western Australia submitted that it is " central to the capacity of [ the ] State to function as a government under the Constitution that it have the power to determine the most appropriate means of financing the development of communities in Western Australia " . This submission bore a striking resemblance to arguments advanced by that State, and rejected, in
Western Australia v The Commonwealth ( Native Title Act Case ) [227] (1995) 183 CLR 373 ; [ 1995 ] HCA 47 . . Western Australia alleged [228] (1995) 183 CLR 373 at 478-479. , in the Native Title Act Case , that, because the " capacity and power to grant, regulate and otherwise deal with land and other resources in Western Australia … is a fundamental sovereign function of the Government of Western Australia as a State " , provisions of the Native Title Act 1993 (Cth) were invalid. But as the plurality held [229] (1995) 183 CLR 373 at 481. in that case:

" The [ Native Title Act ] does not purport to affect the machinery of the government of the State. The constitution of the three branches of government is unimpaired; the capacity of the State to engage the servants it needs is unaffected; the acquisition of goods and services is not impeded; nor is any impediment placed in the way of acquiring the land needed for the discharge of the essential functions of the State save in one respect, namely, the payment of compensation. The Act does not impair what Dawson J described [ in
Queensland Electricity Commission v The Commonwealth [230] (1985) 159 CLR 192 at 260. ] as ' the capacity to exercise ' constitutional functions though it may affect the ease with which those functions are exercised. "

133. If the MRRT Legislation does affect the States ' control over land and resources, the effect is less direct and more speculative than the effect of the Native Title Act . If, then, the MRRT Legislation does diminish the choices available to the executive governments of the States, that diminution does not engage the Melbourne Corporation principle.

134. In Austin , the plurality noted [231] (2003) 215 CLR 185 at 258 [ 145 ] . that the fundamental constitutional conception which underpins the Melbourne Corporation principle " has proved insusceptible of precise formulation " . Accordingly, the plurality warned [232] (2003) 215 CLR 185 at 258-259 [ 145 ] . against the risk of propositions stated in particular cases taking on, " by further judicial exegesis, a life of their own which is removed from the constitutional fundamentals which must sustain them " . It remains important, however, to recognise how that fundamental constitutional conception has been applied in earlier decisions of this Court.

135. In Austin and Clarke , the perceived vice of the Commonwealth law in question lay in its impact upon the capacity of a State to fix the terms of its relationships with its judiciary and legislature as branches of the government of that State. As had previously been pointed out, in Re Australian Education Union; Ex parte Victoria [233] (1995) 184 CLR 188 at 233; [ 1995 ] HCA 71 . , " critical to a State ' s capacity to function as a government is its ability, not only to determine the number and identity of those

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whom it wishes to engage at the higher levels of government, but also to determine the terms and conditions on which those persons shall be engaged " .

136. The legislation held invalid in Queensland Electricity Commission [234] (1985) 159 CLR 192 . was directed only at a State. It provided a special set of rules concerning the resolution of an industrial dispute between certain Queensland State electricity authorities and the Electrical Trades Union, which represented employees of those authorities. That is, the law sought to burden the State by providing special rules to govern decisions about the relationship between agencies of the State and their employees. By contrast, in the Pay-roll Tax Case [235] (1971) 122 CLR 353 . , legislation imposing pay-roll tax on all employers (including the States) was held to be valid even though, of course, it placed a burden on the States.

137. The MRRT Legislation is not aimed at the States or their entities as was the legislation considered in each of Melbourne Corporation , Queensland Electricity Commission , Austin and Clarke . The MRRT Legislation does not impose any special burden or disability on the exercise of powers and fulfilment of functions of the States which curtails their capacity to function as governments. The MRRT Legislation does not deny the capacity of any State to fix the rate of royalty for minerals extracted by miners, and no burden upon a State attaches to any decision by the State to raise or lower that rate. If, as the plaintiffs asserted, the MRRT Legislation affects the States ' ability to use a reduction in royalty rate as an incentive to attract mining investment in the State, the MRRT Legislation does not impose any limit or burden on any State in the exercise of its constitutional functions.

Section 91

138. Section 91 of the Constitution provides that:

" Nothing in this Constitution prohibits a State from granting any aid to or bounty on mining for gold, silver, or other metals, nor from granting, with the consent of both Houses of the Parliament of the Commonwealth expressed by resolution, any aid to or bounty on the production or export of goods. "

It was common ground that the plaintiffs engaged in mining for iron ore and that iron ore is an " other metal " within s 91.

139. The plaintiffs argued that s 91 not only preserves the powers of a State to grant any aid or bounty on mining for gold, silver or other metals, but also limits the legislative power of the federal Parliament. In particular, the plaintiffs submitted that s 91 prevents the enactment of a federal law which impedes States granting an " aid … on mining " for iron ore by reducing the rate of State royalty charged or exempting a miner from paying royalty. They submitted that, because the grant of any such reduction or exemption would have the effect that the MRRT otherwise payable by the miner would be increased by an amount equivalent to such reduction or exemption, the grant of the aid would be illusory. This result, the plaintiffs submitted, was precluded by the phrase " [ n ] othing in this Constitution prohibits " . Insofar as the provisions of the Constitution might otherwise have authorised the making of the law, the introductory words of s 91 limited the ambit (or perhaps the exercise) of the relevant power.

140. The first step in the plaintiffs ' argument is undermined by observations in
Seamen ' s Union of Australia v Utah Development Co [236] (1978) 144 CLR 120 at 126 per Barwick CJ, 135 per Gibbs J, 140 per Stephen J, 148 per Mason J; [ 1978 ] HCA 46 . which suggest that " aid " in s 91 should be read as limited to " financial assistance " . And as the argument of Mr B H McPherson QC in Seamen ' s Union noted [237] (1978) 144 CLR 120 at 125. , parliamentary usage of the term " aid " would support that view. It is, however, not necessary to reach any concluded view about this aspect of the matter. The plaintiffs ' arguments fail for other reasons.

141. Section 91 is not framed in terms of prohibition. As Mason J said [238] (1978) 144 CLR 120 at 149. in Seamen ' s Union , in respect of the second part of the section, " [ i ] t is inconceivable that a section, not cast in the form of a prohibition, should be widely interpreted so as to prevent a State, without the consent of both Houses of the Commonwealth Parliament, from granting … benefits of any kind … that might operate as an aid to production or export " . Likewise, there is no reason to read the introductory words as limiting the legislative powers of the Commonwealth. Indeed, to read those words in the manner proposed by the plaintiffs would be

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to read them as providing for the legislative supremacy of State laws " granting any aid to or bounty on mining for gold, silver, or other metals " . How that result would be consistent with s 109 was not explained.

142. Section 91 denies any constitutional prohibition on granting any aid or bounty of the kind described. The expression " [ n ] othing in this Constitution prohibits " directs the reader to what might otherwise be read as working a prohibition. In particular, the introductory words of s 91 invite attention to s 90. When ss 90 and 91 are read together, there is evident reason for reading s 91 as qualifying s 90. Section 90 provides for the power of the Parliament to impose duties of customs and of excise and to grant bounties to become exclusive. Section 91 provides that nothing in the Constitution prohibits States granting any aid to or bounty on certain mining. Including reference in s 91 to " any aid " foreclosed any debate about whether a grant of financial aid to mining is a bounty on the production of goods. A grant or loan of money to encourage mining for particular metals would be an aid to mining. No great imagination is needed to see that the terms on which a grant or loan was made might provide some basis for arguing that it was a bounty on the production of the metal concerned. Section 91 was cast in terms that avoided that debate.

143. But the words of s 91 do not admit of the construction which the plaintiffs urged. Section 91 preserves the States ' legislative powers with respect to granting certain kinds of aid or bounty. It does not limit the legislative powers of the federal Parliament. In particular, there is no warrant for reading s 91 as if it said " [ n ] o law of the Commonwealth may impair the effect of the provision of assistance by a State to mining for gold, silver, or other metals " . Yet it is only by reading s 91 as having this effect that the plaintiffs ' submissions about s 91 would be made good.

Conclusion and orders

144. For these reasons, the plaintiffs ' challenges to validity are not made out. The plaintiffs should pay the costs of the reserved questions. The questions reserved for the opinion of the Full Court should be answered as follows:

Further proceedings in the matter will be for determination by a single Justice.

Footnotes

[136] (1947) 74 CLR 31 ; [ 1947 ] HCA 26 .
[137] Australia, Senate, Minerals Resource Rent Tax Bill 2011, Minerals Resource Rent Tax (Consequential Amendments and Transitional Provisions) Bill 2011, Minerals Resource Rent Tax (Imposition — Customs) Bill 2011, Minerals Resource Rent Tax (Imposition — Excise) Bill 2011, Minerals Resource Rent Tax (Imposition — General) Bill 2011, Revised Explanatory Memorandum at 3.
[138] Australia, Senate, Minerals Resource Rent Tax Bill 2011, Minerals Resource Rent Tax (Consequential Amendments and Transitional Provisions) Bill 2011, Minerals Resource Rent Tax (Imposition — Customs) Bill 2011, Minerals Resource Rent Tax (Imposition — Excise) Bill 2011, Minerals Resource Rent Tax (Imposition — General) Bill 2011, Revised Explanatory Memorandum at 8 [ 1.25 ] .
[139] Each MRRT year is a financial year and commences on 1 July: s 10-25.
[140] This and other terms used in the MRRT Act are defined in the Dictionary set out in s 300-1. For the most part, it is sufficient to indicate, by the use of quotation marks, that a term is defined in s 300-1 without setting out the content of its definition.
[141] See ss 15-5(2) and 15-15 together with the definition of “ Australian law ” in s 300-1 of the MRRT Act, which refers to the definition of that term in s 995-1(1) of the Income Tax Assessment Act 1997 (Cth).
[142] ss 15-5(4) and 20-5.
[143] s 25-5.
[144] s 35-5(2). See also subdiv 35-B.
[145] s 35-40(1)(a).
[146] ss 10-15 and 45-10.
[147] ss 10-15 and 45-5.
[148] s 35-45(1).
[149] s 35-40(1)(a).
[150] ss 60-20 and 60-25.
[151] ss 60-10 and 60-15.
[152] s 10-10.
[153] s 10-5.
[154] s 60-25(1).
[155] s 60-25(2).
[156] (1947) 74 CLR 31 .
[157] (2003) 215 CLR 185 ; [ 2003 ] HCA 3 .
[158] (2009) 240 CLR 272 ; [ 2009 ] HCA 33 .
[159] New South Wales v The Commonwealth (Work Choices Case) (2006) 229 CLR 1 at 127 [ 219 ] ; [ 2006 ] HCA 52 .
[160] Quick and Garran, The Annotated Constitution of the Australian Commonwealth , (1901) at 550.
[161] Conroy v Carter (1968) 118 CLR 90 at 101 per Taylor J; [ 1968 ] HCA 39 . See also at 103 per Menzies J; Austin v The Commonwealth (2003) 215 CLR 185 at 247 [ 117 ] .
[162] Stanton v Federal Commissioner of Taxation (1955) 92 CLR 630 at 639-642; [ 1955 ] HCA 56 .
[163] The Colonial Sugar Refining Co Ltd v Irving [ 1903 ] St R Qd 261 .
[164] Colonial Sugar Refining Co Ltd v Irving [ 1906 ] AC 360 .
[165] [ 1906 ] AC 360 at 367.
[166] [ 1903 ] St R Qd 261 at 276.
[167] [ 1903 ] St R Qd 261 at 277.
[168] [ 1903 ] St R Qd 261 at 277.
[169] (1908) 6 CLR 41 ; [ 1908 ] HCA 43 .
[170] (1908) 6 CLR 41 at 67.
[171] (1939) 61 CLR 735 at 781; [ 1939 ] HCA 27 .
[172] (1923) 32 CLR 68 ; [ 1923 ] HCA 4 .
[173] (1908) 6 CLR 41 at 70.
[174] (1908) 6 CLR 41 at 70-71.
[175] (1908) 6 CLR 41 at 69-70.
[176] (1908) 6 CLR 41 at 70.
[177] (1908) 6 CLR 41 at 70.
[178] (1923) 32 CLR 68 .
[179] (1923) 32 CLR 68 at 77 per Isaacs J.
[180] Deputy Federal Commissioner of Taxation (NSW) v W R Moran Pty Ltd (1939) 61 CLR 735 .
[181] (1939) 61 CLR 735 at 805.
[182] (1939) 61 CLR 735 at 805.
[183] W R Moran Pty Ltd v Deputy Federal Commissioner of Taxation (NSW) (1940) 63 CLR 338 ; [ 1940 ] AC 838 .
[184] (1940) 63 CLR 338 at 348; [ 1940 ] AC 838 at 856.
[185] (1940) 63 CLR 338 at 348; [ 1940 ] AC 838 at 856-857.
[186] (1908) 6 CLR 41 at 108.
[187] (1908) 6 CLR 41 at 108.
[188] (1968) 118 CLR 90 .
[189] (1968) 118 CLR 90 at 103-104.
[190] (1968) 118 CLR 90 at 102.
[191] United States v Snyder 149 US 210 (1893) ; Knowlton v Moore 178 US 41 (1900) ; Florida v Mellon 273 US 12 (1927) .
[192] “ The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises … but all Duties, Imposts and Excises shall be uniform throughout the United States ” (emphasis added).
[193] (1968) 118 CLR 90 at 101.
[194] (1968) 118 CLR 90 at 101.
[195] (2004) 216 CLR 595 at 629 [ 40 ] ; [ 2004 ] HCA 19 .
[196] (2004) 216 CLR 595 at 629 [ 40 ] , citing Street v Queensland Bar Association (1989) 168 CLR 461 at 506 per Brennan J; [ 1989 ] HCA 53 .
[197] Deputy Federal Commissioner of Taxation v Brown (1958) 100 CLR 32 at 39 per Dixon CJ; [ 1958 ] HCA 2 ; cf Quick and Garran, The Annotated Constitution of the Australian Commonwealth , (1901) at 550.
[198] Quick and Garran, The Annotated Constitution of the Australian Commonwealth, (1901) at 550.
[199] The Oxford English Dictionary , 2nd ed (1989), vol IV at 758, “ discriminate ” , meaning 3a.
[200] The Oxford English Dictionary , 2nd ed (1989), vol IV at 758, “ discriminate ” , meaning 3b.
[201] Street (1989) 168 CLR 461 at 506 per Brennan J.
[202] See, for example, Purvis v New South Wales (2003) 217 CLR 92 ; [ 2003 ] HCA 62 .
[203] Bayside City Council (2004) 216 CLR 595 at 629-630 [ 40 ] .
[204] (2003) 215 CLR 185 at 247 [ 118 ] .
[205] Queensland Electricity Commission v The Commonwealth (1985) 159 CLR 192 at 240; [ 1985 ] HCA 56 ; Castlemaine Tooheys Ltd v South Australia (1990) 169 CLR 436 at 480; [ 1990 ] HCA 1 ; Cameron v The Queen (2002) 209 CLR 339 at 343-344 [ 15 ] ; [ 2002 ] HCA 6 .
[206] Street (1989) 168 CLR 461 at 510-511, 548, 571-573, 582; Cameron v The Queen (2002) 209 CLR 339 at 343-344 [ 15 ] .
[207] (2004) 220 CLR 388 at 424 [ 89 ] ; [ 2004 ] HCA 53 .
[208] R v Kirby ; Ex parte Boilermakers ’ Society of Australia (1956) 94 CLR 254 at 267-268; [ 1956 ] HCA 10 .
[209] Melbourne Corporation (1947) 74 CLR 31 at 82-83.
[210] (1920) 28 CLR 129 ; [ 1920 ] HCA 54 .
[211] [ 1903 ] St R Qd 261 at 276-277.
[212] (1920) 28 CLR 129 at 144-145, 154.
[213] (2004) 220 CLR 388 at 423 [ 86 ] .
[214] (2004) 220 CLR 388 at 423 [ 87 ] - [ 88 ] .
[215] (1936) 54 CLR 657 ; [ 1936 ] HCA 7 .
[216] (1936) 54 CLR 657 at 682.
[217] (1936) 54 CLR 657 at 683 per Dixon J; see also at 668 per Latham CJ.
[218] (1936) 54 CLR 657 at 683 per Dixon J.
[219] Constitution Act 1867 (Q), ss 30, 34 and 40; Western Australia Constitution Act 1890 (Imp), s 3; The Constitution Act 1889 (WA), s 64. See also New South Wales Constitution Act 1855 (Imp) (18 & 19 Vict c 54), Preamble, s 2, Sched 1, ss 43, 47 and 50; Victoria Constitution Act 1855 (Imp) (18 & 19 Vict c 55), Preamble, Sched 1, ss 44 and 54.
[220] Victoria v The Commonwealth ( “ the Pay-roll Tax Case ” ) (1971) 122 CLR 353 at 371 per Barwick CJ; [ 1971 ] HCA 16 ; New South Wales v The Commonwealth ( “ the Seas and Submerged Lands Case ” ) (1975) 135 CLR 337 at 372 per Barwick CJ; [ 1975 ] HCA 58 .
[221] (1947) 74 CLR 31 at 75.
[222] See, for example, New South Wales Constitution Act 1855 (Imp); Williams v Attorney-General for New South Wales (1913) 16 CLR 404 at 425-426; [ 1913 ] HCA 33 .
[223] (1947) 74 CLR 31 at 82; See also Austin (2003) 215 CLR 185 at 245-246 [ 111 ] - [ 115 ] ; Work Choices Case (2006) 229 CLR 1 at 119-120 [ 194 ] .
[224] (2006) 229 CLR 1 at 120 [ 194 ] .
[225] (2003) 215 CLR 185 .
[226] (2009) 240 CLR 272 .
[227] (1995) 183 CLR 373 ; [ 1995 ] HCA 47 .
[228] (1995) 183 CLR 373 at 478-479.
[229] (1995) 183 CLR 373 at 481.
[230] (1985) 159 CLR 192 at 260.
[231] (2003) 215 CLR 185 at 258 [ 145 ] .
[232] (2003) 215 CLR 185 at 258-259 [ 145 ] .
[233] (1995) 184 CLR 188 at 233; [ 1995 ] HCA 71 .
[234] (1985) 159 CLR 192 .
[235] (1971) 122 CLR 353 .
[236] (1978) 144 CLR 120 at 126 per Barwick CJ, 135 per Gibbs J, 140 per Stephen J, 148 per Mason J; [ 1978 ] HCA 46 .
[237] (1978) 144 CLR 120 at 125.
[238] (1978) 144 CLR 120 at 149.

 

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