Melbourne Corporation v Commonwealth

74 CLR 31
[1947] ALR 377

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(Judgment by: Dixon J.)

Briginshaw v.
Briginshaw

Court:

Judges: Latham CJ
Rich J
Starke J

Dixon JMcTiernan J
Williams J

Judgment date: 15 and 16 July, 13 August 1947

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Judgment by:
Dixon J.

In questions of validity we now usually find it necessary to consider with some care whether the provision impugned is capable of restriction or severance and, if so, whether there is not some severable or restricted part of it which falls within a legislative power and, notwithstanding the invalidity of the rest of the provision, will yet operate to produce some of the intended objects of the whole. But in s 48 of the Banking Act 1945 I do not think there is any difficulty of this kind. Subs (1) clearly enough is a single provision which hangs altogether upon its application to the conduct of banking business for a State. Subs (3) depends in its turn upon subs (1), and so of course does subs (2). Indeed I did not understand the contrary to be contended. In strictness, however, the issue is with respect to the efficacy of subs (3); for subs (1) does not come into full operation unless and until the Treasurer fixes a date for the purpose, a thing he has not yet done. In the meantime subs (3) gives to subs (1) such partial application as the Treasurer may specify. Subs (1) lays upon banks a general prohibition against conducting any banking business for a State, except with the consent in writing of the Treasurer. It does not apply to State banks (s 5(1)). It is not clear whether the Commonwealth Bank is or is not comprehended in the prohibition. Upon this point you are left in doubt by the words used in the subsection and in the definition of "bank" given by s 4(1) and in s 7, upon which the definition turns. On the whole, I think that we should treat s 48 as inapplicable to the Commonwealth Bank. The Commonwealth Bank Act 1945 was passed at the same time and was assented to on the same day as the Banking Act. In ss 49 to 53 and s 56 of the latter Act the word "bank" is used in contradistinction from the Commonwealth Bank and it seems proper to conclude that the former Act was regarded as the place in which the authority of the Commonwealth Bank to carry on banking business had been completely stated, to the exclusion of s 7, and therefore of s 48, of the Banking Act.

On this interpretation of the provisions, s 48(1) amounts to a prohibition upon banks other than the Commonwealth Bank, and of course other than State banks, against conducting the banking business for a State or any authority of a State, including a local governing authority, except with the consent of the Commonwealth Treasurer.

The Commonwealth Bank is to act as a central bank, and, in so far as the Commonwealth requires it to do so, it must act as banker and financial agent of the Commonwealth (ss 11 and 12 of the Commonwealth Bank Act). The purpose of s 48 may, therefore, be taken to be to complete the concentration of all governmental accounts in the Commonwealth Bank or to carry it as near completion as practical considerations allow, a matter of which the Treasurer is to judge and make exceptions accordingly. Such a purpose accords with the conceptions held of the function of a central bank and with the view that for its fulfilment the central bank should carry the government account so that it may take measures or counter-measures when the necessary financial operations of government might otherwise produce undesired consequences.

Under a unitary constitutional system there is no legal difficulty in giving effect to such a policy or in carrying it as far down the line of public authorities as may be desired. But it is otherwise in a federal system. State and federal governments are separate bodies politic and prima facie each controls its own moneys. To enable the Parliament of the Commonwealth to deny to the States the use of any bank but the central bank of the Commonwealth and thus to guide the collections and disbursements of the States into and through an account of that bank, there must be found in the Constitution a definite legislative power of sufficient amplitude.

The Commonwealth points to s 51(xiii) as containing a power wide enough to authorize s 48, the power to make laws with respect to banking. No other power was adduced. The long title to the statute describes it as an Act to regulate banking, to make provision for the protection of the currency and of the public credit of the Commonwealth and for other purposes. But, even if, s 48 may be conceived to contribute to any of these further purposes, it was as a law with respect to banking that it was supported, and I do not see how it could be justified under any other power.

The question for our decision, therefore, is whether in the exercise of the power to make laws with respect to banking, other than State banking, the incorporation of banks and the issue of paper money, the Commonwealth Parliament may forbid banks, except the Commonwealth Bank and State banks, to conduct any banking business for a State save by the consent of the Federal Treasurer.

The power should be given an ample meaning and a wide operation and the exception in favour of State banking should, in my opinion, be understood as referring to the operations of a banker conducted by or on behalf of a State and not to the State as the customer of a bank. The purpose of the exception was, I have no doubt, to ensure that State banks should not be affected by any law which the Parliament of the Commonwealth might make about banking and that the exclusive power to regulate them should remain with the States. The form of para (xiii) presents a curious point in its express mention of the incorporation of banks as an extension of or addition to the subject of banking and in its failure to attach the exception of State banking to the extension or addition. But, whatever its significance or effect, it is not a point that touches the question before us.

The exception of State banking means that a general law of the Commonwealth governing the business of banking cannot affect the operations of a State bank within the State concerned. The express inclusion in the federal legislative power of State banking extending beyond the limits of the State concerned gives added point to the exception. For it shows that State banking was contemplated as a possible function of government which should be excluded from the operation of federal law within the territorial limits of the authority of the government concerned.

This Court has adopted a rule of construction with reference to the application to the States of the specific powers conferred by the Constitution upon the Parliament of the Commonwealth. It is a prima-facie rule of construction and its operation may be displaced by sufficient indications of a contrary intention whether found in the nature or subject matter of the power, in the manner in which it is expressed, in the context or elsewhere in the Constitution.

The prima-facie rule is that a power to legislate with respect to a given subject enables the Parliament to make laws which, upon that subject, affect the operations of the States and their agencies. That, as I have pointed out more than once, is the effect of the Engineers' Case (1920) 28 CLR 129 stripped of embellishment and reduced to the form of a legal proposition. It is subject, however, to certain reservations and this also I have repeatedly said. Two reservations, that relating to the prerogative and that relating to the taxation power, do not enter into the determination of this case and nothing need be said about them. It is, however, upon the third that, in my opinion, this case turns. The reservation relates to the use of federal legislative power to make, not a general law which governs all alike who come within the area of its operation whether they are subjects of the Crown or the agents of the Crown in right of a State, but a law which discriminates against States, or a law which places a particular disability or burden upon an operation or activity of a State, and more especially upon the execution of its constitutional powers. In support of such a use of power the Engineers' Case (1920) 28 CLR 129 has nothing to say. Legislation of that nature discloses an immediate object of controlling the State in the course which otherwise the Executive Government of the State might adopt, if that Government were left free to exercise its authority. The control may be attempted in connection with a matter falling within the enumerated subjects of federal legislative power. But it does not follow that the connection with the matter brings a law aimed at controlling in some particular the State's exercise of its executive power within the true ambit of the Commonwealth legislative power. Such a law wears two aspects. In one aspect the matter with respect to which it is enacted is the restriction of State action, the prescribing of the course which the Executive Government of the State must take or the limiting of the courses available to it. As the operation of such a law is to place a particular burden or disability upon the State in that aspect it may correctly be described as a law for the restriction of State action in the field chosen. That is a direct operation of the law.

In the other aspect, the law is connected with a subject of Commonwealth power. Conceivably that connection may be made so insubstantial, tenuous or distant by the character of the control or restriction the law seeks to impose upon State action that it ought not to be regarded as enacted with respect to the specified matter falling within the Commonwealth power. If so, the law fails simply because it cannot be described as made with respect to the requisite subject matter. But, if in its second aspect the law operates directly upon a matter forming an actual part of a subject enumerated among the federal legislative powers, its validity could hardly be denied on the simple ground of irrelevance to a head of power. Speaking generally, once it appears that a federal law has an actual and immediate operation within a field assigned to the Commonwealth as a subject of legislative power, that is enough. It will be held to fall within the power unless some further reason appears for excluding it. That it discloses another purpose and that the purpose lies outside the area of federal power are considerations which will not in such a case suffice to invalidate the law. In the United States much use has been made in this way of the postal power and of the commerce power to legislate in a way calculated to vindicate morality or achieve a social purpose rather than to advance the postal services or promote or regulate inter-state commerce as such. When this is done the result is that laws confined to an existing head of federal power nevertheless reach as a matter of purpose into fields lying under State legislative authority. But it is one thing to say that a federal law may be valid notwithstanding a purpose of achieving some result which lies directly within the undefined area of power reserved to the States. It is altogether another thing to apply the same doctrine to a use of federal power for a purpose of restricting or burdening the State in the exercise of its constitutional powers. The one involves no more than a distinction between the subject of a power and the policy which causes its exercise. The other brings into question the independence from federal control of the State in the discharge of its functions.

In the case of most legislative powers assigned to the Commonwealth some ingenuity would be needed to base a law squarely upon the subject matter of the power and at the same time effect by it a restriction or control of the State in respect of some exercise of its executive authority or for that matter in respect of the working of the judiciary or of the legislature of a State. The difficulty of using most federal powers in that way arises from the character of the subjects of the powers. It is, for instance, difficult to see how any law based on the power with respect to lighthouses, astronomical observations, fisheries, weights and measures, bills of exchange or marriage could be aimed at controlling States in the execution of their functions. But to attempt to burden the exercise of State functions by means of the power to tax needs no ingenuity, and that, no doubt, is why that power occupies such a conspicuous place in the long history both in the United States and here of the question how far federal power may be used to interfere with the States in the exercise of their powers. The doctrine that no exercise of the tax power by Congress could work an interference with State government functions was formerly pushed to extravagant lengths. It was applied artificially to notional and abstract interferences, and, moreover, this led to the making of untenable distinctions. The Supreme Court has now reconsidered the older doctrine. The notion of a reciprocal immunity from which it arose has been condemned as fallacious and the constitutional law of the United States now gives as little countenance to the extreme applications made of the principle of non-interference as does the constitutional law of Australia. But, having cleared much of the ground formerly occupied by this doctrine, the Supreme Court has encountered some difficulty in formulating a test by which the validity of a federal tax falling upon operations of the States may be determined. All agree, however, that a tax cannot be laid on the States "as such," that a State cannot be singled out for taxation or for a special burden of taxation in respect of acts or things when others are not taxed or are not so burdened in respect of the same acts or things, in other words, that a taxing law discriminating against a State is unconstitutional and void.

There are problems which this principle may not cover, but into them I need not go. They are discussed in New York v United States (1946) 326 US 572 (90 Law Ed 326), the various opinions in which will repay study. What is important is the firm adherence to the principle that the federal power of taxation will not support a law which places a special burden upon the States. They cannot be singled out and taxed as States in respect of some exercise of their functions. Such a tax is aimed at the States and is an attempt to use federal power to burden or, may be, to control State action. The objection to the use of federal power to single out States and place upon them special burdens or disabilities does not spring from the nature of the power of taxation. The character of the power lends point to the objection but it does not give rise to it. The federal system itself is the foundation of the restraint upon the use of the power to control the States. The same constitutional objection applies to other powers, if under them the States are made the objects of special burdens or disabilities. Not of course all powers, for some of them are concerned with the States specially or contemplate some measure in particular relation to a State. Examples can be seen in paras (xxxi), (xxxii), (xxxiii), and (xxxiv) of s 51. The meaning and nature of the power cannot be left out of account. Of this the defence power is a conspicuous example. But plainly the greater number of powers contemplate legislation of general application.

I do not think that either under the Constitution of the United States or The British North America Act or the Commonwealth Constitution has countenance been given to the notion that the legislative powers of one government in the system can be used in order directly to deprive another government of powers or authority committed to it or restrict that government in their exercise, notwithstanding the complete overthrow of the general doctrine of reciprocal immunity of government agencies and the discrediting of the reasoning used in its justification. For that reason the distinction has been constantly drawn between a law of general application and a provision singling out governments and placing special burdens upon the exercise of powers or the fulfilment of functions constitutionally belonging to them. It is but a consequence of the conception upon which the Constitution is framed. 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. Among them it distributes powers of governing the country. The framers of the Constitution do not appear to have considered that power itself forms part of the conception of a government. They appear rather to have conceived the States as bodies politic whose existence and nature are independent of the powers allocated to them. The Constitution on this footing proceeds to distribute the power between State and Commonwealth and to provide for their inter-relation, tasks performed with reference to the legislative powers chiefly by ss 51, 52, 107, 108, and 109.

In the many years of debate over the restraints to be implied against any exercise of power by Commonwealth against State and State against Commonwealth calculated to destroy or detract from the independent exercise of the functions of the one or the other, it has often been said that political rather than legal considerations provide the ground of which the restraint is the consequence. The Constitution is a political instrument. It deals with government and governmental powers. The statement is, therefore, easy to make though it has a specious plausibility. But it is really meaningless. It is not a question whether the considerations are political, for nearly every consideration arising from the Constitution can be so described, but whether they are compelling.

A truism that has been invoked is that the possibility that a power may be abused is no reason for restricting the power by construction. Doubtless it formed a proper objection to the view now completely discredited that an agency of one government was not in that character amenable in any degree to a power of the other lest some exercise of the power might interfere with the due performance of the functions of the agency. But as an objection it is not in point where the question is whether an actual attempt to restrict or control the State in the exercise of a function forming part of its executive power is or is not permitted by the Constitution. The considerations I have just mentioned have been used in relation to the question what the federal Government may do with reference to the States and the question of what a State may do with reference to the federal Government. But these are two quite different questions and they are affected by considerations that are not the same. 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. The grant carries all that is proper for its full effectuation. Then supremacy is given to the legislative powers of the Commonwealth.

These two considerations add great strength to the implication protecting the Commonwealth from the operation of State laws affecting the exercise of federal power. But they also amplify the field protected. Further, they limit the claim of the States to protection from the exercise of Commonwealth power. For the attempt to read s 107 as the equivalent of a specific grant or reservation of power lacked a foundation in logic. Accordingly the considerations upon which the States' title to protection from Commonwealth control depends arise not from the character of the powers retained by the States but from their position as separate governments in the system exercising independent functions. But, to my mind, the efficacy of the system logically demands that, unless a given legislative power appears from its content, context or subject matter so to intend, it should not be understood as authorizing the Commonwealth to make a law aimed at the restriction or control of a State in the exercise of its executive authority. In whatever way it may be expressed an intention of this sort is, in my opinion, to be plainly seen in the very frame of the Constitution.

So far I have stated my opinion in an abstract and a general form and in this there is no little danger. For the subject has no vocabulary of technical terms possessing a precise and settled connotation and the use of expressions of indefinite and variable meaning is unavoidable. But the ground is by no means new and my purpose is but to indicate the principles to which I adhere, before proceeding to apply them to s 48 of the Banking Act 1945.

In New York v United States (1946) 326 US, at p 575 (90 Law Ed, at p 329) Frankfurter J said: "One of the greatest sources of strength of our law is that it adjudicates concrete cases and does not pronounce principles in the abstract." The actual decision of the present case can be no wider than the constituent factors contained in s 48 require, however widely the principles which lead to it may be stated.

The factors in s 48 which in my view govern the question of its validity are these. Its operation is confined to States and authorities of States including, of course, local governing authorities. It is based upon the existence of the banks mentioned in the first schedule of the Banking Act as well as the Commonwealth Bank and possibly of other banks and the section assumes that, but for the provisions it contains, the States and their authorities would, like other bodies and individuals, be at liberty freely to choose amongst them. The duty to choose a bank or banks for the purpose of the banking business of a State in fact belongs to the Treasurer of the State, as the Audit Acts of the States show.

In these conditions s 48 forbids the banks to do the business of the States unless the Treasurer of the Commonwealth consents. S 5 of the Crimes Act 1914-1941 operates to make the Treasurer and any subordinate officer of the State guilty of the same offence as the bank if they should procure the bank to disregard the prohibition.

There is thus a law directly operating to deny to the States banking facilities open to others, and so to discriminate against the States or to impose a disability upon them. The circumstance that the primary prohibition is laid upon the banks and not upon the States does not appear to me to be a material distinction. It is just as effectual to deny to the States the use of the banks and that is its object. This I think is not justified by the power to make laws with respect to banking.

I cannot see that it is to the point to argue that under s 51(xiii) the Commonwealth might give the Commonwealth Bank a monopoly complete, except for State banks, and that what s 48 does is to give a monopoly restricted to State business. That is only to say that instead of establishing a monopoly with all its advantages and disadvantages shared by the whole community, States have been singled out and deprived of the freedom of choice which the existing system afforded.

At bottom the principle upon which the States become subject to Commonwealth laws is that when a State avails itself of any part of the established organization of the Australian community it must take it as it finds it. Except in so far as under its legislative power it may be able to alter the legal system, a State must accept the general legal system as it is established. If there be a monopoly in banking lawfully established by the Commonwealth, the State must put up with it.

But it is the contrary of this principle to attempt to isolate the State from the general system, deny it the choice of the machinery the system provides and so place it under a particular disability. Whether the right to exercise such a choice is of great or of small importance to the States is not a material matter for inquiry. It is enough that it forms part of the functions of the Executive Government of the States in administering the finances of the States.

It may be conceded that the Financial Agreement under s 105A of the Constitution and the adoption of the system of uniform taxation of incomes place the finances of the States in a very different position from that which they occupied when the Commonwealth was first established. Further, these measures may well be supposed to lend such a provision as s 48 the appearance of a corollary, at all events from the point of view of a central bank. But these are considerations that cannot affect the interpretation of s 51(xiii). S 105A cuts across the Constitution and, as it has been construed in this Court, imposes upon the States absolute liabilities to the Commonwealth enforceable against the revenues of the States. Extensions of constitutional power or supremacy may explain, but they do not justify, further extensions.

In my opinion s 48 of the Banking Act is void because an inseverable part of it is directed to control or restrict the Executive Government of the States in the use of banks for the conduct of their banking business.

The demurrer should be overruled.